-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TkqO3iL2G1xSTNgHlt2+T0/+uDH+IYMdCjho0/auoFoE/433Qci8jMO/SmASf/3F +FUny6BheaGblTyadE3HYw== 0000950144-96-002100.txt : 19960629 0000950144-96-002100.hdr.sgml : 19960629 ACCESSION NUMBER: 0000950144-96-002100 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SERVICO INC CENTRAL INDEX KEY: 0000089121 STANDARD INDUSTRIAL CLASSIFICATION: 7011 IRS NUMBER: 650350241 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11342 FILM NUMBER: 96560612 BUSINESS ADDRESS: STREET 1: 1601 BELVEDERE RD STE 501 S CITY: WEST PALM BEACH STATE: FL ZIP: 33406 BUSINESS PHONE: 4076899970 MAIL ADDRESS: STREET 1: 1601 BELVEDERE ROAD CITY: WEST PALM BEACH STATE: FL ZIP: 33406 10-Q 1 SERVICO, INC. FORM 10-Q 3-31-96 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 ------- SERVICO, INC. (Exact name of registrant as specified in its charter) 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)
(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. Class Outstanding as of May 6, 1996 - - ----- ----------------------------- Common 9,289,305
(This report contains 31 sequentially numbered pages.) 1 2 SERVICO, INC. AND SUBSIDIARIES INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Page No. 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
2 3 PART I - FINANCIAL INFORMATION ITEM 1. - FINANCIAL STATEMENTS SERVICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Data)
MARCH 31, DECEMBER 31, 1996 1995 --------- ------------ (Unaudited) 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 ======== ========
See accompanying notes 3 4 SERVICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Share Data) (Unaudited)
THREE MONTHS ENDED MARCH 31, ---------------------------- 1996 1995 ---- ---- 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 ========= =========
See accompanying notes. 4 5 SERVICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In Thousands, Except Share Data) (Unaudited)
Common Stock Additional Total ------------ Paid-In Retained Stockholders' Shares Amount Capital Earnings Equity ----------------- ---------- -------- ------------- 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 ========= ==== ========= ======== ========
See accompanying notes. 5 6 SERVICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
Three Months Ended March 31, ---------------------------- 1996 1995 ---- ---- 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 ========== ==========
See accompanying notes. 6 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 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 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 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 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 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 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 13 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 14 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 EX-10.1 2 MORTGAGE NOTE 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"). 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 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"). 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 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. 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 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 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)) 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 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 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. 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. 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 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 EX-11 3 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (In Thousands, Except Share Data)
THREE MONTHS ENDED MARCH 31, ---------------------------- 1996 1995 ---- ---- 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 ======= ======
EX-15.1 4 ERNST & YOUNG REVIEW REPORT 1 [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
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. EX-15.2 5 LETTER FROM ERNST & YOUNG 1 [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
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. EX-27 6 FINANCIAL DATA SCHEDULE
5 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 1,000 3-MOS DEC-31-1996 MAR-31-1996 16,527 0 9,074 0 0 33,954 294,571 0 352,943 35,994 226,812 0 0 93 66,684 352,943 0 52,599 0 45,857 (2,985) 0 6,001 3,726 1,490 2,236 0 0 0 2,236 .24 .24
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