<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 20, 2000.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
IMPERIAL PARKING CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 31-1537375
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
</TABLE>
<TABLE>
<S> <C>
601 West Cordova Street, Suite 300 V6B 1G1
Vancouver, BC Canada
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (604) 681-7311
Securities to be registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
------------------- ------------------------------
<S> <C>
Common Stock, American Stock Exchange
par value $.01 per share
</TABLE>
Securities to be registered pursuant to Section 12(g) of the Act:
None
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<PAGE> 2
IMPERIAL PARKING CORPORATION
PART I
INFORMATION INCLUDED IN INFORMATION STATEMENT
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
<TABLE>
<CAPTION>
ITEM FORM 10 ITEM CAPTION CAPTION IN INFORMATION STATEMENT
- ---- -------------------- --------------------------------
<C> <S> <C>
1. Business................................... Summary -- Background and Reasons for the
Distribution, Pre-Distribution
Transactions, Impark, Management of
Impark, Summary Adjusted Pro Forma
Financial Data; The Distribution --
Pre-Distribution Transactions; Adjusted
Pro Forma Financial Data; Management's
Discussion and Analysis of Adjusted Pro
Forma Financial Condition and Results of
Operations; Historical Selected Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business
2. Financial Information...................... Summary -- Summary Pro Forma Financial
Data; Capitalization; Adjusted Pro Forma
Financial Data; Management's Discussion
and Analysis Adjusted Pro Forma of
Financial Condition and Results of
Operations; Historical Selected Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Index to Financial
Statements
3. Properties................................. Business -- Parking Facilities and Surface
Lots
4. Security Ownership of Certain Beneficial
Owners and Management...................... Security Ownership of Certain Beneficial
Owners and Management
5. Directors and Executive Officers........... Management -- Executive Officers and
Directors
6. Executive Compensation..................... Management -- Executive Compensation
7. Certain Relationship and Related
Transactions............................... Summary -- Background and Reasons for the
Distribution; Pre-Distribution
Transactions, Trading Market; The
Distribution -- Reasons for the
Distribution, Pre-Distribution
Transactions; Listing and Trading of
Impark Common Stock; Certain Transactions
8. Legal Proceedings.......................... Business -- Legal Proceedings
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM FORM 10 ITEM CAPTION CAPTION IN INFORMATION STATEMENT
- ---- -------------------- --------------------------------
<C> <S> <C>
9. Market Price of and Dividends on the
Registrant's Common Equity and Related
Shareholder Matters........................ Summary -- Distribution Ratio and
Mechanics, Trading Market,
Post-Distribution Dividend Policy; Risk
Factors -- Market Risks Associated with
New Public Companies; Listing and Trading
of Impark Common Stock, Description of
Capital Stock
10. Recent Sales of Unregistered Securities.... Certain Transactions -- Other Relationships
11. Description of Registrant's Securities to
be Registered.............................. Description of Capital Stock
12. Indemnification of Directors and
Officers................................... Indemnification of Directors and Officers
13. Financial Statements and Supplementary
Data....................................... Index to Financial Statements
14. Changes in and Disagreements With
Accountants on Accounting and Financial
Disclosure................................. Not Applicable
15. Financial Statements and Exhibits
</TABLE>
<PAGE> 4
[FIRST UNION CORPORATION AND IMPARK LETTERHEAD]
------------------------------------
Dear Shareholder:
On , First Union Real Estate Equity and Mortgage Investments will
make a special distribution of our subsidiary, Imperial Parking Corporation,
known as Impark. You will receive one share of Impark common stock for every 20
shares of First Union you own on . Immediately following consummation
of the distribution, Impark will be owned by its shareholders in the same
proportions as those shareholders own First Union shares.
First Union is a real estate investment trust whose primary business has
been to, manage and own retail, apartment, office and parking properties
throughout the United States. In 1997, First Union acquired the parking
properties of Impark Holdings, Inc. and our affiliate First Union Management,
Inc. acquired the parking services and ancillary businesses of Impark Holdings,
Inc. As a result of tax legislation enacted in 1998, our ability to grow these
businesses was substantially curtailed. Additionally, we believe the investment
characteristics of Impark and First Union are substantially different. First
Union's board of trustees has therefore unanimously approved the distribution as
being in the best interests of First Union's beneficiaries.
We have applied to list Impark's shares on the American Stock Exchange
under the symbol "IPK." The distribution of Impark's shares will be the first
public distribution of those shares. Accordingly, we can provide no assurance to
you as to what their market price may be.
The enclosed Information Statement provides important information regarding
the distribution and Impark's organization, business, properties and historical
and pro forma financial information. Beneficiaries are encouraged to read this
material carefully.
First Union beneficiaries on the record date for the distribution are not
required to take any action to participate in the distribution. Shareholder
approval of the distribution is not required, and First Union is therefore not
soliciting your proxy. On behalf of First Union, we thank you for your continued
support. On behalf of Impark, we welcome you as a new shareholder.
Sincerely,
DANIEL P. FRIEDMAN
President and Chief Executive Officer
of First Union
CHARLES E. HUNTZINGER
President and Chief Executive Officer
of Impark
<PAGE> 5
SUBJECT TO COMPLETION DATED JANUARY 20, 2000
INFORMATION STATEMENT
IMPERIAL PARKING LOGO
IMPERIAL PARKING CORPORATION
DISTRIBUTION OF COMMON STOCK
We are furnishing you with this Information Statement in connection with
the distribution by First Union Real Estate Equity and Mortgage Investments, an
Ohio business trust known as First Union, of all of the outstanding shares of
common stock, $.01 par value per share, (100% of the outstanding shares) of
Imperial Parking Corporation, a Delaware corporation owned by First Union to the
beneficiaries of First Union. We generally refer to Imperial Parking Corporation
in this Information Statement as Impark.
First Union will distribute the shares of Impark's common stock to holders
of First Union shares on the basis of one share of Impark common stock for every
20 First Union shares held on 2000. No consideration will be payable
by First Union beneficiaries for the Impark shares, nor will they be required to
surrender, or exchange shares of First Union, or take any other action in order
to receive the Impark common stock.
There is currently no public market for shares of Impark, although it is
expected that a "when issued" trading market may develop prior to the time of
the Distribution. We have applied to have our common stock listed on the
American Stock Exchange under the symbol "IPK." See "Listing and Trading of
Impark Common Stock."
IN REVIEWING THIS INFORMATION STATEMENT, YOU SHOULD CAREFULLY CONSIDER THE
MATTERS DESCRIBED UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 14.
------------------------------------
NO VOTE OF BENEFICIARIES IS REQUIRED IN CONNECTION WITH THE
DISTRIBUTION. WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT AND REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
THE DATE OF THIS INFORMATION STATEMENT IS , 2000.
1
<PAGE> 6
No person is authorized to give any information or to make any
representations other than those contained in this Information Statement, and if
given or made, such information or representations must not be relied upon as
having been authorized. This Information Statement does not constitute an offer
to sell or a solicitation of any offer to buy any securities. This Information
Statement presents information concerning Impark believed by Impark to be
accurate as of the date set forth on the cover hereof. This Information
Statement presents information concerning First Union believed by First Union to
be accurate as of the date set forth on the cover hereof. Changes may occur in
the presented information after that date. Neither Impark nor First Union plans
to update said information except in the course of fulfilling their respective
normal public reporting and disclosure obligations.
Certain statements in this Information Statement constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects," "intends" and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the results of Impark to differ
materially from those indicated by such forward-looking statements, including
among others, those set forth in this Information Statement under the heading
"Risk Factors."
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
SUMMARY..................................................... 3
THE DISTRIBUTION............................................ 8
RISK FACTORS................................................ 14
LISTING AND TRADING OF IMPARK COMMON STOCK.................. 18
CAPITALIZATION.............................................. 19
ADJUSTED PRO FORMA SELECTED FINANCIAL DATA.................. 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF ADJUSTED PRO FORMA
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............. 23
HISTORICAL SELECTED FINANCIAL DATA.......................... 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 31
BUSINESS.................................................... 34
MANAGEMENT.................................................. 42
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 47
CERTAIN TRANSACTIONS........................................ 49
DESCRIPTION OF CAPITAL STOCK................................ 50
INDEMNIFICATION OF DIRECTORS AND OFFICERS................... 52
AVAILABLE INFORMATION....................................... 52
INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>
2
<PAGE> 7
SUMMARY
This summary highlights information contained elsewhere in this document.
You should read the entire document carefully. This document contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors" and elsewhere in this document.
THE DISTRIBUTION
Background and Reasons for
the Distribution........... First Union Real Estate Equity and Mortgage
Investments, which we refer to as First Union, is a
real estate investment trust. It manages and owns
real estate. First Union has an affiliate, First
Union Management, Inc., which we refer to as FUMI.
FUMI, through its subsidiaries, is an operating
company primarily engaged in managing real estate
through management contracts and leases. A trust
holds all of the shares of FUMI for the sole
benefit of the beneficiaries of First Union. This
type of arrangement is commonly referred to as a
stapled REIT. In April 1997, as part of a strategy
to grow its management business and to assist First
Union in managing parking properties which it
owned, FUMI acquired the parking services and
ancillary businesses of Impark Holdings, Inc.,
which, through its operating subsidiaries, was a
major provider of parking services in Canada as
well as an owner of parking properties. After FUMI
acquired these businesses, First Union purchased
the parking properties of Impark Holdings.
In July 1998 the United States enacted tax
legislation which posed certain limitations on the
activities of stapled REITs with respect to
properties acquired or committed to be acquired
after March 26, 1998. As a result of this
development, the trustees of First Union reviewed
the advisability of having FUMI continue to own its
parking services business. The First Union trustees
concluded that it would be in the best interests of
First Union's beneficiaries to combine the parking
services and ancillary businesses operated by FUMI
with the parking properties business in Canada
owned by First Union, and then distribute the stock
of that corporation to the beneficiaries of First
Union. In this Information Statement we refer to
this distribution of stock as the Distribution. The
new company will be a Delaware corporation named
Imperial Parking Corporation, which we refer to as
Impark.
The First Union board believes that the
Distribution will benefit both First Union and
Impark by:
- Improving each company's access to capital;
- Improving the focus of management and employees
of each company on the performance of their
respective businesses; and
- Providing management incentives linked to the
objective performance of each company's shares
in the public markets.
3
<PAGE> 8
Pre-Distribution
Transactions In preparation for the Distribution, First Union
and FUMI have taken, or will take, a number of
actions to organize Impark and to establish Impark
on a sound financial footing with the capacity to
grow. These actions include:
- Hiring a new chief executive officer and senior
vice president, operations to lead Impark;
- Disposing of some of the ancillary businesses of
FUMI and one of the parking businesses of FUMI;
- Combining the parking services and related
business of FUMI with the parking properties in
Canada owned by First Union; and
- Providing working capital to Impark in the form
of both contributions of cash and debt.
Please see "The Distribution -- Pre-Distribution
Transactions" for a more detailed description of
these transactions.
Impark..................... Following the Distribution, Impark will be a
leading provider of parking services in North
America. From our base in Vancouver and our
regional offices in Calgary, Edmonton, Toronto,
Winnipeg, and Minneapolis, we employ more than
1,900 employees in both Canada and the United
States. As of September 30, 1999, we managed,
leased or owned over 1,400 parking facilities and
lots in Canada and the United States, containing
more than 250,000 parking spaces, making us the
largest parking provider in Canada and one of the
four largest in North America. We also provide
parking lot patrolling, ticketing and collection
services for our own lots and for those operated by
other parties.
Management of Impark....... The current executive officers of Impark will
continue to serve as such following the
Distribution. They are Charles E. Huntzinger,
president and chief executive officer, J. Bruce
Newsome, senior vice president and chief financial
officer, and Bryan L. Wallner, senior vice
president of operations. In addition, two executive
officers of First Union, Daniel P. Friedman and
David Schonberger, will also be employed by Impark
on a part-time basis. Messrs. Huntzinger, Newsome
and Wallner have over 45 years of combined
experience in the parking industry. They have
operated major parking operations throughout the
United States and Canada and have been involved in
numerous acquisitions.
Shares to be distributed... First Union will distribute approximately 2.1
million shares of Impark common stock, representing
100% of the total outstanding shares of Impark
common stock. This number will be reduced to the
extent that cash payments are made in lieu of the
issuance of fractional shares of Impark common
stock.
Distribution Ratio and
Mechanics.................. One share of Impark common stock will be
distributed for every 20 First Union shares held at
the close of business on , 2000. No
fractional shares of Impark common stock will be
issued in connection with the Distribution. Instead
of fractional shares, our distribution agent will
pay to any person who would be entitled to a
fractional share an amount of cash (without
interest) equal to the fraction multiplied by
$ . First Union will not require or accept
4
<PAGE> 9
any payment from the holders of its shares for the
Impark common stock to be received by them in the
Distribution. Furthermore, First Union
beneficiaries will not be required to surrender or
exchange First Union shares in order to receive
Impark common stock in the Distribution.
Risk factors............... The shares of Impark common stock that First Union
will distribute involve a high degree of risk.
Beneficiaries should consider and read carefully
the factors discussed under "Risk Factors."
Federal income tax
consequences of the
Distribution............. The shares of Impark stock which beneficiaries
receive in the Distribution will be treated for tax
purposes like all other distributions to
beneficiaries of First Union. The taxable value of
the Distribution will depend on the trading price
of the Impark shares at the time of the
Distribution.
Additional anti-takeover
provisions............... Provisions of Impark's charter and bylaws and
Delaware corporate law will have the effect of
making more difficult a change of control of Impark
in a transaction not approved by the Impark board
of directors.
Distribution agent......... National City Bank will be the distribution agent
for the Distribution of the Impark common stock.
Record date................ , 2000.
Distribution effective
date....................... , 2000. Shortly after the Distribution of
the Impark common stock, the distribution agent
will begin mailing certificates for Impark common
stock to First Union beneficiaries as of the record
date. First Union beneficiaries will not be
required to make any payment or to take any other
action in order to receive the Impark common stock
to which they are entitled in the Distribution.
Trading market............. There is currently no public market for the Impark
common stock. We have applied to list the Impark
common stock on the American Stock Exchange under
the symbol "IPK."
Post-Distribution dividend
policy..................... Following the Distribution, Impark intends to
retain earnings, if any, to fund the development
and growth of its business. Therefore, we do not
anticipate the payment of any dividends on Impark
common stock in the foreseeable future.
Information about Impark... The principal executive office of Impark is located
at 601 West Cordova Street, Suite 300, Vancouver,
BC Canada V6B 1G1 and its telephone number is (604)
681-7311.
5
<PAGE> 10
SUMMARY ADJUSTED PRO FORMA FINANCIAL DATA
The unaudited adjusted pro forma financial data presented below is based on
the pro forma consolidated and combined financial statements of Impark. These
pro forma financial statements are included elsewhere in this Information
Statement. The adjusted pro forma financial data reflects the historical actual
operating results for the periods presented adjusted to give effect to the
transactions that will result in the formation of Impark as well as the
elimination of the revenues and expenses associated with businesses sold in 1999
which do not meet the definition of a discontinued operation for accounting
purposes. Please see note 1 to the adjusted pro forma financial data on page 21
to see how the adjustment was done. For a description of the transactions that
are excluded by the pro forma financial statements see note 2 to the pro forma
financial statements.
This adjusted pro forma financial data should be read in conjunction with
the pro forma consolidated and combined financial statements and "Management's
Discussion and Analysis of Adjusted Pro Forma Financial Condition and Results of
Operations" included in this Information Statement.
<TABLE>
<CAPTION>
NINE MONTHS YEARS ENDED NINE MONTHS ENDED
ENDED DECEMBER 31 SEPTEMBER 30
DECEMBER 31 ------------------- -------------------
1996 1997 1998 1998 1999
----------- -------- -------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues.............................. $ 38,367 $ 52,557 $ 53,946 $ 39,804 $ 45,709
Direct costs.......................... 28,379 40,144 40,931 29,587 35,380
-------- -------- -------- -------- --------
Gross margin.......................... 9,988 12,413 13,015 10,218 10,329
General and administrative expenses... 7,191 10,504 12,136 8,923 8,065
Depreciation and amortization......... 2,512 4,907 5,375 4,127 3,530
-------- -------- -------- -------- --------
Operating income (loss)............... 285 (2,998) (4,496) (2,832) (1,266)
Other income (expense)................ 1,517 (1,663) (16,675) (1,282) (476)
-------- -------- -------- -------- --------
Net income (loss)..................... $ 1,802 $ (4,661) $(21,171) $ (4,114) $ (1,742)
======== ======== ======== ======== ========
BALANCE SHEET DATA (SEPTEMBER 30,
1999)
Cash.................................. $ 9,278
Working capital....................... (1,694)
Fixed assets.......................... 12,789
Goodwill.............................. 44,037
Total assets.......................... 75,634
Total liabilities..................... 17,008
Total shareholder's equity............ 58,626
OTHER
Gross collections..................... $121,296 $165,033 $164,074 $125,108 $125,937
Cash provided by (used in)
Operating activities................ 116 (2,232) (7,480) (4,466) 2,738
EBITDA................................ 2,797 1,909 879 1,295 2,264
</TABLE>
Other income (expense) principally includes gains or losses on the sale or
write-downs of assets, other interest expense and income taxes. In the year
ended December 31, 1998, other income (expense) included a write-down of
goodwill of $15.0 million. Please see "Management's Discussion and Analysis of
Adjusted Pro Forma Financial Condition and Results of Operations."
6
<PAGE> 11
The gross collections amount represents the aggregate cash collected from
the revenue generating activities of our operations that will be continuing
subsequent to the Distribution for the periods presented. It includes revenues
reported under generally accepted accounting principles as well as collections
made on parking facilities for which we have management contracts. Gross
collections are significant to an understanding of the operations of the
predecessor entities to Impark because:
- Management uses gross collections as a key indicator of its business
opportunities;
- Gross collections demonstrates the magnitude of our historical business
activities;
- Management contract revenues are partly based on the level of gross
collections; and
- Management decisions on the allocation of resources among its business
activities is in part based on the level of gross collections.
EBITDA equals operating income as shown in the table above, plus
depreciation and amortization expense. EBITDA is included because management
believes that it is a useful tool for measuring our ability to generate cash
flow from operations. EBITDA does not represent cash flow from operations, is
not a measure under generally accepted accounting principles and should be
considered together with the other financial information included in this table
and presented elsewhere in this Information Statement. EBITDA measures as
presented may not be comparable to similarly titled measures of other entities.
The adjusted pro forma financial data does not give effect to any
additional costs that we may incur due to being a public company or a registrant
with the SEC.
7
<PAGE> 12
THE DISTRIBUTION
INTRODUCTION
On , 2000 (the "Declaration Date"), the First Union board of
trustees declared a dividend of one share of Impark common stock for every 20
First Union shares held of record on , 2000. On , 2000,
First Union will effect the Distribution by delivering all of the issued and
outstanding shares of Impark common stock to the distribution agent for transfer
and distribution to the holders of record of First Union shares or
. We expect that certificates representing shares of Impark
common stock will be mailed to First Union beneficiaries on or about ,
2000. As a result of the Distribution, 100% of the outstanding shares of Impark
common stock will be distributed to First Union beneficiaries.
First Union shareholders of record with inquiries relating to the
Distribution should contact the distribution agent, by telephone at 800-622-6757
or First Union in writing at First Union Real Estate Equity and Mortgage
Investments, 551 Fifth Avenue, Suite 1416, New York, NY 10176-1499, Attention:
Brenda Mixson, Chief Financial Officer.
REASONS FOR THE DISTRIBUTION
First Union is a real estate investment trust, or REIT. It manages and owns
real estate. First Union's affiliate, FUMI, through its subsidiaries, is an
operating company primarily engaged in managing real estate through management
contracts and leases. A trust holds all of the shares of FUMI for the sole
benefit of the beneficiaries of First Union. This type of arrangement is
commonly referred to as a stapled REIT. In April 1997, as part of a strategy to
grow its management business and to assist First Union in managing parking
properties which it owned, FUMI acquired the parking services and ancillary
businesses of Impark Holdings, Inc. Impark Holdings, through its operating
subsidiaries, was a major provider of parking services in Canada as well as an
owner of parking properties. After FUMI acquired the parking services businesses
of Impark Holdings, First Union purchased the parking properties of Impark
Holdings.
In July 1998 the United States enacted tax legislation which posed certain
limitations on the activities of stapled REITs with respect to properties
acquired or committed to be acquired after March 26, 1998. As a result of this
development, the board of trustees of First Union reviewed the advisability of
having FUMI continue to own its parking services business. The First Union board
concluded that it would be in the best interests of First Union's beneficiaries
to combine the parking services business operated by FUMI with the parking
properties in Canada owned by First Union and then distribute the stock of that
corporation to the beneficiaries of First Union.
The First Union board believes that the Distribution will benefit both
First Union and Impark by:
- Improving each company's access to capital;
- Improving the focus of management and employees of each company on the
performance of their respective businesses; and
- Providing management incentives linked to the objective performance of
each company's shares in the public markets.
In addition, the Distribution will help First Union maintain its status as
a real estate investment trust for U.S. federal income tax purposes.
PRE-DISTRIBUTION TRANSACTIONS
While considering the possibility of the Distribution, First Union and FUMI
developed a plan for the organization and funding of Impark as an independent
company. The goal of the plan was to create a parking services company with a
sound financial footing and the capacity to grow. The key aspects of this plan
are described below.
8
<PAGE> 13
Hire New Management Team. In early 1999, Charles E. Huntzinger was hired
to be president and chief executive officer of the businesses that would become
Impark and Bryan L. Wallner was hired to serve those businesses as senior
vice-president for operations. These individuals have substantial experience in
the parking services industry. They, along with chief financial officer J. Bruce
Newsome, have had key roles in planning the organization of Impark, including
the dispositions of businesses and the provision of financing resources
described below.
Dispose of Businesses. As part of their effort to streamline the
operations of Impark and to assist in the transition from the previous
management team, the Impark management team has disposed of a number of
businesses previously operated as part of FUMI, as follows:
- Inner-Tec Security Consultants Ltd., a security business, was sold in
June 1999. The sale was made to a former executive officer of Impark's
predecessor and formed part of the terms of the settlement of severance
obligations. In the financial information in this Information Statement
results of operations of Inner-Tec have been recorded as discontinued
operations in the FUMI Parking Business for all periods presented.
Please see "Management's Discussion and Analysis of Adjusted Pro Forma
Financial Condition and Results of Operations" for a description of the
FUMI Parking Business.
- Imperial Parking (Asia) Ltd., an Asian parking business, was sold in
September 1999. The sale was to an unrelated party. The financial
condition and operating results of this business have been eliminated
from the Pro Forma Consolidated and Combined Financial Statements as
part of "Businesses sold" to form the Adjusted Pro Forma Combined
Statement of Operations.
- VenTek International, Inc., a parking equipment distributorship, is
being sold to FUMI prior to the Distribution. The Pro Forma Consolidated
and Combined Financial Statements have recorded VenTek as a discontinued
operation in the FUMI Parking Business for all periods presented.
- Robbins Parking Services Ltd., a parking subsidiary, was sold in April
1999. The sale was made to the former president and chief executive
officer of one of Impark's predecessors and formed an important part of
the settlement of severance obligations. As Robbins did not meet
generally accepted accounting principles requirements to be a
discontinued operation, its results are included in the FUMI Parking
Business in all periods presented. The operating results of Robbins were
eliminated for all periods from the Pro Forma Combined Statements of
Operations as part of "Businesses sold" to form the Adjusted Pro Forma
Combined Statements of Operations.
Combine First Union Properties in Canada with FUMI Parking and Other
Businesses. Immediately prior to the Distribution, First Union and FUMI will
implement a series of transactions which will result in the parking services and
other business of FUMI being combined with the parking properties in Canada
owned by First Union. These assets will be held in Impark or its subsidiaries,
which will be a wholly-owned subsidiary of First Union until the Distribution.
Eliminate Debt and Provide Working Capital. In order to place Impark on
sound financial footing, First Union and FUMI will take a number of actions
prior to the Distribution, as follows:
- First Union will repay Impark's credit facilities with HSBC Bank Canada
and Deutsche Bank Canada in consideration for common shares of Impark.
The credit facilities are estimated to have a balance of approximately
$22.0 million at closing. The repayment and issuance of shares have been
recorded in the Pro Forma Combined Balance Sheet and the related
interest on long-term debt and bank indebtedness has been eliminated
from the Pro Forma Consolidated and Combined Statement of Operations for
all periods presented in this Information Statement.
- Since the acquisition of the parking properties and business of Impark
Holdings, Inc. by First Union and FUMI, there have been a series of
loans and transactions between First Union, FUMI, the FUMI Parking
Business and the FUR Parking Business. Please see "Management's
Discussion and Analysis of Pro Forma Financial Condition and Results of
Operations" for a description of the FUR Parking Business. The loans and
the other amounts are to be extinguished
9
<PAGE> 14
as part of the combination of the FUMI Parking Business and the FUR
Parking Business. The debt extinguished and common shares issued have
been recorded in the Pro Forma Combined Balance Sheet. The interest
expense and income between related parties have been eliminated from the
Pro Forma Consolidated and Combined Statement of Operations for all
periods presented in this Information Statement, in addition management
fee income earned by Impark on U.S. properties leased to FUMI by First
Union has been eliminated from the Pro Forma Consolidated and Combined
Statement of Operations for all periods as this fee will not continue to
be earned subsequent to the Distribution.
- First Union will contribute $7.0 million in cash in consideration for
common shares of Impark. Of this amount, $2.0 million will be restricted
cash to be utilized to repay a tax liability discussed in note 15 to the
FUMI Combined Financial Statements. The $7.0 million has been recorded
as cash and owners' equity in the Pro Forma Consolidated and Combined
Financial Statements of Impark.
- First Union will provide a secured line of credit to Impark in the
amount of $8.0 million. See "Liquidity and Capital Resources" for more
information on the First Union line of credit.
- A joint venture between Impark and First Union to develop approximately
4,900 parking spaces for the new San Francisco Giants baseball park,
"Pacific Bell Park", will be contributed to Impark. The First Union
investment will be up to $5.0 million. In addition, Impark expects to
invest $1.0 million in this joint venture in 2000. Because no amounts
were invested by First Union at September 30, 1999 and because operation
of the lot commences in 2000, the contribution has not been recorded in
the Pro Forma Consolidated and Combined Financial Statements.
- First Union will indemnify Impark for any liability resulting from an
existing legal dispute regarding a software contract between an Impark
subsidiary and Oracle. The costs on the books of Impark relating to this
litigation have been eliminated from the Pro Forma Consolidated and
Combined Financial Statements of Impark.
MANNER OF EFFECTING THE DISTRIBUTION
We expect that the date of the Distribution will be , 2000. At
the time of the Distribution, First Union will deliver share certificates for
Impark common stock to the distribution agent. The distribution agent will then
begin mailing the share certificates to holders of First Union shares as of the
, 2000 record date. The Distribution consists of one share of Impark
common stock for every 20 First Union shares held on the record date. We will
not issue certificates representing fractional shares of Impark common stock in
connection with the Distribution. Instead, the distribution agent will pay to
any person who would be entitled to a fractional share of Impark common stock an
amount of cash (without interest) equal to the fraction multiplied by
$ . All shares of Impark common stock will be fully paid and
nonassessable. See "Description of Capital Stock."
Prior to the Distribution, inquiries relating to the Distribution should be
directed to the distribution agent at National City Bank, Corporate Trust
Operations, 3rd Floor, North Annex, Location 5352, 4100 West 150th Street,
Cleveland, Ohio 44135-1385, or by telephone at 800-622-6757, Monday through
Friday, 9:00 a.m. to 5:00 p.m. (Cleveland Time). After the Distribution,
inquiries may be directed to the distribution agent or Impark Investor
Relations, at Suite 300, The Station, 601 West Cordova Street, Vancouver,
British Columbia, VGB 1G1, (604) 681-7311, Attention: Mr. Bruce Newsome, Monday
through Friday, 9:00 a.m. to 5:00 p.m. (Vancouver Time).
NO HOLDER OF FIRST UNION SHARES WILL BE REQUIRED TO MAKE ANY PAYMENT FOR
THE SHARES OF IMPARK COMMON STOCK TO BE RECEIVED IN THE DISTRIBUTION OR TO
SURRENDER OR EXCHANGE FIRST UNION SHARES OR TO TAKE ANY OTHER ACTION IN ORDER TO
RECEIVE IMPARK COMMON STOCK TO WHICH SUCH HOLDER IS ENTITLED IN THE
DISTRIBUTION.
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FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
Introduction. The following is a summary of the material U.S. federal
income tax considerations associated with the Distribution. This discussion is
based upon the laws, regulations and reported rulings and decisions in effect as
of the date of this Information Statement, all of which are subject to change,
retroactively or prospectively, and to possibly differing interpretations. This
discussion does not purport to deal with the federal income or other tax
consequences applicable to all investors in light of their particular
circumstances or to all categories of investors, some of whom may be subject to
special rules (including, for example, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign corporations,
persons who are not citizens or residents of the United States, beneficiaries
who hold their shares as part of a hedge, appreciated financial position
straddle or conversion transaction and beneficiaries who do not own their shares
as a capital asset). In addition, this discussion does not address any state,
local or foreign considerations that may be relevant to particular investors. No
ruling on the federal, state or local tax considerations relevant to the
operation of First Union or Impark or to the Distribution is being requested
from the Internal Revenue Service or from any other tax authority.
ALL FIRST UNION BENEFICIARIES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM, INCLUDING THE
APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.
Taxation of Impark. Impark will not seek to qualify for taxation as a real
estate investment trust. Accordingly, Impark will be taxed as a C corporation,
subject to regular corporate income tax rates.
Income Recognition by First Union as a Result of the Distribution. At the
time of the Distribution, First Union will recognize gain on the Distribution if
and to the extent that the value of the Impark common stock distributed by First
Union exceeds the basis that First Union has in such stock. First Union will
make a determination of the fair market value of the Impark common stock as of
the date of the Distribution. There can be no assurance, however, that the
Internal Revenue Service or the courts will agree with the value determined by
First Union. The amount of gain, if any, will increase First Union's earnings
and profits.
Taxation of Taxable Domestic Shareholders of First Union as a Result of the
Distribution. The Distribution will be treated as a distribution the amount of
which is equal to the value of the Impark common stock distributed plus any cash
in lieu of fractional shares.
Provided First Union qualifies as a REIT, under Sections 856 through 860 of
the Internal Revenue Code in the year of the Distribution, the portion of the
Distribution made to First Union's taxable U.S. beneficiaries out of First
Union's current or accumulated earnings and profits (including earnings and
profits attributable to any gain realized by First Union as a result of the
Distribution as discussed above under "Income Recognition by First Union as a
Result of the Distribution") and not designated as capital gain dividends will
be taken into account by such U.S. beneficiaries as ordinary income and, for
corporate beneficiaries, will not be eligible for the dividends-received
deduction. Any portion of the Distribution in excess of current and accumulated
earnings and profits allocable to the Distribution will not be taxable to a
First Union beneficiary to the extent that such portion does not exceed the
adjusted basis of the beneficiary's First Union shares, but rather will reduce
the beneficiary's adjusted basis of such shares. To the extent that the amount
of the Distribution exceeds First Union's current and accumulated earnings and
profits and exceeds the adjusted basis of a shareholder's First Union shares,
the excess will be included in income as capital gain (taxable at the
short-term, mid-term or long-term rates depending on the period of time that the
shareholder has held the shares) assuming the shares are a capital asset in the
hands of the shareholder.
To the extent that First Union designates a portion of the Distribution as
a capital gain dividend, such portion will be taxable to First Union
beneficiaries as gain from the sale of a capital asset held for more than one
year, without regard to the period for which the shareholder has held its First
Union common
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<PAGE> 16
shares. U.S. beneficiaries that are corporations however, may, be required to
treat up to 20% of certain capital gain dividends as ordinary income.
First Union beneficiaries will receive a basis in Impark common stock equal
to the value thereof at the time of the Distribution. A First Union
beneficiary's holding period in the Impark common stock will not include any
period during which such stock was held by First Union.
Taxation of Tax-Exempt Shareholders of First Union as a Result of the
Distribution. Most tax-exempt employees' pension trusts are not subject to
federal income tax except to the extent of their receipt of "unrelated business
taxable income," or UBTI, as defined in Section 512(a) of the Internal Revenue
Code. The Distribution to a First Union shareholder that is a tax-exempt entity
should not constitute UBTI, provided that the tax-exempt entity has not financed
the acquisition of its First Union common shares with "acquisition indebtedness"
within the meaning of the Internal Revenue Code and the First Union common
shares are not otherwise used in an unrelated trade or business of the
tax-exempt entity. In addition, certain pension trusts that own more than 10% of
a "pension-held REIT" must report a portion of the dividends that they receive
from such a REIT as UBTI. First Union has not been and does not expect to be
treated as a pension-held REIT for purposes of this rule.
Taxation of Foreign Shareholders of First Union as a Result of the
Distribution. The rules governing U.S. federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other foreign
shareholders, whom we refer to collectively as non-U.S. shareholders, are
complex, and no attempt will be made in this Information Statement to provide
more than a summary of such rules. Non-U.S. shareholders should consult with
their own tax advisors to determine the impact of federal, state, local and
foreign tax laws with regard to the Distribution, including any reporting
requirements. In general, as is the case with domestic taxable shareholders of
First Union, the Distribution is treated as a distribution the amount of which
is equal to the value of the Impark common stock distributed plus any cash in
lieu of fractional shares, and non-U.S. shareholders will receive a basis in
Impark common stock equal to the fair market value thereof at the time of the
Distribution.
The Distribution will be treated as an ordinary income dividend to the
extent that it is made out of current and accumulated earnings and profits of
First Union and is neither attributable to gain from sale or exchange by First
Union of U.S. real property interests nor designated by First Union as a capital
gain dividend. The portion of the Distribution that will be treated as an
ordinary income dividend ordinarily will be subject to a withholding tax equal
to 30% of the gross amount thereof, unless an applicable tax treaty reduces or
eliminates that tax. First Union expects to withhold U.S. income tax at the rate
of 30% on the gross amount of the Distribution made to a non-U.S. shareholder
unless (i) a lower treaty rate applies and the non-U.S. shareholder has filed
the required IRS Form 1001 with First Union or (ii) the non-U.S. shareholder
files an IRS Form 4224 with First Union claiming that the Distribution is
effectively connected with the non-U.S. shareholder's conduct of a U.S. trade or
business. The portion of the Distribution that is in excess of First Union's
current and accumulated earnings and profits allocable to the Distribution will
be subject to a 10% withholding requirement but will not be taxable to a
shareholder to the extent that such excess does not exceed the adjusted basis of
the shareholder's First Union common shares, but rather will reduce the adjusted
basis of such shares. To the extent that the portion of the Distribution in
excess of current and accumulated earnings and profits allocable to the
Distribution exceeds the adjusted basis of a non-U.S. shareholder's shares, the
Distribution will give rise to tax liability if the non-U.S. shareholder would
otherwise be subject to tax on any gain from the sale or disposition of the
First Union common shares.
Provided that First Union is a "domestically-controlled REIT" for federal
income tax purposes, a non-U.S. shareholder would be subject to taxation on gain
from the sale or disposition of First Union common shares only if (i) the
investment in the First Union common shares were treated as effectively
connected with the non-U.S. shareholder's U.S. trade or business, in which case
the non-U.S. shareholder would be subject to the same treatment as U.S.
shareholders with respect to such gain, or (ii) the non-U.S. shareholder were a
nonresident alien individual who was present in the United States for
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<PAGE> 17
183 days or more during the taxable year and either the individual has a "tax
home" in the United States or the gain is attributable to an office or other
fixed place of business maintained by the individual in the United States, in
which case the gain would be subject to a 30% tax. We believe that First Union
is and will continue to be a domestically controlled REIT.
As First Union will not be able to determine, at the time that the
Distribution is made, the portion of the distribution, if any, that will be in
excess of the current and accumulated earnings and profits, the Distribution
will be subject to withholding as though the entire distribution (apart from any
portion designated as a capital gain dividend) were an ordinary income dividend.
However, a non-U.S. shareholder may seek a refund of such amounts from the
Internal Revenue Service if it is subsequently determined that a portion of the
distribution was, in fact, in excess of First Union's current and accumulated
earnings and profits.
It is possible that the Impark common stock may constitute a U.S. real
property interest. To the extent that a portion of the Distribution were to be
treated as attributable to gain upon the disposition of a U.S. real property
interest, a non-U.S. shareholder would be subject to tax on such portion as
though it were gain that was effectively connected with a United States trade or
business of such non-U.S. shareholder. Thus, non-U.S. shareholders would be
taxed on such portion of the Distribution at the normal capital gain rates
applicable to U.S. shareholders. First Union is required under applicable
Treasury Regulations to withhold 35% of any distribution to a non-U.S.
shareholder that could be designated by First Union as a capital gain dividend.
The amount so withheld is creditable against the non-U.S. shareholder's U.S. tax
liability and the non-U.S. shareholders may seek a refund to the extent the
amount withheld exceeds such non-U.S. shareholders U.S. tax liability.
Amounts required to be withheld from payments to non-U.S. shareholders will
be collected by converting a portion of the Impark common stock to be
distributed into cash.
LISTING AND TRADING OF IMPARK COMMON STOCK
There is currently no public market for Impark common stock. Although we
currently expect to list the Impark common stock on the American Stock Exchange
following the Distribution, there can be no assurance that a regular trading
market in Impark common stock will develop or, if a public market develops, will
be sustained or provide liquidity.
At the time of the Distribution, Impark will have approximately 9,000
stockholders, based on the number of beneficiaries of First Union shares on the
record date. The transfer agent and registrar for the Impark common stock will
be National City Bank.
SHARES AVAILABLE FOR FUTURE SALE
Impark common stock issued in the Distribution will be freely transferable,
except for securities received by persons who may be deemed to be "affiliates"
of Impark under the Securities Act. Persons who may be deemed to be affiliates
of Impark after the Distribution generally include individuals or entities that
control, are controlled by, or are under common control with Impark and include
directors and executive officers, as well as principal stockholders of Impark.
Persons who are affiliates of Impark will be permitted to sell their shares of
Impark common stock only pursuant to an effective registration statement under
the Securities Act or an exemption from the registration requirements of the
Securities Act. Impark is not able to predict whether substantial amounts of
Impark common stock will be sold in the open market following the Distribution.
Sale of substantial amounts of Impark common stock in the public market, or the
perception that such sales might occur, could adversely affect the market price
of Impark common stock.
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RISK FACTORS
You should carefully consider the risks described below and the other
information in this document, including our financial statements and related
notes. The risks and uncertainties described below are not the only ones we
face. Additional risks and uncertainties, including those not presently known to
us or that we currently deem immaterial, may also impair our business.
If any of the following risks actually occur, our business, financial
condition and future operating results could be adversely affected. The trading
price of Impark common stock could decline due to any of these risks, and you
could lose all or part of your investment. This document contains
forward-looking statements that involve risks, uncertainties and assumptions.
These statements relate to our beliefs, intentions, plans and strategies
regarding the future. These forward-looking statements are usually accompanied
by words such as "intends," "believes," "anticipates," "plans," "expects" and
similar expressions. Our actual results may differ materially from the results
discussed in the forward-looking statements because of factors discussed below
and elsewhere in this Information Statement.
WE HAVE A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE
We have incurred both historical and pro forma net losses in every fiscal
period since 1996. We cannot be certain when we will become profitable, if at
all. Failure to achieve profitability may adversely affect the market price of
our common stock. Even if we do achieve profitability, we cannot assure you that
we can sustain or increase profitability on a quarterly or annual basis.
WE MAY NOT BE ABLE TO RETAIN OUR MANAGEMENT CONTRACTS AND LEASES
A number of our management contracts and leases may be cancelled by the
owner in the event of a change of control. It is possible that some of the third
parties with whom we have management contracts and leases may seek to
characterize the Distribution as a change of control. If a substantial number of
the third parties with the right to terminate management contracts and leases in
the event of a change of control chose to terminate or renegotiate those
agreements and were successful in asserting that the Distribution is a change of
control, our business would be harmed. Management contracts are more likely to
contain a change of control provision. Management contracts historically have
generated approximately one third of our parking services gross margin.
OUR GROWTH STRATEGY MAY NOT SUCCEED
As part of our business strategy, we intend to pursue acquisitions of other
parking operators. In executing our acquisition strategy, we may be unable to
identify suitable acquisition candidates. In addition, we expect to face
competition from other parking providers for acquisition candidates, making it
more difficult to acquire suitable companies on favorable terms. If we pursue
any acquisition, our management could spend a significant amount of time and
effort in identifying and completing the acquisition. If we complete an
acquisition, we may have to devote a significant amount of management resources
to integrating the acquired business with our existing business. An acquisition
might not produce the revenue or earnings that we anticipated, and an acquired
operation may not perform as expected. Accordingly, our acquisition efforts may
not succeed. In addition, from an accounting perspective, an acquisition may
result in non-recurring charges or involve amortization of significant amounts
of goodwill that could adversely affect our operating results.
To pay for an acquisition, we might use capital stock or cash.
Alternatively, we might borrow money from a bank or other lender. If we use
capital stock, our stockholders may experience dilution. If we use cash or debt
financing, our financial liquidity would be reduced. We cannot be certain that
we will have sufficient access to capital to permit us to implement our
acquisition strategies.
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SEVERE WINTER WEATHER MAY ADVERSELY AFFECT OUR BUSINESS
The parking business depends on the free flow of vehicular traffic. Severe
winter weather conditions in Canada and the northern United States could close
or significantly slow roadways. This, in turn, may harm our business and
adversely effect our cash flow by reducing the demand for parking and increasing
our snow removal costs.
OUR MANAGEMENT TEAM IS NEW AND MAY NOT BE ABLE TO PERFORM SUCCESSFULLY
The current management structure and the senior management team of Impark
have been in place for a relatively short time. Mr. Huntzinger, the president
and chief executive officer, began his employment in January 1999. Mr. Wallner,
the senior vice president, operations, began his employment in March 1999. These
individuals have not, therefore, been significantly involved in other than the
most recent operating history of Impark. Our future success depends in large
part on the successful and continued service of our key management personnel.
CHANGES IN PRIVACY LEGISLATION COULD HARM OUR BUSINESS BY MAKING COLLECTIONS
MORE DIFFICULT AND COSTLY
City Collections, an Impark subsidiary, identifies vehicle owners through
searches based on license plate numbers. The license plate data are maintained
by each province. Although most provinces have enacted privacy legislation
regulating access to such data, City Collections has entered into access
agreements with several provinces. Should more restrictive privacy legislation
be enacted it could adversely affect City Collections' business. In addition,
fees charged for searches of motor vehicle registration are also set by
provincial governments and any increase in these fees will have an adverse
affect on City Collections' business.
AN INCREASE IN THE COST OF INSURANCE CLAIMS COULD INCREASE OUR COSTS
We typically have a large number of small property or personal injury
claims. We have insurance to cover the cost of these claims, to the extent such
costs exceed a deductible. However, a major increase in the number and cost of
claims to the insurance company could significantly increase the amount that we
pay to insure against these claims.
CURRENCY FLUCTUATIONS COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS
While our consolidated financial statements are prepared in United States
dollars, most of our operations are conducted in Canadian dollars. Fluctuations
in exchange rates may have a material adverse effect on our financial results,
particularly our operating margins, and could also result in exchange losses. To
date we have not sought to hedge these risks, but may undertake hedging
transactions in the future. We cannot be certain, however, that any hedging
techniques would be successful in preventing or limiting the adverse financial
effects of exchange rate fluctuations.
WE FACE RISKS ASSOCIATED WITH ENVIRONMENTAL REGULATIONS
Various federal, state, provincial and local environmental laws and
regulations impose liabilities on a current or previous owner or operator of
real property for the cost of removal or remediation of hazardous or toxic
substances on the property. These laws typically impose liability without regard
to whether the owner or operator knew of, or was responsible for, the presence
of the hazardous or toxic substances. In connection with our ownership or
operation of parking facilities, we may be potentially liable for such costs.
Although we are currently not aware of any material environmental claims pending
or threatened against us or any of our owned or operated parking facilities, we
cannot give any assurance that a material environmental claim will not be
asserted against us or against our owned or operated parking facilities. We
could face significant costs in defending against claims of liability or in
remediating a contaminated property.
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AN INCREASE IN GOVERNMENT REGULATION OR TAXATION COULD HARM OUR BUSINESS
The parking business is subject to a significant degree of government
regulation. The regulations include potentially costly matters such as requiring
improvements to meet civic by-laws, worker's compensation regulation, labor
standards, environmental, and other potentially costly legislation. Any new or
increased levels of regulation could adversely impact our business.
The parking industry is also subject to increased taxation from the various
levels of government. Historically, it has been considered as an environmentally
unfriendly industry due to its primary purpose, which is to park automobiles
driven into the downtown business districts. Consequently the parking industry
has been the subject of significant taxation including federal and provincial
sales taxes, property taxes, business taxes, and of course federal and
provincial/state income taxes. Our business will be adversely affected by any
significant new tax legislation or increased levels of taxation.
Various other governmental regulations affect our operation of parking
facilities, both directly and indirectly, including air quality laws, licensing
laws, and the Americans with Disabilities Act of 1990. Under the ADA, all public
accommodations, including parking facilities, are required to meet certain
federal requirements related to access and use by disabled persons. Although we
believe that the parking facilities we own and operate are in substantial
compliance with these requirements, a determination that we or the facility
owner is not in compliance with the ADA could result in the imposition of fines
or damage awards against us.
In addition, several provincial, state and local laws have been passed in
recent years that encourage car pooling and the use of mass transit, including,
for example, laws prohibiting employers from reimbursing employee parking
expenses. Laws and regulations that reduce the number of cars and vehicles being
driven could hurt our business.
WE HAVE SIGNIFICANT COMPETITION FROM A VARIETY OF SOURCES
The parking industry is highly competitive. Our competitors range from
small single-lot operators to large regional and national multi-facility
operators, and include municipal and other governmental entities. Some of our
present and potential competitors have or may obtain greater financial and
marketing resources than we have. Furthermore, we compete for qualified
management personnel with other parking facility operators, with property
management companies and with property owners. We may encounter increased
competition in the future. Among other things, increased construction of parking
facilities could limit our ability to attract customers, expand our business or
maintain profitable pricing levels and could decrease our market share. We
compete for acquisitions with other parking facility operators, real estate
developers and real estate investment trusts. We may encounter increased
competition for acquisitions in the future, and this competition could hurt our
ability to complete acquisitions or have the effect of increasing the prices we
must pay for acquisitions.
We believe that there will be rapid business consolidation in the parking
services industry. If this occurs and we are unable to participate successfully
in the business consolidation, our business and financial results could be
harmed.
YOU WILL HAVE A NUMBER OF MARKET RISKS TYPICALLY ASSOCIATED WITH NEW PUBLIC
COMPANIES
Before the Distribution, there has been no public market for our common
stock. Although we currently expect that our common stock will be listed on the
American Stock Exchange, an active trading market may not develop and be
sustained after this Distribution.
The stock market in general has recently experienced extreme price and
volume fluctuations. In particular, the market prices of shares in newly public
companies have been extremely volatile and have experienced fluctuations that
have often been unrelated or disproportionate to the operating performance of
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such companies. The market price of our common stock could be highly volatile
and subject to wide fluctuations in response to many factors, including the
following:
- Quarterly variations in our operating results;
- Adverse business developments;
- Changes in financial estimates by securities analysts;
- Investor perception of Impark; and
- General economic conditions both in Canada and the United States.
In the event of broad fluctuations in the market price of our common stock,
you may be unable to resell your shares at or above the fair market value at the
time of the Distribution.
PROVISIONS OF DELAWARE LAW AND OUR CHARTER AND BY-LAWS MAY MAKE A TAKEOVER OF
OUR COMPANY MORE DIFFICULT
Delaware corporate law and our certificate of incorporation and by-laws
contain certain provisions that could have the effect of delaying, deferring or
preventing a change in control of Impark or our management. These provisions
could discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. These
provisions could also limit the price that certain investors might be willing to
pay in the future for shares of our common stock. Some of these provisions:
- Authorize the issuance of "blank check" preferred stock (preferred stock
that can be created and issued by our board of directors without prior
stockholders' approval) with rights senior to those of common stock;
- Provide for a staggered board of directors (so that it would take three
successive annual meetings to replace all directors);
- Prohibit stockholder action by written consent; and
- Establish advance notice requirements for submitting nominations for
election to the board of directors and for proposing matters that can be
acted upon by stockholders at a meeting.
A LABOR STRIKE COULD HURT OUR COMPETITIVENESS
A significant number of the our employees are members of labor unions. As a
result there is a risk of work stoppages due to strikes which could potentially
be costly to us because increased labor costs could adversely affect our ability
to retain management contracts and to remain competitive in the marketplace.
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LISTING AND TRADING OF IMPARK COMMON STOCK
First Union presently owns 100% of the outstanding shares of Impark common
stock. No trading prices are available with respect to such shares. There can be
no assurance as to the price at which First Union shares or Impark common stock
may be traded after the Distribution or whether their initial combined price
will be higher or lower than the price of the First Union shares prior to the
Distribution. After the Distribution, approximately 2,100,000 shares of Impark
common stock will be issued and outstanding. In addition, shortly following the
Distribution Date, it is anticipated that Impark will grant (i) options covering
an aggregate of 192,550 shares of Impark common stock to employees of Impark and
(ii) shares, in an amount to be determined, of Impark common stock to each of
its outside directors. See "Management -- Stock Plans" and "Management --
Director Compensation."
Impark has applied to list its common stock on the American Stock Exchange.
Based on the expected number of holders of First Union shares of record as of
the Record Date, Impark is expected initially to have approximately 9,000
shareholders of record on the Distribution Date. The transfer agent and
registrar for the Impark common stock will be National City Bank. There can be
no assurance that an active trading market in Impark common stock will develop
or, if a market does develop, at what prices Impark common stock will trade.
Although shares of Impark common stock will not trade on the American Stock
Exchange on a "when-issued" basis, it is expected that a "when-issued" trading
market in Impark common stock may develop prior to the Record Date. A
"when-issued" trading market occurs when trading in shares begins prior to the
time stock certificates are actually available or issued.
Shares of Impark common stock distributed to First Union beneficiaries will
be freely transferable, except for shares received by persons who may be deemed
to be "affiliates" of Impark under the Securities Act. Persons who may be deemed
to be affiliates of Impark after the Distribution generally include individuals
or entities that control, are controlled by, or are under common control with
Impark, and will include: (a) the directors and executive officers of Impark and
(b) Gotham Partners, L.P., Gotham International Advisors, L.L.C., Gotham
Partners III, L.P., Apollo Real Estate Investment Fund II, L.P., and Magten
Asset Management Corp. All of the shares of Impark common stock held by
affiliates of Impark may generally only be resold (i) in compliance with the
applicable provisions of Rule 144 under the Securities Act, (ii) under an
effective registration statement under the Securities Act or (iii) pursuant to
an exemption from the registration requirements of the Securities Act.
Under Rule 144, an affiliate is entitled to sell, within any three-month
period, a number of shares of Impark common stock that does not exceed the
greater of 1% of the then outstanding shares of Impark common stock
(approximately 21,000 shares immediately after the Distribution) or the average
weekly trading volume of the Impark common stock during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied.
Upon consummation of the Distribution, affiliates of Impark will hold
approximately 770,000 shares of Impark common stock. Following the Distribution
Date, Impark will file with the Commission a Registration Statement on Form S-8
to register under the Securities Act the 350,000 shares of Impark common stock
which have been reserved for issuance pursuant to the 2000 Stock Incentive Plan.
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CAPITALIZATION
The following table sets forth the capitalization of Impark as of September
30, 1999:
- On an actual basis combining the FUR Parking Business and FUMI Parking
Business; and
- On a pro forma basis giving effect to the pro forma transactions
described in note 2 to the Pro Forma Financial Statements.
You should read the capitalization information set forth in the table below
in conjunction with the financial statements and notes appearing elsewhere in
this Information Statement.
<TABLE>
<CAPTION>
AS AT SEPTEMBER 30, 1999
-------------------------
ACTUAL PRO FORMA
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Term facility (current portion)............................. $21,393 $ --
Advances payable to FUMI, unsecured, non-interest bearing
and having no specific terms of repayment................. 10,748 --
Promissory note payable to First Union, unsecured, bearing
interest at 11.875% per annum and maturing April 17,
2009...................................................... 26,870 --
Other long-term debt........................................ 120 --
------- -------
59,131 --
Stockholders' equity
Owners' (deficiency)...................................... (5,684) --
Capital stock
Preferred Stock, $.01 par value per share; 2,000,000
shares authorized; no shares issued and outstanding.... -- --
Common Stock, $.01 par value per share; 10,000,000 shares
authorized; no shares issued and outstanding, actual;
2,100,000 shares issued and outstanding, pro forma..... -- 58,626
------- -------
$53,447 $58,626
======= =======
</TABLE>
First Union will repay the term facility prior to the Distribution. In
addition, First Union will capitalize the advances payable, promissory note and
other long-term debt prior to the Distribution.
First Union will provide an $8.0 million line of credit to Impark prior to
the Distribution. Amounts drawn under this line of credit will bear interest at
LIBOR plus 4.5% per annum, be secured by real estate owned by Impark as well as
being full recourse to Impark. The line of credit will have a term of six months
from the date of issuance with two three-month extension options.
19
<PAGE> 24
ADJUSTED PRO FORMA SELECTED FINANCIAL DATA
The pro forma selected financial data presented below is based on the pro
forma consolidated and combined financial statements of Impark, which are
included in this Information Statement, adjusted as indicated below. The
adjusted pro forma selected financial data reflects the historical operating
results for the periods presented of the predecessor entities to Impark adjusted
to give effect to the transactions that will result in the formation of Impark
as well as the elimination of the revenues and expenses associated with
businesses sold in 1999 which do not meet the definition of a discontinued
operation for accounting purposes.
This financial data should be read in conjunction with the pro forma
consolidated and combined financial statements and "Management's Discussion and
Analysis of Adjusted Pro Forma Financial Condition and Results of Operations"
included in this Information Statement.
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED NINE MONTHS ENDED
ENDED DECEMBER 31 SEPTEMBER 30
DECEMBER 31 ------------------- -------------------
1996 1997 1998 1998 1999
----------- -------- -------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1)
Revenues.............................. $ 38,367 $ 52,557 $ 53,946 $ 39,804 $ 45,709
Direct costs.......................... 28,379 40,144 40,931 29,586 35,380
-------- -------- -------- -------- --------
Gross margin.......................... 9,988 12,413 13,015 10,218 10,329
General and administrative expenses... 7,191 10,504 12,136 8,923 8,065
Depreciation and amortization......... 2,512 4,907 5,375 4,127 3,350
-------- -------- -------- -------- --------
Operating income (loss)............... 285 (2,998) (4,496) (2,832) (1,266)
Other income (expense)(2)............. 1,517 (1,663) (16,675) (1,282) (476)
-------- -------- -------- -------- --------
Net income (loss)..................... $ 1,802 $ (4,661) $(21,171) $ (4,114) $ (1,742)
======== ======== ======== ======== ========
BALANCE SHEET DATA (SEPTEMBER 30,
1999)
Cash.................................. $ 9,278
Working capital....................... (1,694)
Fixed assets.......................... 12,789
Goodwill.............................. 44,037
Total assets.......................... 75,634
Total liabilities..................... 17,008
Total shareholder's equity............ 58,626
OTHER(1)
Gross collections(3).................. $121,296 $165,033 $164,074 $125,108 $125,939
Cash provided by (used in)
Operating activities................ 116 (2,232) (7,480) (4,466) 2,738
EBITDA(4)............................. 2,797 1,909 879 2,415 2,264
</TABLE>
- ---------------
20
<PAGE> 25
(1) The amounts presented for these captions have been accumulated as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
-------------------------------- --------------------------------
BUSINESSES BUSINESSES
PRO FORMA SOLD TOTAL PRO FORMA SOLD TOTAL
--------- ---------- ------- --------- ---------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Revenues................... 39,493 (1,126) 38,367 55,596 (3,039) 52,557
Direct costs............... 28,947 (568) 28,379 42,421 (2,277) 40,144
General and administrative
expenses................. 7,568 (377) 7,191 11,073 (569) 10,504
Depreciation and
amortization............. 2,567 (55) 2,512 4,958 (51) 4,907
Other income (expense)..... 628 889 1,517 (1,644) (19) (1,663)
OTHER
Gross collections.......... 126,458 (5,162) 121,296 172,305 (7,172) 165,033
Cash provided by (used in)
Operating activities..... 297 (181) 116 (2,039) (193) (2,232)
EBITDA..................... 2,978 (181) 2,797 2,102 (193) 1,909
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
--------------------------------
BUSINESSES
PRO FORMA SOLD TOTAL
--------- ---------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Revenues................... 58,499 (4,553) 53,946
Direct costs............... 44,567 (3,636) 40,931
General and administrative
expenses................. 14,563 (2,427) 12,136
Depreciation and
amortization............. 5,450 (75) 5,375
Other income (expense)..... (16,662) (13) (16,675)
OTHER
Gross collections.......... 172,966 (8,892) 164,074
Cash provided by (used in)
Operating activities..... (8,990) 1,510 (7,480)
EBITDA..................... (631) 1,510 879
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1999
-------------------------------- -------------------------------
BUSINESSES BUSINESSES
PRO FORMA SOLD TOTAL PRO FORMA SOLD TOTAL
--------- ---------- ------- --------- ---------- ------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues............................................. 43,361 (3,557) 39,804 48,148 (2,439) 45,709
Direct costs......................................... 32,447 (2,861) 29,586 37,293 (1,913) 35,380
General and administrative expenses.................. 8,268 (465) 8,923 6,642 1,423 8,065
Depreciation and amortization........................ 4,168 (41) 4,127 3,396 (46) 3,350
Other income (expense)............................... (1,277) (5) (1,282) (483) 7 (476)
OTHER
Gross collections.................................... 131,947 (6,839) 125,108 129,741 (3,804) 125,937
Cash provided by (used in)
Operating activities............................... (4,235) (231) (4,466) 789 1,949 2,738
EBITDA............................................... 2,646 (231) 1,295 4,213 (1,949) 2,264
</TABLE>
The pro forma amounts set out in the tables in this footnote for the year
ended December 31, 1998 and the nine months ended September 30, 1998 and
1999 have been extracted from the pro forma combined financial statements
included in this Information Statement. The pro forma amounts set out for
the nine months ended December 31, 1996 and the year ended December 31,
1997 have been calculated on a basis consistent with the other periods. The
adjusted pro forma financial data does not give effect to any additional
costs that we may incur due to being a public company or a registrant with
the SEC.
(2) Other income (expense) principally includes gains or losses on the sale or
write-down of assets, other interest expense and income taxes. In the year
ended December 31, 1998, other income (expense) includes a write-down of
goodwill of $15.0 million. Please see "Management's Discussion and Analysis
of Adjusted Pro Forma Financial Condition and Results of Operations" for
additional information on this write-down.
(3) Gross collections represent the aggregate cash collected from the revenue
generating activities of our operations that will be continuing subsequent
to the Distribution for the periods presented. It includes revenues reported
under generally accepted accounting principles as well as collections made
on parking facilities for which we have a management contract. Gross
collections are significant to an understanding of the operations of the
predecessor entities to Impark because management uses gross collections as
a key indicator of its business opportunities, they demonstrate the
magnitude of our historical business activities, management contract
revenues are partly based on the level of gross collections, and
management's decisions on the allocation of resources among its business
activities are in part based on the level of gross collections.
21
<PAGE> 26
(4) EBITDA equals operating income as shown on the table above, plus
depreciation and amortization expense. EBITDA is included because management
believes it to be a useful tool for measuring our ability to generate cash
flow from operations. EBITDA does not represent cash flow from operations,
is not a measure under generally accepted accounting principles and should
be considered together with the other financial information included in the
table and presented elsewhere in this Information Statement. EBITDA measures
as presented may not be comparable to similarly titled measures of other
entities.
22
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF ADJUSTED PRO FORMA FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 AND
YEARS ENDED DECEMBER 31, 1998 AND 1997
The following discussion of Impark's results of operations and financial
condition should be read in conjunction with the Adjusted Pro Forma Selected
Financial Data, the Pro Forma Consolidated and Combined Financial Statements.
DESCRIPTION OF FINANCIAL INFORMATION
Impark is the corporation which will result from the combination of the
parking related businesses of FUMI and the Canadian parking facilities of First
Union. This discussion and analysis reflects the adjusted pro forma results of
operations on a basis consistent with how Impark will be organized at the time
of the Distribution. It is presented on an adjusted pro forma basis because we
believe that a reader's understanding of historical trends should be based on
the same operating businesses which will constitute Impark's continuing
operations. We have set out below a brief description of the operations of each
business being combined.
FUMI Parking Business. The FUMI Parking Business consists of the parking
services and related ancillary activities that will continue in Impark. Since
April 1997 subsidiaries of FUMI have carried on these activities. The continuing
operations of FUMI's indirect subsidiaries, Imperial Parking Limited and Impark
Services Ltd., consist of operating and managing parking facilities in Canada
and the United States and carrying on other parking related activities.
FUR Parking Business. The FUR Parking Business consists primarily of
owning 16 parking properties in Canada. Since April 1997 subsidiaries of First
Union have operated this business, including leasing the properties to FUMI for
operation and management.
Impark Holdings Inc. Impark Holdings Inc. acquired Imperial Parking
Limited from its shareholders in March 1996 and sold this business to First
Union and FUMI in April 1997. Impark Holdings operated and managed parking
facilities in Canada, the United States and Asia.
Periods Presented. The results of operations for the year ended December
31, 1997 combine the period from January 1, 1997 to April 16, 1997 of Impark
Holdings with that from April 17, 1997 to December 31, 1997 of the FUMI Parking
Business and the FUR Parking Business. They also adjust for the elimination of
inter-entity transactions and for businesses sold in 1999.
The results of operation for the year ended December 31, 1998 and the nine
month periods ended September 30, 1999 and 1998 combine the results of the FUMI
Parking Business and the FUR Parking Business and adjust for the elimination of
inter-entity transactions and for businesses sold in 1999.
23
<PAGE> 28
OVERVIEW
Impark operates parking facilities under three types of arrangements:
leased, owned and management contract. In this section, we refer to revenues
generated from these arrangements as parking services. In addition, Impark
generates revenues from the provision of ancillary services. Ancillary services
include patrolling, ticketing and collection. During the two years ended
December 31, 1998 and for the nine months ended September 30, 1999 and 1998,
Impark's revenues have been generated from the following sources:
<TABLE>
<CAPTION>
ADJUSTED PRO FORMA ADJUSTED PRO FORMA
YEARS ENDED DECEMBER 31 NINE MONTHS ENDED SEPTEMBER 30
----------------------------- -------------------------------
1997 1998 % CHANGE 1998 1999 % CHANGE
------- -------- -------- -------- -------- ---------
(THOUSANDS OF DOLLARS, EXCEPT PERCENTS)
<S> <C> <C> <C> <C> <C> <C>
Leased Facilities................ $42,811 $ 45,577 6.5% $33,648 $39,325 16.9%
Managed Facilities............... 4,556 4,294 (5.8)% 3,004 3,416 13.7%
Owned Facilities................. 1,414 1,510 6.8% 1,135 1,224 7.8%
Other............................ 3,776 2,565 (32.1)% 2,017 1,744 (13.5)%
------- -------- ----- ------- ------- -----
Total............................ $52,557 $ 53,946 2.6% $39,804 $45,709 14.8%
======= ======== ===== ======= ======= =====
</TABLE>
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. All revenues generated by the leased
facility are for the account of Impark. As a result, revenues and profits in
lease arrangements are dependent upon the performance of the facility. Leased
facilities typically require a longer commitment and a larger capital investment
than managed facilities but generally provide a more stable source of revenue
and greater opportunity for long term revenue growth. Under its leases, Impark
is typically responsible for all facets of the parking operations, except for
structural, mechanical and electrical maintenance or repairs, and property
taxes. Lease arrangements are usually for terms of two to ten years, sometimes
with renewal options.
Management contracts provide that Impark will have responsibility for
hiring, training and staffing parking personnel and providing collections,
accounting, record keeping, reporting, signage, general maintenance, insurance
and facility marketing services. Our revenues under these arrangements are from
fees paid for our services. In general, we are not responsible for structural,
mechanical and electrical maintenance or repairs, or for providing security
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 cancellable by the property owner on short notice.
When Impark owns a parking facility, all facility revenue and expenses flow
directly to Impark. Impark assumes complete responsibility for all aspects of
each owned property, including all structural, mechanical, and electrical
maintenance or repairs and property taxes. Additionally, we have the potential
to benefit from the appreciation in the value of the underlying real estate, if
any, if the property is sold.
ADJUSTED PRO FORMA NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO ADJUSTED PRO
FORMA NINE MONTHS ENDED SEPTEMBER 30, 1998
Total Revenues. Total revenues increased $5.9 million, or 14.8%, to $45.7
million in the nine months ended September 30, 1999 compared to $39.8 million in
the nine months ended September 30, 1998. This increase was attributable to
greater revenues from parking services as detailed below and was offset by lower
other revenues and a weakening of the Canadian dollar against the United States
dollar in 1999.
Parking revenues from leased facilities increased $5.7 million, or 16.9%,
to $39.3 million during the nine months ended September 30, 1999 as compared to
$33.6 million in the nine months ended September 30, 1998. This increase was
driven by new business growth, primarily in Calgary, Alberta, Toronto, Ontario,
Minneapolis, Minnesota and Milwaukee, Wisconsin where 31 new leased facilities
were added during the period.
24
<PAGE> 29
Parking revenues from management contracts increased $0.4 million, or
13.7%, to $3.4 million in the nine months ended September 30, 1999 as compared
to $3.0 million in the nine months ended September 30, 1998. This increase
resulted primarily from new business growth.
Parking revenues from owned facilities was relatively stable, increasing
$0.1 million, or 7.8%, to $1.2 million during the nine months ended September
30, 1999 as compared to $1.1 million in the nine months ended September 30,
1998.
Other revenues decreased by $0.3 million, or 13.5%, to $1.7 million for the
nine months ended September 30, 1999 from $2.0 million for the nine months ended
September 30, 1998. The decrease was mainly attributable to lower equipment
sales as we wound down our equipment sales and installation division in 1999.
Direct costs increased $5.8 million, or 19.6%, to $35.4 million in the nine
months ended September 30, 1999 from $29.6 million in the nine months ended
September 30, 1998. Rent expense increased $4.8 million, principally as a result
of new locations at higher rents and additional rent on existing locations. The
remaining $1.0 million increase in direct cost was accounted for by an increase
in payroll expenses. The payroll expense increase was attributable to a
combination of new locations and increases in existing payroll. Direct costs, as
a percentage of total revenues, increased to 77.4% in the nine months ended
September 30, 1999 from 74.3% in the nine months ended September 30, 1998. The
increase was primarily attributable of the large new lease deals in Calgary,
Toronto, Minneapolis and Milwaukee. A number of these locations were
unprofitable or only marginally profitable in their first year. New lease
locations may require a few years for revenue to mature.
General and administrative expenses decreased by $0.8 million, or 10.6%, to
$8.1 million for the nine months ended September 30, 1999 from $8.9 million for
the nine months ended September 30, 1998. This decrease was primarily
attributable to $1.3 million lower expansion related costs in the 1999 period
than in 1998. In the nine months ended September 30, 1999 the decrease in
general and administrative expenses was reduced by a $0.5 million provision for
severance, a $0.3 million foreign currency loss on related party debt and $0.3
million of costs for Year 2000 compliance. General and administrative expenses,
before taking into account severance, foreign currency losses and Year 2000
costs, decreased as a percentage of total revenue from 22.4% for the nine months
ended September 30, 1998 to 15.3% for the nine months ended September 30, 1999.
The decrease was a result of management efforts to reduce costs and the effect
of spreading general and administrative expenses over a greater revenue base.
Depreciation and amortization decreased by $0.8 million from $4.1 million
for the nine months ended September 30, 1998 to $3.3 million for the nine months
ended September 30, 1999. The decrease was attributable to lower depreciation
and amortization on management contracts and agreements in 1999 than 1998 as
they became fully amortized during this period.
Other expense includes income taxes, assets written-down and other
interest. The decrease of $0.8 million was primarily attributable to a decrease
of $0.5 million in other interest as a result of repayment in June 1998 of debt
to a former shareholder.
ADJUSTED PRO FORMA YEAR ENDED DECEMBER 31, 1998 COMPARED TO ADJUSTED PRO FORMA
YEAR ENDED DECEMBER 31, 1997
Total Revenues. Total revenues increased $1.3 million, or 2.6%, to $53.9
million in fiscal 1998 compared to $52.6 million in fiscal 1997. This increase
was attributable to increased revenues in both parking services and ancillary
services from new business growth and 41 facilities that were acquired in 1998.
Parking revenues from leased and owned facilities in fiscal 1998 increased
by $2.9 million, or 6.5%, to $47.1 million from $44.2 million in fiscal 1997.
The increase was attributable to new business growth in Canada and the United
States combined with 41 facilities acquired in 1998 from two small Canadian
parking operators.
25
<PAGE> 30
Management contract revenues in fiscal 1998 decreased by $0.3 million, or
5.8%, to $4.3 million from $4.6 million in fiscal 1997. This decrease was
primarily attributable to a weakening of the Canadian dollar against the U.S.
dollar.
Other revenue in fiscal 1998 decreased by $1.2 million, or 32.1%, to $2.6
million from $3.8 million in fiscal 1997. The decrease was due primarily to
lower equipment sales and installation of $1.0 million.
Direct costs in fiscal 1998 increased by $0.8 million, or 2.0%, to $40.9
million from $40.1 million in fiscal 1997. Direct costs increased principally as
a result of new business growth combined with 41 new facilities from two small
acquisitions. Direct costs as a percentage of total revenues, decreased to 75.9%
in fiscal 1998 from 76.4% in fiscal 1997. This decrease was attributable
predominately to the spreading of fixed costs, primarily rent and property
costs, over a larger revenue base.
General and administrative expenses increased by $1.7 million, or 16.0%, to
$12.2 million in fiscal 1998 from $10.5 million in fiscal 1997. This increase
was primarily a result of severance expenses of $0.6 million, United States
expansion costs of $2.0 million and $0.5 million of allocated First Union stock
compensation expense in fiscal 1998, offset by provisions of $1.1 million in
fiscal 1997 to terminate equipment installation contracts.
Depreciation and amortization increased by $0.5 million from $4.9 million
in fiscal 1997 to $5.4 million in fiscal 1998. The increase was due primarily to
increased amortization of management contracts and agreements for a full year in
fiscal 1998 following the April 17, 1997 acquisition by FUMI.
Other expenses in fiscal 1998 included a write-down in the value of
goodwill of $15.0 million at the fiscal year end. Goodwill was primarily created
on the push-down of the acquisition of the business of Impark Holdings by FUMI
in April 1997. Due to the losses incurred in the FUMI Parking Business since its
acquisition, at December 31, 1998, management of First Union and Impark assessed
the recoverability of the net book value of goodwill. This review was made by
comparing the net book value to the discounted estimates of future cash flows
from the FUMI Parking Businesses. As a result of this review, an impairment
charge in goodwill of $15.0 million was recorded.
LIQUIDITY AND CAPITAL RESOURCES
On an adjusted pro forma basis, Impark had cash of $9.3 million at
September 30, 1999 as compared to $2.3 million before the pro forma changes and
the adjustments described in "Adjusted Pro Forma Selected Financial Data." The
additional $7.0 million represents a cash contribution which First Union will
make to Impark immediately prior to the Distribution.
Following the Distribution, Impark will have no long term bank or other
long term debt outstanding and we will have an $8.0 million line of credit from
First Union to fund working capital requirements and for acquisitions and other
capital investment opportunities. The credit facility will be due on September
30, 2000, with two options to extend for three additional months each. We are
required to pay $40,000 for each extension. The line of credit bears interest at
a floating annual rate equal to the London Interbank Offer Rate plus 4.5% per
annum. The credit facility will be secured by a cross collateralized mortgage on
the parking real estate from the First Union parking business. We intend to
obtain a new credit facility with a commercial bank as soon as practicable after
the Distribution. This anticipated additional line will be used to establish
letters of credit, support working capital, fund capital investment
opportunities and repay the First Union line of credit.
Depending on the timing and magnitude of Impark's future investments, which
could be 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, Impark's credit facility, a rights
offering or an equity offering to shareholders over the next twelve months. In
the ordinary course of business, Impark is required to maintain and in some
cases make capital improvements to the parking facilities it operates. As of the
date of this Information Statement, we have no material outstanding commitments
for capital improvements.
26
<PAGE> 31
In the future, if we identify investment opportunities requiring cash in
excess of operating cash flows and credit facilities, we may seek additional
sources of capital, including the sale or issuance of Impark common stock or a
rights offering, or amending our credit facility to obtain additional
indebtedness. No assurances can be given that such increases would be available
at the time needed to complete any such acquisition.
Net cash provided by adjusted pro forma operating activities for the nine
months ended September 30, 1999 was $2.7 million. The primary factors which
contributed to this cash provision was income before depreciation and
amortization of $2.0 million and decreases in working capital of $0.7 million.
Net cash used in investing activities was $0.5 million for the adjusted pro
forma nine months ended September 30, 1999. The primary factor which contributed
to the investing activity was fixed asset expenditures of $0.5 million.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities". This statement
is effective for fiscal quarters of fiscal years beginning after June 15, 2000.
SFAS 133 establishes consistent accounting and reporting standards for
derivative instruments and for hedging activities. As of September 30, 1999 we
have not adopted this standard and do not expect to do so prior to its required
application date. To September 30, 1999, we do not believe we have entered into
significant instruments that are subject to SFAS 133. However, we are continuing
to review and evaluate SFAS 133 and its impact on Impark.
FOREIGN CURRENCY EXPOSURE
Impark operates wholly owned subsidiaries in Canada. Total adjusted pro
forma revenues from Canadian operations amounted to $49.7 million and $50.2
million for fiscal years 1997 and 1998, respectively. Impark intends to continue
to invest in Canadian leased or owned facilities, and may identify expansion
opportunities in other foreign countries. Our exposure to foreign currency
fluctuations is limited as the Canadian dollar revenues have to date been
significantly offset by Canadian dollar operating costs. In limited
circumstances we have denominated Canadian contracts in U.S. dollars to limit
currency exposure. Presently, Impark has no formal hedging programs. We
anticipate implementing a hedging program if such risk materially increases.
IMPACT OF INFLATION AND CHANGING PRICES
The primary sources of revenues to Imperial Parking are parking revenues
from owned and leased locations and management contract revenue (net of expense
reimbursements). In the years ended December 31, 1998 and 1999 and the nine
months ended September 30, 1999 inflation had a limited impact on our
operations.
YEAR 2000 COMPLIANCE PROJECT
In June 1998, we began implementing a Year 2000 compliance project which
was intended to assess the ability of our computer systems to recognize dates
properly on or after January 1, 2000 and to ensure that these systems were Year
2000 compliant as soon as possible. This project addressed three main areas: (a)
information technology systems, (b) process control instrumentation and (c)
third-party, suppliers and customers. This compliance project was completed
prior to December 31, 1999. Subsequent to that date we have not experienced any
significant problems with respect to the Year 2000 change. However, there can be
no certainty that we will not be affected during the fiscal year ending December
31, 2000 due to Year 2000 system facilities or other related events by our
suppliers.
27
<PAGE> 32
QUARTERLY RESULTS
Impark may experience fluctuations in its income from quarter to quarter.
We may continue to experience fluctuations in revenues and related expenses due
to acquisitions, pre-opening costs, travel and transportation patterns affected
by weather and calendar related events, and local and national economic
conditions. Additionally, Impark manages the parking for a number of sports
stadiums and arenas and our income can be affected by the relative degree of
success of various sports teams.
28
<PAGE> 33
HISTORICAL SELECTED FINANCIAL DATA
The historical selected financial data presented below has been calculated
by combining information in the combined financial statements of the FUR Parking
Business and the FUMI Parking Business and from the consolidated financial
statements of Impark Holdings Inc. These combined and consolidated financial
statements are included in this Information Statement. The selected financial
data presented as of and for the nine month periods ended September 30, 1998 and
1999 are unaudited; however, the amounts presented include all adjustments,
consisting solely of normal recurring adjustments, necessary for a fair
presentation of the financial results for the periods presented. The selected
financial data presented as of and for all other periods has been extracted from
audited financial statements.
The amounts presented below have been extracted from the historical
financial statements and are presented on a combined basis without giving effect
to any accounting adjustments that may be required to be given effect prior to
the completion of the plan of organization of Impark. As Impark's predecessor
changed its fiscal year end in 1996 from March 31st to December 31st to be
consistent with that of its then parent company, information for 1996 is
presented for nine months only.
This financial data should be read in conjunction with the consolidated and
combined financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED NINE MONTHS ENDED
ENDED DECEMBER 31 SEPTEMBER 30
DECEMBER 31 ------------------- -------------------
1996 1997 1998 1998 1999
------------ -------- -------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1),(2)
Revenues............................. $ 39,493 $ 56,120 $ 59,458 $ 44,238 $ 48,958
Direct costs......................... 28,947 42,421 44,567 32,447 37,293
-------- -------- -------- -------- --------
Gross margin......................... 10,546 13,699 14,891 11,791 11,665
General and administrative
expenses........................... 7,568 11,073 14,972 8,677 6,642
Depreciation and amortization........ 2,567 4,951 5,443 4,163 3,391
-------- -------- -------- -------- --------
Operating income (loss).............. 411 (2,325) (5,524) (2,169) 1,632
Interest expense..................... (587) (3,335) (5,574) (4,059) (3,637)
Other income (expense)............... 674 (1,582) (15,884) (800) (752)
-------- -------- -------- -------- --------
Income (loss) from continuing
operations......................... $ 498 $ (7,242) $(26,982) $ (7,028) $ (2,757)
======== ======== ======== ======== ========
BALANCE SHEET DATA (END OF
PERIOD)(1),(2)
Working capital...................... $ (7,833) $ (7,023) $ (8,181) $ (6,212) $ (6,483)
Fixed assets......................... 11,479 14,259 13,888 13,434 13,032
Goodwill............................. 31,457 66,560 45,379 61,357 43,896
Total assets......................... 69,499 99,423 74,923 90,593 72,552
Long-term liabilities................ 26,351 52,365 55,219 54,203 59,011
Total liabilities.................... 44,472 84,656 77,720 72,357 78,236
Total owners' equity (deficiency).... 25,027 14,767 (2,797) 18,236 (5,684)
OTHER INFORMATION(1),(2)
Gross collections.................... $126,458 $172,729 $173,925 $132,824 $130,551
Cash provided by (used in)
Operating activities............... 297 (1,530) (8,140) (4,422) (1,559)
Financing activities............... 45,360 35,638 21,412 17,340 194
Investing activities............... (45,040) (33,895) 13,135 13,164 (485)
EBITDA............................... 2,978 2,626 (81) 1,994 5,023
</TABLE>
- ---------------
29
<PAGE> 34
(1) The amounts presented for the nine months ended December 31, 1996 have been
extracted from the consolidated financial statements of Impark Holdings
Inc., which, for accounting and SEC reporting purposes, represents a
predecessor entity to Impark.
(2) The amounts presented for these captions have been accumulated as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------- ----------------------------------------
IMPARK FUMI FUR ELIMINATION TOTAL FUMI FUR ELIMINATION TOTAL
------ -------- ------- ----------- ------- ------- ------ ----------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues...................... 15,618 40,502 302 (302) 56,120 59,458 454 (454) 59,458
Direct costs.................. 13,277 29,446 -- (302) 42,421 45,009 12 (454) 44,567
General and administrative
expenses.................... 3,547 7,526 -- -- 11,073 14,972 -- -- 14,972
Depreciation and
amortization................ 1,066 3,854 31 -- 4,951 5,398 45 -- 5,443
Interest expense.............. 453 4,650 904 (2,672) 3,335 6,542 2,757 (3,725) 5,574
Other income (expense)........ (539) (370) 1,999 (2,672) (1,582) (15,492) 3,333 (3,725) (15,884)
BALANCE SHEET DATA (END OF
PERIOD)
Working capital............... -- (7,375) 352 -- (7,023) (9,353) 1,172 -- (8,181)
Fixed assets.................. -- 5,158 9,101 -- 14,259 5,330 8,558 -- 13,888
Goodwill...................... 66,560 -- -- 66,560 45,379 -- -- 45,379
Total assets.................. -- 89,440 41,660 (31,677) 99,423 65,229 42,002 (32,308) 74,923
Long-term liabilities......... -- 60,768 22,977 (31,380) 52,365 63,052 23,759 (31,592) 55,219
Total liabilities............. -- 92,529 23,804 (31,677) 84,656 85,577 24,451 (32,308) 77,720
Total owners' equity
(deficiency)................ -- (3,089) 17,856 -- 14,767 (20,348) 17,551 -- (2,797)
OTHER
Gross collections............. 49,631 (123,098) 302 (302) 172,729 173,925 454 (454) 173,925
Cash provided by (used in)
Operating activities........ (182) (1,409) 61 -- (1,530) (5,734) (2,415) -- (8,149)
Financing activities........ (399) 34,482 31,897 (30,342) 35,638 8,610 2,802 -- 21,412
Investing activities........ (66) (33,095) (31,076) 30,342 (33,895) (12,494) (141) -- (13,135)
EBITDA........................ (1,206) 3,530 302 -- 2,626 (523) 442 -- (81)
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1999
---------------------------------------- ----------------------------------------
FUMI FUR ELIMINATION TOTAL FUMI FUR ELIMINATION TOTAL
------- ------ ----------- ------- ------- ------ ----------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues................................. 44,238 342 (342) 44,238 48,958 340 (340) 48,958
Direct costs............................. 32,777 12 (342) 32,447 37,631 2 (340) 37,293
General and administrative expenses...... 9,797 -- -- 9,797 6,642 -- -- 6,642
Depreciation and amortization............ 4,132 31 -- 4,163 3,349 42 -- 3,391
Interest expense......................... 4,877 1,996 (2,814) 4,059 4,403 2,236 (3,002) 3,637
Other income (expense)................... (392) 2,406 (2,814) (800) (400) 2,650 (3,002) (752)
BALANCE SHEET DATA (END OF PERIOD)
Working capital.......................... (6,790) 578 -- (6,212) (8,472) 1,989 -- (6,483)
Fixed assets............................. 4,853 8,581 -- 13,434 4,450 8,582 -- 13,032
Goodwill................................. 61,357 -- -- 61,357 43,896 -- -- 43,896
Total assets............................. 81,426 41,090 (31,923) 90,593 62,038 46,983 (36,469) 72,552
Long-term liabilities.................... 62,360 23,162 (31,319) 54,203 67,292 26,870 (35,151) 59,011
Total liabilities........................ 80,507 23,773 (31,923) 72,357 86,760 27,925 (36,469) 78,236
Total owners' equity (deficiency)........ 919 17,317 -- 18,236 (24,722) 19,038 -- (5,684)
OTHER
Gross collections........................ 132,824 342 (342) 132,824 130,551 340 (340) 130,551
Cash provided by (used in)
Operating activities................... (2,168) (2,254) -- (4,422) 3,284 (1,725) -- 1,559
Financing activities................... 15,245 2,095 -- 17,340 (1,857) 2,051 -- 194
Investing activities................... (13,021) (143) -- (13,164) (479) (6) -- (485)
EBITDA................................... 1,664 330 -- 1,994 4,685 338 -- 5,023
</TABLE>
30
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 AND
YEARS ENDED DECEMBER 31, 1998 AND 1997
The following discussion of Impark's historical results of operations and
financial condition should be read in conjunction with the Selected Financial
Data tables and the Combined and Consolidated Financial Statements which are
included in this Information Statement.
During the two years ended December 31, 1998 and for the nine months ended
September 30, 1998 and 1999, our revenues have been generated from the following
sources:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31 SEPTEMBER 30
---------------------------- ----------------------------
1997 1998 % CHANGE 1998 1999 % CHANGE
------- ------- -------- ------- ------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT PERCENTS)
<S> <C> <C> <C> <C> <C> <C>
Leased facilities.................. $45,394 $49,551 9.2% $36,767 $42,373 15.3%
Managed facilities............... 5,536 5,832 5.3% 4,320 3,616 (16.3)%
Owned facilities................. 1,414 1,510 6.8% 1,135 1,224 7.8%
Other............................ 3,776 2,565 (32.1)% 2,017 1,744 (13.5)%
------- ------- ----- ------- ------- -----
Total............................ $56,120 $59,458 5.9% $44,238 $48,958 10.7%
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
Total Revenues. Total revenues increased $4.8 million, or 10.7%, to $49.0
million in the nine months ended September 30, 1999 compared to $44.2 million in
the nine months ended September 30, 1998. This increase was attributable to
greater revenues from parking services, as detailed below, which was offset by
lower ancillary services revenues and a weakening of the Canadian dollar against
the United States dollar in 1999.
Parking revenues from leased facilities increased $5.6 million, or 15.3%,
to $42.4 million during the nine months ended September 30, 1999 as compared to
$36.8 million in the nine months ended September 30, 1998. This increase was
driven by new business growth, primarily in Calgary, Alberta, Toronto, Ontario,
Minneapolis, Minnesota and Milwaukee, Wisconsin where 31 new leased facilities
were added during the period.
Parking revenues from management contracts decreased $0.7 million, or
16.3%, to $3.6 million in the nine months ended September 30, 1999 as compared
to $4.3 million in the nine months ended September 30, 1998. This decrease
resulted primarily from First Union cancelling the agreements for Impark to
manage its U.S. properties in October 1998.
Parking revenues from owned facilities remained relatively stable,
increasing $0.1 million, or 7.8%, to $1.2 million during the nine months ended
September 30, 1999 as compared to $1.1 million in the nine months ended
September 30, 1998.
Other revenue decreased by $0.3 million, or 13.5%, to $1.7 million for the
nine months ended September 30, 1999 from $2.0 million for the nine months ended
September 30, 1998. The decrease was mainly attributable to lower equipment
sales as we wound down our equipment sales and installation division.
Direct costs increased $4.8 million, or 14.9%, to $37.3 million in the nine
months ended September 30, 1999 from $32.5 million in the nine months ended
September 30, 1998. Rent expense increased $4.2 million, principally as a result
of new locations at higher rents and additional rent on existing locations. The
remaining $0.6 million increase in direct costs was primarily accounted for by
an increase in payroll expenses. The payroll expense increase was attributable
to a combination of new locations and increases in existing payroll. Direct
costs, as a percentage of total revenues, increased to
31
<PAGE> 36
76.2% in the nine months ended September 30, 1999 from 73.3% in the nine months
ended September 30, 1998. The increase was primarily attributable to several
large new lease deals in Calgary, Toronto, Minneapolis and Milwaukee. A number
of these locations were unprofitable or only marginally profitable in their
first year. New lease locations may require a few years for revenues to mature.
General and administrative expenses decreased by $2.0 million, or 23.4%, to
$6.6 million for the nine months ended September 30, 1999 from $8.6 million for
the nine months ended September 30, 1998. The decrease was primarily due to a
reversal in 1999 of $1.8 million of an overaccrual for severance originally
provided for in the fourth quarter of 1998. This was partially offset by a
severance provision in 1999 of $0.5 million. General and administrative
expenses, before taking into account severance, decreased as a percentage of
total revenue from 19.6% in 1998 to 16.2% in 1999. This was a result of
management efforts to reduce general and administrative expenses and the effect
of spreading general and administrative expenses over a greater revenue base.
Depreciation and amortization decreased from $4.1 million for the nine
months ended September 30, 1998 to $3.4 million for the nine months ended
September 30, 1999, a decrease of $0.7 million. The decrease was attributable to
lower depreciation and amortization on management contracts and agreements in
1999 than 1998 as they became fully amortized during this period.
Interest expense totalled $3.7 million for the nine months ended September
30, 1999 compared to $4.1 million for the nine months ended September 30, 1998,
a decrease of $0.4 million. Interest on bank debt decreased $0.2 million as bank
debt was repaid during the period. Debt owing to a former shareholder was repaid
in June 1998 resulting in a decrease in other interest of $0.5 million. These
decreases in interest were offset by an increase in interest to related parties
of $0.2 million. With respect to credit facilities which represent substantially
all of Impark's indebtedness, the weighted average balance outstanding for the
nine months ended September 30, 1999 was approximately $23.3 million at a
weighted average interest rate of 6.8%.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Total Revenues. Total revenues increased $3.3 million, or 5.9%, to $59.4
million in the year ended December 31, 1998 compared to $56.1 million in the
year ended December 31, 1997. This increase was attributable to increased
revenues in both parking services and ancillary services from new business
growth and the 41 facilities that were acquired in 1998.
Parking revenues from leased and owned facilities in fiscal 1998 increased
$4.3 million, or 9.1%, to $51.1 million from $46.8 million in fiscal 1997. The
increase was attributable to new business growth in Canada and the United States
combined with 41 facilities acquired in 1998 from two small Canadian parking
operators.
Management contract revenues increased $0.3 million, or 5.3% to $5.8
million from $5.5 million in fiscal 1997. The increase was due primarily to
managing First Union's U.S. properties for a period of ten months in fiscal 1998
compared to six months in fiscal 1997.
Other revenue decreased $1.2 million, or 32.1%, to $2.6 million in fiscal
1998 from $3.8 million in fiscal 1997. The decrease was due primarily to lower
equipment sales and installation.
Direct costs in fiscal 1998 increased $2.1 million, or 5.1%, to $44.5
million from $42.4 million in fiscal 1997. Direct costs increased principally as
a result of new business and from acquisitions. Direct costs as a percentage of
total revenues, decreased to 75.0% in fiscal 1998 from 75.6% in fiscal 1997.
This decrease was attributable predominately to the spreading of fixed costs,
primarily rent and property costs, over a larger revenue base.
General and administrative expenses decreased by $3.2 million, or 32.2%, to
$6.6 million for the nine months ended September 30, 1999 from $9.8 million for
the nine months ended September 30, 1998. This decrease was primarily
attributable to $1.3 million higher US expansion costs for the nine months ended
September 30, 1998 and $0.4 million provision for costs related to a legal
dispute for computer
32
<PAGE> 37
software and services (see Litigation). These expenses were partially offset by
a foreign currency gain of $0.5 million on related party debt. The nine months
ended September 30, 1999 included the reversal of $1.8 million of an
over-accrual for severance originally provided for in the fourth quarter of
1998. The decrease in general and administrative expenses would have been
greater except for $0.5 million severance provision, a $0.3 million cost for
Year 2000 compliance and a $0.3 million foreign currency loss on related party
debt in 1999. General and administrative expenses, before taking account of
severance, foreign currency losses and Year 2000 costs, decreased as a
percentage of total revenue from 23.3% for the nine months ended September 30,
1998 to 15.0% for the nine months ended September 30, 1999. The decrease was a
result of management efforts to reduce costs and the effect of spreading general
and administrative expenses over a greater revenue base.
Depreciation and amortization increased from $5.0 million in fiscal 1997 to
$5.4 million in fiscal 1998, an increase of $0.4 million. The increase was due
primarily to increased amortization of management contracts and agreements for a
full year in fiscal 1998 following the April 1997 acquisition by FUMI.
Interest expense totalled $5.7 million in 1998 compared to $3.3 million in
1997. The increased interest expense was a result of higher interest rates in
1998 and a full year of financing from related parties following the acquisition
of Impark by FUMI on April 17, 1997. With respect to credit facilities which
represent substantially all of Impark's indebtedness, the weighted average
balance outstanding for fiscal 1998 was approximately $24.2 million at a
weighted average interest rate of 7.2%.
Other expenses in fiscal 1998 include a write-down in the value of goodwill
of $15.0 million at the fiscal year end. Goodwill was primarily created on the
push-down of the acquisition of the business of Impark Holdings by FUMI in April
1997.
33
<PAGE> 38
BUSINESS
GENERAL
We are a leading provider of parking services in North America. As of
September 30, 1999, we managed, leased or owned over 1,400 parking lots in
Canada and the United States, containing more than 250,000 parking spaces,
making us the largest parking provider in Canada and one of the four largest in
North America. We estimate that the more than 230,000 parking spaces we operate
throughout Canada give us approximately half of the urban, private parking lot
business in Canada. We also provide parking lot patrolling, ticketing and
collection services for our own lots and for those operated by other parties.
We provide parking services at multi-level parking facilities and surface
lots. We operate these facilities and lots under three general types of
arrangements: management contracts, leases and fee ownership. As of September
30, 1999, we managed 681 parking facilities and lots, leased 716 parking
facilities and lots and owned 16 parking facilities and lots.
We were founded in 1962 in Vancouver, British Columbia and initially
established a significant presence in Western Canada. Since then we have
expanded our operations throughout Canada and also into the United States. Over
the past 13 years we have completed 15 parking-related acquisitions.
Our management team has extensive experience in the parking industry. Our
three most senior officers, Messrs. Huntzinger, Wallner and Newsome, have over
45 years of combined experience. They have operated major parking operations
throughout the United States and Canada and have been involved in numerous
acquisitions. See "Management -- Executive Officers and Directors."
Our clients include a number of significant owners and developers of
commercial real estate in Canada and the United States, including Trizec/Hahn,
Colliers International, Marathon Properties, Trammell Crow Faison, Cadillac
Fairview and Oxford Properties. We provide parking at several high profile
sites, such as Waterfront Center, GM Place and BC Place in Vancouver, the
Skydome in Toronto, Clise Properties in Seattle and Trammell Crow Faison Tower
Place Mall in Cincinnati. In addition, we were recently awarded the right to
manage the parking facilities at the San Francisco Giants' new Pacific Bell
baseball park.
Upon the Distribution, we will no longer be involved in non-parking related
ancillary businesses we have historically operated and we will no longer have
operations outside of North America. We believe this renewed focus on our core
business of parking management, including ticketing and patrolling services, and
our core geographic market of North America will enable our management to
concentrate its efforts on further improving the businesses that have
historically been most profitable for us, and will minimize the distractions we
have encountered from our non-core operations.
INDUSTRY
The parking industry is highly fragmented and competitive. Industry
participants, the vast majority of which are privately held companies, consist
of a relatively few national companies and a large number of small regional or
local operators, including a substantial number of companies providing parking
as an ancillary service in connection with property management or ownership. The
parking industry has begun to experience consolidation as smaller operators have
found that they lack the capital, economies of scale and sophisticated
management techniques required to compete with larger providers. We expect this
trend will continue and will provide significant opportunities for us to acquire
smaller existing providers.
We expect that a number of other trends in the commercial property
management business will continue to provide opportunities for large,
specialized providers of high-quality parking services. We believe that:
- The trend toward consolidation of property management companies will
favor larger, nationwide parking providers, as increasingly centralized
property management companies and property owners seek to minimize the
number of separate parking providers they deal with;
34
<PAGE> 39
- As the property management industry becomes increasingly sophisticated
and professional, property management companies and property owners will
likely seek to work with specialized, professional parking service
providers;
- Parking is increasingly seen by building owners as a profit center, and
owners seek parking providers who can help them to maximize
profitability, increase efficiency and reduce financial
unpredictability; and
- The owners of premier properties, as they begin to recognize that the
parking experience often provides both the first and last impression of
their properties to tenants and users, are seeking to offer the highest
possible level of quality in their parking services as a means of
distinguishing their properties from those of competitors.
We believe that the industry trends toward outsourcing by private-sector
owners and privatization by government entities provide additional significant
growth opportunities for parking facility operators. Private-sector parking
owners have begun to move from owner-operation of their parking facilities to
outsourcing the management of operations to specialized operators. This allows
them to focus on their core competencies while increasing overall returns on
parking assets. In addition, governments and government agencies, particularly
cities and municipal authorities, are increasingly retaining private firms to
operate facilities and parking-related services in an effort to reduce operating
budgets and increase efficiency.
GROWTH STRATEGY
Our strategy is to strengthen our position as the leading parking provider
in Canada while significantly expanding our presence into selected markets in
the United States. Key elements of this growth strategy include:
Increase penetration of existing core markets. We will seek to leverage
our long-standing relationships with real estate owners in cities where we
currently have significant operations. Our reputation for premium service, our
local market knowledge and our management infrastructure, allow us to compete
aggressively for new business in these core cities. Because existing parking
operations are sufficient to cover the costs of local and regional personnel,
additional parking operations in these markets will provide a greater
contribution to our profits than the operations in new markets. As we compete
for new business, it will also be critical to retain and improve the
profitability of existing contracts. We have historically achieved a favorable
contract renewal rate, which we attribute to our strong operating performance
and focus on client satisfaction. Over the past five years, we have retained 90%
of all management contracts and leases that have come up for renewal, where
renewal is calculated as 100% minus lost locations divided by the sum of
locations at the beginning of the year acquired and, added during the year.
Pursue aggressive growth in other urban markets. We have targeted major
cities in Canada and the United States where we currently have little or no
presence for aggressive expansion. We believe that expansion in the United
States will be the key component to enhancing our overall profitability. This is
because we have little presence in the United States, the largest parking market
in the world, and key members of our new management team have significant
experience in the United States. Also, there are far greater opportunities to
bid for contracts in the United States than in Canada where we already dominate
the industry. Additionally, parking rates and average profits per facility tend
to be higher than in Canada. Our strategy is to enter a new market only if we
believe we can quickly gain a significant position in the market, with
sufficient "critical mass" to compete effectively and realize economies of
scale. We will pursue opportunities in these markets either through acquisition
or by establishing our own operations there.
Pursue acquisition opportunities. We believe there are significant
opportunities to expand our business through the acquisition of smaller
operators, both in existing core markets and in other targeted cities where we
believe we can attain a significant market share. The parking industry is highly
fragmented and we believe that many of our smaller competitors have limited
access to capital or do not have the
35
<PAGE> 40
systems or the scale to compete effectively. We have successfully completed five
acquisitions in the last five years (adding approximately 300 facilities).
Typically, we seek to acquire smaller local operators with several years of
experience in their market. We believe this allows for the immediate
understanding of the market and provides a platform for additional acquisitions
and increased penetration in the same city. We believe we can improve operations
and profitability in these acquired locations by implementing our systems and
professional management techniques.
Participate in outsourcing and privatization trends. We believe
significant opportunities for growth will result from the current trend toward
outsourcing and privatization of parking services. We believe we are
particularly well positioned to participate in these trends because we are able
to provide parking facility management and related services at lower costs and
higher service levels than those provided by municipalities, hospitals and
universities. We have been successful in the past in working with the City of
Victoria and the City of Nanaimo to issue municipal tickets on our lots and have
parking contracts for the City of Coquitlam, the University of British Columbia
and the British Columbia Transit Authority. We believe that our status as the
only major parking company with its own ticketing, patrolling and collection
operations will enhance our ability to compete for outsourcing business.
OPERATING STRATEGY
We seek to increase the revenues and profitability of our parking
facilities through a variety of operating strategies, including the following:
Focus on larger urban markets. We intend to focus on larger urban markets.
We believe that (i) urban markets are more resistant to economic downturns, (ii)
property owners and real estate asset managers in these markets typically have a
presence in other cities, which provides opportunities to leverage these
relationships to expand to new locations, (iii) the typically higher prices
charged in these markets can support our premium service levels, and (iv) our
management team has significant expertise in these markets.
Focus on increasing profitability. We believe there is a significant
opportunity to increase the profitability of existing and future operations and
we intend to focus on the profitability of our operations. Our policy is to
continue to operate only those facilities that meet or exceed EBITDA targets.
Generally, we will seek to close or renegotiate the arrangements with respect to
facilities that do not meet our targets within the next 12 months following our
identification of such arrangements. We will also seek to reduce overhead costs
through a program of continuing cost cutting initiatives, including labor cost
reduction, exploiting purchasing power and other economies of scale and ongoing
improvements of automation and technology.
Increase proportion of leased facilities. We intend over time to increase
the number of facilities we operate under lease relative to the number we
operate under a management contracts. Historically, our net profits have been
significantly higher on leased facilities than on managed facilities. Our goal
is to have a higher proportion of leased facilities than managed facilities. We
believe a mix of leased, managed, and owned parking facilities will diversify
our operations, providing us with a balance of lower risk and lower profit
managed operations, and higher risk and higher profit leased and owned
operations.
Provide consistently high level of service. Our goal is to provide a
uniformly high level of quality and service across all of the facilities we
manage, characterized by clean, well-lit, secure and pleasant surroundings,
attractive graphics and signage, and professional, courteous and well-dressed
staff. We also offer a wide range of optional premium services, including valet
parking, concierge services, car washing, dry cleaning drop off and pick up and
vehicle repair. These premium services are typically offered to owners of
first-class properties who seek to provide their tenants with the highest
possible level of service to help differentiate their property from competing
properties. Recently our Toronto branch was awarded the 1999 Pinnacle Award by
the Building Owners and Managers Association of Ontario in recognition of
exemplary customer service.
36
<PAGE> 41
Continue to implement standardized systems and controls. Over the course
of more than 35 years in the parking management business, we have developed
sophisticated and comprehensive management systems and controls, which we seek
to implement uniformly at all facilities we manage. These systems include
accounting and financial management and reporting practices, general operating
procedures, training, employment policies and practices, cash controls,
marketing procedures and visual image. We believe that our standardized systems
and controls enhance our ability to successfully expand our operations into new
markets.
Aggressively implement technology and automation. We believe that
automation and technology can enhance customer convenience, lower labor costs,
improve cash management and increase overall profitability. We have been a
pioneer in the field of introducing automation and technology to the parking
business and we were among the first to widely adopt innovations such as the use
of credit card payment systems, hand-held computers to track violators and issue
citations, bar-code scanners to ensure monthly parkers are using the correct lot
and are up-to-date in payment and entry and exit gates incorporating sensing
equipment that can automatically recognize and admit authorized vehicles. We
believe we have a greater proportion of unmanned facilities than any of our
major Canadian or U.S. competitors, and that this gives us a cost advantage as
we compete for business. We have also developed a sophisticated management
information system that enables us to effectively track revenue and manage cash
on a daily basis and generate a wide variety of internal reports, as well as
customized reports requested by our clients.
Implement incentive compensation program. We have adopted a
performance-based compensation system for city managers, vice presidents and
others based on the profitability of each individual's area of responsibility.
We believe this program will enhance the entrepreneurship of our
management-level employees by tying their compensation directly to improvements
in the profitability of the operations they manage and will encourage them to
improve operations and control costs.
Provide profitable patrol, enforcement and ticketing services. We seek to
increase the profitability of our overall operations by providing parking lot
patrol, enforcement and ticketing services, both at our own facilities and at
facilities operated by others. We believe there are significant opportunities to
market these services to facilities not operated by us, especially those owned
by municipalities or by suburban retail centers, who wish to discourage all-day
parkers by enforcing parking regulations favoring short-term parkers.
Maintain strict cash control. Strict cash control is critical to our
success and that of our clients. Our cash control procedures are based on a
ticketing system supervised by high level managers and include on-site spot
checks, multiple daily cash deposits, local audit functions, managerial
oversight and review, and internal audit procedures. It is our policy that
tickets and gate counts are reconciled daily against cash collected. We believe
our cash control procedures are effective in minimizing the loss of revenues at
parking facilities.
37
<PAGE> 42
PARKING FACILITIES AND SURFACE LOTS
The following table summarizes certain information regarding our parking
facilities and surface lots as of September 30, 1999.
<TABLE>
<CAPTION>
LEASED MANAGED OWNED TOTAL
------------- -------------- ------------- ---------------
LOCATION LOTS SPACES LOTS SPACES LOTS SPACES LOTS SPACES
- -------- ---- ------ ---- ------- ---- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CANADA
BRITISH COLUMBIA
Vancouver.................... 214 21,017 355 86,347 -- -- 569 107,364
Other........................ 27 1,686 17 3,327 -- -- 44 5,013
--- ------ --- ------- --- ----- ----- -------
Total...................... 241 22,703 372 89,674 -- -- 613 112,377
ALBERTA
Edmonton..................... 99 7,485 39 5,891 2 623 140 13,999
Calgary...................... 104 12,970 9 4,384 3 345 116 17,699
Banff........................ 2 83 6 612 -- -- 8 695
--- ------ --- ------- --- ----- ----- -------
Total...................... 205 20,538 54 10,887 5 968 264 32,393
SASKATCHEWAN
Saskatoon.................... 49 3,272 7 1,450 -- -- 56 4,722
Regina....................... 48 2,536 8 1,725 1 20 57 4,281
--- ------ --- ------- --- ----- ----- -------
Total...................... 97 5,808 15 3,175 1 20 113 9,003
MANITOBA
Winnipeg..................... 73 4,598 69 15,284 9(1) 682 151 20,564
ONTARIO
Toronto...................... 33 5,668 76 32,441 1 50 110 38,159
Hamilton..................... 4 595 11 3,909 -- -- 15 4,504
London....................... 4 779 9 2,192 -- -- 13 2,971
Ottawa....................... 2 144 9 5,348 -- -- 11 5,492
Windsor...................... 1 63 6 409 -- -- 7 472
Sudbury...................... 2 570 3 875 -- -- 5 1,445
--- ------ --- ------- --- ----- ----- -------
Total...................... 46 7,819 114 45,174 1 50 161 53,043
QUEBEC/OTHER
Montreal..................... 4 201 15 3,457 -- -- 19 3,658
Halifax...................... 3 64 6 923 -- -- 9 987
St. John's................... 2 246 4 621 -- -- 6 867
--- ------ --- ------- --- ----- ----- -------
Total...................... 9 511 25 5,001 -- -- 34 5,512
TOTAL CANADA................. 671 61,977 649 169,195 16 1,720 1,336 232,892
UNITED STATES
Minneapolis.................. 26 3,073 23 6,387 -- -- 49 9,460
Milwaukee.................... 13 2,323 1 50 -- -- 14 2,373
Buffalo...................... 6 1,552 2 774 -- -- 8 2,326
Seattle...................... -- -- 5 1,520 -- -- 5 1,520
Cincinnati................... -- -- 1 1,605 -- -- 1 1,605
--- ------ --- ------- --- ----- ----- -------
TOTAL UNITED STATES.......... 45 6,948 32 10,336 -- -- 77 17,284
TOTAL........................ 716 68,925 681 179,531 16 1,720 1,413 250,176
=== ====== === ======= === ===== ===== =======
</TABLE>
- ---------------
(1) Represents nine parking facilities located on seven properties acquired from
First Union.
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<PAGE> 43
OPERATING ARRANGEMENTS
We operate parking facilities under three general types of arrangements:
leases, management contracts, and fee ownership. As of September 30, 1999, we
leased 716 parking facilities, operated 681 parking facilities through
management contracts and owned 16 parking facilities.
The general terms and benefits of these types of arrangements are described
below:
Leases. Under a lease arrangement, the parking facility operator generally
pays either a fixed annual rent, a percentage of gross customer collections, or
a combination thereof to the property owner. The parking facility operator
collects all revenues and is responsible for most operating expenses, but is
typically not responsible for major maintenance. In contrast to the management
contracts, lease arrangements are typically for terms of three to ten years and
typically contain a renewal term, and provide for a fixed payment to the
facility owner regardless of the operating earnings of the parking facility. As
a result, the leased facilities generally require a longer commitment and a
larger capital investment by the parking facility operator than do managed
facilities, but generally provide a greater opportunity for long-term revenue
growth.
Management Contracts. Under a management contract, the facility manager
generally receives a base monthly fee for managing the facilities and often
receives an incentive fee based on the achievement of facility revenues above a
base amount. Facility managers generally charge fees for various ancillary
services such as accounting, equipment leasing and consulting. Responsibilities
under a management contract include hiring, training and staffing parking
personnel, and providing collections, accounting, record-keeping, insurance and
facility marketing services. In general, the facility manager is not responsible
for providing security or guard services. Under typical management contracts,
the facility owner is responsible for operating expenses such as taxes, license
and permit fees, insurance premiums, payroll and accounts receivable processing
and wages of personnel assigned to the facility. In addition, the facility owner
is responsible for non-routine maintenance, repair costs and capital
improvements. The typical management contract is for a term of one to three
years (though the owner often reserves the right to terminate, without cause, on
30 days' notice) and may contain a renewal clause.
Fee ownership. Under fee ownership arrangements, the parking facility
operator owns the property and fixtures. Ownership of parking facilities
typically requires a larger capital investment than managed or leased facilities
but provides maximum control over the operation of the parking facility, and all
increases in revenue flow directly to the owner. Ownership provides the
potential for realizing capital gains from the appreciation in the value of the
underlying real estate, but it also subjects the property owner to risks
including reduction in value of the property and additional potential
liabilities, as well as additional costs such as real estate taxes and
structural, mechanical or electrical maintenance or repairs.
ENFORCEMENT AND COLLECTIONS
Many of our parking lots are operated with parking meters and without
parking lot attendants. We enforce user payment at these lots by having
patrollers circulate regularly through lots to identify delinquent parkers and
issue violation notices. We use innovative technology which enables our
patrollers to monitor and identify first-time and repeat offenders using
hand-held computers. The hand-held computers are updated daily to mainframe
computers that track violation history. This equipment generates violation
notices for first-time offenders. Payments on account of these violation notices
are collected by our collections operation and all of the proceeds become our
revenues. Therefore, we have a direct incentive to issue ticket and collect
violation notice payments from parking violators.
We facilitate information collection by using current technology including
bar scanning systems. We have successfully marketed our ticketing collections
business to municipalities, which have traditionally used less efficient manual
systems. Parking lot supervisors travel to each lot on a regular basis to
collect cash from both parking meters and lot attendants in order to keep cash
balances low and reduce the potential for shrinkage.
39
<PAGE> 44
MANAGEMENT INFORMATION SYSTEMS
We have made a significant commitment to technology over the last several
years to provide our employees the tools to perform efficiently in today's
competitive environment, to provide our landlords the information they expect
from a parking operator and to provide management the reporting necessary to
manage the business.
The following is a brief list of key features of our information system:
- Monthly Parking System -- a sophisticated system developed in-house to
manage our more than 100,000 active monthly parkers;
- Attendant System - a control system developed in-house to assist in
balancing, recording, reporting and auditing attendant transactions;
- Parking Meter System -- a control option developed in-house to assist in
balancing, recording, reporting and auditing parking meter transactions
at "unattended" locations;
- Vehicle Violation System -- a system developed in-house to manage the
approximately 700,000 violation notices issued per year; and
- Financial Reporting System -- an in-house developed general ledger,
accounts payable and landlord reporting system to report to our
management and landlords. This is a new system completed in Spring of
1999.
Our information system runs on a Unisys mainframe computer which connects
to all of our major branch offices. The computer system is scalable and, as the
applications have only recently been developed, a continued moderate annual
investment in technology and continued development enhancement should be able to
meet our business objectives for the next few years.
COMPETITION
The parking industry is fragmented and highly competitive, with few
barriers to entry. We compete regularly with a wide variety of parking service
providers to retain our operations and to expand our operations in existing and
new markets. Our largest competitors in North America are Central Parking
Corporation, Apcoa/Standard Parking, Inc. and Ampco System Parking. Each of
these companies operates more parking facilities and lots in the United States
than we do presently, while we operate more parking facilities and lots in
Canada than any of them. In addition, we compete with many regional or local
parking service providers, as well as municipalities and other governmental
entities, property owners and others.
We compete for clients based on rates charged for service, ability to
generate revenues and control expenses for clients, range and quality of
services and ability to expand operations.
REGULATION
Our business is not substantially affected by direct governmental
regulation, however, several provincial, state and local laws have been passed
in recent years that encourage car pooling and the use of mass transit,
including, for example, laws prohibiting employers from reimbursing employee
parking expenses. Laws and regulations that reduce the number of cars and
vehicles being driven could hurt our business. We are also affected by laws and
regulations (such as zoning ordinances and business taxes) that are common to
any business that owns or leases real estate and by regulations (such as labor
and tax laws) that affect companies with a large number of employees.
Under various federal, provincial, state, and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may be liable for the costs of removal or remediation of hazardous or
toxic substances on, under or in such property. Such laws typically impose
liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of such hazardous or toxic substances. In
connection with ownership or operation of parking facilities, we
40
<PAGE> 45
may be potentially liable for such costs. Although we are currently not aware of
any material environmental claims pending or threatened against us or any of our
owned or operated parking facilities, there can be no assurance that a material
environmental claim will not be asserted against us or against our owned or
operated parking facilities. The cost of defending against claims of liability,
or of remediating a contaminated property, could have a material adverse effect
on our financial condition or results of operations.
Various other governmental regulations affect our operation of parking
facilities, both directly and indirectly. In the United States, these include
the Americans with Disabilities Act, or ADA. Under the ADA, all public
accommodations in the United States, including parking facilities, are required
to meet certain federal requirements related to access and use by disabled
persons. For example, the ADA requires parking facilities to include handicapped
spaces, headroom for wheelchair vans, attendants' booths that accommodate
wheelchairs, and elevators that are operable by disabled persons. We believe
that the parking facilities we own and operate are in substantial compliance
with these requirements.
EMPLOYEES
As of September 30, 1999, we employed approximately 1,940 individuals,
including approximately 1,300 full-time and 640 part-time employees. We believe
that our employee relations are good. Approximately 47% of our Canadian
employees (some 816 employees) are represented by unions, including the
Construction and Specialized Workers' Union Local 1611 (British Columbia),
Christian Labour Association of Canada Local 501 (British Columbia), Service
Employees International Union (Regina), Saskatchewan Joint Board, Retail,
Wholesale & Department Store Union Local 558 (Saskatoon), Canada Labour Congress
(Winnipeg), Steelworkers (Sudbury), Teamsters (Ottawa), SEIU, UFCW (Toronto),
SEIU (London), Le Syndicat des employes, Union des employes de service
(Montreal).
LITIGATION
The provision of services to the public entails an inherent risk of
liability. We are engaged from time to time in routine litigation incidental to
our business. Other than a case involving Eau Claire Market in Calgary, Alberta
described below, there is no legal proceeding to which we are a party which, if
decided adversely could materially harm our financial condition. We attempt to
disclaim liability for personal injury and property damage claims by printing
disclaimers on our ticket stubs and by placing warning signs in the facilities
we operate. We also carry liability insurance that we believe meets or exceeds
industry standards. We can provide no assurance, however, that any future legal
proceedings (including any related judgments, settlements or costs) will not
have a material adverse effect on our financial condition, liquidity or results
of operations.
The Eau Claire Market litigation involves a claim by the new owner of a
property which we lease. The new owner asserts that it did not receive full
disclosure of the terms of our lease and, therefore, that we are required to pay
higher rent for the property. We believe that this claim is without merit. If,
however, we do not prevail in the litigation, the amount which we might be
required to pay to the owner could be material.
Imperial Parking Limited, which will be a subsidiary of Impark after the
distribution, is a defendant in a lawsuit brought by Newcourt Financial Ltd. as
the assignee of Oracle Corporation Canada Inc. The suit alleges that Imperial
Parking and FUMI owe approximately $825,000 under a software license and
services agreement. We believe that these claims are without merit, however the
legal action is in its earliest stages. FUMI has agreed to indemnify Impark in
full with respect to this claim.
41
<PAGE> 46
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors, and their ages as of December 31,
1999, are as set forth below. Each of the individuals who is to serve as a
director will begin that service immediately prior to the Distribution.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- ---- --------
<S> <C> <C>
Charles E. Huntzinger................ 52 President and Chief Executive Officer, Director
J. Bruce Newsome..................... 49 Senior Vice President, Chief Financial Officer
Bryan L. Wallner..................... 40 Senior Vice President, Operations
David Schonberger.................... 44 Vice President
William A. Ackman(1)................. 33 Chairman, Director
Daniel P. Friedman................... 42 Vice Chairman, Director
Talton R. Embry(2)................... 53 Director
Armand E. Lasky(2)................... 52 Director
William A. Scully.................... 37 Director
Beth A. Stewart...................... 43 Director
Mary Ann Tighe(1).................... 51 Director
David J. Woods(2).................... 50 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
CHARLES E. HUNTZINGER has served as president and chief executive officer
since joining Imperial Parking in January 1999. From 1993 until December 1998,
Mr. Huntzinger was associated with Central Parking Corporation where he was
vice-president for the Midwest Region and, later, for the New York Region. From
1992 until 1993 Mr. Huntzinger was vice president of Spectacore, a stadium
management company and owner of the Philadelphia Flyers; he was in charge of
parking operations. Mr. Huntzinger was the chief operating officer for Parkway
Corporation from 1978 until 1992, where he was in charge of parking operations
nationwide.
J. BRUCE NEWSOME has served as senior vice president and chief financial
officer of Impark since 1989. From 1986 to 1989, Mr. Newsome served as vice
president for finance and controller. Prior to 1989, Mr. Newsome served as
Impark's controller. He has been involved in several acquisitions in the last 16
years and is responsible for ensuring that financial, accounting, MIS and
treasury systems will accommodate expansion plans. Before joining Imperial
Parking, Mr. Newsome was a senior manager at the accounting firm of KPMG.
BRYAN L. WALLNER became senior vice president of Imperial Parking in March
1999. Prior to joining Impark, Mr. Wallner was a regional manager for Central
Parking Corporation ("Central Parking"). He guided Central Parking's growth in
the Midwest, opening offices in four new cities. He has expertise in
stadium/arena, mixed use, retail, office as well as valet, shuttle, and patrol
contracts. Mr. Wallner began his career in the parking industry in 1987 with
Central Parking Corporation in St. Louis, Missouri.
DAVID SCHONBERGER will become a vice president of Impark upon the
Distribution. He has been executive vice president of First Union since November
1998, where he is primarily responsible for retail, office and residential
projects. From November 1997 to November 1998, he was senior vice president of
Enterprise Asset Management Inc. At Enterprise, he was responsible for retail
and raw land development projects. Since January 1990, Mr. Schonberger has been
director of Legacy Construction Corporation, a privately held leasing and
project management company specializing in institutional property management and
oversight of specialty construction and development projects. In February 1996,
Legacy Construction Corporation merged with Peter Elliot Corporation to form
Peter Elliot LLC. From February 1996 to October 1997, Mr. Schonberger served as
treasurer and manager of Peter Elliot LLC.
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<PAGE> 47
DANIEL P. FRIEDMAN will become vice chairman of the Impark board of
directors upon the Distribution. He has served as president, chief executive
officer and a trustee of First Union since November 1998. He was president and
chief operating officer of Enterprise Asset Management, Inc. from June 1996 to
November 1998 and was executive vice president and chief operating officer of
Enterprise from February 1992 to June 1996. At Enterprise, he was responsible
for asset management and new business development. From September 1994 to
November 1998, Mr. Friedman was a manager of all the Cheshire Limited Liability
Companies ("Cheshire"). Cheshire acquires and restructures non-performing
underlying residential co-op mortgage loans and unsold co-op apartments. From
May 1993 to December 1997, Mr. Friedman was a board member of Emax Advisors,
Inc. From May 1993 to December 1996, he was a board member of Emax Securities,
Inc., a NASD broker/dealer.
WILLIAM A. ACKMAN will become chairman of the Impark board of directors
upon the Distribution. He has been chairman of the board of trustees of First
Union since June 1998. Since January 1, 1993, through a company he owns, Mr.
Ackman has acted as co-investment manager of three investment funds: Gotham
L.P., Gotham III L.P. and Gotham International Advisors, L.L.C.
TALTON R. EMBRY has been the chairman of Magten Asset Management Corp.
("Magten") since 1998, where he is the chief investment officer for Magten's
clients. He has been with Magten since 1978. Mr. Embry is also a director of
Anacomp, Inc., Salant Corporation and BDK Holdings, Inc.
ARMAND E. LASKY has been the president of Empire State Collateral
Corporation Real Estate ("Empire State") since 1983, where he oversees the
acquisition of parking properties and related commercial real estate.
WILLIAM A. SCULLY has been vice chairman of the board of trustees of First
Union since November 1998. Mr. Scully has been a partner of Apollo since 1996
and is responsible for new investments and investment management. From 1994 to
1996, Mr. Scully was a senior vice president of O'Connor Capital, Inc., the
general partner of The Argo Funds, and the director of acquisitions for The Argo
Funds. From 1993 to 1994, Mr. Scully directed private investment activities for
entities related to Clark Construction and The Carlyle Group, primarily in land
development projects in suburban Washington, D.C.
BETH A. STEWART has been president of Stewart Real Estate Capital since
1993, where she has been involved with numerous equity investments in private
and public securities with partners and properties throughout the United States.
Ms. Stewart worked for Goldman, Sachs & Co. from 1980 to 1992 where she was vice
president of the Real Estate Department from 1986 until 1992. Ms. Stewart is a
director of General Growth Properties, Inc.
MARY ANN TIGHE has been vice chairman of Insignia/ESG, a commercial real
estate firm, since January 1999. From 1993 until January 1999 she was an
executive managing director and from June 1992 until March 1993 was senior
managing director. She has also chaired the Executive and Strategic Planning
Committees of Insignia since November 1998. Ms. Tighe is a trustee of First
Union.
DAVID J. WOODS has been president of Pattison Outdoor Group, an outdoor
advertising firm since May 1997. From January 1997 to April 1997, Mr. Woods was
vice president for finance at Interactive Media Inc. From September 1995 until
December 1996 he was senior vice president for finance at Gannett Inc. From
January 1995 until August 1995 Mr. Woods was executive vice president at
Mediacom Inc.
Following the Distribution, the Impark board of directors will be divided
into three classes, each of whose members will serve for a staggered three-year
term. The Board will consist of two Class I directors (Mr. Lasky and Ms. Tighe),
three Class II directors (Messrs. Embry, Huntzinger and Woods) and three Class
III directors (Messrs. Ackman and Friedman and Ms. Stewart). At each annual
meeting of stockholders, a class of directors will be elected for a three-year
term to succeed the directors of the same class whose terms are then expiring.
The terms of the Class I directors, Class II directors and Class III directors
expire upon the election and qualification of successor directors at the annual
meeting of stockholders held during the calendar years 2000, 2001 and 2002,
respectively.
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<PAGE> 48
Each executive officer serves at the discretion of the board of directors
and holds office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. There are no family relationships
among any of our directors or executive officers.
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors has an executive committee, composed of Messrs.
Ackman, Friedman and Huntzinger and Ms. Stewart, which oversees all aspects of
the management of the business of Impark. In addition, the board of directors
has a compensation committee, composed of Mr. Ackman and Ms. Tighe, which makes
recommendations concerning salaries and incentive compensation for our employees
and consultants and administers and grants stock options pursuant to our stock
option plans. The board of directors also has an audit committee, composed of
Messrs. Embry, Woods and Lasky, which reviews the financial statements of Impark
that will be issued to its shareholders, the results and scope of the annual
audit and other services provided by our independent public accountants and
reviews matters that arise from time to time related to our internal accounting
controls.
DIRECTOR COMPENSATION
The directors of Impark will receive the following compensation:
- $1,500 for each board meeting attended;
- $500 for each board meeting participated in by telephone or committee
meeting; and
- an annual grant of $20,000 worth of Impark common stock, valued at the
time of the grant, but vesting one year after the grant.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1999 for Impark's chief executive officer and for
the two other executive officers whose salary and bonus totaled at least
$100,000 for 1999.
In accordance with the rules of the Securities and Exchange Commission the
compensation set forth in the table below does not include medical, group life
and other benefits which are available to all of our salaried employees, or
perquisites or other benefits, securities or property which do not exceed the
lesser of $50,000 or 10% of the person's salary and bonus shown in the table. In
the table below, columns required by the regulations of the Securities Exchange
Commission have been omitted where no information was required to be disclosed
under these columns.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------
NAME AND PRINCIPAL POSITION SALARY BONUS ALL OTHER
- --------------------------- -------- ------- ---------
<S> <C> <C> <C>
Charles E. Huntzinger
President and Chief Executive Officer(1)(2)................. $500,000 $29,100 $10,000
Bryan L. Wallner
Senior Vice President(3)(4)(5)............................ $205,500 $20,000 $ 4,150
J. Bruce Newsome
Senior Vice President and Chief Financial Officer(6)...... $136,900 $15,400 --
</TABLE>
- ---------------
(1) Paul Clough resigned as President and Chief Executive Officer on January 4,
1999 and Mr. Huntzinger was appointed to those offices effective January 4,
1999.
(2) The amount listed for Mr. Huntzinger's bonus was a payment to compensate him
for various costs associated with his relocation.
44
<PAGE> 49
(3) Mr. Wallner's salary is prorated to reflect the fact that he started in
February 1999. His annual salary is at a rate of $237,500.
(4) The amount listed for Mr. Wallner's bonus was a signing bonus paid upon his
joining Impark.
(5) Mr. Wallner's other compensation consists of use of a car that Impark rents
for him.
(6) Mr. Newsome's salary and bonus are paid in Canadian dollars. The figures in
this table were converted to Canadian dollars, based on a conversion rate of
1.45 Canadian dollars to one US dollar on January 7, 2000, as published in
the Federal Reserve Statistical Release, January 10, 2000.
STOCK PLANS
A total of 315,000 shares of Impark common stock have been reserved for
issuance in the aggregate under our stock plan described below.
2000 Stock Incentive Plan. Under our 2000 Stock Incentive Plan, a variety of
awards, including incentive stock options intended to qualify under Section 422
of the Internal Revenue Code, nonstatutory stock options, stock appreciation
rights, restricted and unrestricted stock awards and other stock-based awards,
may be granted to our officers, employees, directors, consultants and advisors
and officers, employees, directors, consultants and advisors our subsidiaries.
The board of directors has authorized the compensation committee to administer
the Stock Incentive Plan. While we currently anticipate that most grants under
the Stock Incentive Plan will consist of stock options, we may also grant stock
appreciation rights, which represent the right to receive any excess in value of
the shares of common stock over the exercise price; restricted stock awards,
which entitle recipients to acquire shares of Impark common stock, subject to
our right to repurchase all or part of such shares at their purchase price in
the event that the conditions specified in the award are not satisfied; or
unrestricted stock awards, which represent grants of shares to participants free
of any restrictions under the Stock Incentive Plan. Options or other awards that
are granted under the Stock Incentive Plan but expire unexercised are available
for future grants. As of December 31, 1999, we had no options to purchase common
stock or other awards under the Stock Incentive Plan, but we expect to grant
options to purchase shares of Impark common stock in the near future.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer has served as a director of or member of the
compensation committee (or other committee serving an equivalent function) of
any other entity, any of whose executive officers serve as a director of or
member of the compensation committee of the board of directors.
EMPLOYMENT AGREEMENTS
Mr. Huntzinger's five-year employment agreement, effective January 1999,
provides for a base salary of $500,000 for the first year. It provides for a
base salary in the second year of $425,000 plus an adjustment based on the
Consumer Price Index with respect to Vancouver, British Columbia.
In the event that Mr. Huntzinger resigns because Impark is not complying
with the terms of the agreement, he will be eligible for a lump sum cash payment
equal to two times the sum of his then base salary plus his prior year's bonus.
The sum is guaranteed to be not less than $500,000.
Mr. Wallner's five-year employment agreement, effective March 1999,
provides for a base salary of $237,500 per year. The agreement also provides
that Mr. Wallner is eligible to earn a bonus of 1.75% the increase of Impark's
EBITDA over its EBITDA for 1998.
Mr. Newsome's four-year employment agreement, effective January 1998,
provides for a base salary of $136,900 in the first year. The base salary is
subject to annual adjustment by the Compensation Committee and for changes based
on the Consumer Price Index with respect to Vancouver, British Columbia. The
agreement also provides for a bonus to be determined by the Compensation
Committee annually.
45
<PAGE> 50
In the event that Impark chooses not to renew Mr. Newsome's contract, he
will be entitled to a lump sum payment equal to his total salary for the
preceding 24 month period.
Mr. Schonberger's employment arrangements with Impark provide for him to
serve on an at-will basis at a salary of $112,500 per year. Mr. Schonberger is
not obligated to work for Impark on a full-time basis and Mr. Schonberger will
continue in his current duties at First Union.
Mr. Friedman's employment arrangements with Impark provide for him to serve
on an at-will basis at a salary of $82,500 per year. Mr. Friedman's employment
agreement does not require Mr. Friedman to work for Impark on a full-time basis,
and Mr. Friedman will continue in his current duties at First Union while
working for Impark.
In addition to the employment arrangements with Messrs. Huntzinger,
Wallner, Friedman and Schonberger described above, Impark has agreed to grant
each of those individuals options to purchase its common stock as follows:
<TABLE>
<S> <C>
Charles E. Huntzinger..................................... 94,500 shares
Bryan L. Wallner.......................................... 21,000 shares
David Schonberger......................................... 25,600 shares
Daniel P. Friedman........................................ 51,450 shares
</TABLE>
We expect to grant these options only after a trading market for the
Impark's common stock has been established, in order to permit us to determine
the exercise price of the options based on the fair market value of the shares
of common stock. We will determine the fair market value as the average of the
closing prices for Impark's common stock on the first 45 trading days following
the Distribution. The options will vest or become exercisable over a four-year
period. In addition, the options will provide for their exercise price to
increase at a rate of 10% per year.
Messrs. Huntzinger and Wallner also have an agreement with Impark to permit
them to maintain their level of ownership of Impark if Impark sells additional
shares of stock. Under the terms of this arrangement, Impark will grant
additional options to Messrs. Huntzinger and Wallner each time Impark sells
shares of its capital stock for cash until Impark has sold a total of $30
million worth of stock. The additional options will be sufficient to maintain
the percentage of Impark's outstanding shares and options represented by each
individual's options prior to the sale of stock. The new options will have an
exercise price equal to the fair market value of Impark's common stock when
granted and will have the same vesting schedule as each individual's existing
options.
Messrs. Friedman and Schonberger are expected to have an arrangement
similar to that of Messrs. Huntzinger and Wallner, except that their arrangement
is expected to require that they purchase some significant part of the shares
necessary to maintain their percentages.
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<PAGE> 51
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, with respect to each member of the board of
directors, the executive officers, and all directors and executive officers as a
group, information relating to their anticipated beneficial ownership of Impark
shares as of the date of the Distribution.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT
- ------------------------ ----------------------- -------
<S> <C> <C>
DIRECTORS
Charles E. Huntzinger (also an executive officer)......... 35 *
William A. Ackman(2)...................................... 292,061 13.91%
Daniel P. Friedman(3)..................................... 19,937 *
Talton R. Embry(4)........................................ 307,564 14.65%
Armand E. Lasky........................................... 50 *
William A. Scully(5)...................................... 0 0
Beth A. Stewart........................................... 225 *
Mary Ann Tighe(6)......................................... 375 *
David J. Woods............................................ 0 0
EXECUTIVE OFFICERS
J. Bruce Newsome.......................................... 0 0
Bryan L. Wallner.......................................... 0 0
David Schonberger(7)...................................... 25,812 1.23%
All directors and executive officers (11 in number) as a
group..................................................... 646,059 30.76%
</TABLE>
- ---------------
* Beneficial ownership does not exceed 1%.
(1) Pursuant to Rule 13d-3 of the Exchange Act, a person is deemed to be a
beneficial owner if he has or shares voting power or investment authority in
respect of such security or has the right to acquire beneficial ownership
within 60 days. The amounts shown in the above table do not purport to
represent beneficial ownership except as determined in accordance with this
Rule. Each director and executive officer has sole voting and investment
power with respect to the amounts shown or shared voting and investment
powers with his or her spouse, except as indicated below.
(2) Mr. Ackman is the president of Karenina Corporation, a general partner of
Section H Partners, LP. Section H is the sole general partner of Gotham LP
and Gotham Partners III, LP. Accordingly, Mr. Ackman, Karenina Corporation
and Section H may be deemed beneficial owners of shares owned by Gotham LP
and Gotham III LP. Gotham International Advisors, LLC, a Delaware limited
liability company, has the power to vote and dispose of the shares held for
the account of Gotham Partners International, Ltd., a Cayman exempted
company, and accordingly, may be deemed the beneficial owner of such shares.
Mr. Ackman is a senior managing member of Gotham International Advisers and
may be deemed a beneficial owner of shares owned by Gotham Partners
International. For purposes of this table, all of such ownership is
included.
(3) Includes 18,187 shares that Mr. Friedman has a right to acquire through the
exercise of First Union options within 60 days after December 31, 1999.
(4) Mr. Embry is the chairman of Magten Asset Management Corp. and, accordingly,
may be deemed a beneficial owner of shares owned by Magten. For purposes of
this table, all such ownership is included. Mr. Embry disclaims beneficial
ownership of 222,638 shares owned by clients of Magten, 62,006 shares owned
by Magten's pension and profit sharing plans of which Mr. Embry is a
trustee, 2,275 shares owned by his wife and 5,425 shares owned by his
children. Mr. Embry shares investment and/or voting power with respect to
the shares held by Magten clients.
(5) Mr. Scully is a limited partner of Apollo LP. As a limited partner, he has
no right to vote or dispose of any Shares held by Apollo LP, and therefore
does not beneficially own any Shares held by Apollo LP.
47
<PAGE> 52
(6) Ms. Tighe is a limited partner of Gotham L.P. As a limited partner of Gotham
L.P., she has no right to vote or dispose of any shares held by Gotham L.P.,
and therefore does not beneficially own any Shares held by Gotham L.P.
(7) Includes 25,812 shares that Mr. Schonberger has a right to acquire through
the exercise of First Union options within 60 days after December 31, 1999.
The following table sets forth, according to publicly available information
on file with the Commission as of the dates indicated in the accompanying
footnotes, except as otherwise indicated, information concerning each person
known by Impark to be the beneficial owner of more than 5% of First Union shares
and, therefore, who would own a similar percentage of Impark shares after the
Distribution.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT
- ------------------------ ----------------------- -------
<S> <C> <C>
Gotham Partners, L.P.(2).................................... 292,061 13.91%
Gotham International Advisors, L.L.C.
Gotham Partners III, L.P.
110 East 42nd Street
New York, NY 10017
Apollo Real Estate Investment Fund II, L.P.(3).............. 149,518 7.12%
c/o Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas
New York, NY 10019
Magten Asset Management Corp. (4)........................... 285,326 13.59%
35 East 21st Street
New York, NY 10010
Snyder Capital Management, L.P. (5)......................... 207,445 9.88%
350 California Street
Suite 1460
San Francisco, CA 94104
</TABLE>
- ---------------
(1) Pursuant to Rule 13d-3 of the Exchange Act, a person is deemed to be a
beneficial owner if he has or shares voting power or investment authority in
respect of such security or has the right to acquire beneficial ownership
within 60 days. The amounts shown in the above table do not purport to
represent beneficial ownership except as determined in accordance with this
Rule.
(2) The information regarding this holder was received by Impark from a Schedule
14A filed with the Commission on October 14, 1999. Gotham L.P. has sole
voting and investment power with respect to 216,556 shares, Gotham
International Advisers has shared voting and investment power with respect
to 71,583 shares and Gotham III L.P. has sole voting and investment power
with respect to 3,922 shares.
(3) The information regarding this holder was received by Impark from a Schedule
14A filed with the Commission on October 14, 1999. This holder has shared
voting and investment power with respect to all of its shares.
(4) The information regarding this holder is as of December 31, 1999, and was
obtained from Magten Asset Management Corporation. This holder has sole
voting and investment power with respect to 62,006 shares, shared voting and
investment power with respect to 117,793 shares, and shared investment power
with respect to 104,845 shares.
(5) The information regarding this holder was received by Impark from a Schedule
14A filed with the Commission on October 14, 1999. This holder has shared
voting and investment power with respect to 168,467 shares and shared
investment and no voting power with respect to 38,978 shares.
48
<PAGE> 53
CERTAIN TRANSACTIONS
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with all of our executive
officers. We have also agreed to grant options to our executive officers. See
"Management -- Employment Agreements."
AFFILIATE TRANSACTION POLICY
We have adopted a policy providing that all material transactions between
us and our officers, directors and other affiliates must be:
- Approved by a majority of the members of our board of directors and by a
majority of the disinterested members of our board of directors; and
- On terms no less favorable to us than could be obtained from
unaffiliated third parties.
CONSULTING RELATIONSHIP WITH MS. BETH A. STEWART
Ms. Stewart worked for First Union under a consulting agreement dated
February 1999. Through December 31, 1999, her fees under this agreement were
$157,500 plus out of pocket expenses.
AGREEMENT WITH PATTISON OUTDOOR GROUP
Pattison Outdoor is the largest outdoor advertising company in Canada with
billboards in all the major markets in the country. David Woods, who will become
director of Impark immediately prior to the Distribution, is the president of
Pattison Outdoor. Pursuant to a competitive bidding process, Pattison Outdoor
entered into a 10-year exclusive agreement with Impark to place a substantial
number of billboards (approximately 265 advertising faces) of various design on
Impark-operated parking lots throughout Canada. The agreement between Imperial
Parking and Pattison Outdoor runs from July 1, 1999 to June 30, 2009. Pattison
Outdoor pays Impark a fee for the right to place billboards on these parking
lots and in year one these payments will be approximately $615,000 escalating to
$845,000 in year 10. Prior to July 1, 1999, the companies had entered into
similar agreements but covering only one to two years.
49
<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Impark consists of 10,000,000 shares of
common stock, $.01 par value per share, and 2,000,000 shares of preferred stock,
$.01 par value per share. Immediately following the Distribution, there will be
approximately 2,100,000 shares of common stock outstanding held by approximately
9,000 stockholders.
The following summary of certain provisions of Impark common stock,
preferred stock, certificate of incorporation and by-laws is not intended to be
complete and is qualified by reference to the provisions of applicable law and
to our certificate of incorporation, by-laws and other agreements included as
exhibits to the registration statement of which this document is a part. See
"Additional Information."
COMMON STOCK
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Holders of common stock are entitled to receive ratably such dividends,
if any, as may be declared by the board of directors out of funds legally
available therefor, subject to any preferential dividend rights of outstanding
preferred stock. Upon the dissolution or liquidation of Impark, subject to the
prior rights of any outstanding preferred stock, the holders of common stock are
entitled to receive ratably the net assets of Impark available after the payment
of all debts and other liabilities. Holders of common stock have no preemptive,
subscription or redemption rights. The outstanding shares of common stock
distributed in the Distribution are fully paid and nonassessable. The rights,
preferences and privileges of holders of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
preferred stock which our board of directors may designate and issue in the
future.
At present, there is no established trading market for Impark Common Stock.
We have applied to list the common stock on the American Stock Exchange under
the symbol "IPK."
PREFERRED STOCK
Under the terms of our certificate of incorporation, the board of directors
is authorized, subject to any limitations prescribed by law, without stockholder
approval, to issue up to 2,000,000 shares of preferred stock in one or more
series. Each such series of preferred stock would have such rights, preferences,
privileges and restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as may be
determined by the board of directors.
The purpose of authorizing the board of directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of our outstanding voting stock. We have no present plans to issue any
shares of preferred stock.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Impark is subject to the provisions of Section 203 of the Delaware General
Corporation Law statute. Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, assets sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
Our certificate of incorporation provides for the division of the board of
directors into three classes as nearly equal in size as possible with staggered
three-year terms. See "Management." In addition, our
50
<PAGE> 55
certificate of incorporation provides that directors may be removed only for
cause by the affirmative vote of the holders of more than 50% of the shares of
capital stock entitled to vote. Under our certificate of incorporation, any
vacancy on the board of directors, including a vacancy resulting from an
enlargement of the board of directors, may only be filled by vote of a majority
of the directors then in office. The classification of the board of directors
and the limitation on the method of filling vacancies could make it more
difficult for a third party to acquire, or discourage a third party from
acquiring, control of Impark.
Our certificate of incorporation also provides that any action required or
permitted to be taken by the stockholders at an annual meeting or special
meeting of stockholders may only be taken if it is properly brought before such
meeting, and may not be taken by written action in lieu of a meeting. Our
certificate of incorporation further provides that special meetings of the
stockholders may only be called by our chairman of the board, our president or
our board of directors. In order for any matter to be considered "properly
brought" before a meeting, a stockholder must comply with advance notice and
information disclosure requirements. The stockholder must deliver written notice
of the matter to the secretary of Impark, to be received not less than 60 days
nor more than 90 days prior to the meeting. However, if less than 70 days'
notice or prior public disclosure of the date of the meeting is given to
stockholders, the notice would have to be received by the secretary not later
than the close of business on the 10th day following the date on which the
notice of the meeting was mailed or such public disclosure was made, whichever
occurs first. If the matter relates to the election of directors, the notice
must set forth specific information regarding each nominee and the nominating
shareholder. For any other matter, the notice must set forth a brief description
of the business desired to be brought and the reasons for conducting business at
the annual meeting and certain information regarding the proponent stockholder.
These provisions could have the effect of delaying until the next stockholders
meeting stockholder actions that are favored by the holders of a majority of our
outstanding voting securities. These provisions could also discourage a third
party from making a tender offer for the common stock, because even if it
acquired a majority of our outstanding voting securities, the third party would
be able to take action as a stockholder (such as electing new directors or
approving a merger) only at a duly called stockholders' meeting, and not by
written consent.
Delaware corporate law provides generally that the affirmative vote of a
majority of the shares entitled to vote on any mater is required to amend a
corporation's certificate of incorporation or by-laws, unless a corporation's
certificate of incorporation or by-laws, as the case may be, requires a greater
percentage. Our certificate of incorporation and by-laws require the affirmative
vote of holders of more than 50% of the votes which all the stockholders would
be entitled to cast in any annual election of directors or class of directors to
amend or repeal any of the provisions described in the prior two paragraphs.
Our certificate of incorporation contains certain provisions permitted
under the Delaware corporate law relating to the liability of directors. The
provisions eliminate a director's liability for monetary damages for a breach of
fiduciary duty, except in certain circumstances involving wrongful acts, such as
the breach of a director's duty of loyalty or acts or omissions which involve
intentional misconduct or a knowing violation of law. Further, our certificate
of incorporation contains provisions to indemnify our directors and officers to
the fullest extent permitted by the Delaware corporate law. We believe that
these provisions will assist us in attracting and retaining qualified
individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock will be National City
Bank.
51
<PAGE> 56
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law and Impark's Amended and Restated
Certificate of Incorporation and Amended and Restated By-Laws limit the monetary
liability of directors to Impark and to its shareholders and provide for
indemnification of Impark's officers and directors for liabilities and expenses
that they may incur in such capacities. In general, officers and directors are
indemnified with respect to actions taken in good faith in a manner reasonably
believed to be in, or not opposed to, the best interests of Impark, and with
respect to any criminal action or proceeding, actions that the indemnitee had no
reasonable cause to believe were unlawful. Impark also has indemnification
agreements with its directors and officers that provide for the maximum
indemnification allowed by law. Reference is made to Impark's Certificate of
Incorporation, By-Laws and Form of Indemnification Agreement for Officers and
Directors which are filed as exhibits to the Registration Statement of which
this Information Statement is a part.
Under the Memorandum of Understanding regarding the Distribution, First
Union is obligated, under certain circumstances, to indemnify directors and
officers of Impark against certain liabilities. Reference is made to the form of
Memorandum of Understanding regarding the Distribution which is filed as an
exhibit to the Registration Statement of which this Information Statement is a
part.
AVAILABLE INFORMATION
Following the Distribution, Impark will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the Commission. Impark will also be subject to the proxy
solicitation requirements of the Exchange Act and will furnish holders of Impark
common stock with annual reports containing consolidated financial statements
prepared in accordance with generally accepted accounting principles in the
United States and audited and reported on, as well as quarterly reports for the
first three quarters of each fiscal year containing unaudited financial
information.
Impark has filed a Registration Statement on Form 10 with the Commission to
register the shares of Impark common stock to be issued on the Distribution Date
under the Exchange Act. This Information Statement does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, as certain items are omitted in accordance with the rules and
regulations of the Commission. Reference is made to such Registration Statement
and the exhibits and schedules thereto, which may be inspected and copied, at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices located at 7 World Trade Center, 13th Floor, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, Washington, D.C. 20549. In
addition, Impark is required to file electronic versions of such material with
the Commission through the Commission's Electronic Data Gathering, Analysis and
Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
52
<PAGE> 57
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IMPERIAL PARKING CORPORATION
Pro Forma Consolidated and Combined Financial Statements
(unaudited)............................................... F-2
Consolidated Balance Sheet as of September 30, 1999....... F-2
Combined Statement of Operations for the nine months ended
September 30, 1999..................................... F-3
Combined Statement of Operations for the nine months ended
September 30, 1998..................................... F-4
Combined Statement of Operations for the year ended
December 31, 1998...................................... F-5
Notes to Pro Forma Consolidated and Combined Financial
Statements............................................. F-6
FUMI PARKING BUSINESS
Independent Auditors' Report................................ F-9
Combined Balance Sheets as of December 31, 1997 and 1998 and
(unaudited) September 30, 1999............................ F-10
Combined Statements of Operations for the period from April
17, 1997 to December 31, 1997, year ended December 31,
1998 and (unaudited) nine months ended September 30, 1998
and 1999.................................................. F-11
Combined Statements of Owner's Deficiency for the period
from April 17, 1997 to December 31, 1997, year ended
December 31, 1998 and (unaudited) nine months ended
September 30, 1999........................................ F-12
Combined Statements of Cash Flows for the period from April
17, 1997 to December 31, 1997, year ended December 31,
1998 and (unaudited) nine months ended September 30, 1998
and 1999.................................................. F-13
Notes to Combined Financial Statements...................... F-15
FUR PARKING BUSINESS
Independent Auditors' Report................................ F-32
Combined Balance Sheets as of December 31, 1997 and 1998 and
(unaudited) September 30, 1999............................ F-33
Combined Statements of Operations for the period from April
17, 1997 to December 31, 1997, year ended December 31,
1998 and (unaudited) nine months ended September 30, 1998
and 1999.................................................. F-34
Combined Statements of Owner's Equity for the period from
April 17, 1997 to December 31, 1997, year ended December
31, 1998 and (unaudited) nine months ended September 30,
1999...................................................... F-35
Combined Statements of Cash Flows for the period from April
17, 1997 to December 31, 1997, year ended December 31,
1998 and (unaudited) nine months ended September 30, 1998
and 1999.................................................. F-36
Notes to Combined Financial Statements...................... F-37
IMPARK HOLDINGS INC.
Independent Auditors' Report................................ F-44
Consolidated Statements of Operations and Retained Earnings
(Deficit) for the nine months ended December 31, 1996 and
the period from January 1, 1997 to April 16, 1997......... F-45
Consolidated Statements of Cash Flows for the nine months
ended December 31, 1996 and the period from January 1,
1997 to April 16, 1997.................................... F-46
Notes to Consolidated Financial Statements.................. F-47
</TABLE>
F-1
<PAGE> 58
UNAUDITED PRO FORMA CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
IMPERIAL PARKING CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS (NOTE 3(A))
FUMI FUR -----------------------------------------
PARKING PARKING DISCONTINUED
BUSINESS BUSINESS INTER-ENTITY OPERATION FORMATION PRO FORMA
-------- -------- ------------ ------------ ----------- ---------
(i) (ii) (iii)-(vii)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash................................. $ 868 $ 1,448 -- (38) 7,000 $ 9,278
Accounts receivable.................. 4,200 158 -- (1,177) -- 3,181
Receivables from related parties..... -- 1,438 (1,438) -- -- --
Inventory............................ 3,236 -- -- (2,498) -- 738
Deposits and prepaid expenses........ 1,623 -- -- (103) -- 1,520
------- ------- -------
9,927 3,044 14,717
Notes receivable....................... -- 35,357 (35,031) -- -- 326
Fixed assets........................... 4,450 8,582 -- (243) -- 12,789
Management and lease agreements........ 735 -- -- -- -- 735
Other assets........................... 3,030 -- -- -- -- 3,030
Goodwill............................... 43,896 -- -- -- 141 44,037
------- ------- -------
$62,038 $46,983 $75,634
======= ======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Rents payable to unrelated parties... $ 6,978 $ -- -- -- -- $ 6,978
Rents payable to FUR Parking
Business.......................... 1,093 -- (1,093) -- -- --
Trade accounts payable............... 8,628 16 (345) (750) (409) 7,140
Income and withholding taxes
payable........................... -- 593 -- -- -- 593
Payable to FUMI...................... -- 446 -- -- (446) --
Deferred revenue..................... 1,700 -- -- -- -- 1,700
------- ------- -------
18,399 1,055 16,411
Long-term debt......................... 21,393 -- -- -- (21,393) --
Notes payable to related parties....... 35,151 -- (35,031) -- (120) --
Payable to FUMI........................ 10,748 -- -- -- (10,748) --
Payable to First Union................. -- 26,870 -- -- (26,870) --
Deferred revenue....................... 577 -- -- -- -- 577
Deferred income taxes.................. 33 20 -- (33) -- 20
Minority interest...................... 459 -- -- -- (459) --
------- ------- -------
86,760 27,945 17,008
Shareholder's equity................... (24,722) 19,038 -- (3,276) 67,586 58,626
------- ------- -------
$62,038 $46,983 $75,634
======= ======= =======
</TABLE>
See accompanying notes to pro forma consolidated and combined financial
statements.
F-2
<PAGE> 59
IMPERIAL PARKING CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
FUMI FUR (NOTE 3(B))
PARKING PARKING ------------------------
BUSINESS BUSINESS INTER-ENTITY FORMATION PRO FORMA
-------- -------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues..................................... $48,958 $ 340 (340) (810) $48,148
Direct costs................................. 37,631 2 (340) -- 37,293
------- ------- -------
Gross margin................................. 11,327 338 10,855
Other operating expenses:
General and administrative................. 6,642 -- -- -- 6,642
Depreciation and amortization.............. 3,349 42 -- 5 3,396
------- ------- -------
9,991 42 10,038
------- ------- -------
Operating income............................. 1,336 296 817
Other income (expense):
Write-down of assets....................... (101) -- -- -- (101)
Interest expense:
Long-term debt.......................... (1,418) -- -- 1,418 --
Related parties......................... (2,985) (2,236) 3,002 2,219 --
Interest income from related parties....... -- 3,002 (3,002) -- --
Other...................................... (113) 5 -- -- (108)
------- ------- -------
(4,617) 771 (209)
------- ------- -------
Income (loss) before income taxes............ (3,281) 1,067 608
Income taxes................................. (186) (357) -- 269 (274)
------- ------- -------
Income (loss) from continuing operations..... $(3,467) $ 710 $ 334
======= ======= =======
Income from continuing operations per share (note 4) $ 0.16
=======
</TABLE>
See accompanying notes to pro forma consolidated and combined financial
statements.
F-3
<PAGE> 60
IMPERIAL PARKING CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
FUMI FUR (NOTE 3(B))
PARKING PARKING -----------------------------
BUSINESS BUSINESS INTER-ENTITY FORMATION PRO FORMA
-------- -------- ------------ -------------- ---------
<S> <C> <C> <C> <C> <C>
Revenues............................... $44,238 $ 342 (342) (877) $43,361
Direct costs........................... 32,777 12 (342) -- 32,447
------- ------- -------
Gross margin........................... 11,461 330 10,914
Other operating expenses:
General and administrative........... 9,797 -- -- (409) 9,388
Depreciation and amortization........ 4,132 31 -- 5 4,168
------- ------- -------
13,929 31 13,556
------- ------- -------
Operating income (loss)................ (2,468) 299 (2,642)
Other income (expense):
Write-down of assets................. (139) -- -- -- (139)
Interest expense:
Long-term debt.................... (1,586) -- -- 1,586 --
Related parties................... (2,814) (1,996) 2,814 1,996 --
Other............................. (477) -- -- -- (477)
Interest income from related
parties........................... -- 2,814 (2,814) -- --
------- ------- -------
(5,016) 818 (616)
------- ------- -------
Income (loss) before income taxes...... (7,484) 1,117 (3,258)
Income taxes........................... (253) (408) -- -- (661)
------- ------- -------
Income (loss) from continuing
operations........................... $(7,737) $ 709 $(3,919)
======= ======= =======
Loss from continuing operations per share (note 4) $ (1.87)
=======
</TABLE>
See accompanying notes to pro forma consolidated and combined financial
statements.
F-4
<PAGE> 61
IMPERIAL PARKING CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
FUMI FUR (note 3(b))
PARKING PARKING ------------------------
BUSINESS BUSINESS INTER-ENTITY FORMATION PRO FORMA
-------- -------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues................................. $ 59,458 $ 454 (454) (959) $ 58,499
Direct costs............................. 45,009 12 (454) -- 44,567
-------- ------- --------
Gross margin............................. 14,449 442 13,932
Other operating expenses:
General and administrative............. 14,972 -- -- (409) 14,563
Depreciation and amortization.......... 5,398 45 -- 7 5,450
-------- ------- --------
20,370 45 20,013
-------- ------- --------
Operating income (loss).................. (5,921) 397 (6,081)
Other income (expense):
Write-down of assets................... (14,976) -- -- -- (14,976)
Interest expense:
Long-term debt...................... (2,033) -- -- 2,033 --
Related parties..................... (3,731) (2,757) 3,725 2,763 --
Other............................... (778) -- -- -- (778)
Interest income from related parties... -- 3,725 (3,725) -- --
-------- ------- --------
(21,518) 968 (15,754)
-------- ------- --------
Income (loss) before income taxes........ (27,439) 1,365 (21,835)
Income taxes............................. (516) (392) -- -- (908)
-------- ------- --------
Income (loss) from continuing
operations............................. $(27,955) $ 973 $(22,743)
======== ======= ========
Loss from continuing operations per share (note 4) $ (10.83)
========
</TABLE>
See accompanying notes to pro forma consolidated and combined financial
statements.
F-5
<PAGE> 62
IMPERIAL PARKING CORPORATION
NOTES TO PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The pro forma consolidated and combined financial statements of Impark are
based upon the historical financial statements described below after giving
effect to the transactions and adjustments described in notes 2 and 3.
These pro forma consolidated and combined financial statements are not
necessarily indicative of the financial position and results of operations
that would have been achieved had the transactions actually taken place at
the dates indicated and do not purport to be indicative of the effects that
may be expected to occur in the future.
The pro forma consolidated and combined financial statements have been
compiled from financial information in the:
(a) unaudited combined financial statements of the FUMI Parking Business
as at and for the nine months ended September 30, 1999 and for the
nine months ended September 30, 1998;
(b) audited combined financial statements of the FUMI Parking Business for
the year ended December 31, 1998;
(c) unaudited combined financial statements of the FUR Parking Business as
at and for the nine months ended September 30, 1999 and for the nine
months ended September 30, 1998;
(d) audited combined financial statements of the FUR Parking Business for
the year ended December 31, 1998; and
(e) the additional information described in note 2.
Impark's consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States. The pro
forma consolidated statements of operations exclude non-recurring charges
or credits directly attributable to the transactions described in note 2.
2. PRO FORMA TRANSACTIONS:
Prior to completion of the Distribution, Impark will be formed through the
combination and amalgamation of the continuing business operations of the
FUMI Parking Business and the FUR Parking Business under First Union. These
pro forma consolidated and combined financial statements reflect the
following formation transactions:
(a) the cancellation of an existing lease agreement between the FUMI
Parking Business and First Union under which certain U.S. properties
owned by First Union are leased to FUMI;
(b) the indemnification by First Union of Impark with respect to all
future costs related to an existing legal dispute regarding a
previously cancelled software contract;
(c) the repayment of Impark's outstanding credit facilities by First Union
in consideration for common stock of Impark;
(d) the transfer of the continuing business operations of the FUMI Parking
Business from FUMI to First Union;
(e) the contribution by First Union to Impark of $7.0 million in cash in
consideration for common stock of Impark. Of the $7.0 million
contributed, $2.0 million will be restricted cash to be utilized
solely towards the settlement of the goods and services tax
contingency described in note 15(c)(i) to the combined financial
statements of the FUMI Parking Business;
F-6
<PAGE> 63
IMPERIAL PARKING CORPORATION
NOTES TO PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. PRO FORMA TRANSACTIONS: (CONTINUED)
(f) the contribution by First Union of its interest in a joint venture
arrangement with Impark related to the development of approximately
4,900 parking spaces for the San Francisco Giants new baseball
stadium, "Pacific Bell Park." Operation of the lot commences in 2000;
(g) the acquisition of all holdings of minority interests in entities
comprising the FUMI Parking Business; and
(h) the capitalization of Impark resulting in it having issued and
outstanding 2.1 million common shares with a par value of $0.01 per
share.
3. PRO FORMA ADJUSTMENTS:
(a) Pro forma consolidated balance sheet:
The pro forma consolidated balance sheet gives effect to the
transactions described in note 2 as if they had occurred on September
30, 1999. Pro forma transactions recognized in the consolidated balance
sheet are as follows:
(i) the elimination of all inter-entity balances between the FUMI
Parking Business and the FUR Parking Business;
(ii) the elimination of balance sheet amounts related to the FUMI
Parking Business discontinued operations;
(iii) the elimination of an amount payable in the amount of $409,000
accrued in the accounts of the FUMI Parking Business related to
the legal action indemnified as described in note 2(b);
(iv) the repayment or capitalization of long-term debt and the notes and
advances payable to FUMI and First Union as described in note 2(c);
(v) the contribution of $7.0 million cash as described in note 2(e);
(vi) the contribution of the joint venture interest as described in note
2(f) at its cost basis, which is estimated to equal $5.0 million at
the date of contribution. The FUMI Parking Business holds the
remaining joint venture interest and it is estimated that its
separate cost basis will equal $1.0 million immediately prior to
this contribution. As at September 30, 1999 no significant costs
had been incurred and, therefore, no adjustment has been made in
the pro forma consolidated balance sheet; and
(vii) the acquisition of minority interests in the FUMI Parking Business
by FUMI for consideration having an estimated fair value of
$600,000. This transaction effectively represents a step purchase
of the FUMI Parking Business and has been pushed down into the pro
forma consolidated balance sheet. The excess of the cost of
repurchase over the carrying value of the minority interest
eliminated has been assigned to goodwill.
The net equity of the predecessor entities has been accounted for as a
capital contribution.
F-7
<PAGE> 64
IMPERIAL PARKING CORPORATION
NOTES TO PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. PRO FORMA ADJUSTMENTS: (CONTINUED)
(b) Pro forma combined statements of operations:
The pro forma combined statements of operations give effect to the
transactions described in note 2 as if they had occurred by January 1,
1998. Pro forma transactions recognized in the combined statements of
operations are as follows:
(i) the elimination of inter-entity lease fees and interest costs;
(ii) the elimination of the asset management fee earned during the
period January 1, 1999 to September 30, 1999 for managing the
United States parking properties of First Union. The fee agreement
will be cancelled as described in note 2(a);
(iii) the elimination of fees earned during the period July 1, 1997 to
October 31, 1998 on certain United States parking facilities
operated by the FUMI Parking Business under contracts with First
Union. First Union canceled the contracts effective October 31,
1998 and, ultimately, replaced them with the fee eliminated as
described in note 3(b)(ii);
(iv) the elimination of amounts expensed in 1998 related to the
indemnified matter described in note 2(b);
(v) the elimination of interest expense on long-term debt repaid or
capitalized as described in note 2(c); and
(vi) the amortization of the goodwill that will arise from the
acquisition of the minority interest described in note 2(g),
calculated on a straight-line basis over a 20 year period.
For purposes of the combined statements of operations, no adjustments
have been made for interest on additional cash balances.
4. CAPITAL STOCK:
Capital stock as at September 30, 1999 in the pro forma consolidated
balance sheet is comprised of the equity of the predecessor businesses to
Impark. Pro forma income (loss) per share from continuing operations has
been calculated by dividing pro forma combined income (loss) from
continuing operations by 2.1 million being the estimated number of shares
of Impark common stock to be issued by Impark to First Union prior to the
Distribution.
Per share information is presented as if the common shares issuable were
issued at the beginning of the 1998 year.
F-8
<PAGE> 65
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
First Union Managements, Inc.
We have audited the accompanying combined balance sheets of the FUMI
Parking Business (note 2(a)) as at December 31, 1998 and 1997 and the related
combined statements of operations, owner's deficiency and cash flows for the
year ended December 31, 1998 and the period from April 17, 1997 to December 31,
1997. These financial statements are the responsibility of the management of the
Business. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the FUMI Parking
Business as at December 31, 1998 and 1997 and the results of its operations and
its cash flows for the year ended December 31, 1998 and the period from April
17, 1997 to December 31, 1997 in accordance with generally accepted accounting
principles in the United States.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
January 12, 2000
F-9
<PAGE> 66
FUMI PARKING BUSINESS
COMBINED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................. $ -- $ -- $ 868
Accounts receivable.............................. 7,613 6,915 4,200
Inventory........................................ 3,374 2,877 3,236
Deposits and prepaid expenses.................... 1,395 2,287 1,623
-------- -------- --------
12,382 12,079 9,927
Fixed assets (note 5).............................. 5,158 5,330 4,450
Management and lease agreements (note 6)........... 4,113 1,852 735
Other assets (note 7).............................. 1,227 589 3,030
Goodwill (note 8).................................. 66,560 45,379 43,896
-------- -------- --------
$ 89,440 $ 65,229 $ 62,038
======== ======== ========
LIABILITIES AND OWNER'S DEFICIENCY
Current liabilities:
Bank indebtedness................................ $ 538 $ 2,744 $ --
Rents payable to unrelated parties............... 6,749 6,228 6,978
Rents payable to FUR Parking Business, a related
party......................................... 297 716 1,093
Trade accounts payable and other accrued
liabilities................................... 10,710 10,390 8,628
Current portion of long-term debt................ 58 -- 21,393
Deferred revenue................................. 1,405 1,354 1,700
-------- -------- --------
19,757 21,432 39,792
Long-term debt (note 9)............................ 24,926 21,059 --
Notes payable to related parties (note 10)......... 31,380 31,592 35,151
Payable to First Union Management, Inc., parent
company (note 10)................................ 4,462 10,401 10,748
Deferred revenue................................... -- -- 577
Deferred income taxes.............................. -- 46 33
Minority interest.................................. 12,004 1,047 459
-------- -------- --------
92,529 85,577 86,760
Owner's deficiency................................. (3,089) (20,348) (24,722)
Future operations (note 3)
Commitments and contingencies (note 16)
Uncertainty due to the Year 2000 Issue (note 17)
Subsequent event (note 18)
-------- -------- --------
$ 89,440 $ 65,229 $ 62,038
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-10
<PAGE> 67
FUMI PARKING BUSINESS
COMBINED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS NINE MONTHS
APRIL 17, 1997 TO YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1998 1999
----------------- ------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues................................ $40,502 $ 59,458 $44,238 $48,958
Direct costs............................ 29,446 45,009 32,777 37,631
------- -------- ------- -------
Gross margin............................ 11,056 14,449 11,461 11,327
Other operating expenses:
General and administrative............ 7,526 14,972 9,797 6,642
Depreciation and amortization......... 3,854 5,398 4,132 3,349
------- -------- ------- -------
11,380 20,370 13,929 9,991
------- -------- ------- -------
Operating income (loss)................. (324) (5,921) (2,468) 1,336
Other expense:
Write-down of assets.................. -- 14,976 139 101
Interest expense:
Long-term debt..................... 1,298 2,033 1,586 1,418
Amounts due to related entities.... 2,684 3,731 2,814 2,985
Other.............................. 668 778 477 --
Other................................. -- -- -- 113
------- -------- ------- -------
4,650 21,518 5,016 4,617
------- -------- ------- -------
Loss from continuing operations before
income taxes and discontinued
operations............................ (4,974) (27,439) (7,484) (3,281)
Income taxes............................ 370 516 253 186
------- -------- ------- -------
Loss from continuing operations before
minority interest and discontinued
operations............................ (5,344) (27,955) (7,737) (3,467)
Loss attributed to minority interest.... 944 -- -- --
------- -------- ------- -------
Loss from continuing operations before
discontinued operations............... (4,400) (27,955) (7,737) (3,467)
Income (loss) from discontinued
operations net of income taxes........ 578 (1,537) (1,502) (1,500)
------- -------- ------- -------
Net loss................................ (3,822) (29,492) (9,239) (4,967)
Other comprehensive income (loss):
Foreign currency translation
adjustment......................... 46 (319) (230) (663)
Unrealized loss on available for sale
security........................... -- -- -- (46)
------- -------- ------- -------
Comprehensive loss...................... $(3,776) $(29,811) $(9,469) $(5,676)
======= ======== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-11
<PAGE> 68
FUMI PARKING BUSINESS
COMBINED STATEMENTS OF OWNER'S DEFICIENCY
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
OTHER COMPREHENSIVE
INCOME (LOSS)
------------------------
FOREIGN
CURRENCY UNREALIZED
ACCUMULATED TRANSLATION LOSS ON
CAPITAL EARNINGS ADJUSTMENT INVESTMENT TOTAL
------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Shares issued on acquisition of business
on April 17, 1997 (note 4(b))........... $ 721 $ -- $ -- $ -- $ 721
Net loss................................ -- (3,822) -- -- (3,822)
Dividends............................... -- (34) -- -- (34)
Foreign currency translation
adjustment............................ -- -- 46 -- 46
------- -------- ----- ---- --------
Balance, December 31, 1997.............. 721 (3,856) 46 -- (3,089)
Acquisition of shares from minority
interest.............................. 10,120 -- -- -- 10,120
Capital contributions................... 2,478 -- -- -- 2,478
Net loss................................ -- (29,492) -- -- (29,492)
Dividends............................... -- (46) -- -- (46)
Foreign currency translation
adjustment............................ -- -- (319) -- (319)
------- -------- ----- ---- --------
Balance, December 31, 1998.............. 13,319 (33,394) (273) -- (20,348)
Capital contributed to acquire shares
held by minority interests............ 1,070 -- -- -- 1,070
Return of capital from FUMI parking
division (note 11(a))................. (774) -- -- -- (774)
Capital contributions for restructuring
and expansion costs................... 1,040 -- -- -- 1,040
Net loss................................ -- (4,967) -- -- (4,967)
Dividends............................... -- (34) -- -- (34)
Foreign currency translation
adjustment............................ -- -- (663) -- (663)
Unrealized loss on available for sale
security.............................. -- -- -- (46) (46)
------- -------- ----- ---- --------
Balance, September 30, 1999
(unaudited)........................... $14,655 $(38,395) $(936) $(46) $(24,722)
======= ======== ===== ==== ========
</TABLE>
See accompanying notes to combined financial statements.
F-12
<PAGE> 69
FUMI PARKING BUSINESS
COMBINED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS NINE MONTHS
APRIL 17, 1997 TO YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1998 1999
----------------- ------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows provided by (used in)
operating activities:
Loss from continuing operations...... $(4,400) $(27,955) $ (7,737) $ (3,467)
Adjustments to reconcile loss from
continuing operations to net cash
provided by (used in) continuing
operations:
Depreciation and amortization..... 3,854 5,398 4,132 3,349
Interest expensed on notes payable
to related parties capitalized
to notes........................ 1,789 2,487 1,871 1,988
Amortization of financing costs... -- 163 130 121
Write-down of assets.............. -- 14,976 139 101
Deferred income taxes............. 77 198 (65) 15
Loss attributable to minority
interest........................ (944) -- -- --
Other............................. -- 11 -- 122
Changes in non-cash working capital
items, net of effects from
companies purchased and divested:
Accounts receivable............... (2,016) (71) 138 490
Inventory......................... (790) (256) 222 (382)
Deposits and prepaid expenses..... 433 (444) (1,390) (161)
Trade accounts payable and accrued
liabilities..................... 86 1,346 954 (494)
Rents payable..................... 1,065 (32) 411 1,098
Deferred revenue.................. 581 (446) 124 1,038
------- -------- -------- --------
Net cash provided by (used in)
continuing operations............. (265) (4,625) (1,071) 3,818
Net cash provided by (used in)
discontinued operations........... (1,144) (1,109) (1,097) (534)
------- -------- -------- --------
Net cash provided by (used in)
operating activities.............. (1,409) (5,734) (2,168) 3,284
Cash flows provided by (used in)
investing activities:
Purchase of fixed assets.......... (1,335) (1,980) (1,479) (516)
Purchase of minority interests.... 172 (10,120) (10,120) (937)
Increase (decrease) in other
assets.......................... 88 (506) (171)
Acquisition of businesses, net of
cash acquired................... (40,309) (808) (808) --
Proceeds from dispositions of
businesses...................... -- -- -- 1,145
</TABLE>
F-13
<PAGE> 70
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS NINE MONTHS
APRIL 17, 1997 TO YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1998 1999
----------------- ------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Proceeds from disposition of real
estate................................. 8,616 -- -- --
------- -------- -------- --------
Net cash used in investing
activities from continuing
operations...................... (32,856) (12,820) (12,913) (479)
Net cash used in discontinued
operations...................... (239) (174) (108) --
------- -------- -------- --------
Net cash as used in investing
activities...................... (33,095) (12,994) (13,021) (479)
Cash flows provided by (used in)
financing activities:
Contributions of capital.......... 721 12,599 12,475 1,158
Equity contribution by minority
interests....................... 415 -- -- --
Increase in long-term debt........ 1,795 1,336 -- --
Long-term debt repayments......... (4,020) (3,408) (1,990) (637)
Increase in payable to First Union
Management, Inc................. 4,758 6,024 4,890 246
Bank indebtedness................. 538 2,206 14 (2,744)
Increase in notes payable to
related parties................. 30,342 -- -- 120
Other............................. -- -- -- --
------- -------- -------- --------
Net cash provided by financing
activities from continuing
operations........................ 34,549 18,757 15,389 (1,857)
Net cash used in discontinued
operations........................ (67) (147) (144) --
------- -------- -------- --------
Net cash provided by financing
activities........................ 34,482 18,610 15,245 (1,857)
Effect of exchange rate changes in
cash................................. 22 118 (56) (80)
------- -------- -------- --------
Decrease (increase) in cash............ -- -- -- (868)
Cash, beginning of period.............. -- -- -- --
------- -------- -------- --------
Cash, end of period.................... $ -- $ -- $ (537) $ 868
======= ======== ======== ========
Supplementary information:
Interest paid........................ $ 2,193 $ 3,277 $ 2,865 $ 1,423
Income taxes paid.................... 278 604 369 139
======= ======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-14
<PAGE> 71
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
1. OPERATIONS:
These combined financial statements have been prepared solely for inclusion
in the registration statement of Imperial Parking Corporation ("Impark").
They present the parking related business activities that will be
contributed to Impark and have, for the periods presented, been carried on
directly and indirectly, through wholly-owned subsidiaries, of First Union
Management, Inc. ("FUMI"). Such business activities, collectively defined
as the "FUMI Parking Business", are to be acquired by Impark, pursuant to a
plan of acquisition and reorganization which is to be completed on or
before March 31, 2000. These activities will be combined with certain of
the parking operations of First Union Real Estate Equity and Mortgage
Investments ("First Union"), which activities are, for purposes of these
combined financial statements, referred to as the FUR Parking Business.
FUMI's indirect subsidiaries, Imperial Parking Limited ("Imperial Parking")
and Impark Services Ltd. ("Services"), operate and manage parking
facilities and carry on other activities related to the parking business in
Canada and the United States. The FUR Parking Business owns certain parking
facilities in Canada which it leases to the FUMI Parking Business for their
operation and management. First Union and FUMI are related as, under a
trust agreement, the shares of FUMI are held for the benefit of
shareholders of First Union.
FUMI and First Union purchased the parking business formerly carried on by
an unrelated party effective April 17, 1997 (the "Acquisition"). Generally,
the Acquisition was structured such that the real estate assets were
acquired by First Union and the other business activities, including
management contracts, were acquired by FUMI. These other business
activities included Imperial Parking and Services and their subsidiaries.
Entities within the FUR Parking Business finance, in part, the business
operations of Imperial Parking and Services.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States and
present only the assets, liabilities, revenues and expenses of the FUMI
Parking Business and do not present any other assets, liabilities,
revenues or expenses of FUMI. The carrying values of the assets and
liabilities included in the FUMI Parking Business include any
adjustments necessary to reflect the cost basis of FUMI. These combined
financial statements include expenses incurred by FUMI to the extent
that such expenses relate to the separate FUMI Parking Business.
These financial statements have been prepared on a combined basis to
reflect the parking business activities under a common parent, FUMI,
from the date of their acquisition from unrelated parties. These
combined financial statements exclude the assets, liabilities, revenues
and expenses of the parking business carried on through First Union. The
combined financial statements of the FUR Parking Business are separately
included in this Information Statement.
Specifically, these combined financial statements present the financial
position and results of operations of the FUMI Parking Business which
consists of the following:
(i) Imperial Parking and Services:
Imperial Parking was formed under the Canada Business Corporation
Act pursuant to the amalgamation on April 17, 1997 of 3357392
Canada Inc. ("Canco 1"), Imperial Parking Ltd. and Impark
Properties Limited. Canco 1 was formed to acquire 100% of the
shares
F-15
<PAGE> 72
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(a) Basis of presentation: (continued)
of Imperial Holdings No. 2 Inc. ("Holdco") (note 4(b)). Prior to
the amalgamation, Holdco owned 100% of Imperial Parking Ltd., a
Canadian company with a principal business of managing parking
lots. Holdco was dissolved and its assets transferred to Canco 1
immediately prior to the amalgamation.
Services was incorporated on April 11, 1997 under the New Brunswick
Business Corporations Act. Services' principal business activity is
the provision of ancillary services to the parking business.
(ii) Lease of First Union Canadian parking facilities:
Pursuant to a lease agreement, First Union leased sixteen parking
facilities in Canada to FUMI. Of these facilities, fifteen were
acquired effective from April 17, 1997 from Imperial Parking
Limited. Effective September 8, 1997, First Union purchased an
additional Canadian parking facility from an unrelated party. The
results of the operations of these facilities are included in these
combined financial statements from the date of the acquisition.
All significant balances and transactions between entities included in
these combined financial statements have been eliminated.
(b) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual amounts may differ from the
estimates applied in the preparation of these combined financial
statements.
(c) Inventory:
Imperial Parking's inventory consists of equipment parts and supplies
and is recorded at the lower of cost, determined on a first-in,
first-out basis, and replacement cost.
(d) Fixed assets:
Fixed assets are recorded at cost. Depreciation and amortization is
provided as follows:
<TABLE>
<CAPTION>
BASIS RATE
----------------- -----------
<S> <C> <C>
ASSET
Furniture and fixtures........................... declining-balance 20%
Equipment........................................ declining-balance 20% and 30%
Automotive equipment............................. declining-balance 30%
</TABLE>
Leasehold improvements are depreciated straight-line over the shorter of
the lease term or the estimated useful life of the asset.
F-16
<PAGE> 73
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(d) Fixed assets: (continued)
Routine maintenance and repairs are expensed as incurred.
(e) Management and lease agreements:
Management and lease agreements are recorded at cost and represent the
value assigned to parking lot agreements acquired from other parking
facility management companies. Amortization is provided over the lives
of the related agreements in amounts equal to the discounted future cash
flows used to measure their original cost. The remaining carrying value
of management and lease agreements terminated before the end of the
agreements is expensed at that time.
(f) Impairment of fixed assets and management and lease agreements:
The FUMI Parking Business accounts for long-lived assets (which include
fixed assets and management and lease agreements) in accordance with the
provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. This Statement
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to future net cash flows expected to
be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less cost to sell.
(g) Deferred financing costs:
The costs of obtaining long-term debt are initially capitalized and then
amortized over the term of the related debt. The amortization of these
charges is included in interest expense.
(h) Goodwill:
Goodwill represents the excess of cost over the value assigned to the
net assets acquired on business acquisitions. Goodwill is amortized on a
straight line basis over 40 years.
The FUMI Parking Business assesses the recoverability of goodwill by
determining whether the amortization of the goodwill balance over its
remaining life can be recovered through undiscounted future operating
cash flows of the acquired operation. The amount of goodwill impairment,
if any, is measured based on projected discounted future operating cash
flows using a discount rate reflecting the FUMI Parking Business's
average cost of funds. The assessment of the recoverability of goodwill
will be impacted if estimated future operating cash flows are not
achieved. Pursuant to such an assessment, the FUMI Parking Business
recorded a $15 million reduction in the carrying value of goodwill at
December 31, 1998.
F-17
<PAGE> 74
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(i) Income taxes:
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to (i) differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and (ii) operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(j) Revenue recognition:
Parking revenues consist of the parking revenues from managed and leased
locations. Management contract revenues represent revenues (both fixed
fees and additional payments based upon parking revenues) from
facilities managed for other parties and miscellaneous management fees
for accounting, insurance and other ancillary services such as
consulting and transportation management services. Parking and
management contract revenues are recognized when earned in accordance
with the applicable agreement. Revenues from leased locations are
recognized in accordance with the terms of the agreements. Deferred
revenue primarily represents revenue received in advance of its due
date. Net income from transit vending machine contracts are recognized
by the percentage of completion method.
Total managed and leased parking revenues, representing gross revenues
processed by the FUMI Parking Business, including the revenues of
facilities managed by the FUMI Parking Business for other parties, was
$123.1 million, $173.9 million, and $130.5 million for the period from
April 17, 1997 to December 31, 1997, the year ended December 31 1998 and
the nine months ended September 30, 1999, respectively.
(k) Research and development:
Research and development costs are expensed as incurred.
(l) Foreign currency translation:
The functional currency of the FUMI Parking Businesses operations in the
United States is the United States dollar. For facilities and operations
located in Canada, the functional currency is the Canadian dollar
("Cdn.").
The assets and liabilities of the Canadian operations are translated
into United States dollars at exchange rates in effect at the balance
sheet date. Revenue and expense items are translated at the rates of
exchange prevailing during the period. The gains or losses resulting
from these translations are excluded from the determination of income
and included in the separate foreign currency translation account within
owners' equity. Other exchange gains and losses are included in the
determination of income.
F-18
<PAGE> 75
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(m) Unaudited interim financial information:
The information as at September 30, 1999 and for the nine months ended
September 30, 1999 and 1998 is unaudited; however, in the opinion of
management such information reflects all adjustments, consisting solely
of nominal recurring adjustments, which are necessary to a fair
presentation of the financial position and results of operations for the
periods presented.
(n) Comprehensive income:
On January 1, 1998, the FUMI Parking Business adopted SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for
reporting and presentation of comprehensive income and its components in
a full set of financial statements. Comprehensive income consists of net
income and net unrealizable gains (losses) on securities and is
presented in the consolidated statements of owners' deficiency as other
comprehensive income. The Statement requires only additional disclosures
in the consolidated financial statements; it does not affect the FUMI
Parking Businesses financial position or results of operations. Prior
year financial statements have been reclassified to conform to the
requirements of SFAS No. 130.
3. FUTURE OPERATIONS:
During the year ended December 31, 1998, the FUMI Parking Business incurred
a loss of $29.5 million and a cash flow deficiency from operations. At
December 31, 1998, the FUMI Parking Business has a working capital
deficiency of $9.4 million and $21.1 million in long-term debt maturing in
April 2000. In order to continue its operations as a going concern, the
FUMI Parking Business requires continued support from their parent company
or other equity financing to reduce long-term debt to a level which can be
supported by recurring operations. Failure to achieve this support or
otherwise commence to generate sufficient positive cash flow could
necessitate that the FUMI Parking Business dispose of assets which may
occur at values significantly less than their carrying values.
During the 1999 fiscal year, management has taken various steps in
reviewing its business activities, including the discontinuance of certain
operations as described in note 12. In addition, management of First Union
and FUMI have approved a plan which will result in First Union combining
the FUMI Parking Business with the FUR Parking Business into a new company,
Imperial Parking Corporation ("Impark"), repaying or capitalizing all of
the FUMI Parking Businesses outstanding long-term debt and the notes and
advances payable to related parties, contributing $7.0 million cash and an
interest in a joint venture to develop a parking lot at the San Francisco
Giants new baseball stadium, indemnifying against certain existing claims
against Impark, and granting a $8.0 million line of credit. Management is
also evaluating additional alternatives for increasing future business
prospects.
Upon completion of these steps, First Union has indicated its intention to
distribute 100% of the common shares of Impark to First Union's
beneficiaries. If these steps had been completed at January 1, 1999, the
exclusion of interest expense related to the debt repaid or capitalized
results in the FUMI Parking Business generating net income and having a
significantly reduced working capital deficiency. In addition, the FUMI
Parking Business would have generated positive cash flow from operations.
As a result, management believes that the completion of these steps are
fundamental to Impark continuing to operate in the future as a going
concern.
F-19
<PAGE> 76
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
4. ACQUISITION OF BUSINESSES:
(a) Prairie Parking Limited and PI Parking Systems Limited:
On February 9, 1998 and July 31, 1998 respectively, the FUMI Parking
Business purchased 100% of the common shares of Prairie Parking Limited
and PI Parking Systems Limited for total cash consideration, including
costs, of $1.2 million. The purchase price was allocated $800,000 to
goodwill and $400,000 to management agreements. The acquisitions are
accounted for by the purchase method with the results of operations
included in these combined financial statements from the dates of
acquisition.
The fair value assigned to the management agreements acquired equalled
their tax basis at date of acquisition.
(b) Imperial Holdings No. 2 Inc.:
On April 17, 1997, Canco 1 purchased 100% of Holdco (note 2(a)) for net
cash of $36.2 (Cdn.$50.6) million and the issuance of 16,947,598 common
shares having an assigned value of $12.1 (Cdn.$16.9) million (note 11).
Expenses related to the acquisition amounting to $3.9 (Cdn.$5.6) million
have been included in the cost of the acquisition. Holdco was then
dissolved and its assets transferred to Canco 1.
This acquisition of Holdco, and therefore of Imperial Parking, was
accounted for by the purchase method and accordingly the aggregate
purchase price, including related costs, was assigned to assets acquired
and liabilities assumed based on their fair values as of the acquisition
date as follows:
<TABLE>
<S> <C>
Net working capital......................................... $ (9,716)
Other assets................................................ 1,214
Fixed assets................................................ 13,226
Future tax asset............................................ 224
Management and lease agreements............................. 6,032
Goodwill.................................................... 68,966
Long-term debt.............................................. (27,728)
--------
$ 52,218
========
Purchase price, including costs............................. $ 52,218
========
</TABLE>
The tax basis of the deductible acquired assets was greater than the
fair values assigned at the date of acquisition. No value has been
assigned to the acquired deferred tax asset in the purchase equation
above due to uncertainty as to its realizability. See note 13. Any
ultimate realization of the acquired temporary difference will be
accounted for as a reduction in goodwill.
Certain of the fixed assets were subsequently sold to a subsidiary of
First Union (note 14).
Financing for the acquisition included the amount of $39.3 million which
was lent to the FUMI Parking Business by an entity within the FUR
Parking Business (note 10).
The net working capital deficiency acquired of $9.7 million includes
$1.6 million (Cdn. $2.3 million) accrued for employee terminations and
relocation costs. Such costs reflect plans initiated by management at or
prior to the time of the acquisition and substantially completed prior
to December 31, 1997. As indicated below, certain acquisition related
accruals
F-20
<PAGE> 77
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
4. ACQUISITION OF BUSINESSES: (CONTINUED)
(b) Imperial Holdings No. 2 Inc.: (continued)
are unpaid at September 30, 1999. These amounts primarily relate to
employee termination agreements that, by contract, are payable over a
period of years.
The activity impacting the accrual for employee terminations and
relocation costs in the periods presented is as follows:
<TABLE>
<CAPTION>
EMPLOYEE RELOCATION
TERMINATION COSTS TOTAL
----------- ---------- ------
<S> <C> <C> <C>
Balance, April 17, 1997........................... $1,112 $ 518 $1,630
Charges utilized.................................. (147) (209) (356)
------ ----- ------
Balance, December 31, 1997........................ 965 309 1,274
Charges utilized.................................. (237) (205) (442)
Accruals reversed................................. (238) -- (238)
------ ----- ------
Balance, December 31, 1998........................ 490 104 594
Charges utilized.................................. (35) -- (35)
Accruals reversed................................. (20) (68) (88)
------ ----- ------
Balance, September 30, 1999 (unaudited)........... $ 435 $ 36 $ 471
====== ===== ======
</TABLE>
5. FIXED ASSETS:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------ ------------ --------
<S> <C> <C> <C>
DECEMBER 31, 1997
Furniture and fixtures................................. $ 593 $ 110 $ 483
Equipment.............................................. 3,784 510 3,274
Automotive equipment................................... 309 72 237
Leasehold improvements................................. 1,426 262 1,164
------ ------ ------
$6,112 $ 954 $5,158
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------ ------------ --------
<S> <C> <C> <C>
DECEMBER 31, 1998
Furniture and fixtures................................. $ 652 $ 193 $ 459
Equipment.............................................. 4,859 1,066 3,793
Automotive equipment................................... 330 148 182
Leasehold improvements................................. 1,513 617 896
------ ------ ------
$7,354 $2,024 $5,330
====== ====== ======
</TABLE>
F-21
<PAGE> 78
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
5. FIXED ASSETS: (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------ ------------ --------
) (UNAUDITED
<S> <C> <C> <C>
SEPTEMBER 30, 1999
Furniture and fixtures................................. $ 431 $ 134 $ 297
Equipment.............................................. 5,251 2,135 3,116
Automotive equipment................................... 410 166 244
Leasehold improvements................................. 1,565 772 793
------ ------ ------
$7,657 $3,207 $4,450
====== ====== ======
</TABLE>
6. MANAGEMENT AND LEASE AGREEMENTS:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Cost........................................... $5,921 $5,750 $6,019
Less accumulated amortization.................. 1,808 3,898 5,284
------ ------ ------
$4,113 $1,852 $ 735
====== ====== ======
</TABLE>
Under certain parking management agreements, the FUMI Parking Business is
committed to pay fees to landlords based on either a fixed monthly rate, a
percentage of gross parking revenues or a percentage of net income. These
fees payable are recognized in accordance with the terms of the specific
agreement.
7. OTHER ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred financing costs....................... $ 442 $ 410 $ 429
Accumulated amortization....................... 112 260 395
------ ------ ------
330 150 34
Note receivable(a)............................. -- -- 2,123
Note receivable(b)............................. -- -- 512
Investments.................................... 752 242 140
Other.......................................... 145 197 221
------ ------ ------
$1,227 $ 589 $3,030
====== ====== ======
</TABLE>
(a) During the nine months ended September 30, 1999, the FUMI Parking
Business sold a subsidiary parking services company to the former
president of Imperial Parking for proceeds of $2.1 (Cdn.$3.1) million.
As consideration for the sale, a promissory note receivable of $2.1
million, repayable to May 2010, was received.
F-22
<PAGE> 79
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
7. OTHER ASSETS: (CONTINUED)
(b) During the nine months ended September 30, 1999, the FUMI Parking
Business sold its security business to the former president of that
business for proceeds of $1.8 (Cdn.$2.8) million. As partial
consideration for the sale, a promissory note receivable of $511,000,
repayable to June 2001, was received.
(c) Included in investments at September 30, 1999 are marketable
securities which are held as available-for-sale having an original
cost of $75,000 and a market value of $29,000. The net unrealized loss
of $46,000 has been recorded as an adjustment to owner's equity.
8. GOODWILL:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Cost............................................ $67,697 $63,435 $62,933
Less:
Accumulated amortization...................... 1,137 2,765 3,881
Accumulated write-down........................ -- 14,976 14,976
Acquisition accruals extinguished............. -- 315 180
------- ------- -------
1,137 18,056 19,037
------- ------- -------
$66,560 $45,379 $43,896
======= ======= =======
</TABLE>
In December 1998, the FUMI Parking Business recorded a $15 million
write-down of goodwill that originally arose on the acquisition of Holdco.
This write-down is as a result of management's annual review of the
recoverability of the net book value of the FUMI Parking Business which
review is based on estimated undiscounted future cash flows of the FUMI
Parking Business and applying a multiple of earnings of similar companies
to determine a value of the entire operations, including goodwill. As this
calculated value was less than the net book value, a discount factor was
applied to the estimated future cash flows to estimate fair value, with the
fair value difference recognized as an impairment in goodwill. The
estimates used for future cash flows may differ from actual performance due
to the number of variables having an effect on daily operations and markets
in which these operations are located.
During 1998 and 1999, management reviewed the remaining liabilities
recognized on the acquisition described in note 4(b) relative to final
settlements and actual costs incurred. As a result of these reviews,
management determined that certain specific accrued obligations of the FUMI
Parking Business had been contractually extinguished. Extinguished
liabilities in the amount of $315,000 in the year ended December 31, 1998
and $180,000 in the nine months ended September 30, 1999 have been recorded
as a reduction in goodwill.
F-23
<PAGE> 80
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
9. LONG-TERM DEBT:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Term facility................................. $23,490 $20,473 $21,393
Acquisition facility.......................... 1,332 586 --
Other......................................... 162 -- --
----------- ----------- -----------
24,984 21,059 21,393
Less current portion of long-term debt........ 58 -- 21,393
----------- ----------- -----------
$24,926 $21,059 $ --
=========== =========== ===========
Long-term debt is repayable in Canadian
dollars as follows:......................... Cdn.$35,549 Cdn.$32,340 Cdn.$31,390
=========== =========== ===========
</TABLE>
The FUMI Parking Business has bank credit facilities consisting of
operating, term and acquisition facilities. The revolving operating
facility is available to a maximum of Cdn.$6.5 million under which, at
December 31, 1998, Cdn.$1.5 million had been drawn on the facility.
Pursuant to the second amendment to the credit facility agreement, no
further accommodations may be obtained by the FUMI Parking Business under
either the term facility or the acquisition facility.
The term facility and revolving acquisition facility are repayable in
mandatory prepayments of 50% of excess cash flow with the balance due on
April 16, 2000. Funds advanced under the term and revolving acquisition
facilities are available at rates of interest based on Canadian prime rate
plus 0.50% per annum or bankers' acceptance rates plus 1.50%. Both interest
rates increased by 0.25% on June 30, 1999. The FUMI Parking Business is
also required to pay a fee on maturity equal to 0.55% per annum on the
aggregate amounts outstanding under all credit facilities.
Based on projected cash flows the FUMI Parking Business will be required to
repay the balance of long-term debt outstanding at December 31, 1998 on
April 16, 2000.
The bank credit facilities are secured by a general assignment by the FUMI
Parking Business in favor of the bank, debentures over certain real
property, assignment of rents and leases, securities pledge agreements and
assignment of insurance. The terms of the bank credit facilities require
that certain financial and non-financial covenants be met by the FUMI
Parking Business including the maintenance of specified financial ratios
and tests.
During the year ended December 31, 1998, the FUMI Parking Business was in
breach of the interest coverage ratio covenants which the bank subsequently
waived for a fee of Cdn.$120,000. In exchange for a fee of Cdn.$400,000,
the FUMI Parking Business has obtained reduced requirements under its
interest coverage and leverage financial covenants through September 30,
1999 and may deduct certain non-recurring charges for determining earnings
before interest, taxes, depreciation and amortization for covenant
purposes. First Union has granted security on the long-term debt including
a letter of credit for $8.0 million and has provided the lender with put
rights whereby the lender can require First Union to purchase the amounts
outstanding under the credit facilities during the 30-day period which runs
from November 18, 1999 to December 17, 1999 or on the occurrence of an
event of default or breach of covenants.
F-24
<PAGE> 81
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
10. PAYABLE TO RELATED PARTIES:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable(a)................................. $31,380 $31,592 $35,031
Advances(b)...................................... 4,462 10,401 10,748
Other............................................ -- -- 120
------- ------- -------
$35,842 $41,993 $45,899
======= ======= =======
</TABLE>
(a) The notes payable are due to an entity within the FUR Parking Business
and represent senior subordinated partial payment-in-kind notes which,
as at the dates indicated, were payable in Canadian dollars as
follows:
<TABLE>
<S> <C>
December 31, 1997........................................... Cdn.$44,752
December 31, 1998........................................... Cdn.$48,441
September 30, 1999 (unaudited).............................. Cdn.$51,406
</TABLE>
These notes bear interest at 12.0% per annum, of which 4% is payable
quarterly in cash and the balance is payable on April 17, 2009 when the
principal outstanding on the notes is repayable in full. The notes are
secured by the assets of the FUMI Parking Business. Interest expense
incurred during the periods indicated has been capitalized to the
balance of notes payable as follows:
<TABLE>
<S> <C> <C>
Period from April 17, 1997 to December 31, 1997............. $1,747 (Cdn.$2,492)
Year ended December 31, 1998................................ $2,277 (Cdn.$3,689)
Nine months ended September 30, 1999 (unaudited)............ $2,208 (Cdn.$2,965)
</TABLE>
(b) The advances due to FUMI are unsecured, non-interest bearing and have
no specific terms of repayment. As FUMI has confirmed that repayment
will not be requested before December 31, 1999, the advances have been
classified as non-current.
11. CAPITAL:
(a) At the time of the acquisition (note 4(b)), First Union entered into
an agreement whereby the holders of 14.7 million class A non-voting
common shares could require First Union to purchase their shares for
the issue price plus specified accretions. During 1998, First Union
assigned its right to repurchase these non-voting common shares from
the holders to FUMI and FUMI repurchased the shares.
(b) The class B and C preferred shares of Imperial Parking are redeemable
by Imperial Parking at its option at a price of $1.00 per share and
are entitled to receive cumulative dividends at a rate of $0.045 per
share per annum.
12. DISCONTINUED OPERATIONS:
Prior to the issuance of its financial statements for the period ended
September 30, 1999, the FUMI Parking Business entered into a formal plan to
discontinue activities related to the manufacturing and sale of metered
equipment for public transit systems and parking lots. As these activities
will not form part of the business activities of Impark, to which the FUMI
Parking Business is considered to be a
F-25
<PAGE> 82
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
12. DISCONTINUED OPERATIONS: (CONTINUED)
predecessor entity, they have been accounted for as discontinued operations
in these combined financial statements. This disposition is scheduled to be
completed by March 31, 2000 through the distribution to FUMI of all of the
shares of the company in which these activities are undertaken. This
disposition will be at the cost basis of the FUMI Parking Business.
In addition, during 1999 the FUMI Parking Business sold its security
business for consideration equal to cash of $1.5 million and notes
receivable of $500,000. No gain or loss was recognized on this sale.
Income (loss) from discontinued operations for the periods presented is
calculated as follows:
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS NINE MONTHS
APRIL 17, 1997 TO YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1998 1999
----------------- ----------------- ----------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues..................... $11,497 $15,838 $11,989 $ 9,130
Direct costs................. 9,071 13,573 11,989 8,188
General and administrative... 1,712 3,572 1,345 2,294
Depreciation and
amortization............... 136 230 157 148
------- ------- ------- -------
10,919 17,375 13,491 10,630
------- ------- ------- -------
Income (loss) from
discontinued operations.... $ 578 $(1,537) $(1,502) $(1,500)
======= ======= ======= =======
</TABLE>
Interest expense has not been allocated to discontinued operations.
13. INCOME TAXES:
Total income taxes for the years ended December 31, 1997 and 1998 and the
nine months ended September 30, 1999 were allocated as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Income from continuing operations.............. $ 370 $ 516 $ 186
Discontinued operations........................ 6 1 88
-------- -------- --------
$ 376 $ 517 $ 274
======== ======== ========
</TABLE>
F-26
<PAGE> 83
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
13. INCOME TAXES: (CONTINUED)
Income tax expense attributable to continuing operations consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- --------
<S> <C> <C> <C>
Period from April 17, 1997 to December 31, 1997:
Canada............................................. $ 321 $ -- $ 321
United States...................................... 49 -- 49
-------- -------- --------
$ 370 $ -- $ 370
======== ======== ========
Year ended December 31, 1998:
Canada............................................. $ 470 $ 46 $ 516
United States...................................... -- -- --
-------- -------- --------
$ 470 $ 46 $ 516
======== ======== ========
</TABLE>
Income tax expense attributable to income from continuing operations
differed from the amounts computed by applying the U.S. federal income tax
rate of 35% to pretax income from continuing operations as a result of the
following:
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS
APRIL 17, 1997 YEAR ENDED ENDED
TO DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
--------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Computed "expected" tax expense............ $(1,741) $(9,604) $(1,148)
Increase (reduction) in income taxes
resulting from:
Write-down of non-deductible
goodwill............................ -- 5,242 --
Loss carryforwards not recognized..... 1,741 4,362 1,148
Large corporations tax................ 370 516 186
------- ------- -------
$ 370 $ 516 $ 186
======= ======= =======
</TABLE>
F-27
<PAGE> 84
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
13. INCOME TAXES: (CONTINUED)
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1997 and 1998 and September 30, 1999 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carry forwards.......... $ 4,395 $ 5,122 $ 5,329
Fixed assets............................... 1,600 937 1,627
Trade accounts payable..................... 680 1,722 157
Management and lease agreements............ -- 461 461
Other...................................... 155 82 137
------- ------- -------
Total gross deferred tax assets.............. 6,830 8,324 7,711
Less: valuation allowance.................... (6,477) (8,194) (7,612)
------- ------- -------
353 130 99
------- ------- -------
Deferred tax liabilities:
Inventory.................................. -- (132) --
Goodwill................................... (314) (10) (132)
Other...................................... (39) (34) --
------- ------- -------
Total deferred tax liabilities............... (353) (176) (132)
------- ------- -------
Net deferred tax assets (liabilities)........ $ -- $ (46) $ (33)
======= ======= =======
</TABLE>
The valuation allowance for deferred tax assets as of April 17, 1997 and
January 1, 1998 and 1999 was $8.3, $6.5 million and $8.1 million,
respectively. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. In order to fully realize
the deferred tax asset at December 31, 1998, the FUMI Parking Business will
need to generate future taxable income of approximately $11.6 million prior
to the expiration of the net operating loss carry forwards in 2005. Based
upon the level of historical taxable income deductible, management does not
believe that it is more likely than not that the FUMI Parking Business will
realize the benefits of these deductible differences.
F-28
<PAGE> 85
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
13. INCOME TAXES: (CONTINUED)
The companies which comprise the FUMI Parking Business had total income tax
losses and deductions of approximately $11.6 million available at December
31, 1998 to reduce future income taxes payable which are available and
expire as follows:
<TABLE>
<CAPTION>
CANADA UNITED STATES TOTAL
------- ------------- -------
<S> <C> <C> <C>
1999............................................. $ 11 $ -- $ 11
2000............................................. 55 -- 55
2001............................................. 515 -- 515
2002............................................. 1,700 -- 1,700
2003............................................. 1,110 -- 1,110
2004............................................. 5,471 -- 5,471
2005............................................. 1,990 756 2,746
</TABLE>
14. RELATED PARTY TRANSACTIONS:
In addition to those discussed elsewhere in these combined financial
statements, the following significant related party transactions occurred
during the periods presented.
During the year ended December 31, 1998, First Union reimbursed the FUMI
Parking Business for expenditures in the amount of $3.5 million (period
from April 17 to December 31, 1997 -- $nil) incurred in relation to a
discontinued plan of expansion.
Included in direct costs is a charge of $140,000 (period from April 17 to
December 31, 1997 -- $130,000) paid to a company partly owned by then
management of the FUMI Parking Business relating to contracts to sweep
parking lots under terms that are estimated to be consistent with others in
the parking industry.
Effective May 8, 1997, the FUMI Parking Business sold certain real estate
assets to a subsidiary of First Union for proceeds of Cdn$11.8 million,
being the estimated fair value of the assets at the time of the acquisition
(note 4(b)).
During the nine months ended September 30, 1999 the FUMI Parking Business
sold its security business to a former executive officer of Imperial
Parking for consideration equal to cash of $625,000 and notes receivable of
$500,000 (Cdn. $750,000). During the same period the FUMI Parking Business
sold a subsidiary with parking lot operations on Vancouver Island, British
Columbia Canada to the former president and chief executive officer of
Imperial Parking for consideration equal to notes receivable of $2.1
million, the settlement of termination benefit claims and related costs.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Financial instruments to the FUMI Parking Business include cash, accounts
receivable, accounts payable and accrued liabilities, long-term debt and
indebtedness to related parties. The fair values of those items included in
current assets and liabilities are estimated to equal their carrying value
due to their short-term to maturity or ability for prompt liquidation. The
fair value of long-term debt is not considered to differ materially form
its carrying value as the FUMI Parking Business pays interest at a floating
rate and management does not consider there to have been a significant
change in its risk premium since the FUMI Parking Business entered into the
bank credit facilities agreements. The fair value of indebtedness to
related parties is not readily determinable due to the nature of the
relationship between the FUMI Parking Business and the other party.
F-29
<PAGE> 86
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
16. COMMITMENTS AND CONTINGENCIES:
(a) Operating lease commitments:
The FUMI Parking Business leases certain of its office premises,
automobiles and office equipment under long-term operating leases. At
December 31, 1998, the aggregate annual minimum lease payments required
under operating leases in each of the next five years are as follows:
<TABLE>
<S> <C>
1999........................................................ $ 1,115
2000........................................................ 953
2001........................................................ 824
2002........................................................ 555
2003........................................................ 254
-------
$ 3,701
=======
</TABLE>
(b) Development commitment:
The FUMI Parking Business and First Union are committed under the terms
of an operating lease with the China Basin Ballpark Company, to develop
37 acres of property in San Francisco, California. The development
provides for construction of approximately 4,900 paved surface parking
stalls for the new Pacific Bell Park for the San Francisco Giants
baseball team.
It is anticipated the construction will commence in October 1999 with
completion by February 2000 at an estimated cost of $6.0 million, which
includes an estimated $5.0 million to be contributed by First Union and
an estimated $1.0 million to be contributed by the FUMI Parking
Business.
(c) Contingencies:
(i) Canada Customs and Revenue Agency:
The FUMI Parking Business was subject to a series of audits by
Canada Customs and Revenue Agency primarily regarding its treatment
of goods and services tax with respect to customer receipts for
parking violation notices. The FUMI Parking Business appealed all
assessments to the Tax Court of Canada and during 1998 it lost its
case before the Court. Management intends to appeal the Tax Court
of Canada decision and has accrued amounts owed pursuant to the
assessed amounts.
As part of its regular operations, the FUMI Parking Business
periodically becomes involved with legal claims or potential claims
related to damage to vehicles or personal injuries for which the
FUMI Parking Business carries insurance, or disagreements with
individual employees or on the interpretation of management or
lease agreements. In the opinion of management, the resolution of
these matters will not have a material effect on the financial
condition, results of operations or cash flows of the FUMI Parking
Business.
(ii) Performance bond:
First Union has provided performance guarantees for the
manufacturing and installation of transit ticket vending equipment
totalling $11.5 million which expire in February 2001.
F-30
<PAGE> 87
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
17. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
18. SUBSEQUENT EVENT: (UNAUDITED)
On January 20, 2000, the board of trustees of First Union approved a series
of transactions that will result in:
(a) the cancellation of an existing lease agreement between the FUMI
Parking Business and First Union under which certain U.S. properties
owned by First Union are leased to FUMI;
(b) the indemnification by First Union with respect to all future costs
related to an existing legal dispute regarding a previously cancelled
software contract of the FUMI Parking Business;
(c) the repayment or capitalization of the FUMI Parking Businesses
long-term debt and payables to related parties;
(d) the transfer of the continuing business operations of the FUMI Parking
Business from FUMI to First Union and their combination with the FUR
Parking Business;
(e) the contribution by First Union to the combined entity, Impark of $7.0
million cash, of which $2.0 million will be restricted cash to be
utilized solely towards the settlement of the goods and services tax
contingency described in note 15(c)(l);
(f) the contribution by First Union of its interest in the joint venture
agreement described in note 16(h);
(g) the capitalization of Impark resulting in it having issued and
outstanding 2.1 million common shares with a par value of $0.01 per
share; and
(h) the distribution of all shares of Impark by First Union to First
Union's beneficiaries.
F-31
<PAGE> 88
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees
First Union Real Estate Equity and Mortgage Investments
We have audited the accompanying combined balance sheets of the FUR Parking
Business (note 2(a)) as at December 31, 1998 and 1997 and the related combined
statements of operations, owner's equity and cash flows for the year ended
December 31, 1998 and the period from April 17, 1997 to December 31, 1997. These
financial statements are the responsibility of the management of the Business.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the FUR Parking
Business as at December 31, 1998 and 1997 and the results of its operations and
its cash flows for the year ended December 31, 1998 and the period from April
17, 1997 to December 31, 1997 in conformity with generally accepted accounting
principles in the United States.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
January 12, 2000
F-32
<PAGE> 89
FUR PARKING BUSINESS
COMBINED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 882 $ 1,128 $ 1,448
Accounts receivable............................... -- 8 157
Rents receivable from First Union Management Inc.,
a related party................................ 297 716 1,093
Interest receivable on notes receivable from
related parties................................ -- -- 345
Current portion of receivable from sale of parking
facility....................................... -- -- 1
------- ------- -------
1,179 1,852 3,044
Notes receivable from related parties (note 4)...... 31,380 31,592 35,031
Long-term receivable from sale of parking facility
(note 9).......................................... -- -- 326
Fixed assets (note 5)............................... 9,101 8,558 8,582
------- ------- -------
$41,660 $42,002 $46,983
======= ======= =======
LIABILITIES AND OWNER'S EQUITY
Current liabilities:
Trade accounts payable............................ $ 10 $ -- $ 16
Income and withholding taxes payable.............. 744 290 593
Payable to First Union Management, Inc., a related
party.......................................... 73 390 446
------- ------- -------
827 680 1,055
Note payable to First Union Real Estate Equity and
Mortgage Investments, parent company (note 6)..... 22,977 23,759 26,870
Deferred income taxes (note 7)...................... -- 12 20
------- ------- -------
23,804 24,451 27,945
Owner's equity...................................... 17,856 17,551 19,038
Uncertainty due to the Year 2000 Issue (note 10)
------- ------- -------
Subsequent event (note 11).......................... $41,660 $42,002 $46,983
======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-33
<PAGE> 90
FUR PARKING BUSINESS
COMBINED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS NINE MONTHS
APRIL 17, 1997 TO YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1998 1999
----------------- ------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Parking facilities lease revenue from
related party.......................... $ 302 $ 454 $ 342 $ 340
Other operating expenses:
Direct costs......................... -- 12 12 2
Depreciation......................... 31 45 31 42
------ ------- ------- -------
31 57 43 44
------ ------- ------- -------
Operating income....................... 271 397 299 296
Other income (expense):
Interest income on notes receivable
from related companies (note 4)... 2,672 3,725 2,814 3,002
Interest expense on note payable to
First Union Real Estate Equity and
Mortgage Investments (note 6)..... (904) (2,757) (1,996) (2,236)
Other................................ -- -- -- 5
------ ------- ------- -------
1,768 968 818 771
------ ------- ------- -------
Income before income taxes............. 2,039 1,365 1,117 1,067
Income taxes (note 7):
Current.............................. 673 380 399 349
Deferred............................. -- 12 9 8
------ ------- ------- -------
673 392 408 357
------ ------- ------- -------
Net income............................. 1,366 973 709 710
Other comprehensive income (loss):
Foreign currency translation
adjustment........................ (527) (1,278) (1,258) 777
------ ------- ------- -------
Comprehensive income (loss)............ $ 839 $ (305) $ (549) $ 1,487
====== ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-34
<PAGE> 91
FUR PARKING BUSINESS
COMBINED STATEMENTS OF OWNER'S EQUITY
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
ACCUMULATED TRANSLATION
CAPITAL EARNINGS ADJUSTMENT TOTAL
------- ----------- ----------- -------
<S> <C> <C> <C> <C>
Issuance of shares in Nominee for cash
consideration...................................... $ 7,580 $ -- $ -- $ 7,580
Issuance of shares in Ontario Holdings for cash
consideration.................................... 336 -- -- 336
Capital contributions to purchase Canadian
properties....................................... 9,101 -- -- 9,101
Net income......................................... -- 1,366 -- 1,366
Foreign currency translation adjustment............ -- -- (527) (527)
------- ------ ------- -------
Balance, December 31, 1997......................... 17,017 1,366 (527) 17,856
Net income......................................... -- 973 -- 973
Foreign currency translation adjustment............ -- -- (1,278) (1,278)
------- ------ ------- -------
Balance, December 31, 1998......................... 17,017 2,339 (1,805) 17,551
Net income......................................... -- 710 -- 710
Foreign currency translation adjustment............ -- -- 777 777
------- ------ ------- -------
Balance, September 30, 1999 (unaudited)............ $17,017 $3,049 $(1,028) $19,038
======= ====== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-35
<PAGE> 92
FUR PARKING BUSINESS
COMBINED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS NINE MONTHS
APRIL 17, 1997 TO YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1998 1999
----------------- ------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows provided by (used in)
operating activities:
Net income............................ $ 1,366 $ 973 $ 709 $ 710
Adjustments to reconcile net income to
cash provided by operating
activities:
Depreciation....................... 31 45 31 42
Deferred income taxes.............. -- 12 9 8
Interest income capitalized........... (1,789) (2,487) (1,871) (1,988)
Changes in non-cash working capital
items:
Accounts receivable................ -- 6 -- (168)
Rents receivable from First Union
Management, Inc.................. (304) (469) (344) (340)
Interest receivable on notes
receivable from related
parties.......................... -- -- (318) (338)
Trade accounts payable............. 10 (9) 6 16
Income and withholding taxes
payable.......................... 762 (416) (427) 286
-------- ------ ------- -------
Net cash provided by (used in)
operating activities............... 76 (2,345) (2,205) (1,772)
Cash flows provided by (used in)
financing activities:
Capital contribution.................. 30,342 -- -- --
Redemption of capital stock........... (22,047) -- -- --
Increase in amount due to FUMI........ 75 333 252 38
Initial issue and increase in note
payable to First Union Real Estate
Equity and Mortgage Investments.... 23,527 2,469 1,843 2,013
-------- ------ ------- -------
Net cash provided by financing
activities......................... 31,897 2,802 2,095 2,051
Cash flows used in investing activities:
Purchase of fixed assets.............. (734) (141) (143) (6)
Increase in notes receivable from
related parties.................... (30,342) -- -- --
-------- ------ ------- -------
Net cash used in investing
activities......................... (31,076) (141) (143) (6)
Effect of exchange rate changes in
cash............................. (15) (70) (49) 47
-------- ------ ------- -------
Increase (decrease) in cash............. 882 246 (302) 320
Cash, beginning of period............... -- 882 882 1,128
-------- ------ ------- -------
Cash, end of period..................... $ 882 $1,128 $ 580 $ 1,448
======== ====== ======= =======
Supplementary information:
Interest paid......................... $ 241 $ 288 $ 153 $ 223
Income taxes paid..................... 0 1,159 403 42
======== ====== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-36
<PAGE> 93
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
1. OPERATIONS:
These combined financial statements have been prepared solely for inclusion
in the registration statement of Imperial Parking Corporation ("Impark").
They present the parking related business activities that will be
contributed to Impark and have, for the periods presented, been carried on
directly and indirectly, through wholly-owned subsidiaries, of First Union
Real Estate Equity and Mortgage Investments ("First Union"). Such business
activities, collectively defined as the "FUR Parking Business", are to be
acquired by Impark pursuant to a plan of acquisition and reorganization
which is to be completed on or before March 31, 2000. These activities will
be combined with the parking operations of First Union Management, Inc.
("FUMI"), which activities are, for the purpose of these combined financial
statements, referred to as the FUMI Parking Business.
The FUR Parking Business owns certain parking facilities in Canada which it
leases to FUMI for their operation and management. In addition, entities
within the FUR Parking Business finance, in part, the business operations
of Imperial Parking Limited ("Imperial Parking") and Impark Services Ltd.
("Services"), Canadian companies which operate and manage parking
facilities and carry on other activities related to the parking business.
Imperial Parking and Services are indirect subsidiaries of First Union
Management Investments Inc., a wholly-owned subsidiary of FUMI. First Union
and FUMI are related as, under a trust agreement, the shares of FUMI are
held for the benefit of shareholders of the Trust.
First Union and FUMI purchased the parking business formerly carried on by
an unrelated party effective April 17, 1997 (the "Acquisition"). Generally,
the Acquisition was structured such that the real estate assets were
acquired by First Union and the other business activities, including
management contracts, were acquired by FUMI. These other business
activities included Imperial Parking and Services and their subsidiaries.
Entities within the FUR Parking Business finance, in part, the business
operations of Imperial Parking and Services.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States and
present only the assets, liabilities, revenues and expenses of the FUR
Parking Business and do not present any other assets, liabilities,
revenues or expenses of First Union. The carrying values of the assets
and liabilities included in the FUR Parking Business include any
adjustments necessary to reflect the cost basis of First Union. These
combined financial statements include expenses incurred by First Union
to the extent that such expenses relate to the separate FUR Parking
Business.
These financial statements have been prepared on a combined basis to
reflect the parking business activities of the FUR Parking Business
being under a common parent, First Union, from the date of their
acquisitions from unrelated parties. These combined financial statements
exclude the assets, liabilities, revenues and expenses of the parking
business carried on through FUMI, including through its direct and
indirect subsidiaries. The combined financial statements of the FUMI
Parking Business are separately included in this registration statement.
F-37
<PAGE> 94
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(a) Basis of presentation: (continued)
Specifically, these combined financial statements present the financial
position and results of operations of the FUR Parking Business which
consists of the following:
(i) Canadian properties:
The FUR Parking Business includes sixteen parking facilities and
one office building in Canada owned through First Union's
wholly-owned subsidiaries, 3006712 Nova Scotia Company ("Nominee")
and 3006714 Nova Scotia Company ("Ontario Holdings"), respectively.
Of these facilities, fifteen were acquired from Imperial Parking,
effective from April 17, 1997 for Cdn.$11.8 million, which price
reflected the fair values assigned to the fixed assets on the
Acquisition. Nominee acquired its facilities beneficially for First
Union. During the periods presented, First Union leased the
facilities to FUMI. Effective September 8, 1997, First Union
purchased an additional Canadian parking facility for $844,000
(Cdn.$1.2 million) from an unrelated party. The results of
operations of these facilities are included in these combined
financial statements from the date of acquisition.
(ii) Imperial Parking and Services financing:
The FUR Parking Business includes the financial position and
results of operations of 3006302 Nova Scotia Company ("Finance
Entity"), a wholly-owned subsidiary of First Union. Finance Entity
is a Canadian incorporated company which commenced operations on
April 17, 1997 by participating in the financing of the acquisition
of Imperial Parking and Services by First Union, FUMI and their
wholly-owned subsidiaries.
All significant balances and transactions between entities included in
these combined financial statements have been eliminated.
(b) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual amounts may differ from the
estimates applied in the preparation of these combined financial
statements.
(c) Notes receivable from affiliated companies:
Notes receivable from affiliated companies are recorded at cost.
Management, considering current information and events, considers a note
receivable to be impaired when it is probable that the FUR Parking
Business will be unable to collect all amounts due according to the
contractual terms of the note agreement. When a note is considered to be
impaired, the amount of the impairment is measured based on the present
value of expected future cash flows discounted at the note's effective
interest rate. Impairment losses are included in the allowance for
doubtful accounts as a charge to bad debt expense. To date no impairment
losses have been recognized.
F-38
<PAGE> 95
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(d) Fixed assets:
Fixed assets are recorded at cost. Depreciation is provided by the
straight-line method. Buildings are depreciated over their estimated
useful lives of 25 to 40 years, based on the property's age, overall
physical condition and type of construction materials. Improvements to
buildings are depreciated over the remaining useful life of the building
at the time the improvement is completed. Leasehold improvements are
depreciated over five years. Routine maintenance and repairs are
expensed as incurred.
The FUR Parking Business accounts for fixed assets in accordance with
the provisions of SFAS No. 121 -- Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of. This
Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying value of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the asset exceeds its fair value. Assets
to be disposed of are reported at the lower of their carrying value or
fair value less costs to sell.
(e) Income taxes:
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to (i) differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and (ii) operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(f) Revenue recognition:
The FUR Parking Business earns revenues from its owned facilities
pursuant to agreements whereby it has leased the facility to FUMI, which
entered into agreements with Imperial Parking to manage their
operations. The FUR Parking Business does not manage facilities on
behalf of other parties. Revenues are recognized as earned in accordance
with the individual lease agreements.
(g) Foreign currency translation:
The functional currency of the operations of FUR Parking Business in the
United States is the United States dollar. For facilities and operations
located in Canada, the functional currency is the Canadian dollar
("Cdn.").
The assets and liabilities of the Canadian operations are translated
into United States dollars at exchange rates in effect at the balance
sheet date. Revenue and expense items are translated at the rates of
exchange prevailing during the period. The gains and losses resulting
from these translations are excluded from the determination of income
and included in the separate foreign
F-39
<PAGE> 96
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(g) Foreign currency translation: (continued)
currency translation account within owners' equity. Other exchange gains
and losses are included in the determination of income.
(h) Unaudited interim financial information:
The information as at September 30, 1999 and for the nine months ended
September 30, 1998 and 1999 is unaudited; however, in the opinion of
management such information reflects all adjustments, consisting solely
of nominal recurring adjustments, which are necessary to a fair
presentation of the financial position and results of operations for the
periods presented.
(i) Comprehensive income:
On January 1, 1998, the FUR Parking Business adopted SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for
reporting and presentation of comprehensive income and its components in
a full set of financial statements. Comprehensive income consists of net
income and unrecognized foreign currency translation adjustments and is
presented in the consolidated statements of owners' equity as other
comprehensive income. SFAS No. 130 requires only additional disclosures
in the consolidated financial statements; it does not affect the FUR
Parking Business's financial position or results of operations. Prior
year financial statements have been reclassified to conform to the
requirements of SFAS No. 130.
3. ACQUISITIONS:
Acquisitions of parking facilities have been accounted for by the purchase
method with the consideration paid assigned to the fair value of the assets
acquired as follows:
<TABLE>
<CAPTION>
CANADIAN PARKING FACILITIES
-------------------------------
ACQUIRED ON SUBSEQUENTLY
THE ACQUISITION ACQUIRED TOTAL
--------------- ------------ ------
(NOTE 2(A)(I))
<S> <C> <C> <C>
Net assets acquired at assigned values:
Fixed assets................................... $8,436 $844 $9,280
====== ==== ======
Consideration paid:
Cash........................................... $8,436 $844 $9,280
====== ==== ======
</TABLE>
The fair value assigned equalled the tax basis of the assets acquired at
the date of acquisition.
4. NOTES RECEIVABLE FROM RELATED PARTIES:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Imperial Parking............................... $24,583 $24,749 $27,443
Services....................................... 6,797 6,843 7,588
------- ------- -------
$31,380 $31,592 $35,031
======= ======= =======
</TABLE>
F-40
<PAGE> 97
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
4. NOTES RECEIVABLE FROM RELATED PARTIES: (CONTINUED)
The notes receivable from related parties represent senior subordinated
partial payment-in-kind notes which, as at the dates indicated, were
receivable in Canadian dollars as follows:
<TABLE>
<S> <C>
December 31, 1997........................................... Cdn. $44,752
December 31, 1998........................................... Cdn. $48,441
September 30, 1999 (unaudited).............................. Cdn. $51,406
</TABLE>
These notes bear interest at 12.0% per annum, of which 4% is receivable
quarterly in cash and the balance is receivable on April 17, 2009 when the
principal outstanding on the notes is repayable in full. The notes are
secured by the assets of the related companies. Interest income earned
during the periods indicated has been capitalized to the balance of notes
receivable from related parties as follows:
<TABLE>
<S> <C> <C>
Period from April 17, 1997 to December 31, 1997............. $1,747 (Cdn. $2,492)
Year ended December 31, 1998................................ $2,277 (Cdn. $3,689)
Nine months ended September 30, 1999 (unaudited)............ $2,288 (Cdn. $2,965)
</TABLE>
The notes are subordinate to bank indebtedness of FUMI Parking Business in
the amount of $21.1 million at December 31, 1998 (September 30, 1999
(unaudited) - $21.4 million).
5. FIXED ASSETS:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------ ------------ --------
<S> <C> <C> <C>
DECEMBER 31, 1997
Land................................................... $7,384 $ -- $7,384
Buildings and improvements............................. 1,751 34 1,717
------ ---- ------
$9,135 $ 34 $9,101
====== ==== ======
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------ ------------ --------
<S> <C> <C> <C>
DECEMBER 31, 1998
Land................................................... $6,878 $ -- $6,878
Buildings and improvements............................. 1,752 72 1,680
------ ---- ------
$8,630 $ 72 $8,558
====== ==== ======
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------ ------------ --------
(UNAUDITED)
<S> <C> <C> <C>
SEPTEMBER 30, 1999
Land................................................... $6,974 $ -- $6,974
Buildings and improvements............................. 1,717 109 1,608
------ ---- ------
$8,691 $109 $8,582
====== ==== ======
</TABLE>
F-41
<PAGE> 98
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
6. NOTE PAYABLE TO FIRST UNION:
The promissory note payable to First Union is unsecured, bears interest
payable on December 31st each year at 11.875% per annum, matures on April
17, 2009 and, as at the dates indicated, was repayable in Canadian dollars
as follows:
<TABLE>
<S> <C>
December 31, 1997........................................... Cdn.$32,769
December 31, 1998........................................... Cdn.$36,430
September 30, 1999 (unaudited).............................. Cdn.$39,762
</TABLE>
Interest expense incurred during the periods indicated has been capitalized
to the note payable to First Union as follows:
<TABLE>
<S> <C> <C>
Period from April 17, 1997 to December 31, 1997............. $ 753 (Cdn.$1,074)
Year ended December 31, 1998................................ $2,384 (Cdn.$3,666)
Nine months ended September 30, 1999 (unaudited)............ $2,015 (Cdn.$3,000)
</TABLE>
7. INCOME TAXES:
Income tax expense is attributable to the Canadian operations of the FUR
Parking Business.
Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 35% to income before income taxes as a result of
the following:
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS
APRIL 17, 1997 YEAR ENDED ENDED
TO DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
--------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Computed "expected" tax expense.............. $ 714 $ 486 $373
Increase (reduction) in income taxes
resulting from:
Difference between U.S. federal and
Canadian effective tax rates.......... 82 57 44
Deductions allocated to the FUR Parking
Business by First Union............... (123) (151) (60)
----- ----- ----
$ 673 $ 392 $357
===== ===== ====
</TABLE>
F-42
<PAGE> 99
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
7. INCOME TAXES: (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at the
balance sheet dates are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Other........................................ $ 3 $ -- $ --
--- ---- ----
Total deferred tax assets...................... 3 -- --
Less: valuation allowance...................... (1) -- --
--- ---- ----
2 -- --
--- ---- ----
Deferred tax liabilities:
Fixed assets, principally due to differences
in depreciation........................... (2) (11) (19)
Other........................................ -- (1) (1)
--- ---- ----
Total deferred tax liabilities................. (2) (12) (20)
--- ---- ----
Net deferred tax asset (liability)............. $-- $(12) $(20)
=== ==== ====
</TABLE>
8. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Financial instruments to the FUR Parking Business include cash, accounts
receivable, notes receivable from related companies, trade accounts payable
and accrued liabilities, long-term debt and the note payable to First
Union. The fair values of those items included in current assets and
liabilities are estimated to equal their carrying value due to the
shorter-term to maturity or ability for prompt liquidation. The fair value
of notes receivable from related parties and the note payable to First
Union are not readily determinable due to the nature of the relationship
between the FUR Parking Business and the other party.
9. RELATED PARTY TRANSACTIONS:
In addition to related party transactions disclosed elsewhere in these
combined financial statements, during the nine months ended September 30,
1999, the FUR Parking Business sold a parking facility to the former
president of Imperial Parking for proceeds equal to the facility's net book
value of $326,000 (Cdn.$480,000). The remaining consideration is receivable
over the period to May 2010.
10. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
F-43
<PAGE> 100
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
11. SUBSEQUENT EVENTS: (UNAUDITED)
On January 20, 1990, the board of trustees approved a series of
transactions that will result in the combination of the FUR Parking
Business and the FUMI Parking Business under First Union and the
distribution of the all shares of the combined entity by First Union to
First Union's beneficiaries.
F-44
<PAGE> 101
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Impark Holdings Inc.
We have audited the consolidated statements of operations and retained
earnings (deficit) and cash flows of Impark Holdings Inc. for the period from
January 1, 1997 to April 16, 1997 and the nine months ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the results of the Company's operations and its cash
flows for the period from January 1, 1997 to April 16, 1997 and the nine months
ended December 31, 1996 in accordance with generally accepted accounting
principles in the United States.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
January 12, 2000
F-45
<PAGE> 102
IMPARK HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
(THOUSANDS OF UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
ENDED JANUARY 1, 1997
DECEMBER 31, TO APRIL 16,
1996 1997
------------ ---------------
<S> <C> <C>
Revenues (note 2(j))........................................ $39,493 $15,618
Direct costs................................................ 28,947 13,277
------- -------
Gross margin................................................ 10,546 2,341
Other operating expenses:
General and administrative................................ 7,568 3,547
Depreciation and amortization............................. 2,567 1,066
------- -------
10,135 4,613
------- -------
Operating income (loss)..................................... 411 (2,272)
Other income (expenses):
Gain on sale of investment................................ 993 --
Write-down of asset....................................... -- (236)
Interest expense:
Long-term debt......................................... (541) (453)
Other.................................................. (46) --
------- -------
406 (689)
------- -------
Income (loss) from continuing operations before income taxes
and discontinued operations............................... 817 (2,961)
Income taxes (recovery) (note 5):
Current................................................... 73 50
Deferred.................................................. 246 (353)
------- -------
319 (303)
------- -------
Income (loss) from continuing operations before discontinued
operations................................................ 498 (2,658)
Income (loss) from discontinued operations (note 6)......... 33 (30)
------- -------
Net income (loss)........................................... 531 (2,688)
Retained earnings, beginning of period...................... -- 531
------- -------
Retained earnings (deficit), end of period.................. $ 531 $(2,157)
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-46
<PAGE> 103
IMPARK HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
ENDED JANUARY 1, 1997
DECEMBER 31, TO APRIL 16,
1996 1997
------------ ---------------
<S> <C> <C>
Cash provided by (used in) operating activities:
Income (loss) from continuing operations.................. $ 498 $(2,658)
Adjustments to reconcile income (loss) from continuing
operations to cash provided by (used in) operating
activities:
Gain on sale of investments............................ (993) --
Depreciation and amortization.......................... 2,567 1,066
Deferred income taxes (recovery)....................... 246 (353)
Changes in non-cash working capital items:
Accounts receivable.................................... (2,067) 886
Inventory.............................................. (388) 9
Deposits and prepaid expenses.......................... (240) 127
Rents payable.......................................... 342 387
Trade accounts payable and other accrued liabilities... 404 682
Deferred revenue....................................... 74 (111)
-------- -------
Operating cash flows from continuing operations........ 443 35
Operating cash flows from discontinued operations...... (146) (217)
-------- -------
Net cash provided by (used in) operating activities....... 297 (182)
Cash flows provided by (used in) investing activities:
Additions to other assets................................. (650) (469)
Purchase of fixed assets.................................. (2,575) --
Additions to management agreements........................ (55) --
Acquisition of businesses, net of cash acquired (note
3)..................................................... (42,441) --
Proceeds on sale of investments........................... 1,085 --
Proceeds on disposal of assets............................ -- 131
-------- -------
Investing cash flows from continuing operations........... (44,636) (338)
Investing cash flows from discontinued operations......... (404) (61)
-------- -------
Net cash used in investing activities..................... (45,040) (399)
Cash flows provided by (used in) financing activities:
Issue of share capital, net............................... 24,662 --
Long-term debt issued..................................... 20,698 --
Bank indebtedness......................................... -- (30)
Repayment of long-term debt............................... -- (34)
-------- -------
Financing cash flows from continuing operations........... 45,360 (64)
Financing cash flows from discontinued operations......... -- (32)
-------- -------
Net cash provided by (used in) financing activities....... 45,360 (96)
Increase (decrease) in cash................................. 617 (617)
Cash, beginning of period................................... -- 617
-------- -------
Cash, end of period......................................... $ 617 $ --
======== =======
Supplementary information:
Interest paid............................................. $ 406 $ 689
Income taxes paid......................................... 12 38
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-47
<PAGE> 104
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
1. OPERATIONS:
Impark Holdings Inc. (the "Company") was incorporated on February 23, 1996
under the Ontario Business Corporations Act, and was inactive until the
commencement of operations upon the acquisition of Imperial Parking Ltd.
(see below) The Company's principal business activity during the periods
presented was the management of parking lots in Canada, the United States
and Asia.
Effective March 4, 1996, Onex Corporation, a Canadian public company,
through wholly-owned subsidiaries (the "Group") acquired all of the issued
and outstanding shares of Imperial Parking Ltd. ("Imperial") from existing
shareholders. Information with respect to the acquisition by the Group of
Imperial is set out in note 3(a). During the period ended December 31,
1996, 99.2% of the shares of Imperial were sold from the Group to the
Company. The remaining 0.8% was sold to companies controlled by the
existing management of Imperial.
As the shareholders of the Group also controlled the Company, this transfer
represented a transaction between companies under common control and has
been accounted for in these consolidated financial statements by a method
similar to the pooling of interests method. Under this method, the assets
and liabilities are recorded in the accounts of the Company at the carrying
amounts recorded by the Group. In addition, under this method, the
operations and cash flows of Imperial are reflected from the date that the
Group acquired Imperial.
The Company sold its investment in Imperial effective April 17, 1997 to
3357392 Canada Inc., an unrelated party. The Company's business was
subsequently carried on under First Union Real Estate Equity and Mortgage
Investments ("First Union") and First Union Management, Inc. ("FUMI"),
which are related entities. The operations carried on under FUMI are herein
defined as the "FUMI Parking Business". As allowed by the rules and
regulations of the Securities and Exchange Commission, the business
activities carried on by entities consolidated in these financial
statements subsequent to April 16, 1997 are included in separate financial
statements included in this Information Statement.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
The consolidated financial statements have been prepared in accordance
with United States generally accepted accounting principles and in
United States dollars. They include the accounts of the Company, its
99.2% owned subsidiary Imperial Holdings No. 2 Inc. ("Holdings") and
Holdings subsidiaries all of which are wholly-owned. All significant
intercompany balances and transactions have been eliminated.
These consolidated financial statements have been prepared solely to
comply with the rules and regulations of the Securities and Exchange
Commission for the presentation of information with respect to a
predecessor entity to a registrant. In accordance with these rules and
regulations, no consolidated balance sheet is required to be or has been
presented.
(b) Use of estimates:
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the recognized amounts of revenues and expenses
during the reporting period. Actual amounts may differ from the
estimates applied in the preparation of these consolidated financial
statements.
F-48
<PAGE> 105
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(c) Inventory:
Inventory consists of equipment parts and supplies and is recorded at
the lower of cost, determined on a first-in, first-out basis, and
replacement cost.
(d) Fixed assets:
Fixed assets are recorded at cost. Depreciation and amortization is
provided as follows:
<TABLE>
<CAPTION>
ASSET BASIS RATE
----- ----------------- -----------
<S> <C> <C>
Buildings........................................ declining-balance 3%
Furniture and fixtures........................... declining-balance 20%
Equipment........................................ declining-balance 20% and 30%
Automotive equipment............................. declining-balance 30%
</TABLE>
Leasehold improvements are depreciated straight-line over the shorter of
the lease term or the estimated useful life of the asset.
Routine maintenance and repairs are expensed as incurred.
(e) Management and lease agreements:
Management and lease agreements are recorded at cost and represent the
Company's investment in parking lot agreements acquired from other
parking facility management companies. Amortization is provided on a
straight-line basis over the agreements expected useful lives of twenty
years. The remaining carrying value of management and lease agreements
that are terminated before the end of the agreements are expensed at
that time.
(f) Impairment of fixed assets and management and lease agreements:
The Company accounts for long-lived assets (which include fixed assets
and management and lease agreements) in accordance with the provisions
of SFAS No. 121 -- Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of. This Statement requires
that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying value of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
value of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount
of the asset exceeds its fair value. Assets to be disposed of are
reported at the lower of their carrying value or fair value less costs
to sell.
(g) Deferred financing costs:
The costs of obtaining long-term debt are initially capitalized and then
amortized over the term of the related debt. The amortization of these
charges is included in interest expense.
(h) Goodwill:
Goodwill represents the excess of cost over the fair values assigned to
the net assets acquired on the business acquisitions (note 3). Goodwill
is amortized on a straight line basis over 40 years.
F-49
<PAGE> 106
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(h) Goodwill: (continued)
The Company assesses the recoverability of goodwill by determining
whether the amortization of the goodwill balance over its remaining life
can be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of goodwill impairment, if any, is
measured based on projected discounted future operating cash flows using
a discount rate reflecting the Company's average cost of funds. The
assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
(i) Income taxes:
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to (i) differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and (ii) operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(j) Revenue recognition:
Parking revenues consist of the revenues from managed and leased
locations. Management agreement revenues represent revenues (both fixed
fees and additional payments based upon parking revenues) from
facilities managed for other parties and miscellaneous management fees
for accounting, insurance and other ancillary services such as
consulting and transportation management services. Parking and
management contract revenues are recognized when earned in accordance
with the applicable agreement. Revenues from leased locations are
recognized in accordance with the terms of the lease agreements.
Deferred revenue is derived primarily for revenue received in advance of
its due date.
Total managed and leased parking revenues from continuing operations,
representing gross revenues processed by the Company, including the
revenues of facilities managed by the Company for other parties, was
$126.5 million and $49.6 million for the nine months ended December 31,
1996 and the period from January 1, 1997 to April 16, 1997,
respectively.
(k) Research and development:
Research and development costs are expensed as incurred.
(l) Foreign currency translation:
The functional currency of the Company's operations in Canada is the
Canadian dollar ("Cdn."). For facilities and operations located in the
United States, the functional currency is the United States dollar.
The assets and liabilities of the Canadian operations are translated
into United States dollars at exchange rates in effect at the balance
sheet date. Revenue and expense items are translated at the rates of
exchange prevailing during the period. The gains or losses resulting
from these translations are excluded from the determination of income
and included in the separate foreign
F-50
<PAGE> 107
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(l) Foreign currency translation: (continued)
currency translation account within owners' equity. Other exchange gains
and losses are included in the determination of income.
3. ACQUISITION OF BUSINESSES:
(a) Imperial Parking Ltd.:
Effective March 4, 1996, through a series of share purchase
transactions, the Group acquired 100% of the outstanding common shares
of Imperial from unrelated parties for aggregate consideration
(including costs) of $44.6 (Cdn.$60.6) million. The Group subsequently
sold its shares in Imperial to the Company (note 1). The acquisition by
the Group was accounted for by the purchase method and accordingly, the
aggregate purchase price, including related costs paid by the Group, was
assigned to Imperial's assets acquired and liabilities assumed based on
their fair values as of the acquisition date as follows:
<TABLE>
<S> <C>
Net working capital......................................... $(6,863)
Other assets................................................ 2,501
Fixed assets................................................ 9,453
Management and lease agreements............................. 13,225
Goodwill.................................................... 32,385
Long-term debt.............................................. (6,101)
-------
Consideration paid.......................................... $44,600
=======
Cash........................................................ $44,600
=======
</TABLE>
The tax basis of the deductible acquired assets was greater than the
fair values assigned at the date of acquisition. No value has been
assigned to the acquired deferred tax asset in the purchase equation
above due to uncertainty as to its realizability. See note 5.
The net working capital deficiency acquired of $6.9 million includes
$1.4 (Cdn.$1.9) million accrued for employee terminations and relocation
costs. Such costs reflect plans initiated by management of the Group at
the time of the acquisition and completed prior to December 31, 1996. As
indicated below, certain acquisition related accruals are unpaid at
April 16, 1997. These amounts relate to employee termination agreements
that, by contract, are payable over a period of years.
The activity impacting the accrual for employee terminations and
relocation costs in the periods presented is as follows:
<TABLE>
<CAPTION>
EMPLOYEE RELOCATION
TERMINATION COSTS TOTAL
----------- ---------- ------
<S> <C> <C> <C>
Balance, April 1, 1996.............................. $1,342 $74 $1,416
Charges utilized.................................... (319) (74) (393)
------ --- ------
Balance, December 31, 1996.......................... 1,023 -- 1,023
Charges utilized.................................... (125) -- (125)
------ --- ------
Balance, April 16, 1997............................. $ 898 $-- $ 898
====== === ======
</TABLE>
F-51
<PAGE> 108
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
3. ACQUISITION OF BUSINESSES: (CONTINUED)
(b) Parking Services, Inc.:
On April 1, 1996, Imperial acquired the parking lot management and lease
agreements of Parking Services, Inc. from an unrelated party for cash
consideration, including costs, of $1.1 million. The acquisition is
accounted for by the purchase method with the results of operations
under the agreements included in these consolidated financial statements
from the date of acquisition. The purchase price was assigned to
management and lease agreements, the identifiable asset acquired.
The fair values assigned equalled the tax basis of the assets acquired
at the date of acquisition.
(c) Century Security Limited:
On November 1, 1996, Imperial acquired 100% of the issued shares of
Century Security Limited from an unrelated party for cash consideration,
including costs, of approximately $210,000 (Cdn.$282,000). The
acquisition was accounted for by the purchase method with the results of
operations of Century included in these consolidated financial
statements from the date of acquisition. The purchase price was assigned
to management and lease agreements, the identifiable asset acquired.
The fair values assigned equalled the tax basis of the assets acquired
at the date of acquisition.
4. DEBT:
At April 16, 1997, the Company had outstanding debt and bank credit
facilities as follows:
(a) Term loan of $23.9 (Cdn.$33.5) million, repayable in semi-annual
installments of principal and interest commencing on June 30, 1997
with the balance to be repaid in full by October 31, 2003. The
semi-annual installments commence at $750,000 (Cdn.$1.05 million)
increasing annually to semi-annual installments of $3.0 (Cdn.$4.2)
million in the year 2003.
(b) Revolving acquisition loan of $1.1 (Cdn.$1.5) million, repayable in
semi-annual installments of principal and interest commencing on June
30, 1998 with the balance to be repaid in full by October 31, 2003.
The semi-annual installments commence at $285,000 (Cdn.$400,000)
increasing annually to semi-annual installments of $900,000 (Cdn.$1.3
million) in the year 2003.
Funds advanced under the term loan and revolving acquisition loan are
available at variable rates of interest based on Canadian prime, U.S. base,
Eurodollar and bankers' acceptances rates plus an applicable margin. The
applicable margin will vary to a maximum of 1.75% depending upon the type
of advance and the Company's compliance with certain financial ratios. The
average interest rate on long-term debt at April 16, 1997 was 4.90% (at
December 31, 1996 -- 5.00%).
(c) Loans payable:
Loans payable of $2.1 (Cdn.$2.9) million, repayable based on a 15 year
amortization period in equal monthly blended principal and interest
payments of Cdn.$34,514, and bearing interest at 8.2% per annum.
F-52
<PAGE> 109
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
4. DEBT: (CONTINUED)
(d) Mortgage payable:
First mortgage payable of $140,000 (Cdn.$200,000), repayable in equal
monthly blended principal and interest payments of Cdn.$2,070 to
maturity on July 1, 1998, and bearing interest at 9.25% per annum.
5. INCOME TAXES:
Income tax expense for the periods presented is substantially attributable
to continuing operations in Canada.
Income tax expense attributable to continuing operations differed from
amounts completed by applying the Canadian combined statutory income tax
rate to income (loss) from continuing operations before income taxes as
follows:
<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
ENDED JANUARY 1, 1997
DECEMBER 31, TO APRIL 16,
1996 1997
------------ ---------------
<S> <C> <C>
Combined Canadian federal and provincial statutory rate..... 45.0% 45.0%
Income tax expense is comprised of:
At statutory rate......................................... $368 $(1,332)
Increase in losses carried forward........................ -- (979)
Large corporations tax.................................... 38 48
Other..................................................... (87) 2
---- -------
$319 $ (303)
==== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1996 and April 16, 1997 are presented below:
<TABLE>
<CAPTION>
DECEMBER 31, APRIL 16,
1996 1997
------------ ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carry forwards......................... $ 1,065 $1,726
Research and development costs............................ 797 637
Fixed assets.............................................. 1,445 1,342
Accrued liabilities....................................... 686 1,181
Other..................................................... 284 331
------- ------
Total deferred tax assets................................... 4,277 5,217
Less: valuation allowance................................... (1,011) (1,947)
------- ------
3,266 3,270
------- ------
Deferred tax liabilities:
Management and lease agreements........................... (3,127) (3,270)
Other..................................................... (139) --
------- ------
Total deferred tax liabilities.............................. (3,266) (3,270)
------- ------
Net deferred tax assets (liabilities)....................... $ -- $ --
======= ======
</TABLE>
F-53
<PAGE> 110
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
5. INCOME TAXES: (CONTINUED)
As of April 16, 1997, the Company has total income tax losses and
deductions carry forward of $3.9 (Cdn. -- $5.4) million which are available
to reduce taxable income otherwise calculated to 2003.
6. DISCONTINUED OPERATIONS:
Prior to the issuance of its financial statements for the period ended
September 30, 1999, the FUMI Parking Business entered into a formal plan to
discontinue activities related to the manufacturing and sale of metered
equipment for public transit systems and parking lots. As these activities
will not form part of the business activities of Imperial Parking
Corporation, to which the Company is considered to be a predecessor entity,
they have been accounted for as discontinued operations in these
consolidated financial statements. This disposition is scheduled to be
completed by March 31, 2000 through the distribution to FUMI of all of the
shares of the company in which these activities are undertaken.
In addition, during 1999, the FUMI Parking Business sold all of its
security business for consideration equal to cash of $625,000 (Cdn.
$950,000) and notes receivable of $500,000 (Cdn. $750,000). No gain or loss
was recognized on this sale.
For the nine months ended December 31, 1996 and the period from January 1,
1997 to April 16, 1997 these activities were undertaken in subsidiaries of
the Company.
Loss from discontinued operations for the periods presented is calculated
as follows:
<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
ENDED JANUARY 1, 1997
DECEMBER 31, TO APRIL 16,
1996 1997
------------ ---------------
<S> <C> <C>
Revenues.................................................... $8,866 $3,494
Direct costs................................................ 6,733 2,556
General and administrative.................................. 1,958 910
Depreciation and amortization............................... 142 58
------ ------
8,833 3,524
------ ------
Income (loss) from discontinued operations.................. $ 33 $ (30)
====== ======
</TABLE>
Interest expense has not been allocated to discontinued operations.
F-54
<PAGE> 111
II
INFORMATION NOT INCLUDED IN THE INFORMATION STATEMENT
ITEM 15. FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
(a) Financial Statement Schedules
Financial Statement Schedules for the FUMI Parking Business and the FUR
Parking Business and the Report of Independent Public Accountants on
such Schedules are included in this Registration Statement as of January
12, 2000. All other financial statement schedules have been omitted
either because they are not required, are not applicable or the
information is otherwise set forth in the Financial Statement and Notes
thereto.
(b) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1* Form of Memorandum of Understanding regarding the
Distribution between First Union Real Estate Equity and
Mortgage Investments ("First Union") and the Registrant.
3.1* Amended and Restated Certificate of Incorporation of the
Registrant.
3.2* Amended and Restated By-Laws of the Registrant.
4.1* Specimen certificate for shares of common stock of the
Registrant.
10.1* 2000 Stock Incentive Plan of the Registrant.
10.2* Form of Loan Agreement between First Union and the
Registrant.
10.3* Form of $8.0 Million Principal amount promissory note due
September 30, 2000, issued by Registrant to First Union.
10.4* Form of Indemnification Agreement between FUMI and
Registrant.
10.5* Form of Indemnification Agreement for Officers and Directors
of the Registrant.
10.6* Form of Tax Allocation Agreement between First Union and the
Registrant.
10.7* Huntzinger Employment Agreement.
10.8* Wallner Employment Agreement.
10.9* Newsome Employment Agreement.
21.1* Subsidiaries of the Registrant.
27.1 Financial Data Schedule for FUMI Parking Business for nine
month period ending September 30, 1999.
27.2 Financial Data Schedule for FUMI Parking Business for year
ending December 31, 1998.
27.3 Financial Data Schedule for FUR Parking Business for nine
month period ending September 30, 1999.
27.4 Financial Data Schedule for FUR Parking Business for year
ending December 31, 1998.
</TABLE>
- ---------------
*To be filed by amendment.
II-1
<PAGE> 112
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Vancouver,
British Columbia on this 20th day of January, 2000.
IMPERIAL PARKING CORPORATION
By: /s/ CHARLES HUNTZINGER
------------------------------------
Charles Huntzinger
President and Chief Executive
Officer
II-2
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
FINANCIAL STATEMENTS OF THE FUMI PARKING BUSINESS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 868
<SECURITIES> 0
<RECEIVABLES> 4,200
<ALLOWANCES> 0
<INVENTORY> 3,236
<CURRENT-ASSETS> 9,927
<PP&E> 7,657
<DEPRECIATION> 3,207
<TOTAL-ASSETS> 62,038
<CURRENT-LIABILITIES> 18,399
<BONDS> 56,544
0
0
<COMMON> 0
<OTHER-SE> (24,722)
<TOTAL-LIABILITY-AND-EQUITY> 62,038
<SALES> 0
<TOTAL-REVENUES> 48,958
<CGS> 0
<TOTAL-COSTS> 37,631
<OTHER-EXPENSES> 9,991
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,403
<INCOME-PRETAX> (3,281)
<INCOME-TAX> 186
<INCOME-CONTINUING> (3,467)
<DISCONTINUED> (1,500)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,967)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
FINANCIAL STATEMENTS OF THE FUMI PARKING BUSINESS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> DEC-31-1997
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 6,915
<ALLOWANCES> 0
<INVENTORY> 2,877
<CURRENT-ASSETS> 12,079
<PP&E> 7,354
<DEPRECIATION> 2,024
<TOTAL-ASSETS> 65,229
<CURRENT-LIABILITIES> 21,432
<BONDS> 52,651
0
0
<COMMON> 0
<OTHER-SE> (20,348)
<TOTAL-LIABILITY-AND-EQUITY> 65,229
<SALES> 0
<TOTAL-REVENUES> 59,458
<CGS> 0
<TOTAL-COSTS> 45,009
<OTHER-EXPENSES> 20,370
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,542
<INCOME-PRETAX> (27,439)
<INCOME-TAX> 516
<INCOME-CONTINUING> (27,955)
<DISCONTINUED> (1,537)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,492)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
FINANCIAL STATEMENTS OF THE FUR PARKING BUSINESS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 1,448
<SECURITIES> 0
<RECEIVABLES> 1,250
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,044
<PP&E> 8,691
<DEPRECIATION> 109
<TOTAL-ASSETS> 46,983
<CURRENT-LIABILITIES> 1,055
<BONDS> 26,870
0
0
<COMMON> 0
<OTHER-SE> 19,038
<TOTAL-LIABILITY-AND-EQUITY> 46,983
<SALES> 0
<TOTAL-REVENUES> 340
<CGS> 0
<TOTAL-COSTS> 2
<OTHER-EXPENSES> 42
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,236
<INCOME-PRETAX> 1,067
<INCOME-TAX> 357
<INCOME-CONTINUING> 710
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 710
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
FINANCIAL STATEMENTS OF THE FUR PARKING BUSINESS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> DEC-31-1997
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 724
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,852
<PP&E> 8,630
<DEPRECIATION> 72
<TOTAL-ASSETS> 42,002
<CURRENT-LIABILITIES> 680
<BONDS> 23,759
0
0
<COMMON> 0
<OTHER-SE> 17,551
<TOTAL-LIABILITY-AND-EQUITY> 42,002
<SALES> 0
<TOTAL-REVENUES> 454
<CGS> 0
<TOTAL-COSTS> 12
<OTHER-EXPENSES> 45
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,757
<INCOME-PRETAX> 1,365
<INCOME-TAX> 392
<INCOME-CONTINUING> 973
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 973
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
