1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1998
Commission file number 001-13950
CENTRAL PARKING CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
Tennessee 62-1052916
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2401 21st Avenue South,
Suite 200, Nashville, Tennessee 37212
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (615) 297-4255
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Former name, address and fiscal year, if changed since last report:
Not Applicable
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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 May 12, 1998
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Common Stock, $0.01 par value 29,474,902
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INDEX
CENTRAL PARKING CORPORATION
PART 1. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets
--- March 31, 1998, September 30, 1997, and March 31, 1997.................................... 3
Condensed consolidated statements of earnings
--- three and six months ended March 31, 1998 and 1997........................................ 4
Condensed consolidated statements of cash flows
--- six months ended March 31, 1998 and 1997.................................................. 5
Notes to condensed consolidated financial statements.......................................... 6 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................................... 11 - 15
PART 2. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders........................................... 16
Item 6. Exhibits and Reports on Form 8-K.............................................................. 16 - 17
SIGNATURES ................................................................................... 18
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PART 1
Item 1. Financial Statements
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Dollar amounts in thousands
UNAUDITED UNAUDITED
MARCH 31, SEPTEMBER 30, MARCH 31,
1998 1997 1997
--------- ------------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 14,384 $ 9,979 $ 7,981
Management accounts receivable 13,520 11,004 9,636
Accounts and current portion of notes receivable - other 10,541 6,158 7,284
Prepaid expenses 13,493 9,394 7,230
Deferred income taxes 1,666 911 697
Assets held for resale -- -- 45,799
Refundable income taxes -- 2,154 --
-------- -------- --------
Total current assets 53,604 39,600 78,627
Investments, at amortized cost 4,881 4,754 4,609
Notes receivable, less current portion 26,629 16,537 8,304
Property, equipment, and leasehold improvements, net 127,870 79,057 89,934
Contract rights, net 11,445 5,021 5,403
Goodwill, net 240,991 31,863 27,612
Investment in partnerships and joint ventures 34,284 50,195 49,102
Other assets 16,412 6,987 7,174
-------- -------- --------
$516,116 $234,014 $270,765
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations $ 1,960 $ 206 47,207
Accounts payable 34,695 25,097 18,515
Accrued payroll and related costs 13,395 8,256 7,214
Accrued expenses 9,728 4,020 3,151
Management accounts payable 11,797 10,381 9,844
Income taxes payable 1,391 871 1,100
-------- -------- --------
Total current liabilities 72,966 48,831 87,031
Long-term debt and capital lease obligations 70,796 73,252 86,767
Other liabilities 14,829 5,161 3,952
Deferred compensation 3,674 3,048 2,977
Deferred income taxes 5,791 6,871 4,602
-------- -------- --------
Total liabilities 168,056 137,163 185,329
Company-obligated mandatorily redeemable securities of
subsidiary holding solely parent debentures 110,000 -- --
Shareholders' equity :
Common stock, $.01 par value; 50,000,000 shares authorized,
29,470,027, 26,303,592 and 26,293,007
issued and outstanding, respectively 295 263 263
Additional paid-in capital 162,901 32,843 32,531
Foreign currency translation adjustment 342 193 225
Retained earnings 75,058 64,122 53,021
Deferred compensation on restricted stock, net (536) (570) (604)
-------- -------- --------
Total shareholders' equity 238,060 96,851 85,436
-------- -------- --------
$516,116 $234,014 $270,765
======== ======== ========
See accompanying notes to condensed consolidated financial statements
Page 3 of 18
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CENTRAL PARKING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
Dollar amounts in thousands, except per share data
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31,
1998 1997 1998 1997
------- ------- -------- -------
Revenues:
Parking $76,529 $45,701 $135,534 $77,786
Management contract 14,693 10,223 26,877 19,562
------- ------- -------- -------
Total revenues 91,222 55,924 162,411 97,348
Costs and expenses:
Cost of parking 65,927 39,397 117,822 68,482
Cost of management contracts 3,859 3,190 7,111 5,692
General and administrative 7,945 5,993 14,586 10,701
Goodwill and non-compete amortization 1,457 235 2,054 235
------- ------- -------- -------
Total costs and expenses 79,188 48,815 141,573 85,110
------- ------- -------- -------
Operating earnings 12,034 7,109 20,838 12,238
Other income (expenses):
Interest income 613 241 1,109 865
Interest expense (3,345) (1,314) (4,756) (1,320)
Dividends on company-obligated mandatorily
redeemable securities of a subsidiary trust (206) -- (206) --
Net gains on sales of property and equipment 15 1 18 5
Equity in partnership and joint venture earnings 1,205 956 2,412 1,205
------- ------- -------- -------
Other income (expenses), net (1,718) (116) (1,423) 755
------- ------- -------- -------
Earnings before income taxes 10,316 6,993 19,415 12,993
Income taxes 3,988 2,577 7,445 4,678
------- ------- -------- -------
Net earnings $ 6,328 $ 4,416 $ 11,970 $ 8,315
======= ======= ======== =======
Basic weighted average common shares and
common share equivalents 26,824 25,986 26,427 25,954
======= ======= ======== =======
Basic earnings per common share $ 0.24 $ 0.17 $ 0.45 $ 0.32
======= ======= ======== =======
Diluted weighted average common shares and
common share equivalents 27,326 26,331 26,925 26,299
======= ======= ======== =======
Diluted earnings per common share $ 0.23 $ 0.17 $ 0.44 $ 0.32
======= ======= ======== =======
See accompanying notes to condensed consolidated financial statements
Page 4 of 18
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CENTRAL PARKING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Dollar amounts in thousands
SIX MONTHS ENDED MARCH 31,
1998 1997
--------- ---------
Cash flows from operating activities:
Net earnings $ 11,970 $ 8,315
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation 2,417 1,822
Amortization of contract rights 429 412
Amortization of deferred compensation cost 34 33
Amortization of goodwill and non-compete agreements 2,054 235
Equity in partnership and joint venture (earnings) (2,412) (1,205)
Distributions from partnerships and joint ventures 1,685 --
Net gains on sales of property and equipment (18) (5)
Deferred income taxes 107 40
Changes in operating assets and liabilities, excluding effects
of acquisitions:
(Increase) decrease in management accounts receivable 1,906 (723)
(Increase) decrease in notes and accounts receivable - other 3,620 (3,016)
(Increase) decrease in prepaid expenses (2,760) (857)
(Increase) decrease in refundable income taxes 2,154 --
(Increase) decrease in other assets (271) (1,626)
Increase (decrease) in accounts payable, accrued expenses
other liabilities and deferred compensation (3,803) (438)
Increase (decrease) in management accounts payable 399 (605)
Increase (decrease) in income taxes payable (140) 288
--------- ---------
Net cash provided by operating activities 17,371 2,670
--------- ---------
Cash flows from investing activities:
Proceeds from sales of property and equipment 97 9,339
Investments in notes receivable (3) (368)
Purchase of assets held for resale -- (45,799)
Purchase of property, equipment, and leasehold improvements (19,508) (4,188)
Purchase of contract rights (4) --
Investment in and partnerships and joint ventures 27 (45,193)
Acquisitions of companies net of cash acquired (206,101) (48,091)
Purchase of investments (127) (126)
--------- ---------
Net cash used by investing activities (225,619) (134,426)
--------- ---------
Cash flows from financing activities:
Dividends paid (987) (699)
Net borrowings under revolving credit agreement (12,150) 129,770
Proceeds from issuance of company-obligated mandatorily redeemable securities, net 106,000 --
Proceeds from issuance of notes payable 100,000 --
Principal repayments on notes payable (101,349) (18,977)
Special distribution from partnerships and joint ventures 30,285 --
Proceeds from issuance of common stock and exercise of stock options, net 90,704 872
--------- ---------
Net cash provided by financing activities 212,503 110,966
--------- ---------
Foreign currency translation 150 166
--------- ---------
Net increase (decrease) in cash and cash equivalents 4,405 (20,624)
Cash and cash equivalents at beginning of period 9,979 28,605
--------- ---------
Cash and cash equivalents at end of period $ 14,384 $ 7,981
========= =========
Non-cash transactions:
Issuance of stock in acquisitions $ 39,385
=========
Effects of acquisitions:
Fair value of assets acquired $ 91,331 $ 71,278
Purchase price in excess of the net assets acquired 211,085 27,839
Liabilities assumed in acquisitions (48,717) (44,361)
Stock issued in acquisitions (39,385) --
--------- ---------
Cash paid 214,314 54,756
Less cash acquired (8,213) (6,665)
--------- ---------
Net cash paid for acquisition $ 206,101 $ 48,091
========= =========
See accompanying notes to condensed consolidated financial statements
Page 5 of 18
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CENTRAL PARKING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
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 six months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended September 30, 1997
(included in the Company's Annual Report on Form 10-K). Certain items have been
restated to conform to current year presentation.
Stock Split
On November 21, 1997, the Board of Directors approved a three-for-two
stock split payable to shareholders of record as of December 5, 1997. The stock
split was distributed on December 12, 1997, resulting in the net issuance of
8,771,363 new shares. All shares and per share amounts in this report have been
adjusted to reflect the stock split.
Earnings Per Share
In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share". Statement 128 replaced the previously reported primary and
fully diluted earnings per share with basic and diluted 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 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:
Six Months Ended Six Months Ended
March 31, 1998 March 31, 1997
Income Common Per-Share Income Common Per-Share
Available Shares Amount Available Shares Amount
($000's) (000's) ($000's) (000's)
Basic earnings per share $11,970 26,427 $0.45 $8,315 25,954 $0.32
Effect of dilutive stock and options:
Stock option plan 279 (0.01) 111
Restricted stock plan 166 171
Deferred stock unit plan 7 -
Employee stock purchase plan 46 63
Diluted earnings per share $11,970 26,925 $0.44 $8,315 26,299 $0.32
Page 6 of 18
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Three Months Ended Three Months Ended
March 31, 1998 March 31,1997
Income Common Per-Share Income Common Per-Share
Available Shares Amount Available Shares Amount
($000's) (000's) ($000's) (000's)
Basic earnings per share $6,328 26,824 $0.24 $4,416 25,986 $0.17
Effect of dilutive stock and options:
Stock option plan 278 (0.01) 110
Restricted stock plan 166 171
Deferred stock unit plan 12 -
Employee stock purchase plan 46 64
Diluted earnings per share $6,328 27,326 $0.23 $4,416 26,331 $0.17
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 because under the related deferred compensation
agreement the officer forfeits such shares if he voluntarily terminates his
employment with the Company. The effect of the conversion of the
company-obligated mandatorily redeemable securities of the subsidiary trust has
not been included in the diluted earnings per share calculation since such
securities are anti-dilutive. At March 31, 1998, such securities were
convertible into 2,000,000 shares of common stock.
Acquisitions
Central Parking System of Louisiana, Inc.
The Company has historically owned 50% of Central Parking System of
Louisiana, Inc. ("CPS of LA") and on March 30, 1998 purchased the remaining 50%
from Property Service Corporation for $2.4 million in common stock (52,631
shares). CPS of LA manages and operates leased parking facilities, manages and
operates parking facilities owned or leased by other parties, and provides
financial and other advisory services. The Company's facilities are located in
Louisiana. The transaction was accounted for using the purchase method and,
accordingly, the purchase price has been allocated to CPS of LA's assets and
liabilities based on their estimated fair market values at the date of
acquisition. Since only 50% of CPS of LA was owned during the periods presented,
the results of operations of CPS of LA have been accounted for on the Company's
books under the equity method as an investment for these periods. All subsequent
results of operations will be included in the Company's consolidated financial
statements.
Kinney System Holding, Corp.
On February 12, 1998, the Company purchased Kinney System Holding Corp.
("Kinney"), a privately-held parking company headquartered in New York City, for
$208.8 million, including $171.8 million in cash and other consideration, and
$37.0 million (882,422 shares) in common stock of the Company. In connection
with this transaction, the Company assumed $8.1 million in capitalized leases,
refinanced $24.2 million in existing Kinney debt and assumed $4.6 million of
Kinney debt. The purchase price is subject to adjustment based on the outcome of
an independent evaluation of Kinney's February 12, 1998 balance sheet. The
Company financed the Kinney Acquisition with borrowings under the New Credit
Facility described below. The transaction was accounted for using the purchase
method and, accordingly, the results of operations of Kinney have been included
in the Company's consolidated financial statements from the date of acquisition.
The preliminary purchase price has been allocated to Kinney's assets and
liabilities based on their estimated fair market values at the date of
acquisition. The excess of the preliminary purchase price over fair value of the
net assets acquired of $188.6 million is being amortized on a straight-line
basis over 30 years. Purchase price adjustments for Kinney have not been
finalized.
Page 7 of 18
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Diplomat Parking Corporation
On October 1, 1997, the Company purchased Diplomat Parking Corporation
("Diplomat") for $21.7 million, which was financed through a $12.3 million draw
on a revolving credit facility and an $8.2 million note to the sellers, that was
subsequently paid, at an interest rate of 5%. The note payment was financed
through a draw on the revolving credit facility. Diplomat operates 164 parking
facilities, located primarily in Washington, D.C. and Baltimore, Maryland. The
transaction was accounted for using the purchase method and, accordingly, the
results of operations of Diplomat have been included in the Company's
consolidated financial statements from the date of acquisition. The purchase
price has been allocated to Diplomat's assets and liabilities based on their
estimated fair values at the date of acquisition. The excess of the purchase
price over fair value of the net assets acquired of $20.3 million is being
amortized on a straight-line basis over 25 years.
Square Industries
On January 18, 1997, the Company acquired all of the outstanding shares
of Square Industries, Inc. ("Square") for $54.8 million, including transaction
fees and other related expenses. In addition, the Company assumed $23.2 million
of existing Square debt. The purchase price was financed through a draw on the
Company's revolving credit facility. The Company also refinanced the debt
assumed from Square through a draw on the revolving credit facility.
The Square acquisition was accounted for under the purchase method and,
accordingly, the results of operations of Square have been included in the
Company's consolidated financial statements from the date of acquisition. The
purchase price has been allocated to Square's assets and liabilities based on
their estimated fair values at the date of acquisition. The excess of the
purchase price over the fair value of the net assets acquired of $27.8 million
is being amortized on a straight-line basis over 25 years.
Civic Parking, L.L.C.
On December 31, 1996, the Company purchased for cash, Civic Parking
L.L.C. ("Civic Parking"), a limited liability company, which owns four parking
garages in St. Louis: Kiener East, Kiener West, Stadium East and Stadium West.
The four garages, which had previously been operated by the Company under
management agreements, have a total of 7,464 parking spaces. The purchase price
was approximately $91.0 million, which was financed through working capital and
a draw of $67.2 million on the Company's revolving credit facility. The
transaction was accounted for under the purchase method. The estimated fair
value of the garages at the date of the acquisition was equal to the purchase
price and, accordingly, management has allocated the purchase price to the land
and buildings acquired.
On April 16, 1997, the Company sold 50% of the membership units of
Civic Parking to an affiliate of Equity Capital Holdings, L.L.C. for $46.0
million in cash. In the allocation of the purchase price, the Company assigned
$45.8 million to the membership units that were sold; consisting of an estimated
sale price of $46.0 million and estimated net cash inflows for the holding
period of $638 thousand offset by interest on incremental debt during the
holding period of $801 thousand. The membership units retained by the Company
have been accounted for in the accompanying financial statements under the
equity method and are included in the Company's consolidated financial
statements.
On March 17, 1998, the Company refinanced the Civic Parking, L.L.C.
with a financial institution for $60 million. The Company received net proceeds
of $30.0 million from this transaction which reduced the Company's investment in
partnerships and joint ventures. The proceeds from the refinancing were used to
pay down the New Credit Facility mentioned below. The Company will continue to
operate these garages pursuant to a lease and operating agreement with Civic
Parking, L.L.C.
Pro Forma Information
The following unaudited consolidated pro forma condensed results of operations,
give effect to the acquisition of Kinney System Holding, Corp and Central
Parking System of Louisiana, Inc. as if such transactions had occurred at
October 1, 1997, as follows (in thousands except for earnings per share):
Six Months Ended
March 31, 1998
----------------
Total revenues $213,268
Earnings before income tax 17,844
Net earnings 10,309
Basic earnings per common share $ 0.38
Diluted earnings per common share $ 0.37
Page 8 of 18
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The foregoing unaudited proforma amounts are based upon certain
assumptions and estimates, including, but not limited to, the recognition of
estimated cost savings related to general and administrative expenses to be
eliminated prospectively in connection with the Kinney acquisition, interest
expense on debt incurred to finance the acquisition and amortization of goodwill
over 30 years. The unaudited proforma amounts do not necessarily represent the
results, which would have occurred if the acquisition had taken place on the
basis assumed above, nor are they indicative of the results of future combined
operations.
Long Term Debt
On February 11, 1998, the Company established a new credit facility
(the "New 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 New Credit Facility bears interest until June 30, 1998 at
a rate of LIBOR plus 1.25%. On June 30, 1998 the interest rate on the New Credit
Facility and the commitment fee on the unused portion will revert to a grid
pricing based upon the achievement of various financial ratios. The New Credit
Facility contains certain covenants including those that require the Company to
maintain certain financial ratios, restrict further indebtedness, and limit the
amount of dividends payable. On March 18, 1998, the Company completed offerings
of equity and convertible trust issued preferred securities, from which the
Company obtained $195.3 million in net proceeds. The Company repaid and
terminated the $100 million term loan with proceeds from these offerings. The
remaining $95.3 million in proceeds was applied to reduce the outstanding
balance under the $200 million revolving credit facility. The amount outstanding
under the Company's New Credit Facility as of March 31, 1998 is $58.6 million,
with a weighted average interest rate of 6.9% for the period the New Credit
Facility was outstanding. The Company used borrowings under the New Credit
Facility to replace the Company's prior revolving credit facility and to finance
the Kinney acquisition.
The prior credit facility, which was unsecured, was scheduled to expire
January 31, 2000. Credit available under the prior facility amounted to $120
million. The amount outstanding under the Company's prior credit facility was
$70.8 million, which is reflected as long term debt on the accompanying
condensed consolidated balance sheets as of September 30, 1997. Such debt had a
7.0% weighted average interest rate for the period from December 31, 1996 to
September 30, 1997 during which the Company had debt outstanding. At March 31,
1997, the Company had $131.8 million outstanding under its credit facility at an
interest rate of 7.0%. The weighted average balance outstanding was $113.7
million during the six months ended March 31, 1997 at an average interest rate
of 7.0%.
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
$89.3 million. Concurrent with the common stock offering, 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 $106.0
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.
The Company's consolidated balance sheets reflect the Preferred Securities
of the Trust as company-obligated mandatorily redeemable securities of
subsidiary holding solely parent debentures.
Page 9 of 18
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Subsequent Events
On April 1, 1988, the Company purchased substantially all of the assets
of Turner Parking Systems, Inc, ("Turner") a privately-held parking company
headquartered in Dallas, Texas, for $3.8 million, including $3.0 million in cash
and $800 thousand (52,631 shares) in common stock of the Company. The Company
financed the cash portion of the Turner purchase with borrowings under the New
Credit Facility described above. Turner operates 34 parking facilities in Texas,
Florida, California, Georgia and Washington D.C.
Page 10 of 18
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company provides parking services at multi-level parking facilities
and surface parking lots. It also provides parking consulting services, shuttle
services, valet services, parking meter enforcement services, and billing and
collection services. The Company distinguishes itself from its competitors by
combining a reputation for professional integrity and quality management with
operating strategies designed to increase the revenues of parking operations for
its clients. The Company's clients and landlords include some of the nation's
largest owners and developers of mixed-use projects, major office building
complexes, sports stadiums and hotels. Parking facilities operated by the
Company include, among others, certain terminals operated by BAA Heathrow
International Airport (London), the Prudential Center (Boston), Cinergy Field
(Cincinnati), Coors Field (Denver) and various parking facilities owned by the
Hyatt and Westin hotel chains, the Rouse Company, Faison Associates, May
Department stores, Equity Office Properties, and Crescent Real Estate.
The Company operates parking facilities under three types of arrangements:
- - Management contracts 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. In general, the
Company is not responsible for structural, mechanical, or electrical
maintenance or repairs, or providing security or guard services. The
Company generally receives a base monthly fee for managing these
facilities plus fees for ancillary services such as insurance,
accounting, equipment leasing, and consulting and often receives a
percentage of facility revenues above a base amount. Under the
Company's typical management contract, the facility owner pays a
minimum management fee and operating expenses such as taxes, license
and permit fees, insurance, payroll and accounts receivable processing,
and wages of personnel assigned to the facility. In addition, the
facility owner also pays for maintenance, repair costs, and capital
improvements. The typical management contract is for a term of one to
three years and is renewable, typically for successive one-year terms.
- - Lease contracts In contrast to management contracts, lease arrangements
are typically for terms of three to ten years, with a renewal term, and
provide for a contractually established payment for the facility owner,
regardless of operating earnings of the parking facility. The Company's
rent is generally a flat annual amount, a percentage of gross revenues,
or a combination thereof. Under its leases, the Company is responsible
for all facets of the parking operations, including utilities and
ordinary and routine maintenance, but is generally not responsible for
major maintenance, repair, or property taxes. The leased facilities
require a longer commitment and a larger capital investment by the
Company than managed facilities, but provides a more stable source of
revenue and a greater opportunity for long term revenue growth.
- - Facility ownership 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. All owned
facility revenues flow directly to the Company. Additionally, ownership
provides the potential for realizing capital gains from the
appreciation of the value of underlying real estate. The Company
typically targets ownership opportunities in cities in which it
currently operates, focusing on unrelated sites that are being used as
parking facilities.
The Company also seeks joint venture partners who are established local
or regional developers pursuing financing alternatives for development projects.
Joint ventures typically involve a development where the parking facility is a
part of a larger multi-use project, allowing the Company's joint venture
partners to benefit from a capital infusion to the project. Joint ventures offer
the revenue growth potential of ownership with a partial reduction in capital
requirements.
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Parking revenues for the second quarter of fiscal 1998 increased to
$76.5 million from $45.7 million in the second quarter of fiscal 1997, an
increase of $30.8 million, or 67.5%. Of the $30.8 million increase, $21.2
million, or 68.9% of the increase, resulted from the acquisitions of Square,
Diplomat and Kinney's 564 leased and owned locations. The remaining increase of
$9.6 million, or 31.1%, resulted from the net addition of 38 leased and owned
locations over the same quarter last year as well as a combination of rate
increases and higher utilization of parking spaces at existing facilities.
Revenues from foreign operations increased to $5.4 million from $4.2 million, an
increase of $1.2 million or 29.8%. The increase in foreign revenues was a result
of a combination of the addition of 8 leased locations as well as rate increases
and higher utilization of parking spaces at existing facilities.
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Management contract revenues for the second quarter of fiscal 1998
increased to $14.7 million from $10.2 million in the second quarter of fiscal
1998, an increase of $4.5 million or 43.7%. Of the $4.5 million increase, $1.8
million, or 41.1% of the increase, resulted from the addition of 155 management
locations through the acquisitions of Square, Diplomat and Kinney. The remaining
increase of $2.7 million, or 58.9% of the total increase, is attributed to the
net addition of 79 management contracts and increased management fees on
existing locations.
Cost of parking in fiscal second quarter 1998 increased to $65.9
million from $39.4 million in fiscal second quarter 1997, an increase of $26.5
million or 67.3%. Rent expense increased $18.3 million and payroll increased
$5.5 million, principally as a result of new locations from acquisitions and
increases on existing locations. Cost of parking as a percentage of parking
revenues, decreased to 86.1% in the second quarter of fiscal 1998 from 86.2% in
fiscal second quarter 1997. This decrease of 10 basis points was attributable
predominantly to the spreading of a number of fixed costs, over a larger revenue
base.
Cost of management contracts in fiscal second quarter 1998 increased to
$3.9 million from $3.2 million in the comparable period in 1997, an increase of
$700 thousand or 21.0%. The increase in cost reflects higher insurance claims
and employment taxes associated with the increase in the number of managed
facilities. Cost of management contracts as a percentage of management contract
revenue decreased to 26.3% for the second fiscal quarter 1998 from 31.2% for the
same period last year. The decrease as a percentage of management contract
revenue was attributable to the spreading of fixed costs over a larger revenue
base.
General and administrative expenses increased to $7.9 million for the
second quarter of fiscal 1998 from $6.0 million in fiscal second quarter 1997,
an increase of $1.9 million or 32.6%. The increase is primarily attributable to
the purchase of Kinney, Square and Diplomat and the increased administrative
activities associated with those acquisitions, as well as increased incentive
compensation resulting from increased profits and start-up costs associated with
the opening of new locations and joint ventures. General and administrative
expenses, as a percentage of revenues, were 8.7% for the second quarter of
fiscal 1998 compared to 10.7% for the second quarter of fiscal 1997, a decrease
of 200 basis points. The decrease was attributable to spreading fixed expenses
over a broader base.
Goodwill and non-compete amortization for the second quarter of fiscal
1998 increased to $1.5 million from $235 thousand in fiscal second quarter 1997,
an increase of $1.3 million, as a result of the Kinney, Square and Diplomat
acquisitions.
Interest income increased to $613 thousand for the second quarter of
fiscal 1998, from $241 thousand in the second quarter of fiscal 1997, an
increase of $372 thousand. The increase in interest income is a result of higher
investment balances outstanding during the quarter and increased notes
receivable balances.
Interest expense increased to $3.3 million for the second quarter of
fiscal 1998 from $1.3 million in the second quarter of fiscal 1997. The increase
in interest expense was attributable to the increase in indebtedness under the
Company's credit facilities. The weighted average balance outstanding under such
credit facilities was $151.8 million during the quarter ended March 31, 1998, at
a weighted average interest rate of 6.8%. The weighted average balance
outstanding was $114.6 million during the quarter ended March 31, 1997, at an
average interest rate of 7.0%. Additionally, the Company recorded dividends on
Company-obligated mandatorily redeemable securities of a subsidiary trust in the
amount of $206 thousand during the quarter ended March 31, 1998.
Income taxes increased to $4.0 million for the second quarter of fiscal
1998 from $2.6 million in the second fiscal quarter in 1997, an increase of $1.4
million or 54.7%. The effective tax rate for the fiscal 1998 quarter was 38.7%
compared to 36.9% for the 1997 quarter. The increase in the effective tax rate
is attributable to a combination of decreasing interest income on tax-exempt
investments, an increase in non-tax deductible goodwill amortization and an
increase in effective state income tax rates.
Six Months Ended March 31, 1998 Compared to Six Months Ended March 31, 1997
Parking revenues for the six months ending March 31, 1998 increased to
$135.5 million from $77.8 million in the six months ending March 31, 1997, an
increase of $57.7 million, or 74.2%. Of the $57.7 million increase, $40.7
million, or 70.4% of the increase, resulted from the acquisition of Square,
Diplomat and Kinney's 564 leased and owned locations. The remaining increase of
$17.0 million, or 29.6%, is a result of the net addition of 64 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
Page 12 of 18
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facilities. Revenues from foreign operations increased to $11.1 million from
$8.2 million, an increase of $2.9 million or 35.8%. The increase in foreign
revenues was a result of a combination of the addition of 16 leased locations as
well as rate increases and higher utilization of parking spaces at existing
facilities.
Management contract revenues for the six months ending March 31, 1998
increased to $26.9 million from $19.6 million in the six months ending March 31,
1997, an increase of $7.3 million or 37.4%. Of the $7.3 million increase, $3.1
million, or 41.9%, resulted from the addition of 155 management locations
through the acquisitions of Square, Diplomat and Kinney. The remaining increase
of $4.2 million, or 58.1%, is attributed to the net addition of 36 management
contracts and increased management fees on existing locations.
Cost of parking in the six months ending March 31, 1998 increased to
$117.8 million from $68.5 million in the six months ending March 31, 1997, an
increase of $49.3 million or 72.0%. Rent expense increased $30.4 million and
payroll increased $10.6 million, principally as a result of new locations from
acquisitions and increases on existing locations. Cost of parking as a
percentage of parking revenues, decreased to 86.9% in the six months ending
March 31, 1998 from 88.0% in the six months ending March 31, 1997. This decrease
of 110 basis points was attributable predominantly to greater economies of scale
resulting from synergies realized from recent acquisitions.
Cost of management contracts in the six months ending March 31, 1998
increased to $7.1 million from $5.7 million in the comparable period in 1997, an
increase of $1.4 million or 24.9%. The increase in cost reflects higher
insurance claims and employment taxes associated with the increase in the number
of managed facilities.
General and administrative expenses increased to $14.6 million for the
six months ending March 31, 1998 from $10.7 million in the six months ending
March 31, 1997, an increase of $3.9 million or 36.3%. The increase is primarily
attributable to increased incentive compensation resulting from increased
profits and start-up costs associated with the opening of new locations and
joint ventures. General and administrative expenses, as a percentage of
revenues, were 9.0% for the six months ending March 31, 1998 compared to 11.0%
for the six months ending March 31, 1997, a decrease of 200 basis points. The
decrease was attributable to spreading fixed expenses over a broader base and
the implementation of bonus limits on certain key executives.
Goodwill and non-compete amortization for the six months ended March
31, 1998 increased to $2.1 million from $235 thousand in the six months ended
March 31, 1997, an increase of $1.8 million, as a result of the Kinney, Square
and Diplomat acquisitions.
Interest income increased to $1.1 million for the six months ending
March 31, 1998, from $865 thousand in the six months ending March 31, 1997, an
increase in the amount of $244 thousand or 28.3%. The increase in interest
income is a result of higher investment balances outstanding during the
six-month period and increased notes receivable balances.
Interest expense increased to $4.8 million for the six months ending
March 31, 1998 from $1.3 million in the six months ending March 31, 1997. The
increase in interest expense was attributable to the increase in indebtedness
under the Company's credit facilities. The weighted average balance outstanding
under such credit facilities was $114.8 million during the six months ended
March 31, 1998, at a weighted average interest rate of 6.7%. The weighted
average balance outstanding was $113.7 million during the six months ended March
31, 1997, at an average interest rate of 7.0%. Additionally, the Company
recorded dividends on Company-obligated mandatorily redeemable securities of a
subsidiary trust in the amount of $206 thousand during the six months ended
March 31, 1998.
Income taxes increased to $7.4 million for the six months ending March
31, 1998 from $4.7 million in the six months ending March 31, 1997, an increase
of $2.7 million or 59.1%. The effective tax rate for the first six months of the
1998 fiscal year was 38.3% compared to 36.0% for the same period in 1997. The
increase in the effective tax rate is attributable to a combination of
decreasing interest income on tax-exempt investments, an increase in non-tax
deductible goodwill amortization and an increase in effective state income tax
rates.
Liquidity and Capital Resources
During the first six months ended March 31, 1998 and 1997, the Company
generated cash flow from operating activities of $17.4 million and $2.7 million,
respectively, an increase of $14.7 million. The increase is primarily
attributable to increased net earnings of $3.7 million, increased depreciation
of $2.4 million, and increased changes in net operating assets and liabilities
of $8.1 million.
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The Company utilized cash of $206.1 million, net of cash acquired, in
the first half of fiscal 1998 for acquisitions (see Acquisitions) compared to
$48.1 million for the first six months of fiscal 1997. The acquisitions were
funded from credit facilities described herein.
The Company purchased properties during the six months ended March 31,
1998, and 1997 in the amounts of $19.5 million and $4.2 million, respectively.
During the first half of the 1997 fiscal year, Civic Parking LLC ("Civic"),
which consists of four parking garages totaling approximately 7,500 parking
spaces, was acquired for $91.0 million. Of the $91.0 million, $45.8 million was
held for resale to a joint venture partner and $45.2 million was recorded as an
investment in joint ventures. The purchase was funded partially through
available cash and the drawing under a revolving credit facility in the amount
of $67.2 million. In April 1997, the Company sold 50% of its investment in Civic
for $46.0 million.
Acquisitions
Square Industries
On January 18, 1997, the Company completed its offer to acquire all the
outstanding shares of Square Industries, Inc. for $54.8 million, including
transaction fees and other related expenses. In addition, the Company assumed
$23.2 million of existing Square debt. The funds required for this acquisition
were drawn under a revolving credit facility.
Diplomat Parking Corporation
On October 1, 1997, Diplomat Parking Corporation was purchased for
$21.7 million. The purchase was financed through a $12.3 million draw on the
Company's revolving credit facility and an $8.2 million note payable to the
sellers, which was subsequently paid. The note payment was financed through the
revolving credit facility. Diplomat operated 164 parking facilities containing
approximately 37,000 parking spaces, located primarily in Washington D.C. and
Baltimore, Maryland.
Kinney System Holding Corp.
On February 12, 1998, the Company purchased Kinney System Holding Corp.
("Kinney"), a privately-held parking company headquartered in New York City, for
$208.8 million, including $171.8 million in cash and other consideration, and
$37.0 million (882,422 shares) in common stock of the Company. In connection
with this transaction, the Company assumed $8.1 million in capitalized leases,
refinanced $24.2 million in existing Kinney debt and assumed $4.6 of Kinney
debt. The purchase price is subject to adjustment based on the outcome of an
independent evaluation of Kinney's February 12, 1998 balance sheet. The Company
financed the Kinney Acquisition with borrowings under the New Credit Facility
described below. The transaction was accounted for using the purchase method
and, accordingly, the results of operations of Kinney have been included in the
Company's consolidated financial statements from the date of acquisition. The
preliminary purchase price has been allocated to Kinney's assets and liabilities
based on their estimated fair market values at the date of acquisition. The
excess of the preliminary purchase price over fair value of the net assets
acquired of $188.6 million is being amortized on a straight-line basis over 30
years. Purchase price adjustments for Kinney have not been finalized.
Special Distribution by Joint Venture
In February 1998, the Company received a special joint venture
distribution of $30.3 million from Civic, as a result of $60.0 million of
financing incurred by Civic. The Company does not expect such distributions to
occur in the future.
New Credit Facility
On February 11, 1998, the Company established a new 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 term
loan portion of the New Credit Facility was repaid with proceeds from the common
stock and Preferred Securities offerings described below. The New Credit
Facility bears
Page 14 of 18
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interest until June 30, 1998 at a rate of LIBOR plus 1.25%. On June 30, 1998
the interest rate on the New Credit Facility and the commitment fee on the
unused portion will revert to a grid pricing based upon the achievement of
various financial ratios. The New Credit Facility contains certain covenants
including those that require the Company to maintain certain financial ratios,
restrict further indebtedness, and limit the amount of dividends payable. The
amount outstanding under the Company's New Credit Facility as of March 31, 1998
is $58.6 million, with an interest rate of 6.9% for the period the New Credit
Facility was outstanding. The Company used borrowings under the New Credit
Facility to replace the Company's prior revolving credit facility and to finance
the Kinney acquisition.
The prior credit facility, which was unsecured, was scheduled to expire
January 31, 2000. Credit available under the prior facility amounted to $120
million. The amount outstanding under the Company's prior credit facility was
$70.8 million, which is reflected as long term debt on the accompanying
condensed consolidated balance sheets as of September 30, 1997. Such debt had a
7.0% weighted average interest rate for the period from December 31, 1996 to
September 30, 1997, during which the Company had debt outstanding. At March 31,
1997, the Company had $131.8 million outstanding under its credit facilities at
an interest rate of 7.0%. The weighted average balance outstanding was $113.7
million during the six months ended March 31, 1997 at an average interest rate
of 7.0%.
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
$89.3 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.
The Company's consolidated balance sheets reflect the Preferred Securities
of the Trust as company-obligated mandatorily redeemable securities of
subsidiary holding solely parent debentures.
Page 15 of 18
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
The following proposals were approved at the Company's Annual Meeting
of Shareholders which was held on March 9, 1998.
The re-election of all seven directors, and one new director for terms
ending at the 1999 Annual Meeting of Shareholders. Each director
received the following number of total votes:
FOR AGAINST ABSTAIN
----------------------------------------------
Monroe J. Carrell, Jr. 24,973,321 0 7,047
James H. Bond 24,973,421 0 6,947
Cecil Conlee 24,972,521 0 7,847
John E. Eakin 24,970,171 0 10,197
Edward G. Nelson 24,970,921 0 9,447
William C. O'Neil, Jr. 24,971,521 0 8,847
P.E. Sadler 24,970,271 0 10,097
Lowell Harwood 24,973,421 0 6,947
An increase in the shares reserved for issuance under the 1995
Incentive and Nonqualified Stock Option Plan for Key Personnel.
FOR AGAINST ABSTAIN
----------------------------------------------
24,450,939 507,555 21,874
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule (EDGAR Filing Only)
(b) Reports on Form 8-K
In relation to the acquisition of Civic Parking, LLC., the
Company filed a Current Report on Form 8-K on January 14, 1997
with subsequent amendments on Form 8-K/A filed on January 16,
1997, March 17, 1997, and April 8, 1997. This report included
Item 2 and Item 7. Financial statements presented under Item 7
included pre-acquisition financial statements for Civic
Parking, L.L.C., Statement of Revenues and Expenses of Civic
Center Corporation, and proforma financial information for
Central Parking Corporation.
In relation to the acquisition of Square Industries, Inc. the
Company filed a Current Report on Form 8-K on January 31, 1997
with subsequent amendments on Form 8-K/A filed on March 18,
1997, March 21, 1997, and April 9, 1997. This report included
Item 2 and Item 7. Financial statements presented under Item 7
included pre-acquisition financial statements for Square
Industries, Inc. and proforma financial information for
Central Parking Corporation.
After the quarter ended March 31, 1997, the Company filed a
Current Report on Form 8-K on April 30, 1997 in relation to
the disposition of 50% of Civic Parking, L.L.C. This report
included Item 2 and Item
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7. Financial information presented under Item 7 included
proforma financial information for Central Parking
Corporation.
In relation to the acquisition of Kinney System Holding, Corp.
the Company filed a Current Report on Form 8-K on February 12,
1998. This report included Item 2 and Item 7. Financial
statements presented under Item 7 included pre-acquisition
financial statements for Kinney System Holding, Corp. and
proforma financial information for Central Parking
Corporation.
In relation to the completion of a private placement of $100
Million aggregate principal amount of Convertible Preferred
Securities, the Company filed a Current Report on Form 8-K on
February 17, 1998. This report included Item 5.
In relation to the acquisition of Kinney System Holding Corp,
the Company filed an amended Current Report on form 8-KA on
May 15, 1998. This report included Item 2 and Item 7.
Financial statements presented under Item 7 included
pre-acquisition financial statements for Kinney System
Holding, Corp. and proforma financial information for Central
Parking Corporation.
Page 17 of 18
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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: 5/15/98 By: /s/ Stephen A. Tisdell
--------------------- -----------------------
Stephen A. Tisdell
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Stephen A. Tisdell Chief Financial Officer (Principal
- --------------------------- Financial and Accounting Officer)
Stephen A. Tisdell
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