<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From ____ to ____
Commission File Number 1-15629
IMPERIAL PARKING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 31-1537375
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 West Cordova Street, Suite 300
Vancouver, BC Canada V6B 1G1
- ------------------------------------------ ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 681-7311
--------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ ] No [ ]
The number of shares outstanding of each of the registrant's classes of common
stock, as of May 10, 2000 was 2,122,266.
================================================================================
1
<PAGE> 2
INDEX
IMPERIAL PARKING CORPORATION
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 1. Financial Statements (Unaudited)(1)
Overview of Financial Statements........................ 3
Consolidated balance sheets
-- March 31, 2000 and December 31, 1999................. 4
Consolidated and pro forma combined statements
of operations -- three months ended March 31, 2000
and 1999................................................ 5
Consolidated statements of stockholders' equity
-- three months ended March 31, 2000.................... 6
Consolidated statements of cash flows
-- three months ended March 31, 2000 and 1999........... 7
Notes to consolidated financial statements.............. 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 12
Item 3. Quantitative and Qualitative Disclosure about
Market Risk............................................. 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................... 15
Item 4. Submission of Matters to a Vote of Security Holders..... 16
Item 6. Exhibits and Reports on Form 8-K........................ 16
Signatures ............................................................ 18
</TABLE>
- --------
(1) for an explanation of the basis of presentation in the financial statements
refer to the Notes to the consolidated financial statements.
2
<PAGE> 3
IMPERIAL PARKING CORPORATION
Overview of Financial Statements
Imperial Parking Corporation (Impark) is the corporation which resulted from the
combination of the Canadian parking assets and operations of First Union Real
Estate Equity and Mortgage Investments (First Union) and the parking related
business of First Union Management, Inc. (FUMI).
The businesses combined into Impark are referred to for periods prior to the
combination as follows:
FUR Parking Business. The FUR Parking Business, constituting the parking
assets and operations of First Union, consisted primarily of 15 owned
parking properties in Canada. Since April 1997 subsidiaries of First Union
have operated this business, including leasing the properties to FUMI for
operations and management.
FUMI Parking Business. The FUMI Parking Business consisted of the parking
services and related ancillary activities that have been continued into
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., consisted of operating
and managing parking facilities in Canada and the United States and
carrying on other parking related activities.
The combination resulting in Impark was completed on March 27, 2000 following a
series of transactions pursuant to a detailed plan of organization. The final
step of the series of transactions was the distribution by First Union of
substantially all of the outstanding shares of common stock to the shareholders
of First Union. For further information regarding this detailed plan of
organization and distribution of common stock, of Impark, refer to the
Information Statement on Form 10 dated March 27, 2000.
The unaudited consolidated balance sheet of Impark is at March 31, 2000 and
reflects the combination of the businesses described above. This business
combination has been accounted for by the purchase method with the FUR Parking
Business identified as the acquirer. The business combination has been
recognized with effect from the close of business on March 31, 2000. Additional
information is provided in note 2 to the unaudited consolidated financial
statements.
The unaudited consolidated statements of operations present the results of
operations for the three months ended March 31, 2000 and 1999 for Impark,
including in its predecessor form as the FUR Parking Business. The unaudited pro
forma combined statements of operations present the results for Impark combined
with the FUMI parking related business, as further described in note 1 (b). The
operations of the acquired business, the FUMI Parking Business, have been
presented separately in the acquisition note, Note 2 to these financial
statements.
3
<PAGE> 4
IMPERIAL PARKING CORPORATION
Consolidated Balance Sheets
Dollar amounts in thousands
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
1999 2000
----------- -----------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash $ 1,984 $16,032
Accounts receivable 30 2,927
Receivables from related parties 1,717 -
Inventory - 911
Deposits and prepaid expenses - 675
Current portion of deferred costs - 1,143
------- -------
Total current assets 3,731 21,688
Deferred costs - 5,690
Notes receivable from related parties 17,330 -
Fixed assets 8,721 14,307
Management and lease agreements - 763
Other assets 331 4,953
Goodwill - 42,556
------- -------
$30,113 $89,957
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable and other accrued liabilities $ 254 $10,627
Rents payable - 7,459
Deferred revenue - 5,975
Payable to First Union Management, Inc.,
a related party 403 -
------- -------
Total current liabilities 657 24,061
Note payable to First Union Real Estate Equity
and Mortgage Investments, parent company 28,061 -
Other liabilities 24 624
------- -------
Total liabilities 28,742 24,685
Stockholders' equity:
Common stock, $.01 par value;
10,000,000 shares authorized,
2,122,266 shares issued and outstanding - 21
Additional paid - in capital 17,017 64,972
Retained earnings (deficit) (14,984) -
Accumulated other comprehensive income (loss)
Foreign currency translation adjustment (662) 279
------- -------
Total stockholders' equity 1,371 65,272
------- -------
$30,113 $89,957
======= =======
</TABLE>
4
<PAGE> 5
IMPERIAL PARKING CORPORATION
Consolidated and Pro Forma Combined Statements of Operations
(Unaudited)
Dollar amounts in thousands, except earnings per share
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
IMPARK PRO-FORMA
------ ---------
(NOTE 1(b))
1999 2000 1999 2000
----- ------ ------ ------
<S> <C> <C> <C> <C>
Revenues $ 144 $ 127 $14,228 $14,631
Direct costs - - 11,340 10,870
----- ------ ------- -------
Gross margin 144 127 2,888 3,761
Other operating expenses:
General and administrative - 90 2,789 2,757
Depreciation and amortization 12 10 1,304 1,061
----- ------ ------- -------
Total other operating expenses 12 100 4,093 3,818
----- ------ ------- -------
Operating income (loss) 132 27 (1,205) (57)
Other income (expenses):
Interest income 961 1,035 - -
Interest expense (705) (786) - -
----- ------ ------- -------
Other income, net 256 249 - -
----- ------ ------- -------
Earnings (loss) before income taxes 388 276 (1,205) (57)
Income tax expense - - 96 61
----- ------ ------- -------
Net earnings (loss) $ 388 $ 276 $(1,301) $ (118)
===== ====== ======= =======
Earnings per share:
Basic and diluted $0.18 $ 0.13 $ (0.61) $ (0.06)
===== ====== ======= =======
</TABLE>
5
<PAGE> 6
IMPERIAL PARKING CORPORATION
Consolidated Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Foreign
Common stock Additional Retained currency
------------------- paid-in earnings translation Comprehensive
Number Amount capital (deficit) adjustment Total income
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, Impark (as FUR Parking
Business), December 31, 1999 - $ - $ 17,017 $(14,984) $(662) $ 1,371
Contributions by First Union:
To repay outstanding credit facility - - 26,369 - - 26,369
Interest in limited liability company - - 3,413 - - 3,413
Cash for working capital and to fund
future costs of limited liability
company - - 5,879 - - 5,879
In settlement of obligations to
related parties - - 8,284 - - 8,284
To acquire net assets of FUMI parking
related business - - 18,604 - - 18,604
Net earnings for the period - - - 276 - 276 $ 276
Foreign currency translation adjustment
in period - - - - 941 941 941
Capitalization of Impark, par value
of $0.01 per share 2,115,822 21 (14,708) 14,708 - 21
Shares issued to directors 6,444 - 114 - - 114
- ----------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity
at March 31, 2000 2,122,266 $21 $ 64,972 $ - $ 279 $65,272
- ----------------------------------------------------------------------------------------------------------------------------
Comprehensive income $1,217
======
</TABLE>
6
<PAGE> 7
IMPERIAL PARKING CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Dollar amounts in thousands THREE MONTHS ENDED
MARCH 31
-----------------
1999 2000
------ -------
<S> <C> <C>
Cash flows from operating activities:
Net income $388 $276
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 12 10
Interest income capitalized (641) (697)
Shares issued for non-cash consideration - 114
Changes in non-cash working capital items,
excluding acquisitions:
Interest receivable on notes receivable
from related parties (320) 8
Rents receivable from related parties (144) (127)
Accrued interest added to note payable
to First Union 705 786
Income and withholding taxes payable (270) (310)
------ -------
Net cash provided by (used in) operating
activities (270) 60
------ -------
Cash flows from investing activities:
Acquisition of minority interests in FUMI parking
related business - (453)
Repayment of outstanding credit facilities - (26,369)
Cash position of business acquired - 8,123
------ -------
Net cash provided by (used in) investing
activities - (18,699)
------ -------
Cash flows from financing activities;
Cash contributions, including $26,369 to repay
assumed outstanding credit facilities - 32,701
------ -------
Net cash provided by (used in) financing
activities - 32,701
------ -------
Effect of exchange rate changes on cash 18 (14)
------ -------
Increase (decrease) in cash (252) 14,048
Cash, beginning of period 1,128 1,984
------ -------
Cash, end of period $ 876 $16,032
====== =======
Supplementary information:
Interest paid - -
Income taxes paid $ 270 $ 311
Outstanding credit facilities assumed from
FUMI parking related business - 26,369
</TABLE>
7
<PAGE> 8
IMPERIAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows:
(a) Organization and Basis of Presentation
Imperial Parking Corporation ("Impark") is the corporation which resulted
from the combination of the Canadian parking facilities of First Union
Real Estate Equity and Mortgage Investments (the "FUR Parking Business)
and the parking related businesses of FUMI (the "FUMI Parking Business").
We have set out below a brief description of the operations of each
business being combined.
FUR Parking Business - The FUR Parking Business, constituting the parking
assets and operations of First Union, consisted primarily of 15 owned
parking properties in Canada. Since April 1997 subsidiaries of First Union
have operated this business, including leasing the properties to FUMI for
operations and management.
FUMI Parking Business - The FUMI Parking Business consisted of the parking
services and related ancillary activities that have been continued into
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., consisted of operating
and managing parking facilities in Canada and the United States and
carrying on other parking related activities.
The accompanying unaudited consolidated financial statements reflect
Impark's acquisition of the FUMI Parking Business which has been accounted
for with effect from the close of business on March 31, 2000.
(b) Pro forma
The pro forma statements of operations have been compiled from financial
information in the:
(a) unaudited combined financial statements of Impark, including its
predecessor the FUR Parking Business, for the three months ended
March 31, 1999 and 2000;
(b) unaudited combined financial statements of the FUMI Parking Business
for the three months ended March 31, 1999 and 2000,
(c) the additional information presented below.
The pro forma combined statement of operations reflects the
combination of Impark and the FUMI Parking Business with effect from
January 1, 1999 and the following transactions:
(i) the elimination of inter-entity lease fees and interest costs;
(ii) the elimination of an asset management fee earned by the FUMI
Parking Business during the period January 1, 1999 to March
31, 2000 for managing the United States parking properties of
First Union. The fee agreement was cancelled on the
acquisition of the FUMI Parking Business; and
8
<PAGE> 9
(iii) the elimination of interest expense on long-term debt repaid
and the note payable capitalized on the acquisition of the
FUMI Parking Business.
For purposes of the pro forma combined statements of operations, no
adjustments have been made for interest on additional cash balances.
These pro forma combined statements of operations are not necessarily indicative
of the 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.
(c) Unaudited interim financial information:
The accompanying unaudited consolidated financial statements of Impark
have been prepared in accordance with generally accepted accounting
principles and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for a
complete set of financial statements. In the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) considered
necessary for a fair presentation have been included. All significant
inter-company transactions and balances have been eliminated in
consolidation. Operating results for the three months ended March 31, 2000
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2000.
(d) Revenue recognition:
Parking revenues consist of the parking revenues from owned and leased
locations. Management contract revenues represent revenues (both fixed
fees and additional payment based upon parking revenues) from facilities
managed for other parties. Parking and management contract revenues are
recognized when earned in accordance with the applicable agreement.
Deferred revenue primarily represents revenue received in advance of its
due date.
(e) Fixed assets:
Fixed assets are recorded at cost. Depreciation is provided principally on
a declining-balance basis over a period of three to five years for
furniture, fixtures and equipment, and over thirty to forty years for
buildings. Leasehold improvements are amortized over the remaining base
lease term or the estimated useful life of the asset, whichever is
shorter.
(f) Goodwill:
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over 20 years.
Impark assesses the recoverability of this intangible asset 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 Impark's average cost of funds. The assessment of the
recoverability of goodwill will be impacted if estimated future operating
cash flows are not achieved.
(g) 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.
9
<PAGE> 10
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.
(h) Foreign Currency Translation:
The functional currency of Impark's operations in the United States is
the United States dollar. For facilities and operations located in Canada,
the functional currency is the Canadian 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 currency translation account within stockholders'
equity. Other exchange gains and losses are included in the determination
of income.
2. ACQUISITION
On March 27, 2000 Impark was formed through a series of transactions involving
the combination of the FUR Parking Business and the FUMI Parking Business. For
accounting purposes the FUR Parking Business has been treated as acquiring the
FUMI Parking Business with effect from the close of business on March 31, 2000
and has accounted for the acquisition using the purchase method. The fair value
of the assets acquired and liabilities assumed of the FUMI Parking Business were
as follows:
<TABLE>
<S> <C>
Working capital deficit $(10,281)
Other assets and liabilities, net 6,276
Fixed assets 5,659
Management and lease agreements 763
Goodwill 42,556
--------
44,973
Less indebtedness (26,369)
--------
$ 18,604
========
</TABLE>
Included in the working capital deficit is $8,123 of cash of the FUMI
Parking Business
Impark will consolidate the results of operations of the acquired FUMI Parking
Business from April 1, 2000. However, pro forma results have been disclosed in
the accompanying financial statements for the three months ended March 31, 1999
and 2000 as if the acquisition were effective at the beginning of those periods.
The results of the FUMI Parking Business for the three months ended March 31,
1999 and 2000, which have been included in the pro forma results, are summarized
as follows:
<TABLE>
<CAPTION>
1999 2000
------- -------
<S> <C> <C>
Revenue $14,498 $14,901
Direct costs 11,484 10,997
------- -------
Gross margin 3,014 3,904
General and administrative expenses 2,789 2,667
Depreciation 1,292 1,051
------- -------
Operating income (loss) (1,067) 186
Other expense 1,482 1,507
------- -------
Loss from continuing operations $(2,549) $(1,321)
======= =======
</TABLE>
10
<PAGE> 11
In preparing the pro forma statements of operations the results of the FUR
Parking Business and the FUMI Business were combined and the following
transactions eliminated:
<TABLE>
<CAPTION>
1999 2000
---- --------
<S> <C> <C>
Revenue
Inter-entity lease fees $144 $ 127
Asset management fee 270 270
Direct costs
Inter-entity lease fees 144 127
Interest expense (income)
Inter-entity interest income (961) (1,035)
Inter-entity interest expense 961 1,035
Interest expense on note payable capitalized 705 786
Interest expense on long-term debt 425 411
</TABLE>
3. EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding
for the period. The weighted average number of shares outstanding gives
retroactive effect to the shares issued on the formation of Impark. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock, or if restricted
shares of common stock were to become fully vested, that then shared in the
earnings of the entity.
The following tables set forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
-------------------------------------------------------------
1999 2000
----------------------------- -----------------------------
INCOME COMMON PER SHARE INCOME COMMON PER SHARE
AVAILABLE SHARES AMOUNT AVAILABLE SHARES AMOUNT
($000's) (000's) ($000's) (000's)
--------- ------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Basic and diluted
earnings per share
Net earnings $ 388 2,122 $ 0.18 $ 276 2,122 $0.13
Pro forma loss from
continuing operations (1,301) 2,122 (0.61) (118) 2,122 (0.06)
</TABLE>
4. BUSINESS SEGMENTS
Senior management of the Company reviews the revenue and overall results
of operations by geographic regions. The following table summarizes the revenue,
operating result and assets for these geographic regions.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
--------------------------------------------------------
1999 2000
-------------------------- ---------------------------
CANADA U.S. TOTAL CANADA U.S. TOTAL
------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Pro forma
Revenue $12,224 $2,004 $14,228 $12,357 $ 2,274 $14,631
Depreciation
and amortization 1,270 34 1,304 1,032 29 1,061
Operating loss (1,105) (100) (1,205) 79 (136) (57)
Income taxes 86 10 96 52 9 61
Total assets $29,034 $1,079 $30,113 $72,534 $17,423 $89,957
</TABLE>
11
<PAGE> 12
5. SUBSEQUENT EVENTS
On May 9, 2000 the Company granted 196,652 stock options to certain directors
and officers. The options are exercisable at a price equal to the Company's
share price on the grant date. The exercise price increases by 10% per annum
during their term. 79,777 of the options vested on May 9 and of the balance of
116,875 options, 25% vests each year until 2004. One quarter of the options
granted are exercisable each year until 2004. The options expire in 2010.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This report includes various forward-looking statements regarding the
Company that are subject to risks and uncertainties, including, without
limitation, the factors set forth below. Forward-looking statements include, but
are not limited to, discussions regarding the Company's operating strategy,
growth strategy, acquisition strategy, cost savings initiatives, industry,
economic conditions, financial condition, liquidity and capital resources and
results of operations. Such statements include, but are not limited to,
statements preceded by, followed by or that otherwise include the words
"believes," "expects," "anticipates," "intends," "estimates" or similar
expressions. For those statements, the Company claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
The following important factors, in addition to those discussed elsewhere
in this report, and the documents which are incorporated herein by reference,
could affect the future financial results of the Company and could cause actual
results to differ materially from those expressed in forward-looking statements
contained or incorporated by reference in this document:
- - successfully integrating past and future acquisitions in light of
challenges in retaining key employees, synchronizing business processes
and efficiently integrating facilities, marketing, and operations;
- - successful implementation of the Company's operating and growth strategy,
including possible strategic acquisitions;
- - fluctuations in quarterly operating results caused by a variety of factors
including the timing of gains on sales of owned facilities, pre-opening
costs, changes in the Company's cost of borrowing, effect of weather on
travel and transportation patterns, player strikes or other events
affecting major league sports and local, national and international
economic conditions;
- - the ability of the Company to form and maintain its strategic
relationships with certain large real estate owners and operators;
- - global and/or regional economic factors;
- - compliance with laws and regulations, including, without limitation,
environmental, antitrust and consumer protection laws and regulations at
the federal, state, local and international levels.
12
<PAGE> 13
OVERVIEW
On March 27, 2000 Impark completed a series of transactions which resulted
in the combination of the Canadian parking facilities of First Union and the
parking and ancillary services of the FUMI Parking Business. The following
discussion reviews the operating results of the combined businesses on a pro
forma basis as if the combination had been in place for the entire periods being
compared.
The Company operates parking facilities under three types of arrangements:
leases, fee ownership and management contracts. Revenues consist of parking
revenues from leased and owned facilities, and revenues earned in accordance
with the terms of management contracts. Direct costs relate typically to leased
and owned facilities and include rent, payroll and related benefits,
maintenance, insurance, and general operating expenses. Direct costs also
include expenses associated with management contracts that are not recoverable
from the property owner.
Pro forma revenues from leased facilities amounted to $12.1 million and $11.6
million for the first quarter of fiscal 2000 and 1999, respectively, accounting
for 82.9% and 82.1% of revenues. Leases generally provide for a contractually
established payment to the facility owner, which is a fixed annual amount, a
percentage of gross revenues, or a combination thereof. As a result, Impark's
revenues and profits in its lease arrangements are dependent upon the
performance of the facility. Leased facilities require a longer commitment and a
larger capital investment by Impark than managed facilities but generally
provide a more stable source of revenue and a greater opportunity for long-term
revenue growth. Under its leases, the Company is typically responsible for all
facets of the parking operations, except for structural, mechanical, and
electrical maintenance and repairs, and property taxes. Lease arrangements are
typically for terms of three to ten years, with renewal options.
Pro forma revenues from owned properties amounted to $0.4 million and $0.4
million for the three months ended March 31, 2000 and 1999, respectively,
accounting for 2.6% and 2.7% of revenues. Ownership of parking facilities,
either independently or through joint ventures, typically requires a larger
capital investment than managed or leased facilities but provides maximum
control over the operation of the parking facility and the greatest profit
potential of the three types of operating arrangements. As the owner, all
changes in owned facility revenue and expense flow directly to the Company.
Additionally, the Company has the potential to realize benefits of appreciation
in the value of the underlying real estate if the property is sold. Impark
assumes complete responsibility for all aspects of the property, including all
structural, mechanical, and electrical maintenance and repairs and property
taxes.
Pro forma management contract revenues amounted to $2.1 million and $2.2 million
for the three months ended March 31, 2000 and 1999, respectively. Management
contract revenues consist of management fees (both fixed and percentage of
revenues). The Company's responsibilities under a management contract as a
facility manager include hiring, training, and staffing parking personnel, and
providing collections, accounting, record keeping, insurance, and facility
marketing services. Generally, Impark is not responsible under its management
contracts for structural, mechanical, and electrical maintenance and repairs, or
for providing security or guard services or for paying property taxes. The
typical management contract is for a term of one to three years and generally is
renewable for successive one-year terms, but is cancelable by the property owner
on short notice.
As of March 31, 2000, Impark leased 502 parking facilities, owned 15 parking
facilities and operated 874 parking facilities through management contracts.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Pro forma revenues from leased and owned facilities for the first quarter of
fiscal 2000 increased to $12.5 million from $11.7 million in the first quarter
of fiscal 2000, an increase of $0.5 million, or 4.0%. The increase is primarily
a result of milder winter weather in 2000 and parking rate increases. However,
the Company experienced a net decline of 25 properties in the number of leased
and owned locations in the first quarter of 2000 from the first quarter of 1999.
The net reduction in locations is a result of the sale of Robbins Parking
Services Ltd. (4 leased locations) and the Asian division (14 leased locations)
and closing unprofitable leased locations.
Management contract revenues for the first quarter of fiscal 2000 decreased to
$2.1 million from $2.2 million in the same period of fiscal 1999, a decrease of
$0.1 million or 3.8%. The decrease is attributed to the sale in 1999 of the
13
<PAGE> 14
Robbins Parking and Asian operations which generated $0.2 million of management
contract revenue in 1999. This decrease was offset by increased management fees
on existing locations of $0.1 million.
Pro forma direct costs in the first quarter of 2000 decreased to $10.9 million
from $11.3 million in the first quarter of 2000, a decrease of $0.4 million or
4.1%. This decrease was due primarily to the sale in 1999 of the Robbins Parking
and Asian operations which incurred $0.6 million of direct costs in the
comparable period in 1999. This decrease was offset by higher rent in the
quarter ended March 31, 2000 than in the same quarter of 1999. Rent expense
increased $0.3 million from $7.4 million for the first quarter of 1999 to $7.7
million for the first quarter of 2000. Rent as a percentage of pro forma
revenues, excluding Robbins and Asia, decreased to 52.5% in the first quarter of
2000 from 54.9% in the same quarter of 1999. This decrease is principally a
result of improved revenues on lease locations due to the milder weather and
cancellation of unprofitable locations. Direct costs as a percentage of revenues
decreased to 74.3% in the first quarter of fiscal 2000 from 79.7% in fiscal
first quarter 1999.
Pro forma general and administrative expenses remained unchanged at $2.8 million
for the first quarter of fiscal 2000 and fiscal first quarter 1999. General and
administrative expenses, as a percentage of pro forma total revenues decreased
to 18.8 % for the first fiscal quarter 2000 compared to 19.6 % for the first
quarter of fiscal 1999.
Depreciation and amortization for the first quarter of fiscal 2000 decreased to
$1.1 million from $1.3 million in fiscal first quarter 1999, a decrease of $0.2
million or 18.6%, as a result of the full amortization of certain management and
lease agreements which are amortized over the term of the agreements.
There is no interest expense in the pro forma results as the related bank
indebtedness was repaid and the note payable to FUR was contributed as part of
the acquisition on March 27, 2000.
The pro forma net loss from continuing operations for the first quarter of 2000
was $0.1 million - a decrease of $1.2 million from the first quarter loss in
1999 of $1.3 million. This decrease is primarily due to increased gross margin
of $0.9 million and lower other operating expenses of $0.3 million.
LIQUIDITY AND CAPITAL RESOURCES
As part of the plan of organization, First Union contributed $32.7 million
of cash as paid-in capital. Of this amount $26.4 million was utilized to repay
all existing bank debt and $0.4 million was used to acquire the minority
interest in the FUMI Parking Business. The balance of $5.9 million is for
working capital purposes and to fund commitments made.
As at March 31, 2000, Impark had cash of $16.0 million. The cash balance
is primarily a result of $8.1 million cash acquired as part of the acquisition
of the FUMI Parking Business, $2.0 million in Impark, $2.6 million contributed
by First Union as part of the distribution transactions, and $3.3 million cash
contributed by First Union to complete its commitment to fund up to $6.7 million
in development costs for the 4,900 spaces for the new San Francisco Giants
Stadium (Pacific Bell Park). Cash in the acquired business includes $4.3 million
attributable to deferred revenues for season pass parking and other receipts at
Pacific Bell Park.
At March 31, 2000 Impark had no long-term bank debt outstanding. Impark
has an $8.0 million line of credit with First Union to fund working capital
requirements, acquisitions and other capital investment opportunities. This
credit facility is due September 30, 2000, with two options to extend for three
additional months each. The line of credit bears interest at a floating annual
rate equal to the London Interbank Offer Rate plus 4.5% per annum.
We intend to obtain a new facility with a commercial bank as soon as
practicable. This facility is intended to replace the First Union credit
facility and will be used to support working capital, establish letters of
credit and fund capital investment opportunities. Impark may need letters of
credit when it bids on larger lease or management contracts.
14
<PAGE> 15
In the next 12 months, we anticipate the working capital necessary to
satisfy current obligations will be generated from operations, available cash,
the First Union credit facility and Impark's new bank facility.
Depending on the timing and magnitude of future investment opportunities,
which could be in the form of leased or purchased properties, Impark's joint
ventures and acquisitions, we anticipate the cash required to come from
operations, the First Union credit facility (or its commercial bank
replacement), a rights offering or an equity offering.
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.
At March 31, 2000, Impark is committed to the completion of the
development of the approximately 4,900 spaces for the new San Francisco Giants
Stadium (Pacific Bell Park). Of the $7.8 million estimated cost, Impark has
funded $1.1 million and First Union has funded $3.4 million and contributed this
investment in the limited liability company and $3.3 million in cash (included
in the cash balances described above) to fund the balance up to its $6.7 million
commitment. Should the development cost exceed $7.8 million, the excess cost
will be funded by Impark.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rates
The Company's primary exposure to market risk consists of changes in
interest rates on cash invested in short-term deposits. Changes in interest
rates could impact the Company's anticipated interest income.
Foreign currency exposure
Impark operates wholly owned subsidiaries in Canada. Total pro forma
revenues from Canadian operations amounted to $12.4 million and $12.2 million
for the three months ended March 31, 2000 and 1999, 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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 facilities we operate. We also carry
liability insurance that we believe meets or exceeds industry standards as
determined by our
15
<PAGE> 16
landlords. We can provide no assurances, however, that any future legal
proceedings (including any related judgements, settlements or costs) will not
have a material adverse effect on our financial condition, liquidity or results
of operations.
The Eau Claire Market litigation was filed in the Queen's Bench of Alberta
on August 20, 1998. It involves a claim against a property in which we are the
lessee. The plaintiff assets that it is entitled to priority over our lease and
to possession of the property. We believe that this claim is without merit. If,
however, we do not prevail in the litigation, we may be forced to renegotiate
the lease with the landlord, in which case the rent could be substantially
increased and may materially impact our results.
Imperial Parking Canada Corporation, a subsidiary of Impark, is a
defendant in a lawsuit brought by Newcourt Financial Ltd. as the assignee of
Oracle Corporation Canada Inc. The suit was filed in Ontario Superior Court on
June 11, 1999. It alleges that Imperial Parking Canada Corporation and FUMI owe
approximately $825,000 under a software licence and services agreement. We
believe that these claims are without merit, however the legal action is in its
earliest stages. First Union has agreed to assume all liability with respect of
this claim.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
There were no matters submitted to a vote of security holders during the quarter
ended March 31, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
Each exhibit listed below in the Index to Exhibits is filed as a part of
this report. Exhibits not incorporated by reference to a prior filing are
designated by an asterisk ("*"); all exhibits not so designated are
incorporated herein by reference to a prior filing as indicated.
Index to Exhibits
Exhibit No. Description
2.1 Form of Memorandum of Understanding regarding the Distribution
between First Union Real Estate Equity and Mortgage Investments
("First Union") and the Registrant (Incorporated by reference to
Exhibit 2.1 to the Company's Registration Statement No. 001-15629 on
Form 10/A as filed on March 2, 2000).
3.1 Form of Amended and Restated Certificate of Incorporation of the
Registrant (Incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement No. 001-15629 on Form 10/A as filed
on March 2, 2000).
3.2 Form of Amended and Restated By-Laws of the Registrant (Incorporated
by reference to Exhibit 3.2 to the Company's Registration Statement
No. 001-15629 on Form 10/A as filed on March 2, 2000).
4.1 Specimen certificate for shares of common stock of the Registrant
(Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement No. 001-15629 on Form 10/A as filed on March
2, 2000).
10.1 Form of 2000 Stock Incentive Plan of the Registrant (Incorporated
by reference to Exhibit 10.1 to the Company's Registration Statement
No. 001-15629 on Form 10/A as filed on March 2, 2000).
10.2 Form of Credit Agreement (Incorporated by reference to Exhibit 10.2
to the Company's Registration Statement No. 001-15629 on Form 10/A
as filed on March 2, 2000).
16
<PAGE> 17
10.3 Form of Guarantee (Incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement No. 001-15629 on Form 10/A as filed
on March 2, 2000).
10.4 Form of Indemnification Agreement (Incorporated by reference to
Exhibit 10.4 to the Company's Registration Statement No. 001-15629
on Form 10/A as filed on March 2, 2000).
10.6 Form of Huntzinger Employment Agreement (Incorporated by reference
to Exhibit 10.6 to the Company's Registration Statement No.
001-15629 on Form 10/A as filed on March 21, 2000).
10.7 Form of Wallner Employment Agreement (Incorporated by reference to
Exhibit 10.7 to the Company's Registration Statement No. 001-15629
on Form 10/A as filed on March 21, 2000).
10.8 Newsome Employment Agreement (Incorporated by reference to Exhibit
10.8 to the Company's Registration Statement No. 001-15629 on Form
10/A as filed on March 2, 2000).
10.9 Form of Debenture (Incorporated by reference to Exhibit 10.9 to the
Company's Registration Statement No. 001-15629 on Form 10/A as filed
on March 2, 2000).
21.1 Subsidiaries of the Registrant (Incorporated by reference to Exhibit
21.1 to the Company's Registration Statement No. 001-15629 on Form
10/A as filed on March 2, 2000).
27 Financial Data Schedule (EDGAR Filing Only)
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended March 31, 2000.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
IMPERIAL PARKING CORPORATION
Date: May 12, 2000 By: /s/ J. Bruce Newsome
- -------------------
-----------------------------------
J. Bruce Newsome
Chief Financial Officer
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-2000
<PERIOD-START> JAN-01-1999 JAN-01-2000
<PERIOD-END> MAR-31-1999 MAR-31-2000
<CASH> 1,984 16,302
<SECURITIES> 0 0
<RECEIVABLES> 1,747 2,927
<ALLOWANCES> 0 0
<INVENTORY> 0 911
<CURRENT-ASSETS> 3,731 21,688
<PP&E> 8,721 14,307
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 30,113 89,957
<CURRENT-LIABILITIES> 657 24,061
<BONDS> 0 0
0 0
0 0
<COMMON> 0 21
<OTHER-SE> 1,371 65,251
<TOTAL-LIABILITY-AND-EQUITY> 30,113 89,957
<SALES> 144 127
<TOTAL-REVENUES> 144 127
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 12 100
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (256) (249)
<INCOME-PRETAX> 388 276
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 388 276
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 388 276
<EPS-BASIC> 0.18 0.13
<EPS-DILUTED> 0.18 0.13
</TABLE>
