<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 June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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.)
</TABLE>
1601 Belvedere Road, West Palm Beach, FL 33406
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (561) 689-9970
--------------
<TABLE>
<S> <C>
(Former name, former address and former fiscal year, if changed since last report) Not applicable
------------------
</TABLE>
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.
Class Outstanding as of August 12, 1997
----- ---------------------------------
Common 20,868,405
<PAGE> 2
SERVICO, INC. AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of
Income for the Three and Six Months Ended
June 30, 1997 and 1996 4
Condensed Consolidated Statements of
Stockholders' Equity for the Six Months
Ended June 30, 1997 and for the Year
Ended December 31, 1996 5
Condensed Consolidated Statements of
Cash Flows for the Six Months Ended
June 30, 1997 and 1996 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 16
SIGNATURES 17
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SERVICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 24,765 $ 19,473
Accounts receivable, net of allowances 9,941 7,742
Other current assets 9,518 10,765
----------- -----------
Total current assets 44,224 37,980
Property and equipment, net 386,813 364,922
Other assets, net 26,899 36,884
----------- -----------
$ 457,936 $ 439,786
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,409 $ 6,369
Accrued liabilities 23,411 23,100
Current portion of long-term obligations 5,866 22,719
----------- -----------
Total current liabilities 36,686 52,188
Long-term obligations, less current portion 183,021 284,880
Deferred income taxes 8,223 8,353
Commitments and contingencies
Minority interests 19,032 19,627
Stockholders' equity:
Common Stock, $.01 par value--25,000,000
shares authorized; 19,422,392 shares and
9,369,605 shares issued and outstanding 195 94
Additional paid-in capital 190,570 55,136
Retained earnings 20,209 19,508
----------- -----------
Total stockholders' equity 210,974 74,738
----------- -----------
$ 457,936 $ 439,786
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
SERVICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Rooms $ 46,499 $ 41,201 $ 87,993 $ 76,298
Food and beverage 20,401 18,346 37,676 32,737
Other 4,276 3,753 8,154 6,864
--------- --------- --------- ---------
71,176 63,300 133,823 115,899
--------- --------- --------- ---------
Operating expenses:
Direct:
Rooms 12,238 10,994 23,388 20,402
Food and beverage 15,180 13,740 28,783 24,992
General and administrative 2,089 2,316 4,292 4,876
Depreciation and amortization 5,500 4,454 10,899 8,480
Other 21,242 19,026 42,854 37,638
--------- --------- --------- ---------
56,249 50,530 110,216 96,388
--------- --------- --------- ---------
Income from operations 14,927 12,770 23,607 19,511
Other income (expenses):
Other income 298 558 671 763
Gain on litigation settlement -- -- -- 3,615
Interest expense (8,177) (7,154) (16,202) (13,155)
Minority interests (143) (756) (656) (1,591)
--------- --------- --------- ---------
Income before income taxes
and extraordinary item 6,905 5,418 7,420 9,143
Provision for income taxes 2,762 2,168 2,968 3,657
--------- --------- --------- ---------
Income before extraordinary item 4,143 3,250 4,452 5,486
Extraordinary item:
Loss on early extinguishment of debt,
net of income taxes of $2,500 in 1997
and $134 in 1996 (3,751) (202) (3,751) (202)
--------- --------- --------- ---------
Net income $ 392 $ 3,048 $ 701 $ 5,284
========= ========= ========= =========
Earnings per common and common
equivalent share:
Income before extraordinary item $ .42 $ .33 $ .45 $ .57
Extraordinary item (.38) (.02) (.38) (.02)
--------- --------- --------- ---------
Net income $ .04 $ .31 $ .07 $ .55
========= ========= ========= =========
Weighted average shares outstanding 9,953 9,816 9,944 9,668
========= ========= ========= =========
</TABLE>
See accompanying notes.
4
<PAGE> 5
SERVICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands, Except Share Data)
<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, 1995 8,846,269 $ 88 $ 51,424 $ 11,308 $ 62,820
401(k) Plan contribution 25,536 1 465 -- 466
Exercise of stock options 497,800 5 2,008 -- 2,013
Tax benefit from exercise of stock
options -- -- 1,239 -- 1,239
Net income -- -- -- 8,200 8,200
---------- ----------- ----------- ----------- -----------
Balance at December 31, 1996 9,369,605 94 55,136 19,508 74,738
401(k) Plan contribution 53,987 1 244 -- 245
Exercise of stock options 30,000 -- 178 -- 178
Issuance of common stock 10,000,000 100 135,550 -- 135,650
Purchase of treasury stock (31,200) -- (538) -- (538)
Net income -- -- -- 701 701
---------- ----------- ----------- ----------- -----------
Balance at June 30, 1997 19,422,392 $ 195 $ 190,570 $ 20,209 $ 210,974
========== =========== =========== =========== ===========
</TABLE>
The data for the six months ended June 30, 1997, is unaudited.
See accompanying notes.
5
<PAGE> 6
SERVICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
---- ----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 21,747 $ 14,047
INVESTING ACTIVITIES:
Capital expenditures, net (23,456) (10,400)
Acquisitions of property and equipment (8,842) (40,794)
Net deposits for capital expenditures (1,274) (3,417)
Payments on notes receivable from related parties 470 220
Decrease investment in unconsolidated entities 9 2,146
Net proceeds from litigation settlements -- 3,615
Notes receivable issued to related parties -- (1,670)
Other -- 559
--------- ---------
Net cash used in investing activities (33,093) (49,741)
--------- ---------
FINANCING ACTIVITIES:
Principal payments on long-term obligations (156,602) (104,207)
(Distributions to) contributions from minority interests (1,250) 5,378
Payments of deferred loan costs (1,154) (12,944)
Net proceeds from issuance of common stock 135,290 1,770
Proceeds from issuance of long-term obligations 40,354 167,235
--------- ---------
Net cash provided by financing activities 16,638 57,232
--------- ---------
Net increase in cash and cash equivalents 5,292 21,538
Cash and cash equivalents at beginning of period 19,473 11,401
--------- ---------
Cash and cash equivalents at end of period $ 24,765 $ 32,939
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amount capitalized $ 13,950 $ 10,678
========= =========
Income taxes paid, net of refunds $ 437 $ 2,402
========= =========
</TABLE>
See accompanying notes.
6
<PAGE> 7
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 48 hotels) and partnerships (owning 9
hotels) in which Servico exercises control over the partnerships' assets and
operations (collectively, the "Company"). An unconsolidated entity (owning one
hotel) in which the Company exercises significant influence over operating and
financial policies is accounted for using the equity method. The accounts of two
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, 1996.
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 June 30, 1997, and the results of its operations and its cash
flows for the three and six 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, 1996.
The accompanying condensed consolidated balance sheet at June 30, 1997 and the
condensed consolidated statement of stockholders' equity for the six month
period ended June 30, 1997, the condensed consolidated statements of income for
the three and six months ended June 30, 1997 and 1996 and the condensed
consolidated statements of cash flows for the six months ended June 30, 1997 and
1996 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) of this Form 10-Q.
Certain amounts in the prior period condensed consolidated financial statements
have been reclassified to conform to the current period presentation.
7
<PAGE> 8
2. DEFERRED COSTS
Deferred franchise, financing and other deferred costs are stated at cost, net
of accumulated amortization of $1.9 million and $4.1 million at June 30, 1997,
and December 31, 1996, respectively, which is computed using the straight-line
method, over the terms of the related franchise, loan or other agreements. The
straight-line method of amortizing deferred financing costs approximates the
interest method.
3. LONG TERM DEBT
During the three months ended June 30, 1997, the Company refinanced
approximately $31.5 million of long term debt secured by six of its hotels. In
addition, the Company repaid, prior to maturity, approximately $128 million of
long term debt on 21 other hotels. The repayment of the debt was funded with the
proceeds from the sale of common stock as more fully discussed in Note 5 below.
As a result of the refinancings and repayment of debt, the Company has no long
term debt maturing during the next 12 months and the Company's remaining debt is
substantially fixed rate debt bearing interest at a rate of approximately 10%.
4. COMMITMENTS AND CONTINGENCIES
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
discussions with counsel, have a material adverse effect on the Company's
financial condition or results of operations.
5. ISSUANCE OF COMMON STOCK
In June 1997 Servico completed a secondary offering of 10 million shares of
common stock at $14.50 per share. An additional 1.5 million shares were issued
in July 1997 upon exercise by the underwriter of the over allotment option.
These stock sales resulted in net proceeds to Servico of $156 million which were
used to repay $128 million of debt, to purchase the minority interests in three
majority owned hotels for $11.3 million and as additional working capital.
6. EXTRAORDINARY ITEM
As a result of the early extinguishment of debt as discussed in Note 3 above,
the Company wrote off approximately $6.2 million in unamortized deferred loan
costs. This transaction was recorded in June, as an extraordinary loss of $3.8
million, net of approximately $2.5 million in taxes.
8
<PAGE> 9
7. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per share is calculated based on the weighted average number of common
shares and dilutive common equivalent shares outstanding during the periods.
Earnings per common share include the Company's outstanding stock options, if
dilutive, and common stock contributed or to be contributed by the Company to
its employee 401(k) Plan. Primary and fully diluted shares were the same for
both periods.
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share". SFAS
128 requires companies with complex capital structures that have publicly-held
common stock or common stock equivalents to present both basic and diluted
earnings per share ("EPS") on the face of the income statement. The presentation
of basic EPS replaces the presentation of primary EPS currently required by
Accounting Principles Board Opinion No. 15 ("APB No. 15"), "Earnings Per Share".
Basic EPS is calculated as income available to common stockholders divided by
the weighted average number of common shares outstanding during the period.
Diluted EPS (previously referred to as fully diluted EPS) is calculated using
the "if converted" method for convertible securities and the treasury stock
method for options and warrants as prescribed by APB No. 15. This statement is
effective for financial statements issued for interim and annual periods ending
after December 15, 1997. The Company does not believe the adoption of SFAS 128
in fiscal 1997 will have a significant impact on the Company's reported EPS.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
In evaluating hotel performance and hotel property values, the Company considers
earnings before interest, taxes, depreciation and amortization ("EBITDA"),
occupancy levels, average daily rate and revenue per available room ("RevPAR").
In addition to revenues generated by its guest rooms, food and beverage revenues
at the Company's full service hotels, although not reflected in RevPAR,
contribute significantly to the Company's EBITDA. These performance measures are
impacted by a variety of factors including national, regional and local economic
conditions, the degree of competition with other hotels in the area, the level
of renovation activity 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 hotels experience lower occupancy levels in
the fall and winter (September through February) which may result in lower
revenues, EBITDA, net income and less cash flow during these months.
The Company's growth strategy includes the acquisition of under-performing
hotels and the implementation of the Company's operational initiatives as well
as repositioning and renovation programs to achieve revenue and margin
improvements. Such initiatives typically require between 12 and 36 months before
newly acquired hotels are repositioned and stabilized (the "Reposition Hotels"
and the "Stabilized Hotels"). During this period, the revenues and earnings of
newly acquired hotels may be adversely affected and may negatively impact
consolidated EBITDA, RevPAR, average daily rate, and occupancy rate performance
as well as consolidated earnings. The Company purchased 25 hotels during the
period from January 1995 through June 30, 1997 and, accordingly, the impact of
such activities is material. In order to better illustrate underlying trends of
the Company's hotels, the Company tracks the performance of both Stabilized and
Reposition Hotels. The Stabilized Hotels include the hotels which were acquired
by the Company through 1994 and certain hotels acquired since January 1, 1995
which, based on management's determination, have achieved normalized operations.
Reposition Hotels include the 1995, 1996 and 1997 acquired hotels which are
still the subject of management's continuing post-acquisition repositioning and
renovating initiatives.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 (THE "1997 QUARTER")
AS COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1996 (THE "1996 QUARTER")
During the 1997 Quarter, the Company owned 57 hotels, managed 2 hotels for third
party owners and had a minority investment in 1 hotel, compared with 50 hotels
owned, 9 managed and 1 minority investment during the 1996 Quarter. The Company
generated EBITDA of $20.5 million ($5.2 million from food and beverage
operations) for the 1997 Quarter, an 18.3% increase over the $17.4 million ($4.6
million from food and beverage operations) for the 1996 Quarter. Occupancy and
average daily
10
<PAGE> 11
rate for owned hotels for the 1997 Quarter was 70.3% and $73.04, respectively,
compared with 72.3% and $70.93, respectively, for the 1996 Quarter.
Revenues for the 1997 Quarter were $71.2 million, a 12.4% increase over revenues
of $63.3 million for the 1996 Quarter. Of this $7.9 million increase in
revenues, approximately $5.2 million was attributable to the Reposition Hotels,
of which approximately $3.7 million was attributable to the hotels acquired
subsequent to June 30, 1996.
Direct operating expenses for the Company were $27.4 million for the 1997
Quarter and $24.7 million for the 1996 Quarter. Of this $2.7 million increase,
approximately $2.5 million was attributable to the Reposition Hotels, of which
approximately $1.7 million related to hotels acquired subsequent to June 30,
1996. Other operating expenses before depreciation and amortization were $23.3
million for the 1997 Quarter compared to $21.3 million for the 1996 Quarter.
This increase is primarily attributable to the hotels acquired subsequent to
June 30, 1996. Depreciation and amortization expense for the Company was $5.5
million for the 1997 Quarter and $4.5 million for the 1996 Quarter. Included in
this $1 million increase is $.5 million associated with the improvements made at
the Stabilized Hotels and the remaining balance is primarily associated with the
hotels acquired subsequent to June 30, 1996.
As a result of the above, income from operations was $14.9 million for the 1997
Quarter as compared to $12.8 million for the 1996 Quarter.
Interest expense, net of interest income, was $7.9 million for the 1997 Quarter,
a $1.3 million increase over the $6.6 incurred million for the 1996 Quarter. Of
this $1.3 million increase, approximately $.7 million was attributable to the
Reposition Hotels, of which approximately $.5 million was related to the hotels
acquired subsequent to June 30, 1996.
During the 1997 Quarter, the Company repaid, prior to maturity, approximately
$128 million in debt and, as a result, recorded as an extraordinary item a loss
on early extinguishment of debt of approximately $3.8 million (net of income
taxes of $2.5 million) relating to the write-off of unamortized loan costs
associated with the debt.
After a provision for income taxes of $2.8 million for the 1997 Quarter and $2.2
million for the 1996 Quarter, the Company had income before extraordinary item
of $4.1 million ($.42 per share) for the 1997 Quarter and $3.3 million ($.33 per
share) for the 1996 Quarter.
Thirty-two of the Company's hotels acquired through 1994, six hotels acquired in
1995 and four hotels acquired in 1996 have achieved normalized operations based
on management's determination and comprise the Stablized Hotels. RevPAR for the
Stablized Hotels increased 4.9% on a 5% increase in revenues during the 1997
Quarter. Four of the hotels acquired in 1995, ten of the hotels acquired in 1996
and one hotel acquired in 1997 were in various stages of repositioning and
renovation during the 1997 Quarter and comprise the Reposition Hotels. As a
result of the ongoing renovations at the Reposition Hotels, occupancy and
average daily rate were substantially below the Stablized Hotels. Consistent
with its strategy, the Company is in the process of implementing new marketing
strategies and operational improvements at the Reposition Hotels. In addition,
the
11
<PAGE> 12
Company is currently negotiating to obtain certain new franchise affiliations
for selected Reposition Hotels and expects to complete significant renovations
at the Reposition Hotels during the next 12 to 36 months. The following table
summarizes certain operating data for the Company's hotels for the three months
ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
------------------------------------- -------------
Average
Number of Daily
Hotels Occupancy Rate RevPAR RevPAR
------------------------------------- ------
<S> <C> <C> <C> <C> <C>
Pre 1995 Hotels 32 73.6% $75.57 $55.62 $53.49
1995 Acquisitions:
Stabilized 6 74.0% $71.43 $52.86 $49.40
Reposition 4 73.3% $59.29 $43.46 $45.53
1996 Acquisitions:
Stabilized 4 64.8% $76.41 $39.51 $43.45
Reposition 10 53.6% $62.79 $33.66 *
1997 Acquisitions:
Reposition 1 65.6% $66.59 $43.68 *
Total Stabilized 42 72.5% $75.16 $54.49 $51.93
Total Reposition 15 60.1% $61.69 $37.08 $43.32
--
Total Company 57 70.3% $73.04 $51.35 $51.28
==
</TABLE>
*Hotels not comparable in prior year
SIX MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD")
AS COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1996 (THE"1996 PERIOD")
During the 1997 Period, the Company owned 57 hotels, managed 3 hotels for third
party owners and had a minority investment in 1 hotel, compared with 50 hotels
owned, 9 managed and 1 minority investment during the 1996 Period. The Company
generated EBITDA of $34.7 million ($8.9 million from food and beverage
operations) for the 1997 Period, a 19.6% increase over the $29 million ($7.7
million from food and beverage operations) for the 1996 Period. Occupancy and
average daily rate for owned hotels for the 1997 Period was 66.5% and $73.23,
compared with 69% and $70.93 for the 1996 Period.
Revenues for the 1997 Period were $133.8 million, a 15.5% increase over revenues
of $115.9 million for the 1996 Period. Of this $17.9 million increase in
revenues, approximately $14.1 million was attributable to the Reposition Hotels,
of which approximately $8.2 million was attributable to the hotels acquired
subsequent to June 30, 1996.
Direct operating expenses for the Company were $52.2 million for the 1997 Period
and $45.4 million for the 1996 Period. This $6.8 million increase was
attributable to the Reposition Hotels, of which $3.4 million related to hotels
acquired subsequent to June 30, 1996. Other operating expenses before
depreciation and amortization were $47.1 million for the 1997 Period compared to
$42.5 million for the 1996 Period. Included in the 1996 other operating expenses
was $.8 million related to a severance agreement with the Company's former chief
executive officer. Of this $5.4 million increase, approximately $4.3 million was
attributable to the Reposition Hotels, of which approximately $3.3 million
related to the hotels acquired subsequent to June 30, 1996. Depreciation and
amortization
12
<PAGE> 13
expense for the Company was $10.9 million for the 1997 Period and $8.5 million
for the 1996 Period. Of this $2.4 million increase approximately $1.6 million
was associated with the Reposition Hotels, of which approximately $.6 million
was attributable to the hotels acquired subsequent to June 30, 1996.
As a result of the above, recurring income from operations was $23.6 million for
the 1997 Period as compared to $20.4 million for the 1996 Period.
Interest expense, net of interest income, was $15.5 million for the 1997 Period,
a $3 million increase over the $12.5 million for the 1996 Period. Of this
increase, approximately $1.9 million was attributable to the Reposition Hotels,
of which approximately $1 million related to the hotels acquired subsequent to
June 30, 1996.
Included in other income for the 1996 Period was a non-recurring $3.6 million
net settlement of a law suit received by the Company in March 1996.
During the 1997 Period, the Company repaid, prior to maturity, approximately
$128 million in debt and, as a result, recorded as an extraordinary item a loss
on early extinguishment of debt of approximately $3.8 million (net of income
taxes of $2.5 million) relating to the write-off of unamortized loan costs
associated with the debt.
After a provision for income taxes of $3 million for the 1997 Period and $3.7
million for the 1996 Period, the Company had income before extraordinary item of
$4.5 million ($.45 per share) for the 1997 Period and $5.5 million ($.57 per
share) for the 1996 Period. Without consideration of the non-recurring items in
1996 discussed above, the Company had recurring net income of $4.5 million ($.45
per share) for the 1997 Period and $3.8 million ($.40 per share) for the 1996
Period.
Thirty-two of the Company's hotels acquired through 1994, six hotels acquired in
1995 and four hotels acquired in 1996 have achieved normalized operations based
on management's determination and comprise the Stablized Hotels. RevPAR for the
Stablized Hotels increased 5.2% on a 3.8% increase in revenues during the 1997
Period. Four of the hotels acquired in 1995, ten of the hotels acquired in 1996
and one hotel acquired in 1997 were in various stages of repositioning and
renovation during the 1997 Period and comprise the Reposition Hotels. As a
result of the ongoing renovations at the Reposition Hotels, occupancy and
average daily rate are substantially below the Stablized Hotels. Consistent with
its strategy, the Company is in the process of implementing new marketing
strategies and operational improvements at the Reposition Hotels. In addition,
the Company is currently negotiating to obtain certain new franchise
affiliations for selected Reposition Hotels and expects to complete significant
renovations at the Reposition Hotels during the next 12 to 36 months.
13
<PAGE> 14
The following table summarizes certain operating data for the Company's hotels
for the six months ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
----------------------------------------------------- -------------
Average
Number of Daily
Hotels Occupancy Rate RevPAR RevPAR
----------------------------------------------------- ----------
<S> <C> <C> <C> <C> <C>
Pre 1995 Hotels 32 69.5% $75.40 $52.40 $50.17
1995 Acquisitions:
Stabilized 6 74.0% $71.43 $52.86 $49.40
Reposition 4 70.6% $68.97 $48.69 $49.37
1996 Acquisitions:
Stabilized 4 64.8% $76.41 $49.51 $43.45
Reposition 10 52.1% $66.30 $34.54 *
1997 Acquisitions:
Reposition 1 65.6% $66.59 $43.68 *
Total Stabilized 42 69.5% $75.18 $52.25 $49.68
Total Reposition 15 59.0% $67.46 $39.80 $45.21
--
Total Company 57 66.5% $73.23 $48.70 $48.94
==
</TABLE>
*Hotels not comparable in prior year
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are existing cash balances and cash
flow from operations. The Company had earnings before interest, taxes,
depreciation and amortization ("EBITDA") for the 1997 Period of $34.7 million, a
19.6% increase over the $29 million for the 1996 Period. EBITDA is a widely
regarded industry measure of lodging performance used in the assessment of hotel
property values, although EBITDA is not indicative of and should not be used as
an alternative to net income or net cash provided by operations as specified by
generally accepted accounting principles. Net cash provided by operating
activities for the 1997 Period was $21.7 million as compared to $14 million for
the 1996 Period.
At June 30, 1997, the Company had working capital of $7.5 million as compared to
a working capital deficit of $14.2 million at December 31, 1996. Included in the
working capital deficit for 1996 was $15.3 million of mortgage notes payable
which mature within twelve months. The Company has refinanced these mortgage
notes before their due dates. The Company's ratio of current assets to current
liabilities was 1.2:1 at June 30, 1997 and .7:1 at December 31, 1996 (1:1 at
December 1996 without consideration of the mortgages due in 1997).
At June 30, 1997, the Company's long-term obligations were $183 million compared
with $284.9 million at December 31, 1996.
In June 1997 Servico completed a secondary offering of 10 million shares of
common stock at $14.50 per share. An additional 1.5 million shares were issued
in July 1997 upon exercise by the underwriter of the over allotment option.
These stock sales resulted in net proceeds to Servico of $156 million which were
used to repay $128 million of debt, to purchase the minority interests in three
majority owned hotels for $11.3 million and as additional working capital.
14
<PAGE> 15
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. Additionally, in connection with the refinancing and acquisition
of hotels, the Company has agreed to make certain capital improvements and, as
of June 30, 1997, has approximately $13.6 million escrowed for such
improvements. The Company estimates its remaining obligations for all of such
commitments to be approximately $16 million, of which approximately $13.2
million is expected to be spent during the remainder of 1997, and the balance is
expected to be spent during the 1998-1999 time period.
The Company may require additional financing to continue its growth strategy.
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.
FORWARD-LOOKING STATEMENTS
Statements in this Form 10-Q which express "belief ", "anticipation", or
"expectation", as well as other statements which are not historical fact, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve risks and uncertainties. Moreover,
there are important factors which include, but are not limited to, general and
local economic conditions, risks relating to the operation and acquisition of
hotels, government legislation and regulation, changes in interest rates, the
impact of rapid growth, the availability of capital to finance growth, the
historical cyclicality of the lodging industry and other factors described in
other Servico, Inc. filings with the United States Securities and Exchange
Commission, all of which are difficult to predict and many of which are beyond
the control of the Company. Actual results could differ materially from these
forward- looking statements. In light of the risks and uncertainties, there is
no assurance that the forward-looking statements contained in this Form 10-Q
will in fact prove correct or occur. The Company does not undertake any
obligation to publicly release the results of any revisions to these
forward-looking statements to reflect future events or circumstances.
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 Employment agreement between Karyn Marasco and the
Company, dated May 2, 1997.
11 Statement re: computation of per share earnings.
15.1 Independent Accountants' 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 June
30, 1997.
16
<PAGE> 17
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: August 14, 1997 /s/ David Buddemeyer
-------------------------------
David Buddemeyer
President and
Chief Executive Officer
DATE: August 14, 1997 /s/ Warren M. Knight
-------------------------------
Warren M. Knight
Vice President-Finance and
Chief Financial Officer
17
<PAGE> 1
EXHIBIT 10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective this 2nd
day of May, 1997 by and between Karyn Marasco ("Employee") and Servico, Inc., a
Florida corporation ("Employer").
WITNESSETH:
WHEREAS, Employer desires to obtain the services of Employee and
Employee desires to make her services available to Employer, all upon the terms
and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, Employer and Employee hereby
agree as follows:
1. Offer and Acceptance of Employment. During the term hereof,
Employer agrees to employ Employee as an executive vice president and its chief
operating officer and Employee agrees to accept such employment and agrees to
discharge faithfully, diligently and to the best of her ability the
responsibilities of such position during the term hereof.
2. Scope of Employment. During the term of this Agreement,
Employee agrees to devote her full time, attention, energies and skills to the
business of Employer for the performance of her duties as set forth in this
Agreement. Nothing in this Agreement shall preclude Employee from spending
reasonable periods of time required for the management of personal investments,
so long as such activities do not interfere with the regular performance of her
duties and responsibilities under this Agreement.
3. Term. Unless sooner terminated in accordance with the
provisions and conditions of this Agreement, the initial term of this Agreement
will be for a three-year period commencing on the date hereof. The term of this
Agreement shall automatically be extended for additional one-year periods on the
terms, provisions and conditions set forth herein unless either party notifies
the other in writing, at least 30 days prior to the end of the initial term or
any extension thereof, of its or her (as the case may be) desire not to extend
the Agreement for an additional term. Any material diminution by Employer of
Employee's duties and responsibilities without her prior written consent shall
constitute a termination of this Agreement by Employer.
4. Compensation.
4.1 Base Salary. Employer agrees to pay to Employee
a base salary ("Base Salary") of Two Hundred Fifteen Thousand Dollars
($215,000.00) per year during the term of this
<PAGE> 2
Agreement. The Base Salary shall be payable in accordance with Employer's
regular payroll practices, subject to applicable taxes and withholdings.
Employee's Base Salary shall be reviewed periodically for merit increases and
may, by action, and in the absolute discretion of Employer's Board of Directors,
be increased at any time and from time to time. No such increase shall at any
time operate as a cancellation of this Agreement and any such increase shall
operate merely as an amendment hereof, effective upon adoption of a resolution
of the Board of Directors of Employer, without any further action by Employee or
Employer. In the event of any such increase, all other terms of this Agreement
shall remain unmodified.
4.2 BONUSES. During the term of this Agreement, the
Board of Directors of Employer in its absolute discretion, from time to time,
may authorize the payment by Employer to Employee of one or more incentive
bonuses in such amounts as the Board of Directors deems advisable but in any
event Employee shall be entitled to participate in the bonus program for key
employees if such a program is made available to other of Employer's executive
officers.
4.3 STOCK OPTIONS. As additional compensation for
services rendered pursuant to this Agreement and the Employee's performance and
observation of the provisions of this Agreement, Employee will be granted
options to acquire 50,000 shares of the common stock of Employer which shall
vest with respect to 10,000 shares upon the date of grant and 10,000 shares will
vest on each anniversary thereafter. The exercise price shall be equal to the
fair market value on the date of grant which shall be as soon as practicable
after the commencement of employment.
5. BUSINESS EXPENSES; BENEFITS.
5.1 BUSINESS EXPENSES. Upon submission of proper
documentation by Employee to Employer, Employer shall reimburse Employee for all
reasonable business expenses incurred by Employee in connection with the
discharge of her duties hereunder and the furtherance of the business of
Employer and in specific accordance with the travel and entertainment expense
policy of Employer as adopted by the Board of Directors of Employer from time to
time. The reimbursement obligations of Employer under this Section 5.1 shall
survive the expiration or termination of this Agreement.
5.2 BENEFITS. During the term of this Agreement,
Employee shall be entitled to receive paid health insurance for herself and her
immediate family and shall be entitled to participate, on the same basis and
subject to the same qualifications as pertain to other executives, in such
disability plans and benefit plans or programs as are generally provided by
Employer to its executive employees. Employee shall also be entitled to paid
vacation time in accordance with the policies of Employer, but not less than
four weeks annually; provided that Employee shall not be entitled to any
additional compensation for any vacation time not used by her.
6. CONFIDENTIAL INFORMATION. Employee shall not, during the
term of her employment hereunder nor thereafter, divulge, except in the regular
course of and to further Employer's business, any information which is
confidential and proprietary to Employer; provided, however, that Employee has
no obligation to refrain from using or disclosing to others any such knowledge
or information which is or hereafter shall become available to the public other
than by disclosure by Employee or anyone else who has an obligation of
confidentiality with respect to such
<PAGE> 3
information.
7. Other Employment. Employee shall not, during the term of
her employment hereunder, participate directly or indirectly, in any manner, as
a partner, officer, director, stockholder, advisor, consultant, employee or in
any other capacity in any other business competitive with Employer's business;
provided, however, that nothing herein shall be deemed to prevent or limit the
right of Employee to own not more than 1% of the outstanding common stock of a
corporation, if, at the time of the acquisition by Employee such stock is listed
on a national securities exchange, is reported on NASDAQ, or is regularly traded
in the over-the-counter market by a member of a national securities exchange.
8. Termination of Employment.
8.1 Severance. Employer shall have the right, at
any time, to terminate the employment of Employee hereunder. Unless Employee's
employment is terminated for cause pursuant to Section 8.4, Employee shall be
entitled to her Base Salary and other benefits under this Agreement for the
greater of the unexpired term of this Agreement or one year.
8.2 Disability. Employer shall at all times have
the right, upon 30 days prior notice to Employee, to terminate Employee's
employment hereunder at any time after Employee shall be unable to perform the
duties to be rendered by her hereunder, for whatever cause, including but not
limited to, mental or physical incapacity, illness or disability (collectively,
"Disability") for a continuous period of more than 120 days or for a period of
150 days during any consecutive 365 day period. In the event of any such
termination for Disability, Employee shall be entitled to be paid her Base
Salary and other benefits to the date which is 30 days following the date of
termination and Employer shall have no further obligation or liability hereunder
(other than for reimbursement for reasonable business expenses in accordance
with the provisions hereof).
8.3 Death. In the event of the death of Employee
during the term of her employment hereunder, Employee's personal representative
shall be entitled to receive Employee's Base Salary and other benefits to the
date which is 30 days following the date of Employee's death and Employer shall
have no further obligation or liability hereunder (other than for reimbursement
for reasonable business expenses in accordance with the provisions hereof);
provided, however, that her estate or beneficiaries shall have a period of 12
months after her death during which to exercise the vested options held by her
on the date of her death.
8.4 Termination for Cause. The employment of
Employee hereunder may be terminated by Employer at any time for proven
deliberate and premeditated acts against the interests of Employer, material
breach by Employee of this Agreement which is not cured within 30 days of
written notice given to Employee by Employer, Employee's conviction of a
criminal act that constitutes a felony or Employee's conviction of a criminal
act that constitutes embezzlement or fraud with respect to property of Employer.
If the employment of Employee is terminated for cause, Employee's compensation,
Base Salary and benefits hereunder shall terminate as of the date of such
termination and Employer shall have no further obligation or liability hereunder
(other than for reimbursement for reasonable business expenses in accordance
with the provisions hereof).
<PAGE> 4
8.5 Voluntary Termination. Employee may voluntarily
terminate her employment under this Agreement upon 30 days prior notice to
Employer and upon such termination Employee's compensation, Base Salary and
benefits hereunder shall terminate as of the date of such termination and
Employer shall have no further obligation or liability hereunder (other than for
reimbursement for reasonable business expenses in accordance with the provisions
hereof).
8.6 Return of Materials. Employee shall, upon any
termination of her employment hereunder, immediately return to Employer any and
all materials, and copies thereof, previously received or obtained by her from
Employer or prepared by her in connection with her employment hereunder and all
files, letters, memoranda, reports, records, computer programs, listings or
other written, photographic or other tangible material containing any trade
secret of Employer whether created by her, employees of Employer or others which
shall come into her possession.
9. Non-Solicitation of Employees. Without the prior consent
of Employer, Employee shall not, within one year after the termination of her
employment hereunder, solicit or cause or authorize directly or indirectly to be
solicited for employment for or on behalf of herself or any persons, firms,
corporations or other entities, any persons who are, as of the date of such
termination, employees of Employer for the purpose of requesting them or
presenting opportunities for them to leave their employment with Employer.
10. Miscellaneous.
10.1 Waiver Not Consent. Any waiver of any breach of
this Agreement shall not be construed to be a continuing waiver or consent to
any subsequent breach by either party hereto.
10.2 Binding Effect. This Agreement shall be
enforceable in accordance with its terms by the parties hereto and shall be
binding upon, and inure to the benefit of, Employer and its successors and
assigns and shall inure to the benefit of Employee and her heirs and assigns.
10.3 Notices. Any notice hereunder shall be
delivered by hand, telegram, cable, telecopier, telex or prepaid overnight
carrier or sent by registered or certified mail, addressed:
If to Employer: Servico, Inc.
1601 Belvedere Road
West Palm Beach, Florida 33406
Attention: Chief Executive Officer
If to Employee: Karyn Marasco
727 Delafalle Court
Naperville, Illinois 60565
Any such notice shall become effective (a) if mailed, either when received or
when the delivery thereof has been attempted and acceptance has been refused,
and (b) in the case of delivery by hand, telegram, cable, facsimile, telex or
prepaid overnight carrier, upon delivery.
<PAGE> 5
10.4 GOVERNING LAW, ENTIRE AGREEMENT. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Florida. This Agreement supercedes any prior agreements or understandings, oral
or written, with respect to the employment of Employee by Employer, and contains
the entire understanding and agreement between the parties subject only to the
terms and conditions of that certain letter agreement between Employer and
Employee, granting Employee rights pursuant to the Employer's severance policy
for its executive officers in the event of a change in control of Employer, as
defined in such letter, which by its terms provides for a credit of any payments
made pursuant to this Agreement against any payments due pursuant to such
executive severance policy. This Agreement may not be amended, modified or
supplemented in any respect, except by a subsequent written agreement entered
into by the parties hereto.
10.5 NO THIRD PARTY BENEFICIARY. Nothing expressed
or implied in this Agreement is intended, or shall be construed, to confer upon
or give any person other than the parties hereto and their respective heirs,
personal representatives, legal representatives, successors and assigns, any
rights or remedies under or by reason of this Agreement.
10.6 WITHHOLDING. All compensation or amounts
payable by Employer, or property to be distributed by Employer, to Employee
pursuant to the provisions hereof may be net of an amount sufficient to satisfy
withholding tax requirements of any government or governmental unit.
10.7 CAPTIONS. The section headings contained herein
are for reference and convenience only and shall not affect the construction of
any provision of this Agreement.
10.8 ARBITRATION. Any controversy or claim arising
out of or relating to this Agreement, any interpretation hereof or breach hereof
shall be resolved by binding arbitration in West Palm Beach, Florida and in
accordance with the rules of the American Arbitration Association, and any
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
IN WITNESS WHEREOF, the parties hereto have executed or duly caused the
execution of this Agreement as of the day and year above written.
EMPLOYER:
SERVICO, INC.
a Florida corporation
By: /s/David Buddemeyer
Its: President
EMPLOYEE:
/s/ Karyn Marasco
Karyn Marasco
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Weighted average common
shares outstanding 9,525 9,316 9,476 9,218
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 428 485 468 446
------- ------- ------- -------
Total 9,953 9,801 9,944 9,664
======= ======= ======= =======
Income before extraordinary item $ 4,143 $ 3,250 $ 4,452 $ 5,486
Extraordinary item:
Loss on early extinguishment of
debt, net of income taxes (3,751) (202) (3,751) (202)
------- ------- ------- -------
Net income $ 392 $ 3,048 $ 701 $ 5,284
======= ======= ======= =======
Per share amount:
Income before extraordinary item $ .42 $ .33 $ .45 $ .57
Extraordinary item (.38) (.02) (.38) (.02)
------- ------- ------- -------
Net income $ .04 $ .31 $ .07 $ .55
======= ======= ======= =======
FULLY DILUTED
Weighted average common shares
outstanding 9,525 9,316 9,476 9,218
Net effect of dilutive stock options-
based on the treasury stock method
using the period-end market price,
if higher than average market price 428 500 468 450
------- ------- ------- -------
Total 9,953 9,816 9,944 9,668
======= ======= ======= =======
Income before extraordinary item $ 4,143 $ 3,250 $ 4,452 $ 5,486
Extraordinary item:
Loss on early extinguishment of
debt, net of income taxes (3,751) (202) (3,751) (202)
------- ------- ------- -------
Net income $ 392 $ 3,048 $ 701 $ 5,284
======= ======= ======= =======
Per share amount:
Income before extraordinary item $ .42 $ .33 $ .45 $ .57
Extraordinary item (.38) (.02) (.38) (.02)
------- ------- ------- -------
Net Income $ .04 $ .31 $ .07 $ .55
======= ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 15.1
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and
Shareholders
Servico, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Servico, Inc. and subsidiaries as of June 30, 1997, the related condensed
consolidated statements of income for the three-month and six-month periods
ended June 30, 1997 and 1996, the condensed consolidated statement of
stockholders' equity for the six-month period ended June 30, 1997 and the
condensed consolidated statement of cash flows for the six-month periods ended
June 30, 1997 and 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, 1996, 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 13, 1997, 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, 1996 and the condensed consolidated statement of
stockholders' equity for the year ended December 31, 1996 is fairly stated, in
all material respects, in relation to the consolidated balance sheet and the
consolidated statement of stockholders' equity from which they have been
derived.
/s/ Ernst & Young LLP
July 31, 1997
<PAGE> 1
EXHIBIT 15.2
July 31, 1997
Board of Directors and Stockholders
Servico, Inc.
We are aware of the incorporation by reference in the Registration Statements
(Form S-3 No. 333-27303, 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.
and subsidiaries for the registration of 11,500,000, 1,000,000, 150,000,
250,000, 1,620,100 and 800,000 shares, respectively, of its common stock of our
report dated July 31, 1997 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 June 30, 1997.
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1997 AND CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED IN
THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDING JUNE 30, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 24,765
<SECURITIES> 0
<RECEIVABLES> 9,941
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,224
<PP&E> 386,813
<DEPRECIATION> 0
<TOTAL-ASSETS> 457,936
<CURRENT-LIABILITIES> 36,686
<BONDS> 183,021
0
0
<COMMON> 195
<OTHER-SE> 210,779
<TOTAL-LIABILITY-AND-EQUITY> 457,936
<SALES> 0
<TOTAL-REVENUES> 133,823
<CGS> 0
<TOTAL-COSTS> 110,216
<OTHER-EXPENSES> (15)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,202
<INCOME-PRETAX> 7,420
<INCOME-TAX> 2,968
<INCOME-CONTINUING> 4,452
<DISCONTINUED> 0
<EXTRAORDINARY> (3,751)
<CHANGES> 0
<NET-INCOME> 701
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
