Exhibit 99.1
RESEARCH
Research Update: Standard Parking Ratings Raised Based On
Improved Financial Profile; Outlook Stable
Publication date: 14-Mar-2006
Primary Credit Analyst: Mark Salierno, New York (1) 212-438-1121;
mark_salierno@standardandpoors.com
Credit Rating: B+/Stable/--
Rationale
On March 14, 2006, Standard & Poor's Ratings Services raised its corporate
credit and senior secured debt ratings on Standard Parking Corp. to 'B+' from
'B' based on the company's improved financial profile. At the same time,
Standard & Poor's raised the senior subordinated debt rating to 'B-' from
'CCC+'. The senior secured credit facility is rated the same as the corporate
credit rating, with a recovery rating of '2', indicating that investors could
expect substantial recovery of principal (80%-100%) in the event of default.
The outlook is stable. Chicago-based Standard Parking had about $92.1
million in total debt outstanding as of Dec. 31, 2005, excluding operating lease
obligations.
The ratings on Standard Parking reflect its narrow business focus,
leveraged financial profile, and exposure to the cyclical travel industry and
adverse economic conditions. Partially offsetting these risks are the company's
strong market position within the highly fragmented and competitive parking
industry, and its geographic diversity in North America and fairly predictable
cash flow-generating ability.
Standard Parking, a provider of on-site management services at urban and
airport parking facilities, operates in more than 300 cities in the U.S. and
Canada and maintains a strong presence in major markets across the U.S.,
providing some geographic diversity to its operations. Despite its somewhat
narrow business focus, it is a leading provider of parking services, with more
than 1,900 parking facilities, containing more than 1 million parking spaces, as
of Dec. 31, 2005. The company operates about 86% of its facilities under
management contracts and the remaining portion under lease agreements. The
company does not own any parking facilities, which limits some of the risks
associated with real estate ownership and development. Though facilities
operated under management contracts tend to generate lower margins than owned or
leased facilities, they yield higher returns on capital because minimal capital
expenditures are required. Furthermore, the average renewal rate for the
company's management contracts was high, averaging about 90% during the past
three years (91% in fiscal 2005), offering some cash flow stability. Standard
Parking has also pursued opportunities to offer ancillary services such as
shuttle buses and valet parking in selected locations to boost overall
profitability and enhance client relationships. Property managers continue to
pursue outsourcing of parking services to larger parking management providers as
a means of improving their own profitability.
Although client/property concentration is low, some industry concentration
risk results from the company's airport parking facilities, contributing about
20% of its gross profit. Still of concern for the ratings are the potential for
greater government regulation of airports, including tightened regulations that
restrict or prohibit parking within a specified distance of an airport terminal
in the event of a heightened security alert, and the possibility of decreased
air travel resulting from possible terrorist activities or challenging economic
conditions.
Financial performance in 2005 was favorable. Standard Parking's revenues
increased 6.7% from 2004 and gross profit improved by about 9% over the same
time period, primarily because of higher same-location sales, which were driven
by higher management fees and lease revenues, and more ancillary service
offerings. Profitability improved despite rising sales, general, and
administrative costs associated with Sarbanes-Oxley Act compliance requirements
and other due diligence-related costs. Overall, operating margins for fiscal
2005 improved to 9.5%, from about 8.5% one year earlier. The improved financials
more than offset the adverse impact of Hurricane Katrina, which significantly
curtailed local and tourist traffic, and caused the temporary closing of leased
and managed locations in the Gulf Coast area.
Following Standard Parking's June 2004 IPO of common stock, the company
reduced its debt balance and annual debt service cost, and retired almost all of
its outstanding preferred stock. Although debt has been reduced and credit
measures have improved, the company's financial profile remains leveraged. For
the fiscal year ended Dec. 31, 2005, lease-adjusted total debt to EBITDA was
about 4.5x (inclusive of benefit obligations) and lease-adjusted EBITDA coverage
of interest expense was about 2.2x, compared with 5x and 1.2x, respectively, for
the same period one year earlier. Standard & Poor's expects credit measures to
continue to improve through earnings growth and debt reduction. The company
opportunistically pursues tuck-in acquisitions to further strengthen its market
position. In January 2006, the company expanded its presence in the Pacific
Northwest, integrating the operations of Sound Parking in Seattle. There is some
flexibility within the ratings to make further modest-sized acquisitions.
Liquidity
Liquidity is adequate. As of Dec. 31, 2005, the company had about $10.8 million
in cash and about $29.9 million available under its $90 million revolving credit
facility due 2007. In the intermediate term, Standard & Poor's expects Standard
Parking to generate free operating cash flow in the $20 million-$25 million
range per year, which is sufficient for near-term debt amortization
requirements, expected capital expenditures in the $4.5 million-$5 million
range, and the anticipated repurchase of up to $7.5 million in common stock in
fiscal 2006.
Recovery analysis
The senior secured bank loan is rated the same as the corporate credit rating.
This and the '2' recovery rating indicate that lenders can expect substantial
(80%-100%) recovery of principal in the event of a default or bankruptcy. The
senior secured credit facility comprises a $90 million revolving credit facility
due 2007. See Standard & Poor's research report on Standard Parking Corp. dated
Oct. 4, 2005, for the complete recovery analysis.
Outlook
The outlook is stable. Regardless of Standard Parking's potential for earnings
variability, Standard & Poor's expects that, on average, credit measures will
remain appropriate for the current rating. In the event that financial policy
becomes more aggressive, or if financial performance is adversely affected by an
unfavorable economic climate and/or weaker industry conditions, the outlook
could be revised to negative.
Ratings List
Standard Parking Corp.
Ratings Raised
To From
Corporate credit rating B+/Stable/-- B/Positive/--
Senior secured debt B+ B
Senior subordinated debt B- CCC+
Ratings Affirmed
Senior secured debt
Recovery rating 2
Complete ratings information is available to subscribers of RatingsDirect,
Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com.
All ratings affected by this rating action can be found on Standard & Poor's
public Web site at www.standardandpoors.com; under Credit Ratings in the left
navigation bar, select Find a Rating, then Credit Ratings Search.