1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30,1999
Commission file number 001-13950
CENTRAL PARKING CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Tennessee 62-1052916
- --------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2401 21st Avenue South,
Suite 200, Nashville, Tennessee 37212
- --------------------------------------------- ----------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (615) 297-4255
-----------------
Former name, address and 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 the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.
Class Outstanding at August 12,1999
- --------------------------------------- ----------------------------------
Common Stock, $0.01 par value 36,722,476
2
INDEX
CENTRAL PARKING CORPORATION
PART 1. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets
-- September 30, 1998 and June 30, 1999........................ 3
Condensed consolidated statements of earnings
-- three and nine months ended June 30, 1998 and 1999.......... 4
Condensed consolidated statements of cash flows
-- nine months ended June 30, 1998 and 1999.................... 5
Notes to condensed consolidated financial statements........... 6-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 11-18
PART 2. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............ 19
Item 6. Exhibits and Reports on Form 8-K............................... 19
SIGNATURES .................................................... 20
3
CENTRAL PARKING CORPORATION
Condensed Consolidated Balance Sheets
Unaudited
Dollar amounts in thousands
September 30, June 30,
Assets 1998 1999
------ ---- ----
Current assets:
Cash and cash equivalents $ 39,495 $ 40,938
Management accounts receivable 19,847 28,943
Accounts and current portion of notes receivable - other 14,921 23,296
Prepaid rent and other expenses 22,695 31,297
Deferred income taxes 545 367
Prepaid and refundable income taxes 1,266 3,376
----------- -----------
Total current assets 98,769 128,217
Investments, at amortized cost 5,087 5,398
Notes receivable, less current portion 46,524 58,295
Property, equipment, and leasehold improvements, net 382,506 414,166
Contract and lease rights, net 62,472 99,494
Goodwill, net 288,170 280,149
Investment in and advances to partnerships and joint ventures 40,376 30,855
Other assets 30,118 35,343
----------- -----------
$ 954,022 $ 1,051,917
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt and capital lease obligation $ 2,881 $ 16,987
Accounts payable 54,918 69,447
Accrued payroll and related costs 16,908 14,793
Accrued expenses 27,403 16,754
Management accounts payable 26,611 33,565
Income taxes payable 945 2,119
----------- -----------
Total current liabilities 129,666 153,665
Long-term debt and capital lease obligations 283,319 350,312
Deferred rent 14,875 16,424
Deferred compensation 11,359 12,034
Deferred income taxes 32,894 29,107
Other liabilities 6,892 5,317
Minority interest 23,103 30,399
----------- -----------
Total liabilities 502,108 597,258
Company-obligated manditorily redeemable convertible
securities of subsidiary whose sole assets are
convertible subordinated debentures of the Company 110,000 110,000
Shareholders' equity:
Common stock, $.01 par value; 50,000,000 shares authorized,
36,719,409 and 36,521,500 shares issued and outstanding,
respectively 366 367
Additional paid -in capital 256,405 259,314
Foreign currency translation adjustment (150) (29)
Retained earnings 85,795 85,467
Deferred compensation on restricted stock (502) (460)
----------- -----------
Total shareholders' equity 341,914 344,659
----------- -----------
$ 954,022 $ 1,051,917
=========== ===========
See accompanying notes to condensed consolidated financial statements
Page 3 of 20
4
CENTRAL PARKING CORPORATION
Condensed Consolidated Statements of Earnings
Unaudited
Dollar amounts in thousands
Three Months Ended June 30, Nine Months Ended June 30,
1998 1999 1998 1999
---- ---- ---- ----
Revenues:
Parking $ 148,590 $ 168,009 $ 383,090 $ 486,387
Management contract 17,006 22,709 46,561 68,219
--------- --------- --------- ---------
Total revenues 165,596 190,718 429,651 554,606
Costs and expenses:
Cost of parking 121,933 139,724 315,554 404,867
Cost of management contracts 4,217 6,322 11,328 17,991
General and administrative 16,883 19,455 45,511 58,331
Goodwill and non-compete amortization 2,909 2,990 5,495 8,730
Merger costs -- 2,882 -- 37,177
--------- --------- --------- ---------
Total costs and expenses 145,942 171,373 377,888 527,096
--------- --------- --------- ---------
Operating earnings 19,654 19,345 51,763 27,510
Other income (expenses):
Interest income 1,065 1,225 2,853 3,292
Interest expense (7,322) (5,850) (23,159) (20,839)
Dividends on Company-obligated mandatorily redeemable
convertible securities of a subsidiary trust (1,515) (1,545) (1,768) (4,433)
Net gains (losses) on sales of property and equipment (17) 379 (709) 3,187
Minority interest (73) (136) (217) (355)
Equity in partnership and joint venture earnings 1,321 1,425 3,804 3,678
--------- --------- --------- ---------
Other income (expenses), net (6,541) (4,502) (19,196) (15,470)
--------- --------- --------- ---------
Earnings (loss) before income taxes and
extraordinary item 13,113 14,843 32,567 12,040
Income tax expense 5,362 6,169 13,267 9,804
--------- --------- --------- ---------
Net earnings before extraordinary item 7,751 8,674 19,300 2,236
Extraordinary item, net of tax -- -- -- 1,002
--------- --------- --------- ---------
Net earnings $ 7,751 $ 8,674 $ 19,300 $ 1,234
========= ========= ========= =========
Basic earnings per share:
Net earnings before extraordinary item $ 0.21 $ 0.24 $ 0.57 $ 0.06
Extraordinary item, net of tax $ -- $ -- $ -- $ 0.03
Net earnings $ 0.21 $ 0.24 $ 0.57 $ 0.03
Diluted earnings per share:
Net earnings before extraordinary item $ 0.21 $ 0.23 $ 0.56 $ 0.06
Extraordinary item, net of tax $ -- $ -- $ -- $ 0.03
Net earnings $ 0.21 $ 0.23 $ 0.56 $ 0.03
Page 4 of 20
5
CENTRAL PARKING CORPORATION
Condensed Consolidated Statements of Cash Flows
Dollar amounts in thousands
Nine Months Ended June 30,
1998 1999
---- ----
Cash flows from operating activities:
Net earnings before extraordinary item $ 19,300 $ 2,236
Extraordinary item, net of tax -- (1,002)
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 11,158 16,870
Amortization of goodwill and non-compete 5,495 8,730
Amortization of contract and lease rights, deferred
rent, deferred financing fees and other 3,155 6,793
Equity in partnership and joint venture earnings (3,804) (3,678)
Distributions from partnerships and ventures 2,303 3,089
Net (gains) losses on sales of property and equipment 709 (3,187)
Deferred income taxes 821 (3,609)
Minority interest 1,041 1,899
Charge for Edison Minority interest write-up -- 7,000
Changes in operating assets and liabilities,
excluding acquisitions:
(Increase) decrease in management accounts receivable (2,756) (9,096)
(Increase) decrease in notes and accounts receivable - other 225 (5,970)
(Increase) decrease in prepaid expenses (3,025) (9,602)
(Increase) decrease in prepaid and refundable income taxes 2,154 (2,110)
(Increase) decrease in other assets (697) 3,515
Increase (decrease) in accounts payable, accrued expenses,
and deferred compensation 1,908 (2,720)
Increase (decrease) in management accounts payable 7,402 6,954
Increase (decrease) in income taxes payable 3,884 1,174
--------- ---------
Net cash provided by operating activities 49,273 17,286
--------- ---------
Cash flows from investing activities:
Proceeds from sales of property and equipment 6,256 21,205
Purchase of property, equipment, and leasehold improvements (57,470) (28,799)
Investment in notes receivable (350) (14,176)
Purchase of contract rights and lease rights (887) (43,436)
Investment in and advances to partnerships, joint ventures
and unconsolidated subsidiaries 6,396 (865)
Purchase of interest in a limited liability company -- (20,474)
Acquisitions of companies, net of cash acquired (214,162) --
Purchase of investments (224) (311)
--------- ---------
Net cash used by investing activities (260,441) (86,856)
--------- ---------
Cash flows from financing activities:
Dividends paid (1,429) (1,436)
Net borrowings under revolving credit agreement, net of
issuance costs (18,914) 96,104
Proceeds from issuance of Company-obligated mandatorily
redeemable securities, net of issuance costs 106,000 --
Proceeds from issuance of notes payable, net of issuance costs 122,723 246,797
Principal repayments on notes payable and capital leases (108,449) (284,757)
Distribution of debt proceeds from partnerships and joint ventures 30,286 --
Proceeds from issuance of common stock and exercise
of stock options, net 101,851 2,879
--------- ---------
Net cash provided by financing activities 232,068 59,587
--------- ---------
Foreign currency translation 122 177
--------- ---------
Net increase (decrease) in cash and cash equivalents 21,022 (9,806)
Cash and cash equivalents at beginning of period 17,308 39,495
Cash impact of merger restatement -- 11,249
--------- ---------
Cash and cash equivalents at end of period $ 38,330 $ 40,938
========= =========
Non-cash transactions:
Reduction of investment in partnership $ -- $ 7,690
Purchase of interest in LLC $ -- $ (7,690)
Issuance of restricted stock $ -- $ 60
Issuance of stock in acquisitions $ 40,185 $ --
Effects of acquisitions:
Estimated fair value of assets acquired $ 97,199 $ 20,474
Purchase price in excess of the net assets acquired 212,440 --
Estimated fair value of liabilities assumed (47,079) --
Stock issued (40,185)
--------- ---------
Cash paid $ 222,375 $ 20,474
Less cash acquired (8,213) --
--------- ---------
Net cash paid for acquisitions $ 214,162 $ 20,474
========= =========
Page 5 of 20
6
CENTRAL PARKING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Central Parking Corporation ("Central Parking" or the "Company") have been
prepared in accordance with generally accepted accounting principles and with
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. All significant
intercompany transactions have been eliminated in consolidation. Operating
results for the three and nine months ended June 30, 1999 are not necessarily
indicative of the results that may be expected for the fiscal year ending
September 30, 1999. For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended September 30, 1998 (included
in the Company's Annual Report on Form 10-K, and restated in form 8-K). Certain
items have been restated to conform to current year presentation.
MERGERS AND ACQUISITIONS
New York Partnership On May 28, 1999 the Company purchased the remaining 60%
interest in a partnership, a limited liability company, which operates a parking
facility in New York City for $20.5 million in cash. The Company previously
owned 40% of the partnership. The previous partner will continue to manage the
garage for the next 7 years.
Prime Group Realty Trust On May 10, 1999, the Company announced a definitive
agreement to purchase a parking facility that is being developed in Chicago by a
wholly owned subsidiary of Prime Group Realty Trust (NYSE: PGE). The purchase
price is approximately $37.3 million. The garage will have a total of 1,018
parking spaces as well as 4,200 square feet suitable for retail. Under the terms
of the agreement, the purchase will occur upon completion of the parking
facility, which is expected in the latter part of 2000.
Allright Holdings, Inc. On March 19, 1999, the Company completed a merger with
Allright Holdings, Inc. ("Allright"), pursuant to which approximately 7.0
million shares of Central Parking common stock and approximately 0.5 million
options and warrants to purchase common stock of Central Parking, were exchanged
for all of the outstanding shares of common stock and options and warrants to
purchase common stock of Allright. The transaction, constituting a tax-free
exchange, has been accounted for as a pooling-of-interests under APB Opinion No.
16. Accordingly, prior period financial statements presented have been restated
to include the combined results of operations, financial position and cash flows
of Allright as if it had been part of Central Parking from the date of
Allright's inception, October 31, 1996. Prior to the consummation of the merger,
Allright's fiscal year end was June 30. In recording the business combination,
Allright's fiscal year end has been restated to reflect a September year end to
conform to Central Parking's fiscal year end. As a result of restating financial
information of both companies, the quarter ending September 30, 1998 for
Allright has been recorded directly to shareholders' equity, and is not included
in year-to-date information presented in the accompanying consolidated financial
statements. In addition, the consolidated income tax provision has been restated
on a combined basis. The impact of the restatement was to increase net earnings
by $849 thousand and to decrease net earnings by $533 thousand in fiscal 1997
and 1998, respectively. There were no material transactions between Central
Parking and Allright prior to the Merger.
The Company incurred $37.2 million of merger related expenses on a pretax basis
as of June 30, 1999 that were reported as operating expenses. Included in these
costs are approximately $19.3 million in professional fees; comprised of
investment banking, legal, accounting, and consulting fees; $9.0 million related
to employment agreements and severance; $7 million related to the restructuring
agreement with the limited partner of Edison; and the balance of $1.9 million in
travel, supplies, printing and other out of pocket expenses. In connection with
the Merger, Allright entered into certain employment and management continuity
agreements. Under such agreements, certain payments will be made which are
contingent upon continued employment through certain dates.
Allied Parking On October 1, 1998, Allright purchased from Allied Parking, Inc.
("Allied") four leases relating to parking facilities in New York City, with
maturities ranging from 2006 to 2029 for approximately $14.2 million. Allied
agreed to lease to Allright two more lots for 19 years, each in exchange for a
note receivable of $4.9 million, secured by an assignment of rents. Allright
also purchased the right to use the "Allied Parking" name associated with these
leases for $835 thousand.
On November 8, 1998, Allright purchased six additional leases from Allied
Parking with maturities ranging from 1999 to 2008 for $5.1 million. Allright
also purchased the right to use the "Allied Parking" name associated with these
leases for $300 thousand.
Page 6 of 20
7
During April 1999, the Company purchased an additional lease from Allied Parking
which matures in 2020 for $3.0 million, and also purchased the right to use the
"Allied Parking" name associated with it as part of the purchase price.
Sterling Parking, Inc. On July 1, 1998, Central Parking purchased substantially
all of the assets of Sterling Parking, Inc. ("Sterling"), a privately-held
parking company headquartered in Atlanta, Georgia for $4.3 million, including
$2.1 million in cash, including transaction fees and other related expenses, and
$2.2 million (54,358 shares) in Central Parking common stock. Sterling operated
parking facilities in Georgia, Florida, Virginia, California, and Kentucky. The
results of operations are included in the Company's consolidated financial
statements from July 1, 1998. The acquisition was accounted for as a purchase
and, accordingly, the purchase price has been allocated to Sterling's assets and
liabilities. The excess of purchase price over fair value of net assets acquired
of $4.5 million is being amortized on a straight-line basis over 10 years.
Turner Parking System, Inc. On April 1, 1998, Central Parking purchased
substantially all of the assets of Turner Parking System, Inc. ("Turner"), a
privately-held parking company headquartered in Dallas, Texas, for $3.8 million,
including $3.0 million in cash and $800 thousand (16,842 shares) in Central
Parking common stock. Turner operated parking facilities in Texas, Florida,
California, Georgia, and Washington, D.C. The results of operations are included
in the Company's consolidated financial statements from April 1, 1998. The
acquisition was accounted for as a purchase and, accordingly, the purchase price
has been allocated to Turner's assets and liabilities. The excess of purchase
price over fair value of net assets acquired of $3.7 million is being amortized
on a straight-line basis over 10 years.
Central Parking System of Louisiana, Inc. Central Parking has historically owned
50% of Central Parking System of Louisiana ("CPS-Louisiana") and on March 30,
1998, purchased the remaining 50% from Property Service Corporation for $2.5
million in Central Parking common stock (52,631 shares). The acquisition was
accounted for as a purchase and, accordingly, the purchase price has been
allocated to CPS -Louisiana assets and liabilities. The excess of purchase price
over fair value of net assets acquired of $2.5 million is being amortized on a
straight-line basis over 5 years.
Kinney System Holding Corp. On February 12, 1998, Central Parking acquired
Kinney System Holding Corp ("Kinney"), a privately held parking company
headquartered in New York City, for approximately $208.8 million, including
$171.8 million in cash, including transaction fees and related expenses, and
$37.0 million (882,422 shares) in Central Parking common stock. In connection
with this transaction, Central Parking assumed $10.3 million in capital leases,
refinanced $24.2 million in existing Kinney debt and assumed $4.6 million of
Kinney debt. Central Parking financed the Kinney acquisition through borrowings
under the Company's credit facility, and ultimately from the issuance of Central
Parking common stock and Central Parking obligations pursuant to the Trust
Issued Preferred Securities. Kinney operated 403 parking facilities containing
approximately 168,800 spaces, including approximately 76,700 in the New York
City metropolitan area, 42,800 in Boston, 31,100 in Philadelphia and 10,300 in
Washington, D.C. At the time of the acquisition, Kinney's facility mix was
comprised of 225 leased sites, 170 managed sites and 8 owned sites. The
acquisition was accounted for as a purchase and the results of operations are
included in the Company's consolidated financial statements from February 12,
1998. The excess of purchase price over the fair value of net assets acquired of
$197.6 million is being amortized on a straight-line basis over 30 years.
In connection with the Kinney acquisition, the remaining 50% interest in
Spectrum Parking Associates ("Spectrum") was acquired for $3.6 million. The
acquisition was accounted for as a purchase and the results of operations are
included from February 13, 1998. The excess of purchase price over the fair
value of net assets acquired of $2.2 million is being amortized on a
straight-line basis over 18 years.
National Garages, Inc. On December 1, 1997, Allright purchased substantially all
of the assets of National Garages, Inc. ("National"), a privately owned parking
company based in Detroit, which operates 210 facilities located primarily in the
Midwestern United States. The purchase price of approximately $3.7 million was
paid in cash and financed through working capital and $2.2 million in debt under
Allright's previous revolving line of credit.
Edison Restructuring Agreement. In conjunction with the Company's merger with
Allright, Allright entered into a restructuring agreement whereby Allright
loaned an additional $9.9 million to the limited partner and amended certain
other related agreements. In addition, the parties agreed that the limited
partner's capital account would be increased to $29.4 million as of the
effective date of the restructuring, which coincided with the consummation date
of the merger with Allright. As a result of this increase in the limited
partner's capital account, the Company recorded a $7 million charge to
operations concurrent with the merger. Such charge is reflected in merger costs
in the accompanying consolidated statement of earnings for fiscal 1999.
Diplomat Parking Corporation. On October 1, 1997, Central Parking acquired the
stock and certain assets of Diplomat Parking Corporation ("Diplomat") for
approximately $22.2 million in cash and notes payable. Diplomat operated parking
facilities located primarily in Washington, D.C. and Baltimore, Maryland. The
acquisition was accounted for as a purchase, and accordingly, the results of
operations of Diplomat have been included in the Company's consolidated
financial statements from the date of acquisition.
Page 7 of 20
8
The excess of purchase price over the fair value of the net assets acquired of
$20.7 million is being amortized on a straight-line basis over 25 years.
EARNINGS PER SHARE
Basic earnings per share excludes dilution and is computed by dividing income
available to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock, or if restricted shares of common stock were to become fully
vested, that then shared in the earnings of the entity. Earnings per share for
all periods presented have been calculated and presented in accordance with SFAS
No. 128.
The following tables set forth the computation of basic and diluted earnings per
share:
Three Months Ended June 30,
---------------------------
1998 1999
---- ----
Income Common Income Common
Available Shares Per Share Available Shares Per Share
($000's) (000's) Amount ($000's) (000's) Amount
----------- ---------- ----------- ----------- ----------- ----------
Basic earnings per share:
Earnings before extraordinary item $ 7,751 36,167 $ 0.21 $ 8,674 36,402 $ 0.24
Effect of dilutive stock and options:
Stock option plan and warrants -- 477 -- -- 449 (0.01)
Restricted stock plan -- 173 -- -- 173 --
Deferred stock unit plan -- 12 -- -- 34 --
Employee stock purchase plan -- 46 -- -- 20 --
--------- -------- --------- --------- -------- -------
Diluted earnings per share:
Earnings before extraordinary item $ 7,751 36,875 $ 0.21 $ 8,674 37,078 $ 0.23
========= ======== ======= ======= ====== =======
Nine Months Ended June 30,
--------------------------
1998 1999
---- ----
Income Common Income Common
Available Shares Per Share Available Shares Per Share
($000's) (000's) Amount ($000's) (000's) Amount
----------- ---------- ----------- ----------- ----------- ----------
Basic earnings per share:
Earnings before extraordinary item $ 19,300 34,077 $ 0.57 $ 2,236 36,312 $ 0.06
Effect of dilutive stock and options:
Stock option plan and warrants -- 452 (.01) -- 487 --
Restricted stock plan -- 174 -- -- 173 --
Deferred stock unit plan -- 8 -- -- 28 --
Employee stock purchase plan -- 48 -- -- 38 --
--------- -------- ------- ------- ------ --------
Diluted earnings per share:
Earnings before extraordinary item $ 19,300 34,759 $ 0.56 $ 2,236 37,038 $ 0.06
========= ======== ======= ======= ====== ========
Weighted average common shares used for the computation of basic earnings per
share excludes certain common shares issued pursuant to the Company's restricted
stock plan and deferred compensation agreement, because under the related
agreements the holder of such restricted stock may forfeit the shares if certain
employment or service requirements are not met. The effect of the conversion of
the company-obligated mandatory redeemable securities of the subsidiary trust
has not been included in the diluted earnings per share calculation since such
securities are anti-dilutive. At June 30, 1999 and 1998, such securities were
convertible into 2,000,000 shares of common stock. For the three and nine months
ended June 30, 1999, options and warrants to purchase 643,748 and 572,601 shares
respectively, are excluded from the diluted common shares since they are
anti-dilutive.
LONG TERM DEBT
On March 19, 1999, Central Parking established a new credit facility (the "New
Credit Facility") providing for an aggregate of up to $400 million consisting of
a five-year $200 million revolving credit facility including a sub-limit of $25
million for standby letters of credit, and a $200 million five-year term loan.
The principal amount of the term loan shall be repaid in quarterly payments of
$12.5 million commencing June 30, 2000 and continuing until the loan is repaid.
The New Credit Facility bears interest at either prime rate plus 0.5% or LIBOR
plus a margin of 1.125% through June 30, 1999, and thereafter reverts to a
grid-based pricing based upon the
Page 8 of 20
9
Company achieving certain financial ratios. As of June 30, 1999, the rate was
LIBOR plus 1.125%. The New Credit Facility contains covenants including those
that require Central Parking to maintain certain financial ratios, restrict
further indebtedness and limit the amount of dividends paid. Central Parking
used the New Credit Facility to replace Central Parking's previous credit
facility and to refinance the existing debt of Allright Holdings, Inc. The
amount outstanding under the Company's New Credit Facility as of June 30, 1999
is $346.4 million with a weighted average interest rate of 6.07% for the period
from March 19, 1999 through June 30, 1999.
The Company had previously established a credit facility (the "Previous Credit
Facility") providing for an aggregate availability of up to $300 million,
consisting of a five-year $200 million revolving credit facility, including a
sub-limit of $25 million for standby letters of credit, and a $100 million term
loan. The $100 million term loan was repaid with proceeds from debt and equity
offerings completed in March 1998, and the remaining balance of the revolving
credit facility was repaid with proceeds from the New Credit Facility.
In October 1996, Allright entered into a credit agreement for the purpose of
financing the purchase of the predecessor company. The credit facility was
obtained in two tranches with two sub-portions to the first tranche. The first
tranche, sub-part A of $30 million, bore an annual interest rate of one month
LIBOR plus 3.00% through October 30, 1998, and LIBOR plus 3.25% thereafter. The
first tranche, sub-part B of $125 million bore an annual interest rate of LIBOR
plus 3.00% through October 31, 1998, and LIBOR plus 3.25% thereafter. The second
tranche, of $30 million, bore an annual interest rate of 12.25% up to October
30, 1998, and 12.5% thereafter. All tranches were set to mature October 30,
1999. These obligations were repaid upon consummation of the Merger from
proceeds of the New Credit Facility. In connection with the repayment of such
amounts, the Company recognized an extraordinary loss of $1.5 million ($1.0
million, net of tax).
On March 18, 1998, the Company created Central Parking Finance Trust ("Trust")
which completed a private placement of 4,400,000 shares at $25.00 per share of
5.25% convertible trust issued preferred securities ("Preferred Securities")
pursuant to an exemption from registration under the Securities Act of 1933, as
amended. The Preferred Securities represent preferred undivided beneficial
interests in the assets of Central Parking Finance Trust, a statutory business
trust formed under the laws of the State of Delaware. The Company owns all of
the common securities of the Trust. The Trust exists for the sole purpose of
issuing the Preferred Securities and investing the proceeds thereof in an
equivalent amount of 5.25% Convertible Subordinated Debentures ("Convertible
Debentures") of the Company due 2028. The net proceeds to the Company from the
Preferred Securities private placement were $106.5 million. Each Preferred
Security is entitled to receive cumulative cash distributions at an annual rate
of 5.25% (or $1.312 per share) and will be convertible at the option of the
holder thereof into shares of Central Parking common stock at a conversion rate
of 0.4545 shares of Central Parking common stock for each Preferred Security
(equivalent to $55.00 per share of Central Parking common stock), subject to
adjustment in certain circumstances. The Preferred Securities do not have a
stated maturity date but are subject to mandatory redemption upon the repayment
of the Convertible Debentures at their stated maturity (April 1, 2028) or upon
acceleration or earlier repayment of the Convertible Debentures.
The Company's consolidated balance sheets reflect the Preferred Securities of
the Trust as company-obligated mandatorily redeemable convertible securities of
a subsidiary whose sole assets are convertible subordinated debentures of the
Company. The consolidated results of operations reflect dividends on the
Preferred Securities.
RECENT ACCOUNTING PRONOUNCEMENTS
Accounting for Derivative Instruments. In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("Statement 133"). Statement 133 established reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts. Under SFAS No. 133, the Company would recognize all
derivatives as either assets or liabilities, measured at their fair value, in
the statement of financial position. In July 1999, SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of Effective Date of
FASB No. 133, An Amendment of FASB Statement No. 133" was issued deferring the
effective date of Statement 133 to fiscal years beginning after June 15, 2000.
The Company is in the process of evaluating the impact, if any, these
pronouncements will have on its financial statements.
Accounting for the cost of Computer Software. In March 1998, the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," effective for fiscal years beginning after December 16, 1998. SOP
98-1 defines which costs incurred to develop or purchase internal-use software
should be capitalized and which should be expensed. The Company is in the
process of determining what impact, if any, this pronouncement will have on its
financial statements.
Page 9 of 20
10
Comprehensive Income. In June 1997, the Financial Accounting Standards Board
issued SFAS No. 130, "Reporting Comprehensive Income" ("Statement 130").
Statement 130 established standards for reporting and display of comprehensive
income and its components. Comprehensive income is the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. Comprehensive income includes all changes
in equity except those resulting from investments by and distributions to
owners. The Company's other comprehensive income consists of foreign currency
translation, which is recorded to shareholders' equity, net of tax. Other
comprehensive gain (loss) for the nine month periods ended June 30, 1999 and
1998 was $214 thousand and ($117) thousand, respectively.
Page 10 of 20
11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report includes various forward-looking statements that are
subject to risks and uncertainties. Forward-looking statements include
discussions concerning future results of operations of the Company including,
without limitation, statements preceded by, followed by or that otherwise
include the words "believes," "expects," "anticipates," "intends," "estimates"
or similar expressions. For those statements, Central Parking Corporation (the
"Company" or "Central Parking") claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.
The following important factors, in addition to those discussed elsewhere in
this Quarterly Report, could affect the future financial results of the Company
and could cause actual results to differ materially from those expressed in
forward-looking statements contained in this document:
- successfully integrating Allright Holdings, Inc. as well as past and
future acquisitions in light of challenges in retaining key employees,
synchronizing business processes and efficiently integrating facilities,
marketing, and operations;
- successful implementation of the Company's operating and growth strategy,
including possible strategic acquisitions;
- fluctuations in quarterly operating results caused by a variety of
factors including the timing of gains on sales of owned facilities,
preopening costs, the effect of weather on travel and transportation
patterns, and local, national and international economic conditions.
- the ability of the Company to form and maintain its strategic
relationships with certain large real estate owners and operators;
- the ability of the Company to successfully implement Year 2000
compliance measures;
- global and/or regional economic factors and potential changes in laws and
regulations, including, without limitation, changes in federal, state and
international laws regulating the environment;
OVERVIEW
The Company operates parking facilities under three types of arrangements:
leases, fee ownership, and management contracts.
On March 19, 1999, Central Parking completed a merger (the "Merger") with
Allright Holdings, Inc. ("Allright"). The transaction constituted a tax-free
reorganization and has been accounted for as a pooling-of-interests under
Accounting Principles Board ("APB") Opinion No. 16, "Business Combinations."
Refer to the accompanying notes to the condensed consolidated financial
statements.
Parking revenues consist of Central Parking Corporation and subsidiaries
revenues from leased and owned facilities. Cost of parking relates to both
leased and owned facilities and includes rent, payroll and related benefits,
depreciation (if applicable), maintenance, insurance, and general operating
expenses.
Parking revenues from owned properties amounted to $53.0 million and $44.8
million for the nine months ended June 30, 1999 and June 30, 1998, respectively.
Owned properties parking revenues, as a percentage of parking revenues,
accounted for 10.9% and 11.7% in the nine months ended June 30, 1999 and 1998,
respectively. Ownership of parking facilities, either independently or through
joint ventures, typically requires a larger capital investment than managed or
leased facilities but provides maximum control over the operation of the parking
facility and the greatest profit potential of the three types of operating
arrangements. As the owner, all changes in owned facility revenue and expense
flow directly to the Company. Additionally, the Company has the potential to
realize benefits of appreciation in the value of the underlying real estate if
the property is sold. Central Parking assumes complete responsibility for all
aspects of the property, including all structural, mechanical, or electrical
maintenance or repairs and property taxes.
Parking revenues from leased facilities amounted to $433.4 million and $338.3
million for the first nine months of fiscal 1999 and 1998, respectively. Leased
properties parking revenues, as a percentage of parking revenues, accounted for
89.1% and 88.3% in the nine months ending June 30, 1999 and 1998, respectively.
Leases generally provide for a contractually established payment to the facility
owner, which is either a fixed annual amount, a percentage of gross revenues, or
a combination thereof. As a result, Central
Page 11 of 20
12
Parking's revenues and profits in its lease arrangements are dependent upon the
performance of the facility. Leased facilities require a longer commitment and a
larger capital investment by Central Parking than managed facilities but
generally provide a more stable source of revenue and a greater opportunity for
long-term revenue growth. Under its leases, the Company is typically responsible
for all facets of the parking operations, except for structural, mechanical, or
electrical maintenance or repairs, or property taxes. Lease arrangements are
typically for terms of three to ten years, with renewal options.
Management contract revenues amounted to $68.2 million and $46.6 million for the
nine months ended June 30, 1999 and 1998, respectively. Management contract
revenues consist of management fees (both fixed and percentage of revenues) and
fees for ancillary services such as insurance, accounting, equipment leasing,
and consulting. The cost of management contracts includes insurance premiums and
claims and other indirect overhead. The Company's responsibilities under a
management contract as a facility manager include hiring, training, and staffing
parking personnel, and providing collections, accounting, record keeping,
insurance, and facility marketing services. Generally, Central Parking is not
responsible under its management contracts for structural, mechanical, or
electrical maintenance or repairs, or for providing security or guard services
or for paying property taxes. The typical management contract is for a term of
one to three years and generally is renewable for successive one-year terms, but
is cancelable by the property owner on short notice.
The Company's clients have the option of obtaining insurance on their own or
having Central Parking provide insurance as part of the services provided under
the management contract. Because of its size and claims experience, the Company
can purchase such insurance at discounts to comparable market rates and,
management believes, at lower rates than the Company's clients can generally
obtain on their own. Accordingly, Central Parking generates profits on the
insurance provided under its management contracts.
As of June 30, 1999, Central Parking operated 2,076 parking facilities through
management contracts, leased 2,501 parking facilities, and owned 260 parking
facilities, either independently or in joint venture with third parties.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Parking revenues for the third quarter of fiscal 1999 increased to $168.0
million from $148.6 million in the third quarter of fiscal 1998, an increase of
$19.4 million, or 13.1%. Of the $19.4 million increase, $4.0 million resulted
from the addition of 17 locations as a result of the acquisitions Sterling and
Allied. The remaining $15.4 million is a result of the net addition of 53 leased
and owned locations over the same period last year as well as a combination of
rate increases and higher utilization of parking spaces at existing facilities.
Additionally, the Company converted four previously leased locations to a
management agreement, thereby reducing parking revenues by $3.0 million in the
quarter ended June 30, 1999 as compared to the same quarter of 1998. Revenues
from foreign operations amounted to $6.3 million and $5.4 million, for the
quarters ended June 30, 1999 and 1998 respectively.
Management contract revenues for the third quarter of fiscal 1999 increased to
$22.7 million from $17.0 million in the same period of fiscal 1998, an increase
of $5.7 million or 33.5%. Of the $5.7 million increase, $231 thousand is
attributable to 28 locations added as a result of the Sterling and National
acquisitions. The remaining $5.5 million is attributed to the net addition of
356 management contracts in the three months ended June 30, 1999 as compared to
the same quarter of 1998, and increased management fees on existing locations.
Cost of parking in the third quarter of 1999 increased to $139.7 million from
$121.9 million in the third quarter of 1998, an increase of $17.8 million or
14.6%. Rent expense increased $9.3 million from the third quarter of 1998 to the
third quarter of 1999, principally as a result of new locations from
acquisitions. Payroll increased $4.2 million from the quarter ended June 30,
1998 over the same period in 1999, principally as a result of new locations from
acquisitions and increases in wage rates on existing locations. Cost of parking
as a percentage of parking revenues increased to 83.2% in the third quarter of
fiscal 1999 from 82.1% in fiscal third quarter 1998. This increase was due
primarily to higher payroll, insurance claims, and depreciation as a percentage
of total revenues in the quarter ended June 30, 1999 than in the same quarter of
1998. Additionally, the Company converted four previously leased locations to a
management agreement, thereby reducing costs of parking revenues by $3.0 million
in the quarter ended June 30, 1999 as compared to the same quarter of 1998.
Cost of management contracts in fiscal third quarter 1999 increased to $6.3
million from $4.2 million in the comparable period in 1998, an increase of $2.1
million or 49.9%. The increase in cost reflects higher insurance claims, in
total and as a percentage of management contract revenue, and higher employment
taxes associated with the increase in the number of managed facilities. Cost of
management contracts as a percentage of management contract revenue increased to
27.8% for the third fiscal quarter 1999 from 24.8% for the same period in 1998,
primarily due to the costs of insurance claims.
General and administrative expenses, excluding amortization of goodwill and
non-compete agreements, increased to $19.5 million for
Page 12 of 20
13
the third quarter of fiscal 1999 from $16.9 million in fiscal third quarter
1998, an increase of $2.6 million or 15.2%. This increase is due primarily to
administrative activities associated with increased business volume and expenses
associated with implementation of new accounting systems, including $0.9 million
of additional depreciation related to adopting a shorter life on Allright
related computer assets as a result of the merger integration process. General
and administrative expenses, as a percentage of total revenues remained constant
at 10.2% for both the third quarter of fiscal 1999 and for the third quarter of
fiscal 1998.
Goodwill and non-compete amortization for the third quarter of fiscal 1999
increased to $3.0 million from $2.9 million in fiscal third quarter 1998, an
increase of $100 thousand or 2.8%, as a result of the acquisition of Sterling.
Interest income increased to $1.2 million for the third quarter of fiscal 1999
from $1.1 million in the third quarter of fiscal 1998, an increase of $160
thousand, or 15.0%. The increase in interest income is a result of additional
notes receivable outstanding during the quarter ended June 30, 1999 that were
not outstanding during the same quarter 1998.
Interest expense and dividends on Company-obligated mandatorily redeemable
convertible securities of a subsidiary trust decreased to $7.4 million for the
third quarter of fiscal 1999 from $8.8 million in the third quarter of fiscal
1998, a decrease of $1.4 million or 16.3%. This decrease in interest expense was
primarily attributable to lower interest rates on the Company's overall
outstanding debt as a result of refinancing the Allright debt with the new
Credit Facility. The weighted average balance outstanding under such credit
facilities and convertible securities was $333.6 million during the quarter
ended June 30, 1999, at a weighted average interest rate of 7.8% compared to
$262.0 million during the quarter ended June 30, 1998 at an average interest
rate of 11.0%.
Income taxes increased to $6.2 million for the third quarter of fiscal 1999 from
$5.4 million in the third fiscal quarter in 1998, an increase of $807 thousand
or 15.1%. The effective tax rate for the third fiscal quarter 1999 was 41.6%
compared to 40.9% for the 1998 quarter. The increase in the effective tax rate
is attributable to a combination of an increase in non-tax deductible goodwill
amortization and certain non-deductible merger expenses included in operating
expenses.
NINE MONTHS ENDED JUNE 30, 1999 COMPARED TO NINE MONTHS ENDED JUNE 30, 1998
Parking revenues for the nine months ended June 30, 1999 increased to $486.4
million from $383.1 million in the same period of fiscal 1998, an increase of
$103.3 million, or 26.9%. Of the $103.3 million increase, $54.1 million resulted
from the acquisitions of Kinney, Turner, Allied and Sterling's 267 leased and
owned locations. The remaining increase of $49.2 million, resulted from the net
addition of 53 leased and owned locations over the same period last year as well
as a combination of rate increases and higher utilization of parking spaces at
existing facilities. During the quarter ended December, 31, 1998, the Company
converted four previously leased locations to a management agreement. This
conversion reduced parking revenues by $8.1 million in the first nine months of
fiscal 1999 as compared to the same period of fiscal 1998. Revenues from foreign
operations amounted to $25.7 million and $25.2 million, for the nine months
ended June 30, 1999 and 1998, respectively.
Management contract revenues for the first nine months of fiscal 1999 increased
to $68.2 million from $46.6 million in the same period of fiscal 1998, an
increase of $21.6 million or 46.5%. Of the $21.6 million increase, $4.2 million
resulted from having 423 management locations through the acquisitions of
Kinney, Turner, Sterling, and National. The remaining increase of $17.4 million
is attributed to the net addition of 356 management contracts and increased
management fees on existing locations.
Cost of parking in the first nine months of 1999 increased to $404.9 million
from $315.6 million in the same period of 1998, an increase of $89.3 million or
28.3%. Rent expense increased $49.4 million from the nine months ended June 30,
1998 to the same period of 1999, principally as a result of new locations from
acquisitions. Payroll increased $20.8 million from the nine months ended June
30, 1998 over the same period in 1999, principally as a result of new locations
from acquisitions and increases in wage levels on existing locations. Cost of
parking as a percentage of parking revenues increased to 83.2% in the first nine
months of fiscal 1999 from 82.4% in the same period of 1998. This increase was
attributable to high auto damage and insurance claims mitigated by the Company's
conversion of four previously leased locations to a management agreement, which
reduced costs of parking by $7.8 million in the third quarter of fiscal 1999 as
compared to the same quarter of fiscal 1998.
Cost of management contracts in first nine months of 1999 increased to $18.0
million from $11.3 million in the comparable period in 1998, an increase of $6.7
million or 58.8%. The increase in cost reflects higher insurance claims, in
total and as a percentage of total management contract revenue, and higher
employment taxes associated with the increase in the number of managed
facilities. Cost of management contracts as a percentage of management contract
revenue increased to 26.4% in the first nine months of fiscal 1999 from 24.3% in
the same period of 1998. This increase is due primarily to increases in
liability insurance expenses and equipment lease expenses.
Page 13 of 20
14
General and administrative expenses, excluding amortization of goodwill and
non-compete agreements, increased to $58.3 million for the first nine months
fiscal 1999 from $45.5 million in the fiscal first nine months 1998, an increase
of $12.8 million or 28.2%. The increase is primarily attributable to the
increased volume of activity and expenses associated with upgrading accounting
systems, including $0.9 million of additional depreciation related to adopting a
shorter life on Allright related computer assets as a result of the merger
integration process. General and administrative expenses, as a percentage of
total revenues, were 10.5% for the nine months ended June 30, 1999 compared to
10.6% for the same period of fiscal 1998.
Goodwill and non-compete amortization for the first nine months of fiscal 1999
increased to $8.7 million from $5.5 million in the first nine months of 1998, an
increase of $3.2 million, or 58.9% as a result of having Sterling, CPS of
Louisiana, Turner, Spectrum, National and Kinney as part of the Company for a
greater portion of the year.
Interest income increased to $3.3 million for the nine months ended June 30,
1999 from $2.9 million in the same period of fiscal 1998, an increase of $400
thousand, or 15.4%. The increase in interest income is a result of additional
notes receivable outstanding during the nine month period ended June 30, 1999
than during the same period in the previous year.
Interest expense and dividends on Company-obligated mandatorily redeemable
convertible securities of a subsidiary trust increased to $25.3 million for the
first nine months of fiscal 1999 from $24.9 million in the same period of fiscal
1998. The increase in interest expense was primarily attributable to higher
outstanding balances on the Company's credit facilities which was used to repay
Allright notes payable and finance the purchase of fixed assets. The weighted
average balance outstanding under such credit facilities and convertible
securities was $297.6 million during the nine months ended June 30, 1999, at a
weighted average interest rate of 10.1% compared to $301.6 million during the
nine months ended June 30, 1998 at an average interest rate of 10.4%.
Income taxes decreased to $9.8 million for the first nine months of fiscal 1999
from $13.3 million for the same period in 1998, a decrease of $3.5 million or
26.3%. The effective tax rate for the nine months ended June 30, 1999 was 81.4%
compared to 40.7% for the 1998 period. The increase in the effective tax rate is
attributable to a combination of increases in non-tax deductible goodwill
amortization and certain non-deductible merger costs.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities for the nine months ended June 30, 1999 provided net cash
of $17.3 million, compared to $49.3 million of cash provided by operating
activities for the nine months ended June 30, 1998. Net earnings of $1.2 million
and depreciation and amortization of $32.4 million, together with increases in
management accounts payable of $7.0 million, generally offset by increases in
management accounts receivables, notes and accounts receivable, and prepaid
expenses account for the majority of the cash provided by operating activities
during the first nine months of fiscal 1999. Net earnings of $19.3 million,
depreciation and amortization of $19.8 million, increases in management accounts
payable of $7.4 million, and increases in income tax payable, partially offset
by increases in management accounts receivable and prepaid expenses account for
the majority of the cash provided by operating activities in the first nine
months of fiscal 1998.
Investing activities for the nine months ended June 30, 1999 used net cash of
$86.9 million, compared to $260.4 million for the same period in 1998. Purchase
of property, equipment, and leasehold improvements, together with investments in
notes receivable, contract rights, and partnership interest of $108.1 million,
offset by proceeds from sales of property and equipment of $21.2 million account
for the cash used by investing activities during the first nine months of fiscal
1999. Purchase of property, equipment, and leasehold improvements of $57.5
million and acquisitions of companies of $214.2 million, partially offset by
proceeds from sales of property account for the majority of the cash used by
investing activities in the first nine months of fiscal 1998.
Financing activities for the nine months ended June 30, 1999 provided net cash
of $59.6 million, compared to $232.1 million provided in the same period in
1998. Proceeds from issuance of notes payable of $246.8 million and net
borrowings under the revolving credit agreement of $96.1 million, offset by
principal repayments on notes payable and capital leases of $284.8 million
during the nine months ended June 30, 1999, accounts for the majority of the
cash provided by financing activities. Proceeds from issuance of convertible
trust issued preferred securities of $106.0 million and notes payable of $122.7
million, together with proceeds from issuance of common stock of $101.9 million,
partially offset by principal repayments on notes payable and capital leases of
$108.4 million account for the majority of cash provided by financing activities
during the nine months ended June 30, 1998.
Depending on the timing and magnitude of the Company's future investments
(either in the form of leased or purchased properties, joint ventures, or
acquisitions), the working capital necessary to satisfy current obligations is
anticipated to be generated from
Page 14 of 20
15
operations and from Central Parking's New Credit Facility (described below) over
the next twelve months. In the ordinary course of business, Central Parking is
required to maintain and, in some cases, make capital improvements to the
parking facilities it operates; however, as of June 30, 1999, Central Parking
had no material outstanding commitments for capital expenditures related to
current operations except as discussed below. If Central Parking identifies
investment opportunities requiring cash in excess of Central Parking's cash
flows and the New Credit Facility, Central Parking may seek additional sources
of capital, including the sale or issuance of Central Parking common stock or
convertible securities, or amending the New Credit Facility to obtain additional
indebtedness. Central Parking's ability to raise additional capital by issuing
additional shares of common stock is limited as a result of the registration
rights agreement entered into in connection with the merger with Allright
Holdings, Inc. ("Allright"). The registration rights agreement provides certain
limitations and restrictions upon Central Parking's ability to issue new shares
of Company common stock. While Central Parking does not expect this limitation
to affect its working capital needs, it could have an impact on Central
Parking's ability to complete significant acquisitions.
FUTURE CASH COMMITMENTS
In connection with the Allright Merger, the Company has incurred approximately
$37.2 million of merger related expenses before adjustment for the tax benefits
associated with those expenses. The Company anticipates approximately $7.3
million of additional expenses related to the Allright merger, which will be
recognized when incurred in subsequent quarters. Included in this total is
approximately $2.2 million of amounts to be paid to certain Allright employees
under retention and employment agreements.
On May 10, 1999, the Company announced a definitive agreement to purchase a
parking facility that is being developed in Chicago by a wholly owned subsidiary
of Prime Group Realty Trust (NYSE: PGE). The purchase price is approximately
$37.3 million. The garage will have a total of 1,018 parking spaces as well as
4,200 square feet suitable for retail. Under the terms of the agreement, the
purchase will occur upon completion of the parking facility, which is expected
in the latter part of 2000.
NEW CREDIT FACILITY
On March 19, 1999, Central Parking established a new credit facility providing
for an aggregate of up to $400 million (the "New Credit Facility") consisting of
a five-year $200 million revolving credit facility including a sub-limit of $25
million for standby letters of credit, and a $200 million five-year term loan.
The principal amount of the term loan shall be repaid in quarterly payments of
$12,500,000 commencing June 30, 2000 and continuing until the loan is repaid.
The New Credit Facility bears interest at either prime rate plus 0.5% or LIBOR
plus a margin of 1.125% through June 30, 1999 thereafter reverts to a grid based
pricing based upon the Company achieving certain financial ratios. The rate as
of June 30, 1999 was LIBOR plus 1.125%. The New Credit Facility contains certain
covenants including those that require Central Parking to maintain certain
financial ratios, restrict further indebtedness and limit the amount of
dividends paid. Central Parking used the New Credit Facility to replace Central
Parking's previous credit facility and to refinance the existing debt of
Allright Holdings, Inc. The amount outstanding under the Company's New Credit
Facility as of June 30, 1999 is $346.4 million, with a weighted average interest
rate of 6.07% for the period from March 19, 1999 through June 30, 1999.
CONVERTIBLE TRUST ISSUED PREFERRED SECURITIES AND EQUITY OFFERINGS
On March 18, 1998, the Company completed an offering of 2,137,500 shares of
common stock. The Company received net proceeds from the offering of $89.1
million. Concurrent with the common stock offering, the Company created the
Trust which completed a private placement of 4,400,000 shares at $25.00 per
share of 5.25% convertible trust issued preferred securities pursuant to an
exemption from registration under the Securities Act of 1933, as amended. The
Preferred Securities represent preferred undivided beneficial interests in the
assets of Central Parking Finance Trust, a statutory business trust formed under
the laws of the State of Delaware. The Company owns all of the common securities
of the Trust. The Trust exists for the sole purpose of issuing the Preferred
Securities and investing the proceeds thereof in an equivalent amount of 5.25%
Convertible Subordinated Debentures ("Convertible Debentures") of the Company
due 2028. The net proceeds to the Company from the Preferred Securities private
placement were $106.0 million. Each Preferred Security is entitled to receive
cumulative cash distributions at an annual rate of 5.25% (or $1.312 per share)
and will be convertible at the option of the holder thereof into shares of
Company common stock at a conversion rate of 0.4545 shares of Company common
stock for each Preferred Security (equivalent to $55.00 per share of Company
common stock), subject to adjustment in certain circumstances. The Preferred
Securities do not have a stated maturity date but are subject to mandatory
redemption upon the repayment of the Convertible Debentures at their stated
maturity (April 1, 2028) or upon acceleration or earlier repayment of the
Convertible Debentures. The proceeds of the equity and preferred security
offerings were used to repay indebtedness.
Page 15 of 20
16
The Company's consolidated balance sheets reflect the Preferred Securities of
the Trust as company-obligated mandatorily redeemable convertible securities of
subsidiary whose sole assets are convertible subordinated debentures of the
Parent.
YEAR 2000
The Company has considered the impact of Year 2000 issues on its computer
systems and applications and has developed remediation plans. These plans are
part of the Company's ongoing business strategies to incorporate advanced
technologies in its information systems, and were contemplated in advance of
Year 2000 issues. The expenditures for system upgrades are being accounted for
as regular capital expenditures and are being depreciated over their estimated
useful lives of 3-5 years. The ongoing expenses of training and testing are
expensed as they are incurred. The Company has spent in excess of $6.0 million
upgrading its computer information systems in accordance with its plans for
technological enhancement. Such expenditures are not material to the Company's
operations or liquidity. Based on tests and other information, Central Parking
has concluded that the upgraded information systems that have been installed are
Year 2000 compliant. The Company believes that subsequent systems being
contemplated will also be Year 2000 compliant. System hardware and software that
in management's estimation are not Year 2000 compliant have been fully
depreciated. Central Parking is in the process of testing newly installed
systems to determine their compliance with Year 2000 issues, and, while testing
is not yet complete, the Company believes that all such systems are Year 2000
compliant. Management believes that it has enough time to fully test and foresee
all significant remaining Year 2000 issues on its information systems and
therefore , does not have any other contingency plan in place for such systems.
Central Parking uses some fee calculation devices that compute parking fees and
statistical data, and also automate the ingress and egress control mechanisms at
certain parking facilities. Based on contacts with vendors of such equipment,
Central Parking, expects them to make available reasonably priced upgrades to
address Year 2000 issues. However, the vendors have given no assurance that such
fee computation devices will be Year 2000 compliant on any given date before
December 31, 1999. Central Parking believes that less than 10% of its operations
have fee calculation devices with any Year 2000 issues with regard to carrying
out its parking business. In the event remediation is not complete at any of
these sites prior to the Year 2000, and a failure of such equipment were to
occur due to processing incompatibilities in the Year 2000, manual override
systems are in place at all locations. Given the limited technology required to
operate such facilities, management believes all material operations could
adequately be performed manually. Such contingency plans are currently deployed
in the event of power failures or other business interruptions at locations
where these devices are located.
Certain property management systems are not currently Year 2000 compliant,
however, alternative systems are being implemented and tested that will
adequately address the Year 2000 issue. The Company believes all such systems
will be fully Year 2000 compliant by December 1999. In the event such systems
are not completely installed, or are not Year 2000 compliant, the Company has
manual backup systems that will adequately perform all material functions.
Central Parking is communicating, by means of Year 2000 questionnaires, with
each of its major vendors to determine third party compliance with Year 2000
issues. Although Central Parking cannot require its vendors to respond,
follow-up with each party is being conducted to try and determine and resolve
any Year 2000 issues. Central Parking is also requiring all vendors to warrant
that all software and hardware purchased by Central Parking is fully Year 2000
compliant. While Central Parking does not expect to be materially affected by
any third party's Year 2000 issues, no assurance can be given that a third
party's failure to adequately address their Year 2000 issues could not
materially effect Central Parking's business or financial results.
MERGERS AND ACQUISITIONS
New York Partnership On May 28, 1999, the Company purchased the remaining 60%
interest in a partnership, a limited liability company, which operates a parking
facility in New York City for $20.5 million in cash. The Company previously
owned 40% of the partnership. The previous partner will continue to manage the
garage for the next 7 years.
Prime Group Realty Trust On May 10, 1999, the Company announced a definitive
agreement to purchase a parking facility that is being developed in Chicago by a
wholly owned subsidiary of Prime Group Realty Trust (NYSE: PGE). The purchase
price is approximately $37.3 million. The garage will have a total of 1,018
parking spaces as well as 4,200 square feet suitable for retail. Under the terms
of the agreement, the purchase will occur upon completion of the parking
facility, which is expected in the latter part of 2000.
Allright Holdings, Inc. On March 19, 1999, Central Parking Corporation ("Central
Parking" or the "Company") completed a merger with Allright Holdings, Inc.
("Allright"), pursuant to which approximately 7.0 million shares of Central
Parking common stock and
Page 16 of 20
17
approximately 0.5 million options and warrants to purchase common stock of
Central Parking, were exchanged for all of the outstanding shares of common
stock and options and warrants to purchase common stock of Allright. The
transaction, constituting a tax-free exchange, has been accounted for as a
pooling-of-interests under APB Opinion No. 16. Accordingly, prior period
financial statements presented have been restated to include the combined
results of operations, financial position and cash flows of Allright as if it
had been part of Central Parking from the date of Allright's inception, October
31, 1996. Prior to the consummation of the merger, Allright's fiscal year end
was June 30. In recording the business combination, Allright's fiscal year end
has been restated to reflect a September year end to conform to Central
Parking's fiscal year end. As a result of restating financial information of
both companies, the quarter ending September 30, 1998 for Allright has been
recorded directly to shareholders' equity, and is not included in year-to-date
information presented in the accompanying consolidated financial statements. In
addition, the consolidated income tax provision has been restated on a combined
basis. The impact of the restatement was to increase net earnings by $849
thousand and to decrease net earnings by $533 thousand in fiscal 1997 and 1998,
respectively. There were no material transactions between Central Parking and
Allright prior to the Merger.
The Company incurred $37.2 million of merger related expenses on a pretax basis
as of June 30, 1999 that were reported as operating expenses. Included in these
costs are approximately $19.3 million in professional fees; comprised of
investment banking, legal, accounting, and consulting fees; $9.0 million related
to employment agreements and severance; $7 million related to the restructuring
agreement with the limited partner of Edison; and the balance of $1.9 million in
travel, supplies, printing and other out of pocket expenses. In connection with
the Merger, Allright entered into certain employment and management continuity
agreements. Under such agreements, certain payments will be made which are
contingent upon continued employment through certain dates.
Allied Parking On October 1, 1998, Allright purchased from Allied Parking, Inc.
("Allied") four leases relating to parking facilities in New York City, with
maturities ranging from 2006 to 2029 for approximately $14.2 million. Allied
agreed to lease to Allright two more lots for 19 years, each in exchange for a
note receivable of $4.9 million, secured by an assignment of rents. Allright
also purchased the right to use the "Allied Parking" name associated with these
leases for $835 thousand.
On November 8, 1998, Allright purchased six additional leases from Allied
Parking with maturities ranging from 1999 to 2008 for $5.1 million. Allright
also purchased the right to use the "Allied Parking" name associated with these
leases for $300 thousand.
During April 1999, the Company purchased an additional lease from Allied Parking
which matures in 2020 for $3.0 million, and also purchased the right to use the
"Allied Parking" name associated with it as part of the purchase price.
Sterling Parking, Inc. On July 1, 1998, Central Parking purchased substantially
all of the assets of Sterling Parking, Inc. ("Sterling"), a privately-held
parking company headquartered in Atlanta, Georgia for $4.3 million, including
$2.1 million in cash, including transaction fees and other related expenses, and
$2.2 million (54,358 shares) in Central Parking common stock. Sterling operated
parking facilities in Georgia, Florida, Virginia, California, and Kentucky. The
results of operations are included in the Company's consolidated financial
statements from July 1, 1998. The acquisition was accounted for as a purchase
and, accordingly, the purchase price has been allocated to Sterling's assets and
liabilities. The excess of purchase price over fair value of net assets acquired
of $4.5 million is being amortized on a straight-line basis over 10 years.
Turner Parking System, Inc. On April 1, 1998, Central Parking purchased
substantially all of the assets of Turner Parking System, Inc. ("Turner"), a
privately-held parking company headquartered in Dallas, Texas, for $3.8 million,
including $3.0 million in cash and $800 thousand (16,842 shares) in Central
Parking common stock. Turner operated parking facilities in Texas, Florida,
California, Georgia, and Washington, D.C. The results of operations are included
in the Company's consolidated financial statements from April 1, 1998. The
acquisition was accounted for as a purchase and, accordingly, the purchase price
has been allocated to Turner's assets and liabilities. The excess of purchase
price over fair value of net assets acquired of $3.7 million is being amortized
on a straight-line basis over 10 years.
Central Parking System of Louisiana, Inc. Central Parking has historically owned
50% of CPS-Louisiana and on March 30, 1998, purchased the remaining 50% from
Property Service Corporation for $2.5 million in Central Parking common stock
(52,631 shares). CPS-Louisiana manages and operates leased parking facilities,
manages and operates parking facilities owned or leased by other parties, and
provides financial and other advisory services.
Kinney System Holding Corp. On February 12, 1998, Central Parking acquired
Kinney, a privately held parking company headquartered in New York City, for
approximately $208.8 million, including $171.8 million in cash, and $37.0
million (882,422 shares) in Central Parking common stock. In connection with
this transaction, Central Parking assumed $10.3 million in capital leases,
refinanced $24.2 million in existing Kinney debt and assumed $4.6 million of
Kinney debt. Central Parking financed the Kinney
Page 17 of 20
18
acquisition through borrowings under the Company's credit facility, and
ultimately from the issuance of Central Parking common stock and Central Parking
obligations pursuant to the Trust Issued Preferred Securities. Kinney operated
403 parking facilities containing approximately 168,800 spaces, including
approximately 76,700 in the New York City metropolitan area, 42,800 in Boston,
31,100 in Philadelphia and 10,300 in Washington, D.C. At the time of the
acquisition, Kinney's facility mix was comprised of 225 leased sites, 170
managed sites and 8 owned sites. The acquisition was accounted for as a purchase
and the results of operations are included in the Company's consolidated
financial statements from February 12, 1998. The excess of purchase price over
the fair value of net assets acquired of $197.6 million is being amortized on a
straight-line basis over 30 years.
In connection with the Kinney acquisition, the remaining 50% interest in
Spectrum Parking Associates ("Spectrum") was acquired for $3.6 million. The
acquisition was accounted for as a purchase and the results of operations are
included from February 13, 1998. The excess of purchase price over the fair
value of net assets acquired of $2.2 million is being amortized on a
straight-line basis over 18 years.
National Garages, Inc. On December 1, 1997, Allright purchased substantially all
of the assets of National Garages, Inc. ("National"), a privately owned parking
company based in Detroit, which operates 210 facilities located primarily in the
Midwestern United States. The purchase price of approximately $3.7 million was
paid in cash and financed through working capital and $2.2 million in debt under
Allright's previous revolving line of credit.
Edison Restructuring Agreement. In conjunction with the Company's merger with
Allright, Allright entered into a restructuring agreement whereby Allright
loaned an additional $9.9 million to the limited partner and amended certain
other related agreements. In addition, the parties agreed that the limited
partner's capital account would be increased to $29.4 million as of the
effective date of the restructuring, which coincided with the consummation date
of the merger with Allright. As a result of this increase in the limited
partner's capital account, the Company recorded a $7 million charge to
operations concurrent with the merger. Such charge is reflected in merger costs
in the accompanying consolidated statement of earnings for fiscal 1999.
Diplomat Parking Corporation. On October 1, 1997, Central Parking acquired the
stock and certain assets of Diplomat Parking Corporation ("Diplomat") for
approximately $22.2 million in cash and notes payable. Diplomat operated parking
facilities located primarily in Washington, D.C. and Baltimore, Maryland. The
acquisition was accounted for as a purchase, and accordingly, the results of
operations of Diplomat have been included in the Company's consolidated
financial statements from the date of acquisition. The excess of purchase price
over the fair value of the net assets acquired of $20.7 million is being
amortized on a straight-line basis over 25 years.
Page 18 of 20
19
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
There were no matters submitted to a vote of security holders during the quarter
ended June 30, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(2)(i) Agreement and Plan of Merger by and among Central
Parking Corporation, Central Merger Sub, Inc., Allright
Holdings, Inc., Apollo Real Estate Investment Fund II,
LP and AEW Partners, LP, dated as of September 21,
1998, and amended as of January 5, 1999 (incorporated
by reference to Exhibit 2 to the Company's Registration
Statement No. 333-66081 on Form S-4)
(ii) Acquisition Agreement and Plan of Merger dated as of
November 7, 1997, by and between the Registrant and
Kinney System Holding Corp. and a subsidiary of the
Registrant (Incorporated by reference to the Company's
Current Report on Form 8-K filed on February 17, 1998)
(3)(i) Amended and Restated Charter of the Registrant
(Incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement No. 33-95640 On Form
S-1)
(ii) Articles of Amendment to the Charter of Central Parking
Corporation increasing the authorized number of shares
of common stock, par value $0.01 per share, to one
hundred million (incorporated by reference to Exhibit 2
to the Company's 10-Q for the quarter ended March 31,
1999.)
(iii) Amended and Restated Bylaws of the Registrant
(Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement No. 33-95640 on Form
S-1)
(27) Financial Data Schedule (EDGAR Filing Only)
(b) Reports on Form 8-K
On June 4, 1999, the Company filed an amendment on Form 8-K/A to the
Current Report filed on March 19, 1999 restating Selected Financial
Data, Management Discussion, Analysis of Financial Condition, and
results of operations, and its financial statements to include the
results of Allright for the relevant periods.
Page 19 of 20
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CENTRAL PARKING CORPORATION
Date: February 18, 2000 By: /s/ Stephen A. Tisdell
----------------- -------------------------------
Stephen A. Tisdell
Chief Financial Officer
Page 20 of 20