<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
COMMISSION FILE NUMBER: 333-50433
AP HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 06-1269403
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
900 N. MICHIGAN AVENUE, (312) 274-2000
CHICAGO, ILLINOIS 60611-1542 (Registrant's Telephone Number,
(Address of Principal Executive Offices) Including Area Code)
Former name, address and 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 X NO
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AP HOLDINGS, INC.
FORM 10-Q INDEX
<TABLE>
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998...............................................................................3
Condensed Consolidated Statements of Operations for the three and six
months ended June 30, 1999 and June 30, 1998........................................................4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1999 and June 30, 1998........................................................5
Notes to Condensed Consolidated Financial Statements................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..............11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.........................................17
Part II. Other Information
Item 1. Legal Proceedings..................................................................................18
Item 2. Changes in Securities and Use of Proceeds..........................................................18
Item 3. Defaults upon Senior Securities....................................................................18
Item 4. Submission of Matters to a Vote of Security Holders................................................18
Item 5. Other Information..................................................................................18
Item 6. Exhibits and Reports on Form 8-K...................................................................18
Signatures.........................................................................................................19
Exhibits...........................................................................................................20
</TABLE>
2
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AP HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
ASSETS (UNAUDITED) (SEE NOTE)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................. $ 6,559 $ 19,183
Notes and accounts receivable, net.................................... 34,244 32,639
Prepaid expenses and supplies......................................... 2,528 2,806
------------ ------------
Total current assets..................................................... 43,331 54,628
Leaseholds and equipment, net............................................ 31,749 27,618
Advances and deposits.................................................... 2,526 3,318
Cost in excess of net assets acquired.................................... 109,711 108,741
Intangible and other assets.............................................. 15,894 17,943
Due from affiliate....................................................... 23 409
------------ -------------
Total assets.......................................................... $ 203,234 $ 212,657
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable...................................................... $ 14,311 $ 18,184
Accrued and other current liabilities................................. 29,969 43,624
Current portion of long-term borrowings............................... 1,180 1,939
------------- ------------
Total current liabilities................................................ 45,460 63,747
Long-term borrowings, excluding current portion.......................... 204,905 191,666
Other long-term liabilities.............................................. 10,629 11,675
Common stock of subsidiary subject to put/call rights;
5.01 shares issued and outstanding.................................... 4,589 4,589
Stockholders' deficit:
Preferred stock, 12% quarterly, cumulative, par value $.01 per share,
10,000 shares authorized; 3,343.6 shares at June 30, 1999 and 3,151.7
shares at December 31, 1998 issued and outstanding.................... 30,091 28,364
Common stock, par value $1.00 per share; 1,000 shares authorized;
26.3 shares issued and outstanding.................................... 1 1
Additional paid-in capital............................................ 2,088 2,088
Accumulated deficit................................................... (94,529) (89,473)
------------ -----------
Total stockholders' deficit.............................................. (62,349) (59,020)
------------ -----------
Total liabilities and stockholders' deficit........................... $ 203,234 $ 212,657
=========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
Note: The balance sheet at December 31, 1998 has been derived from the
audited financial statement at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
3
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AP HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------------- ------------------------------------
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1999 JUNE 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Gross customer collections............. $ 339,000 $ 266,600 $ 655,600 $ 439,200
============== ============= ============= =============
Parking services revenue:
Lease contracts.................... $ 50,648 $ 40,638 $ 100,525 $ 65,301
Management contracts............... 12,182 8,886 23,174 13,547
------------- ------------- ------------- -------------
62,830 49,524 123,699 78,848
Cost of parking services:
Lease contracts.................... 44,873 36,317 88,892 58,152
Management contracts............... 4,282 2,550 8,162 4,811
------------- ------------- ------------- -------------
49,155 38,867 97,054 62,963
------------- ------------- ------------- -------------
Gross profit 13,675 10,657 26,645 15,885
General and administrative expenses.... 7,510 5,901 14,516 9,361
Restructuring and other unusual costs.. 260 -- 410 14,100
Depreciation and amortization.......... 2,351 1,916 4,150 2,971
------------- ------------- ------------- -------------
Operating income (loss)................ 3,554 2,840 7,569 (10,547)
Interest expense (income):
Interest expense................... 5,484 4,958 10,465 5,995
Interest income.................... (40) (637) (107) (786)
------------- ------------- ------------- -------------
5,444 4,321 10,358 5,209
------------- ------------- ------------- -------------
Loss before minority interest, income
taxes and extraordinary item....... (1,890) (1,481) (2,789) (15,756)
Minority interest...................... 90 108 257 251
Income tax expense....................... 130 30 283 60
------------- ------------- ------------- -------------
Loss before extraordinary item......... (2,110) (1,619) (3,329) (16,067)
Extraordinary item..................... -- -- -- 2,816
------------- ------------- ------------- -------------
Net loss............................... (2,110) (1,619) (3,329) (18,883)
Preferred stock dividends.............. (876) (779) (1,727) (1,535)
------------- ------------- ------------- -------------
Net loss available for common
stockholders....................... $ (2,986) $ (2,398) $ (5,056) $ (20,418)
============== ============= ============= =============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
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AP HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................. $ (3,329) $ (18,883)
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation and amortization.......................... 4,150 2,971
Provision for impairment of assets..................... -- 2,400
Interest accreted on long-term borrowing............... 2,483 1,188
Change in operating assets and liabilities, net of
acquisitions........................................... (18,241) 1,865
------------- -------------
Net cash used in operating activities..................... (14,937) (10,459)
INVESTING ACTIVITIES:
Businesses acquired, net of cash, and including direct
acquisition costs...................................... (1,426) (81,579)
Purchase of leaseholds and equipment...................... (4,339) (2,556)
Purchase of leaseholds and equipment by joint ventures.... (192) (274)
Increase in other assets.................................. (920) (491)
------------- -------------
Net cash used in investing activities..................... (6,877) (84,900)
FINANCING ACTIVITIES:
Proceeds from long-term borrowings........................ 10,700 189,632
Payments on long-term borrowings.......................... (1,273) (41,645)
Payments on joint venture borrowings...................... (237) (273)
Payments of debt issuance costs........................... -- (6,180)
Redemption of redeemable preferred stock.................. -- (8,000)
------------- -------------
Net cash provided by financing activities................. 9,190 133,534
Increase (decrease) in cash and cash equivalents.......... (12,624) 38,175
Cash and cash equivalents at beginning of period.......... 19,183 3,322
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ 6,559 $ 41,497
============= =============
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest............................................... $ 7,656 $ 2,099
Taxes.................................................. 87 46
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
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AP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(IN THOUSANDS, UNAUDITED)
1. INTERIM FINANCIAL DATA
AP Holdings ("Holdings") is a subsidiary of Holberg Industries, Inc.
("Holberg"), which owns 84% of the outstanding voting stock and 100% of the
preferred stock of APCOA/Standard Parking, Inc. ("APCOA/Standard" or "the
Company"), formerly known as APCOA, Inc. ("APCOA"). APCOA/Standard accounts for
all of Holdings' assets and Holdings conducts substantially all of its business
through APCOA/Standard.
The accompanying unaudited condensed consolidated financial statements
of Holdings, have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements.
In the opinion of management, all adjustments (consisting only of
adjustments of a normal and recurring nature) considered necessary for a fair
presentation of the financial position and results of operations have been
included. Operating results for the six-month period ended June 30, 1999 are not
necessarily indicative of the results that might be expected for the year ending
December 31, 1999. The financial statements presented in this Report should be
read in conjunction with the consolidated financial statements and footnotes
thereto included in Holdings' 1998 Form 10-K filed March 31, 1999.
Certain reclassifications have been made to the 1998 financial
information to conform to the 1999 presentation.
2. ACQUISITIONS
In January 1998, APCOA entered into a definitive Combination Agreement
to acquire all of the outstanding capital stock, partnership and other equity
interests of Standard Parking Corporation and certain of its affiliates
("Standard"). On March 30, 1998, APCOA acquired Standard for consideration
consisting of $65,000 in cash, 16% of the common stock of APCOA outstanding as
of January 15, 1998 and the assumption of certain liabilities, including a
$5,000 consulting and non-compete obligation for one of the former owners of
Standard, which represents the current value of the payments to be made, as
determined by consulting actuaries. In addition, on March 30, 1998, APCOA paid
to the Standard owners $2,822, generally representing Standard's earnings from
January 1 through the date of the acquisition and Standard's cash on hand at
such time. Financing of the acquisition included a contribution from Holdings of
$40,683, in exchange for redeemable preferred stock, and other transactions as
described below and in Note 3.
The acquisition has been accounted for under the purchase method;
accordingly, Standard's results are included in the consolidated financial
statements of APCOA/Standard from the date of acquisition. Following is the
final purchase price allocation based upon a final determination of the fair
value of assets acquired and liabilities assumed.
<TABLE>
<S> <C>
Cash consideration...................................................... $ 65,000
5.01 shares of common stock issued, at calculated put/call value........ 4,589
Closing distribution to the Standard owners............................. 2,822
Consulting and non-compete agreement with former owner.................. 5,000
Direct acquisition costs................................................ 7,179
--------
Total purchase price.................................................... $ 84,590
========
Cash.................................................................... $ 1,711
Notes and accounts receivable........................................... 1,815
Prepaid expenses........................................................ 545
Leaseholds and equipment................................................ 7,971
Consulting and non-compete agreement.................................... 5,000
Cost in excess of net assets acquired................................... 74,519
Other assets............................................................ 415
Accounts payable and accrued expenses................................... (2,758)
Other costs and liabilities............................................. (4,628)
--------
$ 84,590
========
</TABLE>
6
<PAGE> 7
AP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The put/call value for the 5.01 shares of common stock described above
is based primarily upon a multiple of EBITDA, as defined, of the Company. Under
certain circumstances the Company can be required to repurchase these shares,
however, in no case will the Company be obligated to do so prior to March 2001.
Direct acquisition costs incurred in connection with the acquisition include
investment banking fees of $3,289 and legal and other professional fees of
$3,890.
Other costs and liabilities include pre-existing Standard vacation and
bonus liabilities of $1,089. Also included in other costs and liabilities are
software modifications of $870, re-branding costs of $510 and other costs of
$2,159 incurred in connection with the Company's business plan to integrate
Standard's operations.
The following unaudited pro forma results of operations for the
six-month period ended June 30, 1998 assume the acquisition of Standard occurred
at the beginning of the period presented:
SIX MONTHS ENDED
JUNE 30, 1998
-------------
Net revenue...................................... $ 93,407
Loss before extraordinary item................... (17,446)
This pro forma information does not purport to be indicative of the
results that actually would have been obtained if the combination had taken
place at the beginning of the period presented and is not intended to be a
projection of future results.
On January 22, 1998, the Company acquired the assets of Huger Parking
Company, LLC, d/b/a Dixie Parking, for $1,000 in cash at closing and $3,250 in
notes payable. On May 1, 1998, the Company acquired the remaining 76% interest
in Executive Parking Industries LLC, through the acquisition of all of the
outstanding capital stock of S&S Parking, Inc., the sole asset of which was such
76% interest in EPI, for $7,020 in cash. In addition, on June 1, 1998,
APCOA/Standard acquired all of the outstanding capital stock of Century Parking,
Inc., and Sentry Parking Corporation, for $5,168 in cash at closing and $1,000
payable on the third anniversary of the closing date. On September 1, 1998,
APCOA/Standard acquired the operations of Virginia Parking Service, Inc. in a
stock purchase transaction for $3,114 in cash, including direct costs, and up to
$1,250 in notes payable over five years with interest at the prime rate. All of
these acquisitions have been accounted for under the purchase method,
accordingly operating results of the acquired companies have been included in
the Consolidated Financial Statements from the date of acquisition. The
historical operating results of the businesses prior to acquisition were not
material to the consolidated results of the Company.
On April 1, 1999, the Company acquired the assets of Pacific Rim
Parking, Inc. in Los Angeles for $750 in cash and up to $750 in non-interest
bearing notes payable over five years. On May 1, 1999 the Company acquired
various contracts of System Parking Inc. located in Atlanta for $250 in cash.
Effective as of July 1, 1999 the Company acquired all of the outstanding stock
of Universal Park Holdings Inc. operating under the names, U-Park and Select
Valet Parking, in Vancouver B.C. for $1,130 plus a multiple of EBITDA on a
future earn-out as defined in the purchase agreement. These acquisitions have
been accounted for under the purchase method. The historical operating results
of the businesses prior to acquisition were not material relative to the
consolidated results of APCOA/Standard.
3. RESTRUCTURING AND OTHER UNUSUAL COSTS
In conjunction with the March 1998 acquisition of Standard (See Note 2),
the Company adopted a business plan which included consolidating the Company's
headquarters in Chicago and company staff reductions. Through June 30, 1999,
restructuring and other unusual costs aggregating $18,460 have been recorded in
connection with the implementation of this plan. Of the $15,860 cash component
of this total, $14,887 has been disbursed through June 30, 1999, and it is
expected that the remainder will be disbursed by the end of 1999.
Included in "Restructuring and other unusual costs" in the accompanying
Condensed Consolidated Statements of Operations for the six months ended June
30, 1999 and 1998 are the following:
7
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Employee severance costs.................................. $ -- $ 5,400
Employee relocation costs................................. -- 5,000
Impairment of assets that will no longer be used
(non-cash expenses).................................... -- 2,400
Increase in insurance reserves............................ -- 1,000
Incremental integration costs and other................... 410 300
------------- -------------
$ 410 $ 14,100
============= =============
</TABLE>
Employee severance costs consist of cash compensation and related
expenses to 54 people for whom employment was terminated. Employee relocation
costs relate to the relocation and consolidation of the headquarters of the
Company, the relocation of two major field offices, moving Cleveland
headquarters staff members to Chicago and other relocations within the field
organization. The increase in insurance reserves results from a buyout of the
insurance program of APCOA in connection with the combination of APCOA and
Standard insurance programs. The impairment and abandonment of assets that will
no longer be used consists of the write-off of capitalized organization costs
and leasehold improvements. Other incremental integration costs associated with
the restructuring plan that do not qualify as exit costs are expensed as
incurred and included in "Restructuring and other unusual costs" in the
Condensed Consolidated Statements of Operations. These integration costs relate
primarily to actions to facilitate the accounting system consolidation and
activities to realign and centralize administrative and other support functions.
4. BORROWING ARRANGEMENTS
APCOA/Standard's $140,000 9 1/4% Senior Subordinated Notes were issued
in September of 1998 and are due in March of 2008. The Notes are registered with
the Securities and Exchange Commission. The Notes were exchanged for
unregistered notes with substantially identical terms, which had been issued
earlier in 1998 to finance the acquisition of Standard and retire certain
existing indebtedness, and for general working capital purposes.
Holdings' 11 1/4% Senior Discount Notes were issued in September of
1998 and are due in March of 2008. The Discount Notes are registered with the
Securities and Exchange Commission. The issuance was exchanged for unregistered
notes with substantially identical terms, which had been issued earlier in 1998
to finance the March 1998 acquisitions of Standard (see Note 2).
In March of 1998, the Company entered into a $40,000 revolving Senior
Credit Facility (the "Facility") with a group of banks. Rates of interest on
borrowings against the Facility are indexed to certain key variable rates. At
June 30, 1999, borrowings under the Facility aggregated $10,700 and there were
letters of credit outstanding against the Facility of $1,250.
The Notes and Senior Credit Facility contain covenants that limit
APCOA/Standard from incurring additional indebtedness and issuing preferred
stock, restrict dividend payments, limit transaction with affiliates and
restrict certain other transactions. Substantially all of APCOA/Standard's net
assets are restricted under these provisions and covenants (See Note 5).
In connection with the early extinguishment of debt in March 1998, the
Company recorded an extraordinary loss of $2,816. The extraordinary loss
represents the unamortized balance of debt issuance costs related to APCOA's
previous credit agreement of $727 and a prepayment fee of $2,089 related to
APCOA's previous credit agreement.
5. SUBSIDIARY GUARANTORS
All of the Company's direct or indirect wholly owned domestic
subsidiaries, discussed in Note 4, other than inactive subsidiaries, fully,
unconditionally, jointly and severally guarantee the Senior Subordinated Notes.
Separate financial statements of the guarantor subsidiaries are not separately
presented because, in the opinion of management, such financial statements are
not material to investors. The non-guarantor subsidiaries include joint
ventures, wholly owned subsidiaries of the Company organized under the laws of
foreign jurisdictions and inactive subsidiaries, all of which are included in
the consolidated financial statements. The following is summarized combining
financial information for the Company, the guarantor subsidiaries of the Company
and the non-guarantor subsidiaries of the Company:
8
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<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
APCOA SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
----- ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
- ------------------
JUNE 30, 1999
Cash and cash equivalents.................. $ 2,913 $ 4,919 $ (1,273) $ - $ 6,559
Notes and accounts receivable.............. 24,008 5,497 4,739 - 34,244
Current assets............................. 27,278 12,214 3,839 - 43,331
Leaseholds and equipment, net.............. 16,751 9,936 5,062 - 31,749
Cost in excess of net assets acquired, net. 18,691 90,229 791 - 109,711
Investment in subsidiaries................. 109,676 - - (109,676) -
Total assets............................... 188,025 117,820 11,394 (109,676) 207,563
Accounts payable........................... 12,266 295 1,750 - 14,311
Current liabilities........................ 34,314 4,236 6,910 - 45,460
Long-term borrowings, excluding current 153,346 659 4,244 - 158,249
portion..................................
Redeemable preferred stock................. 46,657 - - - 46,657
Common stock subject to put/call rights.... 4,589 - - - 4,589
Total stockholders' equity (deficit)....... (59,111) 111,017 (251) (109,676) (58,021)
Total liabilities and stockholders' equity 188,025 117,820 11,394 (109,676) 207,563
(deficit)................................
DECEMBER 31, 1998
Cash and cash equivalents.................. $ 10,784 $ 7,177 $ 1,222 $ -- $ 19,183
Notes and accounts receivable.............. 27,406 3,657 1,576 -- 32,639
Current assets............................. 38,886 11,968 3,774 -- 54,628
Leaseholds and equipment, net.............. 12,129 10,086 5,403 -- 27,618
Cost in excess of net assets acquired, net. 18,966 88,961 814 -- 108,741
Investment in subsidiaries................. 107,293 -- -- (107,293) --
Total assets............................... 193,411 118,881 11,770 (107,293) 216,769
Accounts payable........................... 11,235 6,390 559 -- 18,184
Current liabilities........................ 40,757 16,022 6,968 -- 63,747
Long-term borrowings, excluding current 142,716 277 4,499 -- 147,492
portion..................................
Redeemable preferred stock................. 44,174 -- -- -- 44,174
Common stock subject to put/call rights.... 4,589 -- -- -- 4,589
Total stockholders' equity (deficit)....... (48,710) 101,544 (449) (107,293) (54,908)
Total liabilities and stockholders' equity 193,411 118,881 11,770 (107,293) 216,769
(deficit)................................
INCOME STATEMENT DATA:
- ---------------------
THREE MONTHS ENDED JUNE 30, 1999
Parking Revenue............................ $ 24,723 $ 26,772 $ 11,335 $ - $ 62,830
Gross profit............................... 5,654 5,946 2,075 - 13,675
Restructuring and other unusual costs...... 260 - - - 260
Depreciation and amortization.............. 1,248 811 292 - 2,351
Operating income........................... 1,516 530 1,508 - 3,554
Interest expense, net...................... 3,974 (28) 118 - 4,064
Equity in earnings of subsidiaries......... 1,736 - - (1,736) -
Net income (loss).......................... (730) 636 1,100 (1,736) (730)
THREE MONTHS ENDED JUNE 30, 1998
Parking Revenue............................ $ 20,448 $ 19,409 $ 9,667 $ - $ 49,524
Gross profit............................... 5,018 5,109 530 - 10,657
Depreciation and amortization.............. 834 812 270 - 1,916
Operating income (loss).................... 98 2,830 (88) - 2,840
Interest expense, net...................... 2,972 (10) 171 - 3,133
Equity in earnings of subsidiaries......... (2,472) - - 2,472 -
Net income (loss).......................... (431) (2,840) (367) (2,472) (431)
SIX MONTHS ENDED JUNE 30, 1999
Parking Revenue............................ $ 51,642 $ 50,416 $ 21,641 $ - $ 123,699
Gross profit............................... 12,338 11,728 2,579 - 26,645
Restructuring and other unusual costs...... 410 - - - 410
Depreciation and amortization.............. 2,213 1,418 519 - 4,150
Operating income........................... 4,631 1,410 1,528 - 7,569
Interest expense, net...................... 7,382 (1) 278 - 7,659
Equity in earnings of subsidiaries......... 2,337 - - (2,337) -
Net income (loss).......................... (630) 1,412 926 (2,337) (630)
SIX MONTHS ENDED JUNE 30, 1998
Parking Revenue............................ $ 38,815 $ 20,463 $ 19,570 $ - $ 78,848
Gross profit............................... 8,691 5,440 1,754 - 15,885
Depreciation and amortization.............. 1,600 840 531 - 2,971
Restructuring and other unusual costs...... 14,100 - - - 14,100
Operating income (loss).................... (13,968) 3,024 397 - (10,547)
Interest expense, net...................... 3,704 (10) 327 - 4,021
Equity in earnings of subsidiaries......... (2,885) - - 2,855 -
Net income (loss).......................... (17,695) 3,034 (178) (2,855) (17,695)
</TABLE>
9
<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C> <C>
STATEMENT OF CASH FLOW DATA:
SIX MONTHS ENDED JUNE 30, 1999
Net cash used in operating activities...................... ($ 11,871) ($ 763) ($ 2,303) $ -- ($ 14,937)
Investing activities:
Purchase of leaseholds and equipment..................... (2,844) (1,495) -- (4,339)
Purchase of leaseholds and equipment by joint -- -- (192) -- (192)
ventures...............................................
Businesses acquired ..................................... (1,426) -- -- -- (1,426)
Other ................................................... (920) -- -- -- (920)
---------- -------- ------- ------- ---------
Net cash used in investing activities...................... (5,190) (1,495) (192) -- (6,877)
Financing activities:
Proceeds from long-term borrowings....................... 10,700 -- -- -- 10,700
Payments on long-term borrowings......................... (1,510) -- -- -- (1,510)
---------- -------- ------- ------- ---------
Net cash provided by financing activities ................. 9,190 -- -- -- 9,190
SIX MONTHS ENDED JUNE 30, 1998
Net cash provided by (used in) operating activities........ ($ 12,230) $ 1,253 $ 518 - ($10,459)
Investing activities:...................................... - - - - -
Purchase of leaseholds and equipment..................... (2,010) (546) - - (2,556)
Purchase of leaseholds and equipment by joint.......... - - (274) (274)
ventures...................................
Businesses acquired ..................................... (85,663) 4,084 - - (81,579)
Other ................................................... (491) - - - (491)
Net cash provided by (used in) investing activities........ (88,164) 3,538 (274) - (84,900)
Financing activities:
Proceeds from long-term borrowings ...................... 148,949 - - - 148,949
Payments on long-term borrowings ........................ (41,645) - - - (41,645)
Payments on debt issuance costs.......................... (6,180) - - - (6,180)
Payments on joint venture debt........................... - - (273) - (273)
Proceeds from issuance of preferred stock................ 40,683 - - - 40,683
Redemption of redeemable preferred stock................. (8,000) - - - (8,000)
Net cash provided by (used in) financing activities........ 133,807 - (273) - 133,534
</TABLE>
10
<PAGE> 11
PART I FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
AP Holdings ("Holdings") is a subsidiary of Holberg Industries, Inc.
("Holberg"), which owns 84% of the outstanding voting stock and 100% of the
preferred stock of APCOA/Standard Parking, Inc. ("APCOA/Standard" or "the
Company"), formerly known as APCOA, Inc. ("APCOA"). APCOA/Standard accounts for
all of Holdings' assets and Holdings conducts substantially all of its business
through APCOA/Standard.
APCOA/Standard operates in a single reportable segment operating
parking facilities under two types of arrangements: management contracts and
leases. Under a management contract, APCOA/Standard typically receives a base
monthly fee for managing the property, and may also receive an incentive fee
based on the achievement of facility revenues above a base amount. In some
instances, APCOA/Standard also receives certain fees for ancillary services.
Typically, all of the underlying revenues, expenses and capital expenditures
under a management contract flow through to the property owner, not to
APCOA/Standard. Under lease arrangements, APCOA/Standard generally pays to the
property owner either a fixed annual rental, a percentage of gross customer
collections or a combination thereof. APCOA/Standard collects all revenues under
lease arrangements and is responsible for most operating expenses, but it is
typically not responsible for major maintenance or capital expenditures. As of
June 30, 1999, APCOA/Standard operated approximately 74% of its 1,704 parking
facilities under management contracts and approximately 26% under leases.
Parking services revenue--leases. Lease parking services revenues
consist of all gross customer collections received at a leased facility.
Parking services revenue--management contracts. Management contract
revenues consist of management fees, including both fixed and revenue-based, and
fees for ancillary services such as accounting, equipment leasing, consulting,
and other value-added services with respect to managed locations, but exclude
gross customer collections at such locations. Management contracts generally
provide APCOA/Standard a management fee regardless of the operating performance
of the underlying facility.
Cost of parking services--leases. Cost of parking services under lease
arrangements consist of (i) contractual rental fees paid to the facility owner
and (ii) all operating expenses incurred in connection with operating the leased
facility. Contractual fees paid to the facility owner are based on either a
fixed contractual amount or a percentage of gross revenue, or a combination
thereof. Generally, under a lease arrangement APCOA/Standard is not responsible
for major capital expenditures or property taxes.
Cost of parking services--management contracts. Cost of parking
services under management contracts is generally passed through to the facility
owner, therefore these costs are not included in the results of operations of
the Company. Several APCOA/Standard contracts, however, require APCOA/Standard
to pay for certain costs that are offset by larger management fees. These
contracts tend to be large airport properties with high cost structures.
General and administrative expenses. General and administrative
expenses include primarily salaries, wages, travel and office related expenses
for the headquarters and field office and supervisory employees.
SUMMARY OF OPERATING FACILITIES
The following table reflects the Company's facilities at the end of the
periods indicated:
June 30, 1999 December 31, 1998 June 30, 1998
------------- ----------------- -------------
Managed facilities........... 1,268 1,190 1,013
Leased facilities............ 436 446 359
-------- -------- ---------
Total facilities............. 1,704 1,636 1,372
======== ======== =========
The Company's strategy is to add locations in core cities where a
concentration of locations improves customer service levels and operating
margins. In general, contracts added as set forth in the table above followed
this strategy. The decline in the number of leased facilities in the first
half of 1999, are the result of the conversion of 6 locations from leases to
management contracts and the net loss of 4 other lease locations.
11
<PAGE> 12
RESULTS OF OPERATIONS
Gross customer collections consist of gross receipts collected at all
leased and managed properties, including unconsolidated affiliates. Gross
customer collections increased $72.4 million, or 27.2%, to $339.0 million in the
second quarter of 1999 compared to $266.6 million in the second quarter of 1998.
This increase is attributable to the addition of 332 locations during the
period. Gross customer collections increased $216.4 million or 49.3% to $655.6
million in the first six months of 1999 compared to $439.2 million in the first
six months of 1998. This increase is attributable $120.9 million to the
combination with Standard and $95.5 million to the addition of other locations
during the period.
In analyzing gross margins of APCOA/Standard, it should be noted that
the cost of parking services incurred in connection with the provision of
management services is generally paid by the clients. Margins for lease
arrangements are significantly impacted by variables other than operating
performance, such as variability in parking rates in different cities and widely
varying space utilization by parking facility type.
The following should be read in conjunction with the Condensed
Consolidated Financial Statements and notes thereto in Item 1.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Parking services revenue--leases. Lease revenue increased $10.0
million, or 24.6% to $50.6 million in the second quarter of 1999 as compared to
$40.6 million in the second quarter of 1998. This resulted from the net addition
of 77 leases through internal growth and acquisitions completed in 1998 and
1999. (See Note 2 of the Notes to Condensed Consolidated Financial Statements.)
Parking services revenue--management contracts. Management contract
revenue increased $3.3 million, or 37.1%, to $12.2 million in the second quarter
of 1999 as compared to $8.9 million in the second quarter of 1998. This resulted
from the net addition of 255 management contracts through internal growth and
other 1998 and 1999 acquisitions.
Cost of parking services--leases. Cost of parking for leases increased
$8.6 million, or 23.6%, to $44.9 million for the second quarter of 1999 from
$36.3 million in the second quarter of 1998. This increase resulted from the
addition of a net total of 77 new leases through internal growth and
acquisitions. Gross margin for leases improved to 11.4% for the second quarter
of 1999 compared to 10.6% for the second quarter of 1998.
Cost of parking services--management contracts. Cost of parking for
management contracts increased $1.7 million, or 67.9%, to $4.3 million for the
second quarter of 1999 from $2.6 million in the second quarter of 1998. This
increase resulted from the addition of a net total of 255 new contracts through
internal growth and acquisitions. Gross margin for management contracts declined
to 64.8% in the second quarter of 1999 compared to 71.3% for the second quarter
of 1998. Most management contracts have no cost of parking services related to
them as all costs are reimbursable to the Company. However, several contracts
(primarily large airport properties and several urban locations), require the
Company to pay for certain costs which are offset by larger management fees. The
increase in cost of parking management contracts was related to the addition of
several contracts of this type.
General and administrative expenses. General and administrative
expenses increased $1.6 million, or 27.3%, to $7.5 million for the second
quarter of 1999 as compared to $5.9 million, for the second quarter of 1998.
This increase resulted from costs associated with the acquired companies,
inflation, and investment in the Company's infrastructure in anticipation of
future growth.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Parking services revenue-leases. Lease revenue increased $35.2 million,
or 53.9% to $100.5 million for the first half of 1999 as compared to $65.3
million in the first half of 1998. This resulted from the net addition of 77
leases through internal growth and acquisitions completed in 1998 and 1999.
Parking services revenue-management contracts. Management contract
revenue increased $9.6 million, or 71.1% to $23.2 million for the first half of
1999 as compared to $13.6 million in the first half of 1998. This resulted from
the net addition of 255 management contracts through internal growth and
acquisitions completed in 1998 and 1999.
Cost of Parking services-leases. Cost of parking for leases increased
$30.7 million, or 52.9% to $88.9 million for the first half of 1999 as compared
to $58.2 million for the first half of 1998. Gross margin for leases improved to
11.6% for
12
<PAGE> 13
the first half of 1999 compared to 10.9% for the first half of 1998.
Cost of Parking services-management contracts. Cost of parking for
management contracts increased $3.4 million, of 69.7% to $8.2 million for the
first half of 1999 as compared to $4.8 million for the first half of 1998. Gross
margin for management contracts increased to 64.8% in the first half of 1999
compared to 64.5% for the first half of 1998.
General and administrative expenses. General and administrative
expenses increased $5.2 million, or 55.1%, to $14.5 million for the first half
of 1999 as compared to $9.4 million for the first half of 1998. This increase
resulted from costs associated with the acquired companies, inflation, and
investment in the Company's infrastructure in anticipation of future growth.
Partially offsetting these increases were acquisition related cost savings of
$1.4 million realized in the first half of 1999.
Restructuring and other unusual costs. The Company recorded $14.1
million of restructuring and other unusual costs in the first half of 1998 as
compared to $0.4 million for the first half of 1999. These costs were incurred
in connection with the combination with Standard and a thorough analysis of the
costs associated with implementing the business plan of consolidating the
Company's headquarters in Chicago and costs related to APCOA staff reductions.
The Company recorded $0.3 million of incremental integration costs in the second
quarter of 1999 relating primarily to actions to facilitate the accounting
system consolidation and other support functions in connection with
acquisitions.
COMPARISON OF RESULTS OF OPERATIONS ON A COMBINED BASIS
The following supplementary information is provided to enhance the
analysis of results of operations. The results presented below represent the
combined historical results of APCOA and Standard for the periods presented,
without pro forma adjustments for the impact of the acquisition of Standard.
These combined results do not purport to represent what the actual results would
have been if the acquisition had occurred at the beginning of 1998.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS ENDED ENDED
-----------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross customer collections................... $ 339,000 $ 266,600 $ 655,600 $ 516,100
=========== =========== =========== ===========
Parking services revenue:
Lease contracts......................... $ 50,648 $ 40,638 $ 100,525 $ 77,346
Management contracts.................... 12,182 8,886 23,174 16,061
----------- ----------- ----------- -----------
62,830 49,524 123,699 93,407
Cost of parking services:
Lease contracts......................... 44,873 36,317 88,892 69,341
Management contracts.................... 4,282 2,550 8,162 4,811
----------- ----------- ----------- -----------
49,155 38,867 97,054 74,152
----------- ----------- ----------- -----------
Gross profit................................. 13,675 10,657 26,645 19,255
General and administrative expenses.......... 7,510 5,901 14,516 11,379
----------- ----------- ----------- -----------
Operating income before depreciation,
amortization and restructuring costs.... $ 6,165 $4,756 $12,129 $7,876
=========== =========== =========== ===========
</TABLE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE30, 1998
Parking services revenue--leases. Lease revenue increased $10.0
million, or 24.6% to $50.6 million in the second quarter of 1999 as compared to
$40.6 million in the second quarter of 1998. This resulted from the net addition
of 77 leases through internal growth and acquisitions completed in 1998 and
1999. (See Note 2 of the Notes to Condensed Consolidated Financial Statements.)
Parking services revenue--management contracts. Management contract
revenue increased $3.3 million, or 37.1%, to $12.2 million in the second quarter
of 1999 as compared to $8.9 million in the second quarter of 1998. This resulted
from
13
<PAGE> 14
the net addition of 255 management contracts through internal growth and other
1998 and 1999 acquisitions.
Cost of parking services--leases. Cost of parking for leases increased
$8.6 million, or 23.6%, to $44.9 million for the second quarter of 1999 from
$36.3 million in the second quarter of 1998. This increase resulted from the
addition of a net total of 77 new leases through internal growth and
acquisitions. Gross margin for leases improved to 11.4% for the second quarter
of 1999 compared to 10.6% for the second quarter of 1998.
Cost of parking services--management contracts. Cost of parking for
management contracts increased $1.7 million, or 67.9%, to $4.3 million for the
second quarter of 1999 from $2.6 million in the second quarter of 1998. This
increase resulted from the addition of a net total of 255 new contracts through
internal growth and acquisitions. Gross margin for management contracts declined
to 64.8% in the second quarter of 1999 compared to 71.3% for the second quarter
of 1998. Most management contracts have no cost of parking services related to
them as all costs are reimbursable to the Company. However, several contracts
(primarily large airport properties and several urban locations), require the
Company to pay for certain costs which are offset by larger management fees. The
increase in cost of parking management contracts was related to the addition of
several contracts of this type.
General and administrative expenses. General and administrative
expenses increased $1.6 million, or 27.3%, to $7.5 million for the second
quarter of 1999 as compared to $5.9 million, for the second quarter of 1998.
This increase resulted from costs associated with the acquired companies,
inflation, and investment in the Company's infrastructure in anticipation of
future growth.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Parking services revenue--leases. Lease revenue increased $23.2
million, or 30.0%, to $100.5 million for the first half of 1999 as compared to
$77.3 million in the first half of 1998. This resulted from the net addition of
77 leases through internal growth and acquisitions completed in 1998.
Parking services revenue--management contracts. Management contract
revenue increased $7.1 million, or 44.3%, to $23.2 million for the first half of
1999 as compared to $16.1 million in the first half of 1998. This resulted from
the net addition of 255 management contracts through internal growth and
acquisitions completed in 1998 and 1999.
Cost of parking services--leases. Cost of parking for leases increased
$19.6 million, or 28.2%, to $88.9 million for the first half of 1999 as compared
to $69.3 million for the first half of 1998. Gross margin for leases improved to
11.6% for the first half of 1999 compared to 10.3% for the first half of 1998.
Cost of parking services--management contracts. Cost of parking for
management contracts increased $3.4 million, or 69.7% to $8.2 million for the
first half of 1999 as compared to $4.8 million for the first half of 1998. Gross
margin for management contracts declined to 64.8% in the first half of 1999
compared to 70.0% for the first half of 1998. Most management contracts have no
cost of parking services related to them as all costs are reimbursable to the
Company. However, several contracts (primarily large airport properties and
several urban locations), require the Company to pay for certain costs which are
offset by larger management fees. The increase in cost of parking management
contracts was related to the addition of several contracts of this type.
General and administrative expenses. General and administrative
expenses increased $3.1 million, or 27.6%, to $14.5 million for the first half
of 1999 as compared to $11.4 million, for the first half of 1998. This increase
resulted from costs associated with the acquired companies, inflation, and
investment in the Company's infrastructure in anticipation of future growth.
Partially offsetting these increases were acquisition-related costs savings of
$1.2 million realized in the first half of 1999.
Restructuring and other unusual costs. The Company recorded $14.1
million of restructuring and other unusual costs in 1998 as compared to $0.4
million for the first half of 1999. These charges were incurred in connection
with the combination with Standard and a thorough analysis of the costs
associated with implementing the business plan of consolidating the Company's
headquarters in Chicago and costs related to APCOA staff reductions. The Company
recorded $0.3 million of incremental integration costs in the second quarter of
1999 relating primarily to actions to facilitate the accounting system
consolidation and other support functions in connection with acquisitions.
14
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
As a result of day-to-day activity at the parking locations,
APCOA/Standard collects significant amounts of cash. Under lease contracts, this
revenue is deposited into local APCOA/Standard bank accounts, with a portion
remitted to the clients in the form of rental payments according to the terms of
the leases. Under management contracts, some clients require APCOA/Standard to
deposit the daily receipts into a local APCOA/Standard bank account. Others
require the deposit into a client account, and some have a segregated account
for the receipts and disbursements of the property.
Locations with revenues deposited into the APCOA/Standard banks enable
the Company to operate with a negative working capital. This negative working
capital arises from the liability that is created for the amount of revenue that
will be remitted to the clients in the form of rents or net profit distributions
subsequent to month end, after the books are closed and reconciled. Since the
Company operates with a revolving Senior Credit Facility, all funds held for
future remittance to the clients are used to reduce the line until the payments
are made to the clients.
Locations with revenues deposited into client accounts or segregated
accounts can, depending upon timing of rent or net profit distributions, result
in significant amounts of cash being temporarily inaccessible to the Company for
use for operating needs. Additionally, the ability to utilize cash deposited
into local APCOA/Standard accounts is dependent upon the movement of that cash
into the Company's corporate account. For these reasons, the Company from time
to time is required, despite significant cash balances, to utilize its Senior
Credit Facility to fund immediate working capital needs. In April 1999, the
Company began an initiative to streamline its cash management and receivables
collection processes by standardizing the procedures used by all acquired
companies.
The Company had cash and cash equivalents of $6.6 million at June 30,
1999 compared to $19.2 million at December 31, 1998.
The Company's Senior Credit Facility ("the Facility") provides for
borrowings of up to $40 million at variable rates based, at the Company's
option, either on LIBOR, the overnight federal funds rate, or the bank's base
rate. From time to time the Company utilizes the Facility to provide
readily-accessible cash for working capital purposes. The Facility includes
covenants that limit APCOA/Standard from incurring additional indebtedness,
issuing preferred stock or paying dividends, and contains certain other
restrictions. At June 30, 1999, borrowings against the Facility aggregated $10.7
million, and letters of credit outstanding against the Facility aggregated $1.3
million.
The Company believes that cash flow from operating activities, existing
cash and cash equivalents, and borrowings under the Facility will be adequate to
meet the Company's short-term liquidity requirements prior to maturity of its
long-term indebtedness, although no assurance can be provided in this regard.
15
<PAGE> 16
If the Company identifies investment opportunities requiring cash in
excess of the Company's operating cash flows and existing cash, the Company may
borrow under the Facility or may seek additional sources of capital including
the sale or issuance of common stock. The Company has in the past and expects in
the future to pursue a strategy of growth through acquisition. On January 22,
1998, the Company acquired the assets of Dixie for $1.0 million in cash and
notes aggregating $3.2 million. On May 1, 1998, the Company acquired the
remaining 76% interest in Executive Parking Industries, LLC, through acquisition
of its parent company for $7.0 million in cash. On June 1, 1998, the Company
completed the acquisition of Century Parking and Sentry Parking for
consideration consisting of $5.2 million in cash at closing and $1.0 million
payable on the third anniversary of the closing date. In addition, on September
1, 1998, the Company acquired the capital stock of Virginia Parking Services
Inc. for $2.7 million in cash including direct costs, and up to $1.3 million in
notes. On April 1, 1999, the Company acquired the assets of Pacific Rim Parking,
Inc. ("Pacific Rim") in Los Angeles for $0.8 million in cash and up to $0.8
million in non-interest bearing notes payable over five years. On May 1, 1999
the company acquired various contracts of System Parking Inc. located in Atlanta
for $250 in cash. Effective as of July 1, 1999, the company acquired all of the
outstanding stock of Universal Park Holdings Inc. ("Universal Park") operating
under the names U-Park and Select Valet Parking, in Vancouver B.C. for $1,130
plus a multiple of EBITDA on a future earn-out as defined in the purchase
agreement. These acquisitions have been accounted for under the purchase method.
The historical operating results of the businesses prior to acquisition were not
material relative to the consolidated results of APCOA/Standard.
The Company is currently in negotiations with respect to several
possible additional acquisitions, none of which are "probable" as of the date
hereof. There can be no assurance as to the Company's ability to effect future
acquisitions, nor as to the affect that any such acquisitions will have on the
Company's operations, financial condition and profitability.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Net cash used in operating activities totaled $14.9 million for the
first half of 1999 compared to $10.5 million for the first half of 1998. Cash
used during 1999 included $5.5 million for the purchase of an insurance tail
policy to cover claims for all years prior to 1999 under APCOA's previous
insurance program, $5.0 million for cash restructuring charges and increases in
accounts receivable relating to acquired contracts and existing locations of
$1.6 million.
Cash used in investing activities totaled $6.9 million for the first
half of 1999 compared to $84.9 million for the first half of 1998. Cash used in
the first half of 1999 included the acquisitions of the assets of Pacific Rim in
Los Angeles for $750, various contracts of System Parking in Atlanta for $250,
and the buy-out of a regional office lease in Los Angeles for $426. In addition,
cash used in investing in the first half of 1999 included the furnishing and
improvement of the Company's combined office space in Chicago, investment in
management information system enhancements and capital investments to secure
and/or extend leased facilities. Cash used in investing activities in the first
half of 1998 included the acquisitions of Standard and Huger Parking Company,
LLC d/b/a Dixie Parking ("Dixie"). In addition, the Company acquired the
remaining 76% interest in Executive Parking Industries LLC, and the acquisition
of the outstanding capital stock of Century Parking Inc. and Sentry Parking
Corporation.
Cash generated from financing activities totaled $9.2 million in the
first half of 1999 compared to $133.5 million in the first half of 1998. The
1999 activity included $10.7 million in borrowings from the revolving Senior
Credit Facility, partially offset by repayments on long-term borrowings of $1.5
million. The 1998 activity included $183.5 million of proceeds from the issuance
of debt, $41.9 million in debt repayments, and $8.0 million for the redemption
of preferred stock.
YEAR 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as a year other than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations including, among other things, a temporary inability
to process transactions or engage in normal business activities.
In conjunction with the integration of the Company's operations
described above, the Company's business plan includes the integration of
existing information and operating systems of the acquired companies with those
of APCOA. By the end of January 1999, substantially all of the accounting for
the Company's five regions was converted to the APCOA management information
systems. At the same time, the Company has fully integrated field management and
finalized a combined aesthetics program, which will create a common look and
theme for all of the Company's parking facilities. This program is being
implemented over a period of time based upon client input and approval.
16
<PAGE> 17
The core business applications and technical infrastructure that will
continue in use when the integration is completed have been tested and are
believed to be Year 2000 compliant. The Company has not, however, evaluated the
degree of compliance of the various systems that will be discontinued. If the
Company does not complete the remainder of its planned integration within the
scheduled time frame, the impact could potentially be material.
The Company has no material systems that interface directly with those
of third parties. The Company does, however, rely on certain third party vendors
for routine transaction processing such as the clearing of checks and payment of
certain payroll. The Company is monitoring the degree of compliance of these
vendors, and those who are unable to provide assurance of compliance will be
replaced prior to the year 2000. The Company anticipates no difficulty in
locating appropriate replacement vendors should it become necessary, and the
impact to the Company is not expected to be material.
The Company expects to incur no significant costs as a direct result of
the Year 2000 issue.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended which are
intended to be covered by the safe harbors created thereby. Those statements
include, but may not be limited to, the discussions of the Company's
expectations concerning its future profitability, the discussion of the
Company's strategic relationships, discussions about Year 2000 compliance plans,
and the Company's operating and growth assumptions regarding certain matters,
including anticipated cost savings, in preparation of the unaudited financial
information. Investors are cautioned that forward-looking statements involve
risks and uncertainties. Although the Company believes that the assumptions
underlying the forward-looking statements contained herein are reasonable, any
of the assumptions could be inaccurate and, therefore, there can be no assurance
that the forward-looking statements included will prove to be accurate. In light
of the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
CAUTIONARY STATEMENTS
Holdings and the Company continue to be subject to certain factors that
could cause Holdings and the Company's results to differ materially from
expected and historical results (see the "Risk Factors" set forth in the
Company's Registration Statement on Form S-4 (No. 333-50433) filed on April 17,
1998, as amended on June 9, 1998, July 15, 1998, August 11, 1998 and August 14,
1998 (the "Registration Statement)).
PART I FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Holdings' and the Company's primary market risk exposure consists of risk
related to changes in interest rates. Historically, Holdings and the Company
have not used derivative financial instruments for speculative or trading
purposes.
The Company has a $40 million revolving variable rate Senior Credit
Facility (see Note 4 of the Notes to the Condensed Consolidated Financial
Statements). Interest expense on such borrowing is sensitive to changes in the
market rate of interest. If the Company were to borrow the entire $40 million
available under the Facility, a 1% increase in the average market rate would
result in an increase in the Company's annual interest expense of $0.4 million.
This amount is determined by considering the impact of the hypothetical
interest rates on the Company's borrowing cost, but does not consider the
effects of the reduced level of overall economic activity that could exist in
such an environment. Due to the uncertainty of the specific changes and their
possible effects, the foregoing sensitivity analysis assumes no changes in the
Company's financial structure.
17
<PAGE> 18
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Amended and Restated Certificate of Incorporation of
the Company (incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form S-4
(No. 333-50433) filed on April 17, 1998, as amended on
June 9, 1998, July 15, 1998, August 11, 1998 and August
14, 1998 (the "Registration Statement")).
3.2 Amended and Restated By-Laws of the Company
(incorporated by reference to Exhibit 3.2 to the
Registration Statement).
4.1 Indenture, dated as of March 30, 1998, amended as of
July 6, 1998, September 21, 1998 and January 12, 1999
by and among the Company, the Subsidiary Guarantors and
State Street Bank and Trust Company (incorporated by
reference to Exhibit 4.1 to the Registration
Statement).
4.2 Form of New Note (included as Exhibit A to Exhibit 4.1).
4.3 Form of New Note Guarantee (included as Exhibit D to
Exhibit 4.1).
4.4 Supplemental Indenture, dated as of January 12, 1999 by
and among APCOA LaSalle Parking Company, LLC, the
Company, and State Street Bank and Trust Company
(incorporated by reference to Exhibit 4.4 to the
Company's Annual Report on Form 10K filed for December
31, 1998).
4.5 Supplemental Indenture, dated as of September 21, 1998,
among Virginia Parking Service, Inc., the Company, and
State Street Bank and Trust Company (incorporated by
reference to Exhibit 4.5 to the Company's Annual Report
on Form 10K filed for December 31, 1998).
4.6 Supplemental Indenture, dated as of July 6, 1998, among
S&S Parking, Century Parking, Inc. and Sentry Parking
Corporation, the Company, and State Street Bank and
Trust Company (incorporated by reference to Exhibit 4.6
to the Company's Annual Report on Form 10K filed for
December 31, 1998).
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
No current report on Form 8-K was filed by Holdings and
the Company during the quarter ended June 30, 1999.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements 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:
AP Holdings, Inc.
(Registrant)
August 9, 1999
By: /s/ Walter Stuelpe
---------------------------------------
Walter Stuelpe,
Chief Executive Officer, President and
Director (Principal Executive Officer)
August 9, 1999
By: /s/ Michael J. Celebrezze
---------------------------------------
Michael J. Celebrezze,
Treasurer (Principal Financial and
Accounting Officer)
19
<PAGE> 20
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-4 (No. 333-50433) filed on April
17, 1998, as amended on June 9, 1998, July 15, 1998, August 11, 1998
and August 14, 1998 (the "Registration Statement")).
3.2 Amended and Restated By-Laws of the Company (incorporated by
reference to Exhibit 3.2 to the Registration Statement).
4.1 Indenture, dated as of March 30, 1998, amended as of July 6, 1998,
September 21, 1998 and January 12, 1999 by and among the Company,
the Subsidiary Guarantors and State Street Bank and Trust Company
(incorporated by reference to Exhibit 4.1 to the Registration
Statement).
4.2 Form of New Note (included as Exhibit A to Exhibit 4.1).
4.3 Form of New Note Guarantee (included as Exhibit D to Exhibit 4.1).
4.4 Supplemental Indenture, dated as of January 12, 1999 by and among
APCOA LaSalle Parking Company, LLC, the Company, and State Street
Bank and Trust Company (incorporated by reference to Exhibit 4.4 to
the Company's Annual Report on Form 10K filed for December 31,
1998).
4.5 Supplemental Indenture, dated as of September 21, 1998, among
Virginia Parking Service, Inc., the Company, and State Street Bank
and Trust Company (incorporated by reference to Exhibit 4.5 to the
Company's Annual Report on Form 10K filed for December 31, 1998).
4.6 Supplemental Indenture, dated as of July 6, 1998, among S&S Parking,
Century Parking, Inc. and Sentry Parking Corporation, the Company,
and State Street Bank and Trust Company (incorporated by reference
to Exhibit 4.6 to the Company's Annual Report on Form 10K filed for
December 31, 1998).
27.1 Financial Data Schedule.
20
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> AP HOLDINGS, INC.
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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30,091
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<INTEREST-EXPENSE> 10,465
<INCOME-PRETAX> (3,046)
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