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 31,1999
Commission file number 001-13950
CENTRAL PARKING CORPORATION
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(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
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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 13,1999
- -------------------------------------- --------------------------
Common Stock, $0.01 par value 36,664,845
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INDEX
CENTRAL PARKING CORPORATION
PAGE
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated condensed balance sheets
--- March 31, 1999 and September 30, 1998...................... 3
Consolidated condensed statements of earnings
--- three and six months ended March 31, 1999 and 1998......... 4
Consolidated condensed statements of cash flows
--- six months ended March 31, 1999 and 1998................... 5 - 6
Notes to consolidated condensed financial statements........... 7 - 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 12 - 19
PART 2. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............ 20
Item 6. Exhibits and Reports on Form 8-K............................... 20
SIGNATURES .................................................... 21
3
CENTRAL PARKING CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
UNAUDITED
Dollar amounts in thousands
March 31, September 30,
1999 1998
---------- --------
Assets
Current assets:
Cash and cash equivalents $ 35,677 $ 39,495
Management accounts receivable 28,149 19,847
Accounts and current portion of notes receivable - other 25,330 14,921
Prepaid rent and other expenses 37,305 22,695
Deferred income taxes 717 545
Prepaid and refundable income taxes 4,451 1,266
----------- ---------
Total current assets 131,629 98,769
Investments, at amortized cost 5,284 5,087
Notes receivable, less current portion 58,605 46,524
Property, equipment, and leasehold improvements, net 383,813 382,506
Contract and lease rights, net 80,091 62,472
Goodwill, net 282,869 288,170
Investment in and advances to partnerships and joint ventures 41,319 40,376
Other assets 35,848 30,118
----------- ---------
$ 1,019,458 $ 954,022
=========== =========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt and capital lease obligation $ 4,517 $ 2,881
Accounts payable 71,808 54,918
Accrued payroll and related costs 14,446 16,908
Accrued expenses 18,617 27,403
Management accounts payable 35,529 26,611
Income taxes payable -- 945
----------- ---------
Total current liabilities 144,917 129,666
Long-term debt and capital lease obligations 336,174 283,319
Deferred rent 16,332 14,875
Deferred compensation 9,576 11,359
Deferred income taxes 35,024 32,894
Other liabilities 4,557 6,892
Minority interest 22,545 23,103
----------- ---------
Total liabilities 569,125 502,108
Company-obligated mandatorily 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,
36,612,300 and 36,521,551 issued and outstanding,
respectively 366 366
Additional paid-in capital 258,616 256,405
Foreign currency translation adjustment (69) (150)
Retained earnings 81,894 85,795
Deferred compensation on restricted stock (474) (502)
----------- ---------
Total shareholders' equity 340,333 341,914
----------- ---------
$ 1,019,458 $ 954,022
=========== =========
See accompanying notes to condensed consolidated financial statements
Page 3 of 21
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CENTRAL PARKING CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
UNAUDITED
Dollar amounts in thousands
Three Months Six Months
Ended March 31, Ended March 31,
1999 1998 1999 1998
--------- --------- --------- ---------
Revenues:
Parking $ 160,654 $ 126,839 $ 318,378 $ 234,500
Management contract 22,569 15,961 45,510 29,555
--------- --------- --------- ---------
Total revenues 183,223 142,800 363,888 264,055
Costs and expenses:
Cost of parking 136,107 104,530 265,143 193,621
Cost of management contracts 6,031 3,859 11,669 7,111
General and administrative 19,175 15,204 38,876 28,628
Goodwill and non-compete amortization 2,840 1,743 5,740 2,632
Merger costs 27,295 -- 27,295 --
--------- --------- --------- ---------
Total costs and expenses 191,448 125,336 348,723 231,992
--------- --------- --------- ---------
Operating earnings (loss) (8,225) 17,464 15,165 32,063
Other income (expenses):
Interest income 946 948 2,067 1,787
Interest expense (7,427) (8,933) (14,989) (15,837)
Dividends on Company-obligated mandatorily
redeemable convertible securities of a
subsidiary trust (1,492) (253) (2,888) (253)
Net gains on sales of property and equipment 2,893 (654) 2,808 (692)
Minority interest (141) (72) (219) (144)
Equity in partnership and joint venture earnings 1,067 1,241 2,253 2,484
--------- --------- --------- ---------
Other income (expenses), net (4,154) (7,723) (10,968) (12,655)
--------- --------- --------- ---------
Earnings (loss) before income taxes and (12,379) 9,741 4,197 19,408
extraordinary item
Income tax (benefit) expense (352) 3,753 6,085 7,905
--------- --------- --------- ---------
Net earnings (loss) before extraordinary item (12,027) 5,988 (1,888) 11,503
--------- --------- --------- ---------
Extraordinary item, net of tax 1,002 -- 1,002 --
--------- --------- --------- ---------
Net earnings (loss) $ (13,029) $ 5,988 $ (2,890) $ 11,503
========= ========= ========= =========
Basic earnings (loss) per share:
Net earnings (loss) before extraordinary item $ (0.33) $ 0.18 $ (0.05) $ 0.35
Extraordinary item, net of tax $ (0.03) $ -- $ (0.03) $ --
Net earnings (loss) $ (0.36) $ 0.18 $ (0.08) $ 0.35
Diluted earnings (loss) per share:
Net earnings (loss) before extraordinary item $ (0.33) $ 0.17 $ (0.05) $ 0.34
Extraordinary item, net of tax $ (0.03) $ -- $ (0.03) $ --
Net earnings (loss) $ (0.36) $ 0.17 $ (0.08) $ 0.34
Page 4 of 21
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CENTRAL PARKING CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Dollar amounts in thousands
Six Months Ended March 31,
1999 1998
--------- ---------
Cash flows from operating activities:
Net earnings (loss) before extraordinary item $ (1,888) $ 11,503
Extraordinary item, net of tax (1,002) --
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 10,202 6,682
Amortization of goodwill and non-compete 5,740 2,632
Amortization of contract and lease rights, straight-line rent,
deferred financing fees and other 4,875 2,180
Equity in partnership and joint venture earnings (2,253) (2,484)
Distributions from partnerships and joint ventures 2,203 1,685
Net (gains) loss on sales of property and equipment (2,808) 692
Deferred income taxes 1,958 853
Minority interest 1,045 1,052
Changes in operating assets and liabilities, excluding acquisitions:
(Increase) decrease in management accounts receivable (8,302) 1,906
(Increase) decrease in notes and accounts receivable - other (6,756) (1,271)
(Increase) decrease in prepaid expenses (14,610) (2,613)
(Increase) decrease in prepaid and refundable income taxes (3,185) 2,154
(Increase) decrease in other assets 423 (1,832)
Increase (decrease) in accounts payable,
accrued expenses and deferred compensation 1,267 (2,975)
Increase (decrease) in management accounts payable 8,918 399
Increase (decrease) in income taxes payable (945) (102)
--------- ---------
Net cash (used) provided by operating activities (5,118) 20,461
--------- ---------
Cash flows from investing activities:
Proceeds from sales of property and equipment 19,306 6,232
Purchase of property, equipment, and leasehold improvements (23,165) (46,206)
Investments in notes receivable, net (15,734) 280
Purchase of contract rights and lease rights (22,190) (698)
Investment in and advances to partnerships, joint ventures
and unconsolidated subsidiaries (1,013) 5,980
Acquisitions of companies, net of cash acquired -- (208,893)
Purchase of investments (197) (127)
--------- ---------
Net cash used by investing activities (42,993) (243,432)
--------- ---------
Cash flows from financing activities:
Dividends paid (887) (987)
Net borrowings under revolving credit agreement, net of issuance costs 68,704 (13,782)
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 220,330 117,242
Principal repayments on notes payable and capital leases (257,457) (107,199)
Distribution of debt proceeds from partnerships and joint ventures -- 30,285
Proceeds from issuance of common stock and exercise of stock options, net 2,179 99,632
--------- ---------
Net cash provided by financing activities 32,869 231,191
--------- ---------
Foreign currency translation 175 150
--------- ---------
Net increase (decrease) in cash and cash equivalents (15,067) 8,370
Cash and cash equivalents at beginning of period 50,744 17,308
--------- ---------
Cash and cash equivalents at end of period $ 35,677 $ 25,678
========= =========
Page 5 of 21
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CENTRAL PARKING CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Dollar amounts in thousands
Six Months Ended March 31,
1999 1998
--------- ---------
Non-cash transactions:
Issuance of restricted stock $ 18 $ --
Issuance of stock in acquisitions $ -- $ 39,385
Effects of acquisitions:
Estimated fair value of assets acquired $ -- $ 94,123
Purchase price in excess of the net assets acquired -- 211,085
Estimated fair value of liabilities assumed (48,717)
Stock issued -- (39,385)
--------- ---------
Cash paid -- 217,106
Less cash acquired (8,213)
========= =========
Net cash paid for acquisitions $ -- $ 208,893
========= =========
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CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation
The accompanying unaudited consolidated condensed 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
inter-company transactions have been eliminated in consolidation. Operating
results for the three and six months ended March 31, 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). Certain items have been restated
to conform to current year presentation.
Mergers and Acquisitions
ALLRIGHT HOLDINGS, INC.
On March 19, 1999, Central Parking Corporation (the "Company" or "Central
Parking") completed a merger ("the Merger") in which Allright Holdings, Inc.
("Allright") merged with a wholly owned subsidiary of the Company. Approximately
7.0 million shares of Central Parking stock, and approximately 0.5 million
options and warrants to purchase such 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. Allright was one of the largest
parking services companies in the United States with revenues of approximately
$217.2 million for the fiscal year ended June 30, 1998.
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." Accordingly, all 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 always been part of
Central Parking from the date of Allright's inception, October 31, 1996. The
Company incurred $27.3 million of merger related expenses on a pre-tax basis as
of March 31, 1999. Included in these costs are approximately $18.2 million in
professional fees, which are comprised of investment banking, legal, accounting,
and consulting fees; $8.0 million related to Allright employment agreements, and
the balance of $1.1 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. Payments that were required prior to and concurrent with
the consummation of the merger have been included in merger costs. Payments to
be made in future periods, subject to attaining the employment periods, total
approximately $3.6 million.
Prior to the Central Parking/Allright Merger, Allright's fiscal year ended June
30. In recording the business combination, Allright's fiscal year-end has been
restated to reflect a September year-end to conform with Central Parking's
fiscal year-end. There were no material transactions between Central Parking and
Allright prior to the Merger. Certain reclassifications have been made to
Allright's historical financial statements to conform to Central's presentation.
As a result of restating financial information of both companies to conform to
Central Parking's fiscal year-end, and to provide for comparability of
operations, the quarter ending September 30, 1998 for Allright has been recorded
directly to stockholders' equity, and is not included in year-to-date
information presented in the accompanying consolidated financial statements.
The results of operations and cash flows from Allright for that quarter were as
follows: (in thousands)
Results of Operations Cash Flows from:
--------------------- ----------------
Total revenue $59,167 Operating activities $ 1,142
Earnings before tax 244 Investing activities (4,552)
Income tax 264 Financing activities 14,659
Net loss (20)
Page 7 of 21
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ALLIED PARKING
On October 1, 1998, Allright purchased from Allied Parking, Inc. ("Allied"),
four leases relating to parking facilities in New York City, with remaining
lease terms 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
for $835,000.
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 $300,000.
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
company headquartered in New York City. Kinney has been in the parking
business for over 60 years. In addition to enhancing the Company's presence
in New York City, Kinney increased Central Parking's presence in a number of
other major metropolitan areas such as Boston, Philadelphia and Washington,
D.C. and broadened its geographic coverage in the following nine states:
Connecticut, Florida, Kentucky, Maryland, Massachusetts, New Hampshire, New
York, Pennsylvania, and Virginia. Kinney provides both self-parking and
valet parking services, and provides parking related services such as
facility design and development and consulting services.
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 parking
facilities operated by Kinney include Yankee Stadium, the Waldorf-Astoria,
Port Authority Bus Terminal, World Financial Center, and the General Motors
Building in New York City, The Ritz-Carlton-Boston, Government Center in
Boston, Spectrum-Philadelphia, and the Four Seasons Hotel of Washington,
D.C.
Consideration for the Kinney acquisition was approximately $208.8 million,
including $171.8 million in cash, including transaction fees and other
related costs, 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.
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 connection with the Merger, Allright entered into a Restructuring
Agreement with Edison Parking Management L.P., which required Allright to
contribute an additional $11.7 million to the limited partnership and modify
certain other related agreements. The partnership then loaned such amounts
back to Allright
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
Page 8 of 21
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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 Three Months Ended
March 31, 1999 March 31,1998
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:
Earnings (loss) before extraordinary
item $(12,027) 36,273 $(0.33) $5,988 33,540 $0.18
Effect of dilutive stock and options:
Stock option plan 464 (0.01)
Restricted stock plan 173
Deferred stock unit plan 12
Employee stock purchase plan 48
-------- ------ ------ ------ ------ -----
Diluted earnings per share:
Earnings (loss) before extraordinary
item $(12,027) 36,273 $(0.33) $5,988 34,237 $0.17
======== ====== ====== ====== ====== =====
Six Months Ended Six Months Ended
March 31, 1999 March 31,1998
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:
Earnings (loss) before extraordinary
item $ (1,888) 36,267 $(0.05) $11,503 33,032 $0.35
Effect of dilutive stock and options:
Stock option plan 441 (0.01)
Restricted stock plan 174
Deferred stock unit plan 6
Employee stock purchase plan 48
-------- ------ ------ ------- ------ -----
Diluted earnings per share:
Earnings (loss) before extraordinary
item $(1,888) 36,267 $(0.05) $11,503 33,701 $0.34
======== ====== ====== ======= ====== =====
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 restricted stock may forfeit such shares if certain
employment or service requirements are not met. 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, 1999, such securities were
convertible into 2,000,000 shares of common stock. For the three and six months
ended March 31, 1999, options and warrants to purchase 1,172,983 and 1,235,938
shares, respectively of Central Parking common stock are excluded from the
diluted common shares since they are antidilutive.
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 sublimit 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 1.12% through June 19, 1999, and thereafter reverts to a
grid-based pricing based upon the Company achieving certain financial ratios.
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 March 31, 1999 is $319 million
with a weighted average interest rate of 6.08% for the period from March 19,
1999 through March 31, 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.
Page 9 of 21
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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).
Convertible Trust Issued Preferred Securities and Equity Offerings
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 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 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. The consolidated results of operations reflect dividends on the
Preferred Securities in interest expense.
Recent Accounting Pronouncements
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 loss for the six month
periods ended March 31, 1999 and 1998 was $175 thousand and $150 thousand,
respectively.
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.
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. The Company is in the process of evaluating the impact, if any, this
pronouncement will have on its financial statements.
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Subsequent Events
On April 14, 1999 the Company entered into a letter agreement to purchase the
remaining 60% interest in a partnership which operates a parking facility in New
York City for $23.2 million in cash. The Company currently owns 40% of the
partnership. The current partner will continue to manage the garage for the next
7 years.
During April 1999 the Company purchased an additional lease from Allied Parking
with a remaining lease term through 2020 for $3.0 million. The Company also
purchased the right to use the "Allied Parking" name associated with the
properties covered by this lease as part of the purchase price.
On May 10, 1999, the Company entered into 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.
Page 11 of 21
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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 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 and Kinney Systems, 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 complete 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.
Parking revenues consist of Central Parking Corporation and subsidiaries
("Central Parking" or the "Company") 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 $35.2 million and $28.4
million for the six months ended March 31, 1999 and March 31,1998, respectively.
Owned properties parking revenues, as a percentage of parking revenues,
accounted for 11.1% and 12.1% in the six months ended March 31, 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 $283.2 million and $206.1
million for the six months ending March 31, 1999 and 1998, respectively. Leased
properties parking revenues, as a percentage of parking revenues, accounted for
88.9% and 87.9% in the six months ending March 31, 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 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
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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 $45.5 million and $29.6 million for the
six months ended March 31, 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. In general, 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 March 31, 1999, Central Parking operated 2,045 parking facilities through
management contracts, leased 2,541 parking facilities, and owned 263 parking
facilities, either independently or in joint venture with third parties.
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
Parking revenues for the second quarter of fiscal 1999 increased to $160.6
million from $126.8 million in the second quarter of fiscal 1998, an increase of
$33.8 million, or 26.7%. Of the $33.8 million increase, $16.1 million resulted
from the acquisitions of Kinney, Turner and Sterling's 267 leased and owned
locations. The remaining increase of $17.7 million, resulted from the net
addition of 110 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 previous quarter, the Company converted four
previously leased locations to a management agreement. This conversion reduced
parking revenues by $2.6 million in the second quarter of fiscal 1999 as
compared to the same quarter of fiscal 1998. Revenues from foreign operations
amounted to $7.5 million and $5.4 million, for the quarters ended March 31, 1999
and 1998, respectively. This increase resulted primarily from increased parking
activities in the Company's European Operations.
Management contract revenues for the second quarter of fiscal 1999 increased to
$22.6 million from $16.0 million in the second quarter of fiscal 1998, an
increase of $6.6 million or 41.4%. Of the $6.6 million increase, $1.1 million
resulted from the addition of 423 management locations through the acquisitions
of Kinney, Turner, Sterling, and National. The remaining increase of $5.5
million is attributed to the net addition of 410 management contracts and
increased management fees on existing locations.
Cost of parking in the second quarter of 1999 increased to $136.1 million from
$104.5 million in the second quarter of 1998, an increase of $31.6 million or
30.2%. The significant components of the increase from the second quarter of
1998 to the second quarter of 1999 were rent expense and payroll expense. Rent
expense increased, principally as a result of new locations from acquisitions
and net new additions. Payroll increased as a result of new locations from
acquisitions, net new additions, and increases in parking activities at existing
locations. Cost of parking as a percentage of parking revenues increased to
84.7% in the second quarter of fiscal 1999 from 82.4% in fiscal second quarter
1998. This increase was attributable to higher operating costs such as rent and
payroll associated with facilities acquired with Kinney, partially offset by the
Company's conversion of four previously leased locations to a management
agreement, which reduced costs of parking by $2.3 million in the second quarter
of fiscal 1999 as compared to the same quarter of fiscal 1998.
Cost of management contracts in fiscal second quarter 1999 increased to $6.0
million from $3.8 million in the comparable period in 1998, an increase of $2.2
million or 56.3%. 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
26.7% for the second fiscal quarter 1999 from 24.2% for the same period last
year.
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General and administrative expenses excluding amortization of goodwill increased
to $19.2 million for the second quarter of fiscal 1999 from $15.2 million in
fiscal second quarter 1998, an increase of $4.0 million or 26.1%. The increase
is primarily attributable to the purchase of Kinney and the increased
administrative activities associated with the Kinney operations. General and
administrative expenses, as a percentage of revenues, were 10.5% for the second
quarter of fiscal 1999 compared to 10.6% for the second quarter of fiscal 1998.
Goodwill and non-compete amortization for the second quarter of fiscal 1999
increased to $2.8 million from $1.7 million in fiscal second quarter 1998, an
increase of $1.1 million, as a result of the Sterling, CPS of Louisiana, Turner,
Kinney, and National acquisitions.
The Company incurred $27.3 million of merger related expenses on a pretax basis
as of March 31, 1999 that were reported as operating expenses. Included in these
expenses are approximately $18.2 million in professional fees; comprised of
investment banking, legal, accounting, and consulting fees; $8.0 million related
to Allright employment payments, and the balance of $1.1 million in travel,
supplies, printing, and other out-of-pocket expenses. The Company anticipates
approximately $10.2 million of additional expenses related to the Allright
merger, which will be recognized when incurred in subsequent quarters.
Interest income remained relatively constant at $946 thousand for the second
quarter of fiscal 1999, compared with $948 thousand in the second quarter of
fiscal 1998.
Interest expense and dividends on Company-obligated mandatorily redeemable
convertible securities of a subsidiary trust decreased to $8.9 million for the
second quarter of fiscal 1999 from $9.2 million in the second quarter of fiscal
1998. The decrease in interest expense was primarily attributable to lower
interest rates on the Company's credit facilities. The weighted average balance
outstanding under such credit facilities and convertible securities was $433.8
million during the quarter ended March 31,1999, at a weighted average interest
rate of 8.0% compared to $433.4 during the quarters ended March 31, 1998 at an
average interest rate of 9.2%.
During the quarter, a third party exercised its option to purchase certain land
from the Company. As a result, the Company received proceeds of $17.7 million
and recognized a gain on such sale of $2.5 million.
Income taxes decreased to a benefit of $352 thousand for the second quarter of
fiscal 1999 from tax expense of $3.7 million in the second fiscal quarter in
1998, a decrease of $4.1 million. The effective tax rate for the second fiscal
1999 quarter was impacted by an increase in non-deductible goodwill
amortization, the tax benefit of merger expenses, and by the tax expense on the
gain on sale of property.
During the quarter, an extraordinary loss of $1.5 million, or $1.0 million net
of tax, was incurred in connection with the repayment of Allright's debt in
connection with the Merger.
Six Months Ended March 31, 1999 Compared to Six Months Ended March 31, 1998
Parking revenues for the six months ending March 31, 1999 increased to $318.4
million from $234.5 million in the same period ended March 31, 1998, an increase
of $83.9 million, or 35.8%. Of the $83.9 million increase, $50.0 million
resulted from the acquisitions of Kinney, Turner, Sterling, and National's 267
leased and owned locations. The remaining increase of $33.9 million, resulted
from the net addition of 267 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 previous year, the Company
converted four previously leased locations to a management agreement. This
conversion reduced parking revenues by $5.0 million in the second quarter of
fiscal 1999 as compared to the same quarter of fiscal 1998. Revenues from
foreign operations amounted to $16.3 million and $16.7 million, for the quarters
ended March 31, 1999 and 1998, respectively.
Management contract revenues for the first half of fiscal 1999 increased to
$45.5 million from $30.0 million in the same period of fiscal 1998, an increase
of $15.9 million or 54.0%. Of the $15.5 million increase, $4.1 million resulted
from the addition of 423 management locations through the acquisitions of
Kinney, Turner, Sterling, and National. The remaining increase of $11.8 million
is attributed to the net addition of 255 management contracts and increased
management fees on existing locations.
Cost of parking in the first half of fiscal 1999 increased to $265.1 million
from $193.6 million in the first half of fiscal 1998, an increase of $71.5
million or 36.9%. The significant components of the increase from the first half
of 1998 to the first half of 1999 were rent expense and payroll expense. Rent
expense increased, principally as a result of new locations from acquisitions
and net new additions. Payroll increased, principally as a result of new
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locations from acquisitions, net new additions and increases in parking
activities at existing locations. Cost of parking as a percentage of parking
revenues decreased to 83.3% in the second quarter of fiscal 1999 from 82.6% in
fiscal first half of 1998. This decrease was attributable to lower operating
costs such as rent and utilities associated with facilities acquired with
Kinney, as well as the spreading of a number of other fixed costs over a larger
revenue base. The Company's conversion of four previously leased locations to a
management agreement which reduced costs of parking by $4.6 million in the first
half of fiscal 1999 as compared to the same period of fiscal 1998.
Cost of management contracts in the first six months of fiscal 1999 increased to
$11.7 million from $7.1 million in the comparable period in 1998, an increase of
$4.6 million or 64.1%. 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 decreased to
25.7% for the six months ending March 31, 1999 from 24.1% for the same period
last year.
General and administrative expenses excluding amortization of goodwill increased
to $38.9 million for the six months ended March 31, 1999 from $28.6 million in
the same period of 1998, an increase of $10.3 million or 35.8%. The increase is
primarily attributable to the purchase of Kinney and the increased
administrative activities associated with the Kinney operations. General and
administrative expenses, as a percentage of revenues, were 10.7% for the first
half of fiscal 1999 compared to 10.8% for the first half of fiscal 1998.
Goodwill and non-compete amortization for the first half of fiscal 1999
increased to $5.7 million from $2.6 million in the first half of fiscal 1998, an
increase of $3.1 million, as a result of the Sterling, CPS of Louisiana, Turner,
Kinney, and National acquisitions.
The Company incurred $27.3 million of merger related expenses on a pretax basis
as of March 31, 1999 that were reported as operating expenses. Included in these
expenses are approximately $18.2 million in professional fees; comprised of
investment banking, legal, accounting, and consulting fees; $8.0 million related
to Allright, employment agreements, and the balance of $1.1 million in travel,
supplies, printing, and other out-of-pocket expenses. The Company anticipates
approximately $10.2 million of additional expenses related to the Allright
merger which will be recognized when incurred in subsequent quarters.
Interest income increased to $2.1 million for the six months ended March 31,
1999, from $1.8 million in the same period of 1998, an increase of $300
thousand. The increase in interest income is a result of larger balance in notes
receivable outstanding during the six-month period.
Interest expense and dividends on company-obligated mandatorily redeemable
convertible securities of a subsidiary trust increased to $17.9 million for the
six months ended March 31, 1999 from $16.1 million in the first half of fiscal
1998. The increase in interest expense was primarily attributable to the
increase in indebtedness under the Company's credit facilities and convertible
securities. The weighted average balance outstanding under such credit
facilities was $286.3 million during the six months ended March 31,1999, at a
weighted average interest rate of 11.5%. The weighted average balance
outstanding was $321.7 million during the six months ended March 31, 1998, at an
average interest rate of 9.4%.
During the first half of fiscal 1999, a third party exercised its option to
purchase certain land from the Company. As a result, the Company received
proceeds of $17.7 million and recognized a gain on such sale of $2.5 million.
Income taxes decreased to $6.1 million for the first half of fiscal 1999 from
$7.9 million in the first half of fiscal 1998, a decrease of $1.8 million or
23.0%. The effective tax rate for the first half of fiscal 1999 was 145.0%
compared to a rate of 40.7% for the same period in 1998. The increase in the
effective tax rate is attributable to an increase in non-tax deductible goodwill
amortization, an increase in expenses related to the Allright merger that are
not all tax deductible, and higher state income taxes.
During the six months ended March 31, 1999, an extraordinary loss of $1.5
million ($1.0 million net of tax) was incurred on the extinguishment of
Allright's debt in connection with the Merger.
Liquidity and Capital Resources
Operating activities for the six months ended March 31, 1999 used net cash of
$5.1 million, compared to $20.5 million of cash provided by operating activities
for the six months ended March 31, 1998. This decrease in cash provided by
operating activities resulted from merger expenses of $27.3 million, increases
in management accounts receivable of $10.2 million, prepaid rent and other
expenses of $12.0 million, and prepaid and refundable income taxes of $5.3
million; partially offset by an increase in management accounts payable of $8.5
million and an increase in accounts payable, accrued expenses and deferred
compensation of $4.2 million.
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Net cash used by investing activities was $43.0 million for the first half of
fiscal 1999, a decrease in cash used of $200.4 million from net cash of $243.4
million used in investing activities during the first half of fiscal 1998. In
the first half of 1999, the Company received proceeds from sale of property of
$13.1 million more than in the first half of fiscal 1998, offset by increases in
notes receivable of $16.0 million. In the first half of fiscal 1998, the Company
used $187.4 million more for acquisitions, net of cash acquired and purchase of
contract and lease rights, than in the same period of 1999.
Net cash provided by financing activities for the six months ended March 31,
1999 was $32.9 million, a decrease of $198.3 million over the $231.2 million
provided during the six months ended March 31, 1998. Primary factors that
contributed to this decrease are the purchase of Kinney, the issuance of
preferred securities, and the issuance of common stock in connection with the
completion of a secondary offering during the first six months of fiscal 1998,
which did not occur in the same six month period of fiscal 1999.
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 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
March 31, 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
On May 10, 1999, the Company entered into 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.
During April 1999 the Company purchased an additional lease from Allied Parking
with a lease term through 2020 for $3.0 million. Allright also purchased the
right to use the "Allied Parking" name associated with these as part of the
purchase price.
On April 14, 1999, the Company entered into a letter agreement to purchase the
remaining 60% interest in a partnership which operates a parking facility in
New York City for $23.2 million in cash. The Company currently owns 40% of the
partnership. The current partner will continue to manage the garage for the
next 7 years.
In connection with the Allright merger, the Company has incurred $27.3 million
of merger related expenses on a pre tax basis. The Company anticipates
approximately $10.2 million of additional expenses related to the Allright
Merger which will be recognized when incurred in subsequent quarters. Included
in this total is approximately $3.6 million of amounts to be paid to certain
Allright employees under retention and employment agreements.
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 sublimit 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 1.12% through June 19, 1999 thereafter reverts to a grid based
pricing based upon the Company achieving certain financial ratios. 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 March 31, 1999 is $319 million, with a
weighted average interest rate of 6.065% for the period from March 19, 1999
through March 31, 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
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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, 19998, 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.
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 $106.5 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
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 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 will be accounted for as
regular capital expenditures and will be 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 $4 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. Central Parking believes that less than 20% of its
operations have fee calculation devices with any Year 2000 issues with regard to
carrying out its parking business. 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. 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 events 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 back up 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
ALLRIGHT HOLDINGS, INC.
On March 19, 1999, Central Parking Corporation (the "Company" or "Central
Parking") completed a merger ("the Merger") in which Allright Holdings, Inc.
("Allright"), merged with a wholly owned subsidiary of the Company.
Approximately 7.0 million shares of Central Parking 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. Allright was one of the largest
parking services companies in the United States with revenues of approximately
$217.2 million for the fiscal year ended June 30, 1998.
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." Accordingly, all 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 always been part of
Central Parking from the date of Allright's inception, October 31, 1996. The
Company incurred $27.3 million of merger related expenses on a pretax basis as
of March 31, 1999 that were reported as operating expenses. Included in these
costs are approximately $18.2 million in professional fees; comprised of
investment banking, legal, accounting, and consulting fees; $8.0 million related
to Allright employment agreements and the balance of $1.1 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. Payments that were
required prior to and concurrent with the consummation of the merger have been
included in merger costs. Payments to be made in future periods, subject to
attaining the employment periods, total approximately $3.6 million.
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Prior to the Central Parking/Allright Merger, Allright's fiscal year ended 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. There were no material transactions between Central Parking and
Allright prior to the Merger. Certain reclassifications have been made to
Allright's historical financial statements to conform to Central's presentation.
As a result of restating financial information of both companies to conform to
Central Parking's fiscal year-end, and to provide for comparability of
operations, the quarter ending September 30, 1998 for Allright has been recorded
directly to stockholders' equity, and is not included in year-to-date
information presented in the accompanying consolidated financial statements.
The results of operations and cash flows for Allright for that quarter were as
follows: (in thousands)
Results of Operations Cash Flows from:
--------------------- ----------------
Total revenue $59,167 Operating activities $ 1,142
Earnings before tax 244 Investing activities (4,552)
Income tax 264 Financing activities 14,659
Net loss (20)
ALLIED PARKING
On October 1, 1998, Allright purchased from Allied four leases relating to
parking facilities in New York City, with remaining lease terms 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 prepaid lease
payment of $4.9 million. Allright also purchased the right to use the
"Allied Parking" name for $835,000.
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 $300,000.
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
company headquartered in New York City. Kinney has been in the parking
business for over 60 years. In addition to enhancing the Company's presence
in New York City, Kinney increased Central Parking's presence in a number of
other major metropolitan areas such as Boston, Philadelphia and Washington,
D.C. and broadened its geographic coverage in the following nine states:
Connecticut, Florida, Kentucky, Maryland, Massachusetts, New Hampshire, New
York, Pennsylvania, and Virginia. Kinney provides both self-parking and
valet parking services, and provides parking related services such as
facility design and development and consulting services.
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 parking
facilities operated by Kinney include Yankee Stadium, the Waldorf-Astoria,
Port Authority Bus Terminal, World Financial Center, and the General Motors
Building in New York City, The Ritz-Carlton-Boston, Government Center in
Boston, Spectrum-Philadelphia, and the Four Seasons Hotel of Washington,
D.C.
Consideration for the Kinney acquisition was approximately $208.8 million,
including $171.8 million in cash, including transaction fees and other
related costs, 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.
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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 on Allright's previous revolving line of credit.
EDISON RESTRUCTURING AGREEMENT
In connection with the Merger, Allright entered into a Restructuring Agreement
with Edison Parking Management L.P., which required Allright to contribute an
additional $11.7 million to the limited partnership and modify certain other
related agreements. The Partnership then loaned such amounts back to Allright.
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
Eight directors were elected for terms ending at the 2000 Annual Meeting of
Shareholders, at the Company's Annual Meeting of Shareholders which was held on
March 5, 1999.
Each director received the following number of total votes:
---------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
---------------------------------------------------------------------------------------------
Monroe J. Carrell, Jr. 26,697,963 0 93,076
---------------------------------------------------------------------------------------------
James H. Bond 26,697,963 0 93,076
---------------------------------------------------------------------------------------------
Cecil Conlee 26,698,102 0 92,937
---------------------------------------------------------------------------------------------
Lowell Harwood 26,696,833 0 94,206
---------------------------------------------------------------------------------------------
Lewis Katz 26,697,233 0 93,806
---------------------------------------------------------------------------------------------
Edward G. Nelson 26,696,227 0 94,812
---------------------------------------------------------------------------------------------
William C. O'Neil, Jr. 26,697,513 0 93,526
---------------------------------------------------------------------------------------------
Julia Carell Stadler 26,693,812 0 97,227
---------------------------------------------------------------------------------------------
The following proposals were approved at a special meeting of shareholders of
Central Parking Corporation held on February 17, 1999.
The approval of an Agreement and Plan of Merger by and among Central
Parking, Central Merger Sub, Inc. ("Central Parking Sub"), Allright
Holdings, Inc. ("Allright"), Apollo Real Estate Investment Fund II,
L.P. and AEW Partners, L.P. dated as of September 21, 1998, and amended
as of January 5, 1999, pursuant to which Central Parking Sub was merged
with and into Allright, and the issuance of Central Parking common
stock.
------------------------------------------------
FOR AGAINST ABSTAIN
------------------------------------------------
24,751,034 652,442 1,387,563
------------------------------------------------
The approval of an amendment to the Central Parking Amended and
Restated Charter to increase the number of shares of authorized common
stock from 50 million to 100 million (the "Charter Amendment
Proposal").
------------------------------------------------
FOR AGAINST ABSTAIN
------------------------------------------------
24,751,034 652,442 1,387,563
------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(2) Agreement and Plan of Merger by and among Central Parking
Corporation, Central Merger Sub, Inc., Allright Holdings, Inc, Apollo
Real Estate Investment Fund II, L.P. and AEW Partners, L.P., 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).
(3)(i) 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 (filed
herewith on page 22).
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on February 12, 1999
announcing operating results for the first quarter of fiscal 1999.
The Company filed a Current Report on Form 8-K on April 5, 1999
announcing the merger with Allright.
27. Financial Data Schedule (EDGAR Filing Only)
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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: May 17, 1999 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
Chief Financial Officer (Principal
/s/ Stephen A. Tisdell Financial and Accounting Officer)
- -------------------------------------------
Stephen A. Tisdell
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