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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] 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: 333-50433
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AP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 06-1269403
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
900 N. MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611-1542
(Address of principal executive offices)
(312) 274-2000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE.
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 periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part II of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting and non-voting shares of common
stock held by non-affiliates of the registrant is not applicable as there is not
a public market for such stock. As of March 31, 1999, there were 7,920 shares of
common stock of the registrant outstanding.
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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), which are intended to be covered
by the safe harbors created thereby. Those statements include, but may not be
limited to, the discussions of AP Holdings, Inc. ("AP Holdings") expectations
concerning its future profitability, the discussion of AP Holdings's strategic
relationships, discussions about Year 2000 compliance plans, and AP Holdings
operating and growth assumptions regarding certain matters, including
anticipated cost savings. Investors are cautioned that forward-looking
statements involve risks and uncertainties. Although AP Holdings' 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 AP Holdings or any other person
that the objective and plans of AP Holdings will be achieved.
ITEM 1. BUSINESS
GENERAL
AP Holdings is a subsidiary of Holberg Industries, Inc. ("Holberg"), which
owns 84% of the outstanding voting stock of APCOA/Standard Parking, Inc.
("APCOA/Standard" or "the Company"), formerly known as APCOA, Inc. ("APCOA").
APCOA/Standard accounts for all of AP Holdings' assets and AP Holdings conducts
substantially all of its business through APCOA/Standard. APCOA/Standard is a
leading national provider of parking facility management services. The Company
provides on-site management services at multi-level and surface parking
facilities in the two major markets of the parking industry: urban parking and
airport parking. The Company manages 1,636 parking facilities, containing
approximately 800,000 parking spaces in over 60 cities across the United States
and Canada. AP Holdings' gross customer collections, parking services revenue,
gross profit and net income (loss) for the years ended December 31, 1998 and
1997 were $1,026.1 and $476.2 million, $195.5 and $117.7 million, $40.3 and
$22.9 million and ($27.0) and $1.9 million, respectively.
The Company believes that its superior management services coupled with its
focus on increasing market share in select core cities helps to maximize
profitability per parking facility. The Company believes that it enhances its
leading position by providing: (i) Ambiance in Parking(R), an approach to
parking that includes a number of on-site, value-added services and amenities;
(ii) state-of-the-art information technology, including Client View(R), a
proprietary client reporting system which allows the Company to provide clients
with real-time access to site-level financial and operating information; and
(iii) award-winning training programs for on-site employees that promote
customer service and client retention. In addition, the Company believes that it
distinguishes itself from its competitors because of its long-standing
experience in securing contracts, particularly with regard to the airport
parking market.
The Company's diversified client base includes some of the nation's largest
owners and developers of major office building complexes, shopping centers,
sports complexes, hotels and hospitals, in excess of 1,500 locations. In
addition, the Company manages parking operations at 133 locations at 65
airports, including many of the major airports in North America.
The Company does not own any parking facilities and, as a result, the
Company assumes none of the risks of real estate ownership. The Company operates
its clients' parking properties through two types of arrangements: management
contracts and leases. Under a management contract, the Company 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 set amount.
In some instances, the Company also receives certain fees for ancillary
services. Typically, all of the underlying revenues and expenses under a
management contract flow through to the property owner, not to the Company.
Under lease arrangements, the Company generally pays either a fixed annual
rental, a percentage of gross customer collections, or a combination thereof to
the property owner. The Company 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 December 31,
1998, the Company operated approximately 73% of its 1,636 parking facilities
under management contracts and approximately 27% under
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leases. Renewal rates for the Company's management contracts and leases averaged
approximately 95% for the last three years.
THE COMBINATION
Pursuant to the Combination Agreement, dated as of January 15, 1998 by and
among Myron C. Warshauer, Stanley Warshauer, Steven A. Warshauer, Dosher
Partners, L.P., a Delaware limited partnership, SP Parking Associates, an
Illinois general partnership, and SP Associates, an Illinois general partnership
(collectively, the "Standard Owners") and APCOA, APCOA acquired (the
"Combination"), on March 30, 1998, all of the outstanding capital stock,
partnership and other equity interests of Standard Parking Corporation, an
Illinois corporation; Standard Auto Park, Inc., an Illinois Corporation;
Standard Parking Corporation MW, an Illinois corporation; Standard Parking,
L.P., a Delaware limited partnership; Standard Parking Corporation IL, an
Illinois corporation; and Standard/Wabash Parking Corporation, an Illinois
corporation (all such entities, collectively, "Standard") for consideration
consisting of $65.0 million in cash, 5.01 shares or 16%, of the common stock of
the Company outstanding as of January 15, 1998, and the assumption of certain
liabilities including a $5.0 million 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 $2.8 million, generally
representing Standard's earnings from January 1, 1998 through the date of the
Combination and Standard's cash on hand at such time.
In connection with the Standard acquisition, on March 30, 1998 the Company
issued $140 million principal amount of 9 1/4% Senior Subordinated Notes due
2008 in a Rule 144A private placement. Effective September 14, 1998 the Company
completed an offer to exchange all the outstanding Senior Subordinated Notes
with new notes with substantially identical terms that are registered under the
Securities Act of 1933.
Upon the closing of the Combination, the Company entered into a $40.0
million secured revolving Senior Credit Facility with The First National Bank of
Chicago. Borrowings under the Senior Credit Facility bear interest at variable
rates based, at the Company's option, either on LIBOR, the federal funds rate,
or the Agent's base rate.
Also in connection with the Combination, AP Holdings contributed $40.7
million of cash to the Company in exchange for $40.7 million initial liquidation
preference of new preferred stock of the Company. The contribution was financed
through AP Holdings' offering of $70.0 million in aggregate principal amount of
its 11 1/4% Senior Discount Notes due 2008.
OTHER ACQUISITIONS
On January 22, 1998 the Company acquired the assets of Huger Parking
Company, LLC, d/b/a Dixie Parking, for $1.0 million in cash and $3.2 million in
notes payable. 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, Inc., a California corporation ("Century Parking"), and
Sentry Parking Corporation, a California corporation ("Sentry Parking"), for
consideration consisting of $5.2 million in cash at closing and up to $1.0
million payable on the third anniversary of the closing date. On September 1,
1998, APCOA/Standard acquired the capital stock of Virginia Parking Service,
Inc., for $2.7 million in cash including direct costs, and up to $1.25 million
in notes.
INDUSTRY OVERVIEW
General. The International Parking Institute, a trade organization of
parking professionals, estimates that as of December, 1997 there were 35,000
parking facilities in the United States generating over $26.0 billion in gross
customer collections. The parking industry is highly fragmented, with over 1,700
commercial parking operators in the United States, as estimated by the Parking
Market Research Company, an independent research company. Industry participants,
the vast majority of which are privately-held companies, consist of relatively
few nationwide companies and a large number of small regional or local
operators, including a substantial number of companies providing parking as an
ancillary service in connection with property management or ownership.
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Clients of parking facility managers include the owners of office buildings,
major airports, shopping centers, sports complexes, hotels and hospitals, which
provide parking to customers.
Operating Arrangements. Parking facilities operate under two general types
of arrangements: management contracts and leases. The general terms and benefits
of these two types of arrangements are as follows:
Management Contracts. Under a management contract, the facility
manager generally receives a base monthly fee for managing the facility and
often receives an incentive fee based on the achievement of facility
revenues above a base amount. Facility managers generally charge fees for
various ancillary services such as accounting, equipment leasing and
consulting. Responsibilities under a management contract include hiring,
training and staffing parking personnel, and providing collections,
accounting, record-keeping, insurance and facility marketing services. In
general, the facility manager is not responsible for structural or
mechanical repairs, and typically is not responsible for providing security
or guard services. Under typical management contracts, the facility owner
is responsible for operating expenses such as taxes, license and permit
fees, insurance premiums, payroll and accounts receivable processing and
wages of personnel assigned to the facility. In addition, the facility
owner is responsible for non-routine maintenance, repair costs and capital
improvements. The typical management contract is for a term of one to three
years (though the owner often reserves the right to terminate, without
cause, on 30 days' notice) and may contain a renewal clause.
Leases. Under a lease arrangement, the parking facility operator
generally pays either a fixed annual rent, a percentage of gross customer
collections, or a combination thereof to the property owner. The parking
facility operator collects all revenues and is responsible for most
operating expenses, but is typically not responsible for major maintenance.
In contrast to management contracts, lease arrangements are typically for
terms of three to ten years and typically contain a renewal term, and
provide for a fixed payment to the facility owner regardless of the
operating earnings of the parking facility. As a result, leased facilities
generally require a longer commitment and a larger capital investment by
the parking facility operator than do managed facilities.
Parking Industry Markets. The parking industry is comprised of two major
markets: urban parking and airport parking. The urban parking market consists of
many sub-markets with differing clients including commercial, office,
residential, event, entertainment, retail, shopping centers, hospitals and
hotels. In contrast, the airport parking market consists of a relatively small
number of clients with large revenue-generating parking operations and needs
that are unique to airport parking facilities.
Industry Growth Dynamics. A number of opportunities for growth exist for
parking facility operators:
Industry Consolidation. There are many opportunities for industry
consolidation, both domestically and abroad. Consolidation among operators
provides opportunity to achieve accelerated growth in the parking industry
because of the limitations on growth in revenues of existing operations.
While some growth in revenues from existing operations is possible through
redesign, increased operational efficiency or increased facility use and
prices, such growth is ultimately limited by the size of a facility and
market conditions.
Privatization of Government-Owned and Operated Facilities. Additional
growth in the industry has been a function of the trend for parking
facility owners to move from owner-operation to outsourcing the management
of operations to private operators. This is particularly true in the case
of privatization of government operations and facilities, which is
resulting in new opportunities for the parking industry. The Company
believes that cities and municipal authorities are increasingly retaining
private firms to operate facilities and parking-related services in an
effort to reduce operating budgets and increase efficiency.
Expanding Relationships with Large Property Managers, Owners and
Developers. Generally, the overall parking industry expansion is created
by new construction of parking facilities by property managers, owners and
developers. Because new construction in the United States slowed in the
late 1980s and has only gradually begun to increase in recent years, growth
for parking facility operators during such period generally resulted from
more established parking facility operators leveraging their relationships
with property managers and owners to take market share from smaller
companies. As new construction of parking
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facilities increases, the Company believes that facility operators with
established relationships with such parking facility developers can
leverage such relationships to capture incremental market share.
BUSINESS STRATEGY AND COMPETITIVE ADVANTAGES
The Company believes its innovative parking facility amenities, services
and management, coupled with its state-of-the-art information technology and
reporting systems, position the Company to enhance its standing as a leading
provider of parking services. Specific elements of the Company's business
strategy and competitive advantages include:
Focus on Core Cities. Part of the Company's business strategy is to
focus on increasing system-wide profitability by maximizing operating
leverage. As part of this strategy, the Company operates in certain core
cities and realizes certain economies of scale, including the ability to
spread administrative overhead costs across a large number of parking
facilities in a single market.
Stable Operating Portfolio. From 1994 to 1998, the Company reduced
exposure to increasing cost of parking services by (i) increasing the
proportion of its management contracts, which generally pass cost of
parking services on to the Company's clients, and (ii) maintaining low
minimum rental commitments under its non-cancelable leases. Additionally,
the Company's average management and lease contract renewal rate over the
last three years was approximately 95%.
Strategic Growth Through Acquisitions. The parking industry is highly
fragmented, with over 1,700 commercial parking operators. In addition to
pursuing individual contracts, the Company is seeking to capitalize on this
industry fragmentation by pursuing a focused acquisition strategy which
includes: (i) acquiring parking management companies within core cities and
targeted growth markets where the Company believes it can attain a
significant market share, and (ii) acquiring larger, regional parking
management companies. APCOA and Standard, combined, have successfully
acquired and integrated eight companies with 419 new facilities over the
past five years.
Leading Client Base. The Company's diversified, long-standing
customer base comprises many of the premier national property management
and ownership organizations in the United States and Canada. The Company is
a market leader in airport parking, operating approximately 133 parking
facilities at 65 airports in the United States and Canada. The Company's
focus on select core cities enables the Company to maintain broader and
stronger relationships with the local client base, which the Company
believes improves its client retention rates and its ability to compete for
new contracts.
Value-Added Services and Award-Winning Information Systems. The
Company believes that it can continue to increase profitability and attract
new clients by providing: (i) Ambiance in Parking(R); (ii) state-of-
the-art information technology, including Client View(R); and (iii)
award-winning training programs for on-site employees. In addition, these
capabilities facilitate development opportunities that typically lead to
long-term lease and management contracts on new facilities.
AMBIANCE IN PARKING(R)
The Company offers a comprehensive package of value-added, on-site parking
services and amenities which the Company characterizes as Ambiance in
Parking(R). The package includes:
Patented Musical Theme Floor Reminder System. The Company's patented
musical theme floor reminder system is designed to help customers remember the
garage level on which they had parked. A different song is played on each floor
of the parking garage. Each floor also displays distinctive signs and graphics
which correspond with the floor's theme. For example, in one garage with U.S.
cities as a theme, songs played include "I Left My Heart in San Francisco" on
one floor and "New York, New York" on a different floor. Other garages have
themes such as college fight songs, broadway musicals, classic movies and
professional sports teams.
Books-To-Go(R) is an audiotape library which is provided free-of-charge for
monthly parkers.
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ParkNet(R) traffic information system allows parking customers to obtain
continuous, site-specific traffic reports relating to current traffic conditions
on area expressways as well as the routes utilized to get from the specific
parking facility to the expressways.
CarCare service program is provided in conjunction with Midas International
Corporation. Parking customers can have their cars picked up from the parking
facility, serviced and returned before the end of the business day.
Standard Parking Exchange(TM) entitles monthly parkers at participating
locations to free parking for one hour per day at other participating locations.
Complimentary Windshield and Headlight Cleaning. During off-peak hours,
the Company's parking attendants clean windshields and headlights of cars and
place a card on the windshield informing the parking customer that this service
has been provided.
Emergency Car Services. The Company offers complimentary services such as
battery starts, lost car assistance, tire inflation, tire change and vehicle
escort service.
STATE-OF-THE-ART INFORMATION TECHNOLOGY
The Company's information technology provides valuable benefits to the
Company's clients. Client View(R), a proprietary Windows(R)-based client
reporting system, allows the Company's clients to access, on a real-time basis,
site-level financial and operating information.
The Company has created advanced information systems that connect local
offices across the country to its corporate office. A centralized staff provides
accounting and administrative expertise and controls that eliminate duplication
of administrative and accounting functions at the field level. ParkStat(R), one
of the Company's proprietary software tools, enhances the performance of parking
facilities managed by the Company. By automatically polling information from
on-site collection devices, ParkStat(R) uses location-specific information to
calculate the impact of pricing alternatives, optimize staffing levels, improve
forecasting and assist in long-range planning. Technological innovations such as
an automated credit card lane and a radio-activated hands-free parking access
system allow fast and hassle-free service for parking customers.
COMPETITION
The parking industry is fragmented and highly competitive, with limited
barriers to entry. The Company faces direct competition for additional
facilities to manage or lease and the facilities currently operated by the
Company face competition for employees and customers. The Company competes with
a variety of other companies to add new operations. Although there are
relatively few large, national parking companies that compete with the Company,
developers, hotel companies, and national financial services companies also have
the potential to compete. Municipalities and other governmental entities also
operate parking facilities that compete with the Company. The Company also faces
competition from local owner-operators of facilities who are potential clients
for the Company's management services. Construction of new parking facilities
near the Company's existing facilities could adversely affect the Company's
business.
REGULATION
The Company's business is not substantially affected by direct governmental
regulation, although parking facilities are sometimes directly regulated by both
municipal and state authorities. The Company is affected by laws and regulations
(such as zoning ordinances) that are common to any business that deals with real
estate and by regulations (such as labor and tax laws) that affect companies
with a large number of employees. In addition, several state and local laws have
been passed in recent years that encourage car pooling and the use of mass
transit, including, for example, a Los Angeles, California law prohibiting
employers from reimbursing employee parking expenses. Laws and regulations that
reduce the number of cars and vehicles being driven could adversely impact the
Company's business.
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Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in such property. Such laws typically impose liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. In connection with the operation
of parking facilities, the Company may be potentially liable for any such costs.
Although the Company is currently not aware of any material environmental claims
pending or threatened against it or any of the parking facilities which it
operates, there can be no assurance that a material environmental claim will not
be asserted against the Company or against the parking facilities which it
operates. The cost of defending against claims of liability, or of remediating a
contaminated property, could have a material adverse effect on the Company's
financial condition or result of operations.
Various other governmental regulations affect the Company's operation of
parking facilities, both directly and indirectly, including the ADA. Under the
ADA, all public accommodations, including parking facilities, are required to
meet certain federal requirements related to access and use by disabled persons.
For example, the ADA requires parking facilities to include handicapped spaces,
headroom for wheelchair vans, attendants' booths that accommodate wheelchairs,
and elevators that are operable by disabled persons. When negotiating management
contracts and leases with clients, the Company generally has the property owner
contractually assume responsibility for any ADA liability in connection with the
property; however, there can be no assurance that the property owner has assumed
such liability for any given property and there can be no assurance that the
Company would not be held liable despite assumption of responsibility for such
liability by the property owner. Management believes that the parking facilities
the Company operates are in substantial compliance with ADA requirements.
EMPLOYEES
AP Holdings does not have any paid employees. As of December 31, 1998, the
Company employed approximately 11,700 individuals, including approximately 7,000
full-time and 4,700 part-time employees. The Company believes that its employee
relations are good.
INTELLECTUAL PROPERTY
The APCOA name and logo and the Standard name and logo are registered with
the United States Patent and Trademark Office. In addition, the Company has
registered the names and, as applicable, the logos of all material subsidiaries
and divisions of the Company in the United States Patent and Trademark Office or
the equivalent State registry, including the right to the exclusive use of the
name Central Park in the Chicago metropolitan area. The Company has also
obtained a United States patent for its Multi-Level Vehicle Parking Facility
(the Musical Theme Floor Reminder System) and trademark protection for its
proprietary parker programs, such as Books-To-Go(R) and Ambiance in Parking(R).
Proprietary software developed by the Company, such as Client View(R), Hand Held
Program(R), License Plate Inventory Program(R) and ParkStat(C) are registered in
the United States Copyright Office.
ITEM 2. PROPERTIES
PARKING FACILITIES
The Company operates parking facilities in 38 states, Washington D.C. and
three provinces of Canada pursuant to management contracts or leases. The
Company does not currently own any parking facilities. The following table
summarizes certain information regarding the Company's facilities as of December
31, 1998:
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<TABLE>
<CAPTION>
# LOCATIONS # SPACES
------------------------- -----------------------------
STATES/PROVINCES AIRPORTS AND URBAN CITIES AIRPORT URBAN TOTAL AIRPORT URBAN TOTAL
---------------- --------------------------------- ------- ----- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Alabama Airports......................... 3 3 1,430 1,430
Arizona Phoenix.......................... 17 17 12,423 12,423
British Columbia Vancouver, Victoria.............. 5 5 2,236 2,236
California Los Angeles, Long Beach,
Sacramento, San Diego, San
Francisco, and San Jose, and
Airports......................... 9 393 402 23,940 139,811 163,751
Colorado Colorado Springs, Denver and
Airports......................... 4 16 20 4,813 7,456 12,269
Connecticut Greenwich, Stamford and
Airports......................... 6 7 13 4,501 5,170 9,671
Delaware Wilmington....................... 1 1 500 500
District of Columbia Washington, D.C.................. 42 42 14,611 14,611
Florida Miami, Orlando, Pensacola and
Airports......................... 7 27 34 3,820 12,414 16,234
Georgia Atlanta and Airports............. 2 28 30 2,142 10,548 12,690
Hawaii Honolulu and Airports............ 3 57 60 2,393 19,281 21,674
Idaho Airport.......................... 1 1 376 376
Illinois Chicago and Airports............. 5 173 178 22,505 94,470 116,975
Indiana Fort Wayne, Indianapolis and
Airport.......................... 1 20 21 1,234 4,935 6,169
Kansas Topeka........................... 1 1 310 310
Kentucky Louisville and Airports.......... 2 2 4 7,136 676 7,812
Louisiana New Orleans and Airport.......... 1 54 55 1,302 12,295 13,597
Maine Airports......................... 3 3 1,299 1,299
Maryland Baltimore, Bethesda.............. 23 23 4,971 4,971
Massachusetts Boston, Worcester and Airports... 2 135 137 645 53,254 53,899
Michigan Detroit and Airports............. 6 8 14 17,373 3,447 20,820
Minnesota Minneapolis, Rochester, St. Paul
and Airports..................... 6 47 53 11,550 18,749 30,299
Missouri Kansas City and Airports......... 10 79 89 8,016 13,485 21,501
Montana Great Falls and Airports......... 5 4 9 2,432 1,906 4,338
Nebraska Airport.......................... 1 1 1,361 1,361
Nevada Las Vegas, Reno.................. 5 5 1,618 1,618
New York Buffalo, New York, Rochester, and
Airports......................... 10 15 25 9,312 23,990 33,302
North Dakota Bismarck, Fargo.................. 2 2 1,415 1,415
Ohio Akron, Cleveland, Columbus,
Toledo and Airports.............. 14 93 107 15,953 44,149 60,102
Oklahoma Airport.......................... 1 1 990 990
Ontario Hamilton, Toronto and Airports... 2 38 40 2,000 27,765 29,765
Oregon Airport.......................... 1 1 433 433
Pennsylvania Philadelphia, Pittsburgh and
Airports......................... 2 2 4 1,331 1,181 2,512
Quebec Airports......................... 3 3 9,405 9,405
Rhode Island Providence....................... 6 6 1,899 1,899
South Carolina Airports......................... 4 4 4,232 4,232
South Dakota Airports......................... 2 2 1,508 1,508
Tennessee Memphis, Nashville and
Airports......................... 2 18 20 3,077 7,237 10,314
Texas Houston, Dallas, Fort Worth and
Airports......................... 4 61 65 4,341 44,766 49,107
Virginia Alexandria, Arlington, Richmond,
Virginia Beach and Airports...... 6 115 121 3,468 24,144 27,612
Washington Seattle and Airports............. 2 6 8 822 4,081 4,903
Wisconsin Milwaukee and Airports........... 3 3 6 1,512 2,013 3,525
--- ----- ----- ------- ------- -------
TOTALS........................... 133 1,503 1,636 176,652 617,206 793,858
=== ===== ===== ======= ======= =======
</TABLE>
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The Company has interests in 18 joint ventures that each operate between
one and three parking facilities. The Company is the general partner of three
limited partnerships which operate a single parking facility and one limited
partnership which operates five parking facilities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Summary of
Operating Facilities."
The Company leases approximately 37,000 square feet of office space for its
corporate offices in Chicago, Illinois. The lease expires in 2008, and includes
a renewal option for an additional five years. The lease also includes expansion
options for up to 12,000 additional square feet of space, and the Company has a
right of first refusal on 25,000 square feet more. The Company believes that the
leased facility, together with expansion options, is adequate to meet current
and foreseeable future needs.
The Company also leases regional facilities. These lease agreements
generally include renewal and expansion options, and the Company believes that
these facilities are adequate to meet its current and foreseeable future needs.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
There is no public trading market for the common stock of AP Holdings. AP
Holdings did not pay a dividend in respect of its common stock in 1998, 1997 or
1996. The indenture governing AP Holdings' Senior Discount Notes limits the
ability of AP Holdings and APCOA/Standard to pay cash dividends. Unless AP
Holdings meets certain financial ratios, neither AP Holdings nor the Company may
pay cash dividends except those payable in additional shares stock or proceeds
therefrom. AP Holdings paid dividends in respect of its preferred stock in
additional shares of preferred stock, aggregating $3,163, $3,697 and $3,293 in
1998, 1997 and 1996, respectively.
APCOA/Standard did not pay a cash dividend in respect of its common stock
in 1998, 1997 or 1996. By the terms of the Company's Revolving Credit Facility,
the Company is restricted from paying cash dividends on its capital stock until
September 30, 2003. From and after September 30, 2003, the Company may pay cash
dividends in respect of its Redeemable Preferred Stock of up to $8.5 million
annually, subject to certain conditions, to enable AP Holdings to service its
Senior Discount Notes. The Company paid dividends in respect of its Redeemable
Preferred Stock in additional shares of Redeemable Preferred Stock, aggregating
$3,491, $887 and $796 in 1998, 1997 and 1996, respectively.
The indenture governing the Company's Senior Subordinated Notes also limits
the Company's ability to pay cash dividends. Unless the Company meets certain
financial ratios, it may not pay dividends in respect of its stock except for
those payable in additional shares of stock.
There are no restrictions on the ability of APCOA/Standard's wholly-owned
subsidiaries to pay cash dividends to APCOA/Standard.
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The following table presents selected historical consolidated financial
data at and for the years ended December 31, 1998, 1997, 1996, 1995 and 1994,
which have been derived from the audited financial statements of AP Holdings.
The selected financial data set forth below should be read in conjunction with
"Management's
9
<PAGE> 10
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical consolidated financial statements and notes thereto included
elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1998(1) 1997 1996 1995 1994
---------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Parking services revenue................. $ 195,517 $117,704 $138,409 $143,723 $150,242
Cost of parking services................. 155,230 94,846 116,158 122,398 131,019
General and administrative expenses...... 23,506 13,528 13,017 12,121 10,879
Restructuring and other unusual
charges............................... 18,050 -- -- -- --
Depreciation and amortization............ 7,435 3,767 4,888 8,772 8,749
---------- -------- -------- -------- --------
Operating income (loss).................. (8,704) 5,563 4,346 432 (405)
Interest expense, net.................... 14,541 3,243 2,877 2,705 2,350
Other expense............................ -- -- -- -- 125
Minority interest........................ 487 321 424 604 850
Income tax expense....................... 430 140 106 240 169
Extraordinary loss....................... 2,816 -- -- -- --
---------- -------- -------- -------- --------
Net income (loss)........................ $ (26,978) $ 1,859 $ 939 $ (3,117) $ (3,899)
========== ======== ======== ======== ========
OTHER DATA:
Gross customer collections............... $1,026,085 $476,183 $430,696 $408,952 $389,556
Capital expenditures..................... 7,691 2,357 2,552 2,782 2,002
Net cash provided by (used in):
Operating activities..................... (16,381) 931 2,042 4,340 3,403
Investing activities..................... (96,025) (3,592) (3,349) (4,917) (4,647)
Financing activities..................... 128,267 3,451 1,288 1,107 1,068
Number of managed locations.............. 1,190 378 207 227 197
Number of leased locations............... 446 267 243 260 223
Number of total locations................ 1,636 645 450 487 420
Number of parking spaces................. 794,000 273,000 225,000 226,000 235,000
BALANCE SHEET DATA (AT END OF YEAR):
Cash and cash equivalents................ $ 19,183 $ 3,322 $ 2,532 $ 2,551 $ 2,021
Working capital (deficiency)............. (9,119) (17,059) (19,455) (20,990) (20,795)
Total assets............................. 212,657 59,095 52,823 51,605 51,544
Total debt............................... 193,605 38,283 32,795 30,461 27,700
Redeemable preferred stock............... -- 8,728 7,841 7,045 6,330
Common stock of subsidiary subject to
put/call rights....................... 4,589 -- -- -- --
Stockholders' deficit.................... (59,020) (22,259) (23,231) (23,374) (19,542)
</TABLE>
- ---------------
(1) Includes the effects of the acquisition of Standard Parking effective March
30, 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of AP Holdings' results of operations should be
read in conjunction with the consolidated financial statements of AP Holdings
and the notes thereto included elsewhere herein.
10
<PAGE> 11
OVERVIEW
APCOA/Standard operates 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 December 31, 1998, the Company operated approximately 73% of
its approximately 1,600 parking facilities under management contracts and
approximately 27% under leases.
Parking services revenue -- leases. Lease parking services revenues
consist of all revenues 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, field offices and supervisory employees.
SUMMARY OF OPERATING FACILITIES
The following table reflects the Company's facilities at the end of the
periods indicated taking into consideration the combination with Standard on a
pro forma basis:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
(PRO FORMA) (PRO FORMA)
<S> <C> <C> <C>
Managed Facilities................................. 1,190 691 502
Leased Facilities.................................. 446 306 275
----- --- ---
Total Facilities................................... 1,636 997 777
===== === ===
</TABLE>
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.
11
<PAGE> 12
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Gross customer collections.............................. $1,026,085 $476,183 $430,696
========== ======== ========
Parking services revenue:
Lease contracts....................................... $ 162,568 $ 99,594 $120,286
Management contracts.................................. 32,949 18,110 18,123
---------- -------- --------
195,517 117,704 138,409
Cost of parking services:
Lease contracts....................................... 144,086 85,355 107,375
Management contracts.................................. 11,144 9,491 8,783
---------- -------- --------
155,230 94,846 116,158
General and administrative expenses..................... 23,506 13,528 13,017
Restructuring and other unusual charges................. 18,050 -- --
Depreciation and amortization........................... 7,435 3,767 4,888
---------- -------- --------
Operating (loss) income................................. (8,704) 5,563 4,346
Interest expense, net................................... 14,541 3,243 2,877
Minority interest....................................... 487 321 424
Income tax expense...................................... 430 140 106
Extraordinary loss...................................... 2,816 -- --
---------- -------- --------
Net (loss) income....................................... $ (26,978) $ 1,859 $ 939
========== ======== ========
</TABLE>
In analyzing gross margins of APCOA/Standard, it should be noted that the
cost of parking services for parking facilities under management contracts is
generally paid by the Company's clients. Margins for lease contracts vary
significantly not only due to operating performance, but also variability of
parking rates in different cities and space utilization by parking facility type
and location.
FISCAL 1998 COMPARED TO FISCAL 1997
Gross Customer Collections. Gross customer collections consist of gross
receipts collected at all leased and managed properties, including
unconsolidated affiliates. Gross customer collections increased $549.9 million,
or 115.5%, to $1,026.1 million in fiscal 1998 compared to $476.2 million in
fiscal 1997. This increase is attributable $417.4 million to APCOA's combination
with Standard and $132.5 million to the addition of other locations during the
period.
Parking services revenue -- leases. Lease revenue increased $63.0 million,
or 63.2%, to $162.6 million in the year ended December 31, 1998 as compared to
$99.6 million in the year-ago period. This resulted from the net addition of 30
leases through internal growth, and the net addition of 149 leases through
APCOA's combination with Standard and the other acquisitions completed in 1998
(see Note B of the Notes to Consolidated Financial Statements).
Parking services revenue -- management contracts. Management contract
revenue increased $14.8 million, or 81.9%, to $32.9 million in 1998 as compared
to $18.1 million in 1997. During 1998, a net 228 management contracts were added
through internal growth and 584 were added as a result of APCOA's combination
with Standard and the other 1998 acquisitions.
Cost of parking services -- leases. Cost of parking for leases increased
$58.7 million, or 68.8%, to $144.1 million for the year ended December 31, 1998
from $85.4 million during the year-ago period. This increase resulted from the
addition of a net total of 179 new leases through internal growth and
acquisitions. Acquisition-related cost savings of $0.2 million were realized
during 1998. Gross margin for leases declined to
12
<PAGE> 13
11.4% during 1998 compared to 14.3% during 1997. This decline resulted from the
average gross margin on acquired leases from the Standard and other 1998
acquisitions being approximately 10%, which reduced the average lease gross
margin.
Cost of parking services -- management contracts. Cost of parking for
management contracts increased by $1.7 million, or 17.4%, to $11.1 million in
1998 as compared to $9.5 million in 1997. Partially offsetting this increase
were acquisition-related cost savings of $0.7 million. Gross margin for
management contracts, however, improved to 66.2% in the current year compared to
47.6% in the prior year. This improvement results from the relative mix of
locations that were added compared to those already in the contract portfolio.
The locations added during 1998 for the most part do not carry any cost of
parking since all of these costs are paid by the clients. Some of the older
management contracts do carry some costs.
General and administrative expenses. General and administrative costs
increased $10.0 million, or 73.8%, to $23.5 million during 1998 as compared to
$13.5 million during 1997. 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 $1.2 million realized during 1998.
Restructuring and other unusual charges. The Company incurred $18.1
million of restructuring and other unusual charges during 1998 in connection
with the combination with Standard and the other acquisitions completed during
1998, which were based upon 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/Standard staff reductions. The charge
included (A) $5.0 million of relocation costs in connection with the
headquarters relocation of the Company, the relocation of two major field
offices, moving the families of 20 Cleveland headquarters staff members to
Chicago and other relocations within the field organization, (B) $6.9 million in
severance costs consisting of cash compensation to 54 people, (C) the write-off
of $2.6 million related to abandoned and impaired assets that will no longer be
used in the business, (D) a $2.6 million increase in insurance reserves
resulting from a buyout of APCOA's insurance program in connection with the
combination of the APCOA and Standard insurance programs and (E) $1.0 million of
other restructuring costs. Of the $15.5 million cash component of this
restructuring charge, $9.9 million has been disbursed through December 31, 1998
and the balance is expected to be disbursed by the middle of 1999. The Company
may incur additional restructuring charges in the future related to its
acquisition strategy.
Other income and expenses. Interest expense, net of interest income,
totaled $14.5 million in the current year, up $11.3 million from 1997. This is a
result of debt financing incurred in connection with APCOA's combination with
Standard and other acquisitions. In connection with the debt refinancing, an
extraordinary loss was recognized in the first quarter of 1998 of $2.8 million.
This loss is comprised of $2.1 million from a prepayment penalty for early
extinguishment of debt and $0.7 million from a write-off of the unamortized
balance of deferred financing costs associated with the extinguished debt.
Minority interest for the current year totaled $0.5 million, compared to $0.3
million for 1997, which is reflective of increasing joint venture income. Income
taxes consist primarily of Canadian income tax, and have increased to $0.4
million from $0.1 million as a result of increasing Canadian income.
FISCAL 1997 COMPARED TO FISCAL 1996
Gross customer collections. Gross customer collections increased $45.5
million, or 10.6%, to $476.2 million in fiscal 1997 from $430.7 million in
fiscal 1996. This increase resulted primarily from the addition of leased and
managed locations, as well as a combination of rate increases and higher
utilization of parking spaces at existing facilities.
Parking services revenue-leases. Lease revenue decreased $20.7 million, or
17.2%, to $99.6 million in fiscal 1997 from $120.3 million in fiscal 1996. This
decrease resulted from the loss of an airport lease ($31.7 million) partially
offset by improvements at other lease facilities ($6.9 million) and new leases
acquired in connection with the acquisitions completed during 1997 ($4.1
million).
13
<PAGE> 14
Parking services revenue -- management contracts. Management contract
revenue remained constant in fiscal 1997 as compared to fiscal 1996, at $18.1
million. Increases resulting from increased revenues at existing facilities and
new contracts acquired were offset by APCOA's Los Angeles facilities that were
contributed to EPI.
Cost of parking services -- leases. Cost of parking for leases decreased
$22.0 million, or 20.5%, to $85.4 million in fiscal 1997 from $107.4 million in
fiscal 1996. The reduction in cost of parking services -- leases was due to the
loss of a large airport lease ($31.2 million) partially offset by increases in
costs at existing lease locations ($5.4 million) and new leases acquired in
connection with 1997 acquisitions ($3.8 million). Gross margin for leases
improved to 14.3% of lease revenue in 1997 from 10.7% in 1996. This improvement
in gross margin resulted from the termination of a large airport lease with a
low gross margin.
Cost of parking services -- management contracts. Cost of parking for
management contracts increased $0.7 million, or 8.1%, to $9.5 million in fiscal
1997 from $8.8 million in fiscal 1996. Most management contracts have no cost of
parking services related to them as all costs are reimbursable to APCOA.
However, several contracts (primarily large airport properties), require APCOA
to pay for certain costs which are offset by larger management fees. The
increase in cost of parking for management contracts was related to growth at
two airport facilities ($0.8 million), costs related to new management contracts
and the acquisition of Metropolitan in June 1997 ($0.4 million), offset by
APCOA's Los Angeles facilities that were contributed to Executive Parking
Industries, LLC ($0.5 million). Gross margin for management contracts declined
to 47.6% of management contract revenue in 1997 from 51.5% in 1996. This decline
resulted from the addition of a location in 1997 that had a small loss in its
initial contract year, and increased insurance expense.
General and administrative expenses. General and administrative expenses
increased $0.5 million, or 3.9%, to $13.5 million in fiscal 1997 from $13.0
million in fiscal 1996. This increase was primarily a result of inflation.
Depreciation and amortization expense. Depreciation and amortization
expense decreased $1.1 million, or 22.9%, to $3.8 million in fiscal 1997 from
$4.9 million in fiscal 1996. This decrease resulted primarily from the declining
balance of the leasehold contracts which were amortized over seven years. The
leasehold contracts were recorded in 1989 at their fair value in connection with
the acquisition of APCOA by Holberg.
Other income and expenses. Net interest expense for 1997 increased $0.4
million, or 12.7%, to $3.2 million from $2.9 million in 1996. The increase was
due to an increased level of indebtedness resulting from the incurrence of debt
to fund working capital needs and acquisitions that occurred in 1997. Minority
interest expense for 1997 declined by $0.1 million to $0.3 million compared to
$0.4 million in 1996. Income taxes were $0.1 million in both 1997 and 1996.
14
<PAGE> 15
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 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
Gross customer collections.................................. $1,103,000 $938,000
========== ========
Parking services revenue:
Lease contracts........................................... $ 174,613 $153,195
Management contracts...................................... 35,463 28,161
---------- --------
210,076 181,356
Cost of parking services:
Lease contracts........................................... 155,275 135,497
Management contracts...................................... 11,144 9,491
---------- --------
166,419 144,988
General and administrative expenses......................... 25,524 21,385
---------- --------
Operating income before depreciation, amortization and
restructuring and other unusual charges................... $ 18,133 $ 14,983
========== ========
</TABLE>
FISCAL 1998 COMPARED TO FISCAL 1997
Gross customer collections. Gross customer collections increased $165.0
million, or 17.6%, to $1,103.0 in 1998 as compared to $938.0 in 1997. This
resulted from the addition of 639 new leases and management contracts during
1998.
Parking services revenue -- leases. Lease revenue increased $21.4 million,
or 14.0%, to $174.6 million in the year ended December 31, 1998 as compared to
$153.2 million in the year-ago period. This resulted from the acquisition of 110
leases and the net addition of 30 leases through internal growth.
Parking services revenue -- management contracts. Management contract
revenue increased $7.3 million, or 25.9%, to $35.5 million in 1998 as compared
to $28.2 million in 1997. During 1998, 228 net management contracts were added
through internal growth and 271 net additional contracts were acquired.
Cost of parking services -- leases. Cost of parking for leases increased
$19.8 million, or 14.6%, to $155.3 million for the year ended December 31, 1998
from $135.5 million during the prior year. This increase resulted from the
addition of a net total of 140 new leases through internal growth and 1998
acquisitions. Acquisition-related cost savings of $0.2 million were realized
during 1998. Gross margin for leases declined to 11.1% during 1998 compared to
11.6% during 1997. This decline resulted from the average gross margin on
acquired leases being approximately 10%, which reduced the average lease gross
margin.
Cost of parking services -- management contracts. Cost of parking for
management contracts increased by $1.7 million, or 17.4%, to $11.1 million in
1998 as compared to $9.5 million in 1997. Partially offsetting this increase
were acquisition-related cost savings of $0.7 million. Gross margin for
management contracts, however, increased to 68.6% in the current year compared
to 66.3% in the prior year. This improvement results from the relative mix of
locations that were added compared to those already in the contract portfolio.
The locations added during 1998 do not, for the most part, carry any cost of
parking since all of the costs are paid by the clients. Some of the older
management contracts do carry some costs.
15
<PAGE> 16
General and administrative expenses. General and administrative costs
increased $4.1 million, or 19.4%, to $25.5 million during 1998 as compared to
$21.4 million during 1997. 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 aggregating $1.2 million.
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.
The 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 working capital 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 the 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.
AP Holdings had cash and cash equivalents of $19.2 million at December 31,
1998 compared to $3.3 million at December 31, 1997.
Net cash used in operating activities totaled $16.4 million for 1998
compared to cash provided of $0.9 million for 1997. Cash used during 1998
included $9.9 million of cash restructuring charges and increases in accounts
receivable relating to acquired contracts and existing locations of $14.1
million, partially offset by increases in accrued liabilities of $18.8 million.
This increase in accrued liabilities was driven primarily by increases in
accrued payroll and related taxes in keeping with the Company's growth, and
increased insurance reserves in connection with the buyout of APCOA's insurance
program, which was completed in January of 1999.
Cash used in investing activities totaled $96.0 million in 1998 compared to
$3.6 million in 1997. The change was a result of the acquisitions of Standard
and Dixie Parking by the Company in the first quarter of 1998, the acquisitions
of Executive Parking and Century Parking and Sentry Parking in the second
quarter, and the acquisition of Virginia Parking Service in the third quarter of
1998. In addition, the Company had $7.7 million of capital purchases in 1998.
Significant capital purchases included the furnishing and improvement of the
Company's combined office space in Chicago, investment in management information
system enhancements, and capital investments on leased facilities. On August 4,
1998, AP Holdings repurchased 10% of its common stock outstanding and all
warrants to purchase additional common stock held by Delaware North Companies
Incorporated ("Delaware North") for $4.0 million in cash. This transaction was
entered into pursuant to a put/call contained in the Stockholders' Agreement
dated April 1989. The repurchase was funded by an intercompany loan from the
Company.
Cash generated from financing activities totaled $128.3 million in 1998
compared to $3.5 million in 1997. The 1998 activity included $140.0 million of
proceeds from the issuance of debt, $40.7 million of proceeds from the issuance
of preferred stock, $32.3 million in debt repayments and $8.0 million for the
redemption of preferred
16
<PAGE> 17
stock. These transactions were consummated in connection with the combination
with Standard and other acquisitions.
OTHER LIQUIDITY AND CAPITAL RESOURCES INFORMATION
In connection with the combination with Standard, the Company entered into
a Senior Credit Facility for $40.0 million of secured revolving credit.
Borrowings under the Facility bear interest at variable rates based, at the
Company's option, either on LIBOR, the overnight federal funds rate, or the
bank's base rate. The credit facility contains certain covenants with which the
Company must comply, including restrictions on debt limits relative to EBITDA,
capital expenditures, dividends and other customary requirements. At December
31, 1998, the Company had $5.7 million of letters of credit outstanding under
the Facility.
AP Holdings' primary capital requirements are for working capital, capital
expenditures and debt service. AP Holdings believes that cash flow from
operating activities, cash and cash equivalents and borrowings under the Senior
Credit Facility will be adequate to meet AP Holdings' short-term liquidity
requirements prior to the maturity of its long-term indebtedness, although no
assurance can be provided in this regard.
The Company has lease commitments of $25.8 million for fiscal 1999. The
leased properties generate sufficient cash flow to meet the base rent payments.
If the Company identifies investment opportunities requiring cash in excess
of the Company's cash flows and existing cash, the Company may borrow under the
Senior Credit Facility, or may seek additional sources of capital including the
sale or issuance of common stock. From time to time the Company utilizes the
Facility to provide readily-accessible cash for working capital purposes. The
Company borrowed $5.0 million against the Facility during the first quarter of
1999. The Company has begun to streamline its cash management and receivables
collection process by standardizing the procedures used by all acquired
companies. Management anticipates that this process will provide substantial
additional liquidity in 1999 and thus partially reduce reliance upon the Senior
Credit Facility as a working capital resource. The Company has in the past
utilized non-recourse financing to fund specific projects.
In January 1999, the Company completed the combination of the insurance
programs of APCOA and Standard into one program. In conjunction therewith, the
Company purchased an insurance policy to cover amounts previously self-insured
by APCOA and its affiliates. The APCOA insurance program had historically
included a self-insured retention component, which required the establishment of
reserves to reflect the estimated final settlement value of open claims. The
purchase of a tail policy to eliminate future exposure from retrospective
adjustments resulted in a use of cash of $5.6 million in January of 1999, $2.6
million of which was included in restructuring and other unusual charges. This
transaction provided an offsetting increase in availability of funds by allowing
the elimination of letters of credit in the amount of $4.7 million.
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 Huger Parking Company, LLC, d/b/a Dixie Parking, for $1.0 million in
cash and notes aggregating $3.25 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 $1.25 million in
notes. 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 effect of any such acquisition on the Company's
operations, financial condition and profitability.
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 such 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
17
<PAGE> 18
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, 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, the accounting for all of 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 has 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.
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 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure consists of risk related to
changes in interest rates. Historically, the Company has not used derivative
financial instruments for speculative or trading purposes.
In March of 1998, the Company entered into a $40 million revolving
variable-rate Senior Credit Facility (see Note D of the Notes to the
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 their
possible effects, the foregoing sensitivity analysis assumes no changes in the
Company's financial structure.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item are attached to and are
hereby incorporated into this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS
AP HOLDINGS
The following table sets forth certain information with respect to each
person who is an executive officer or director of AP Holdings, as indicated
below:
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<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
John V. Holten....................... 42 Director and Chairman
G. Walter Stuelpe, Jr................ 54 Director, President and Chief Executive Officer
Gunnar E. Klintberg.................. 50 Director and Assistant Secretary
A. Petter Ostberg.................... 36 Vice President
Michael J. Celebrezze................ 41 Treasurer
Robert N. Sacks...................... 46 Secretary
</TABLE>
John V. Holten. Mr. Holten has served as Chairman and Chief Executive
Officer of Holberg since its inception in 1986, and as a Director and Chairman
of APCOA since 1989. Mr. Holten was Managing Director of DnC Capital
Corporation, a merchant banking firm in New York City, from 1984 to 1986. Mr.
Holten received his M.B.A. from Harvard University in 1982 and he graduated from
the Norwegian School of Economics and Business Administration in 1980.
G. Walter Stuelpe, Jr. Mr. Stuelpe has been associated with APCOA for over
25 years, serving as the Company's President since 1986. His prior executive
positions have included sales and marketing, corporate development and strategic
planning, as well as having headed up different operational divisions in a
variety of cities in the United States and Europe. Mr. Stuelpe is an alumnus of
Indiana University, class of 1967. Mr. Stuelpe has since participated in
numerous executive programs specifically designed to address managing business
change and growth. He has also had an active leadership role in industry-related
associations, having served as president, chairman and now as a member of the
Board of the National Parking Association as well as the International Parking
Institute, and is a full member of the Urban Land Institute.
Gunnar E. Klintberg. Mr. Klintberg has served as Vice Chairman of Holberg
since its inception in 1986, and as a Director of APCOA since 1989. Mr.
Klintberg was a Managing Partner of DnC Capital Corporation, a merchant banking
firm in New York City, from 1983 to 1986. From 1975 to 1983, Mr. Klintberg held
various management positions with the Axel Johnson Group, headquartered in
Stockholm, Sweden. Mr. Klintberg headed up the Axel Johnson Group's headquarters
in Moscow from 1976 to 1979 and served as assistant to the President of Axel
Johnson Group's $1 billion operation in the U.S., headquartered in New York
City, from 1979 to 1983. Mr. Klintberg received his undergraduate degree from
Dartmouth College in 1972 and a degree in Business Administration and Economics
from the University of Uppsala, Sweden in 1974.
A. Petter Ostberg. Mr. Ostberg joined Holberg in 1994 and was appointed
Chief Financial Officer of Holberg in 1997. Mr. Ostberg is currently a Vice
President of APCOA/Standard. Prior to joining Holberg, Mr. Ostberg held various
finance positions from 1990 to 1994 with New York Cruise Lines, Inc., including
Group Vice President, Treasurer and Secretary. Prior to joining New York Cruise
Lines, Inc. Mr. Ostberg received a B.A. in International Relations and Economics
from Tufts University in 1985, and an M.B.A. from Stanford University Graduate
School of Business in 1989.
Michael J. Celebrezze. Mr. Celebrezze joined APCOA in 1984 as Manager,
Treasury and Financial Planning. Since then he has held the positions of Vice
President, Controller, Senior Vice President, Chief Financial Officer and
Treasurer and, since 1998, Executive Vice President. His responsibilities
include the operations of accounting, tax, management information systems,
corporate security, financial planning, insurance and risk management, real
estate finance and banking. Mr. Celebrezze graduated cum laude from Kent State
University with a Degree in Business Administration, majoring in Accounting and
he subsequently earned a Masters in Business Administration from John Carroll
University. He is a Certified Public Accountant in the State of Ohio.
Robert N. Sacks. Mr. Sacks joined APCOA in 1988, serving as General
Counsel and Secretary since 1988, serving as Vice President, Secretary, and
General Counsel since 1989 and serving as Senior Vice President, Secretary and
General Counsel since 1997 and as Executive Vice President since 1998. Mr. Sacks
has overall responsibility for the Legal Department, which includes negotiation,
documentation and approval of parking and corporate contracts, financing
documentation and coordination of outside counsel. In his position, Mr. Sacks is
also responsible for maintaining field compliance with corporate legal and
financial policies. Mr. Sacks received his B.A. Degree, cum laude, from
Northwestern University in 1976 and, in 1979, received his J.D. Degree from
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<PAGE> 20
Suffolk University. Mr. Sacks has spoken on legal issues concerning the parking
industry at the National Parking Association National Convention and the
Institutional and Municipal Parking Congress.
THE COMPANY
The following table sets forth certain information with respect to each
person who is an executive officer or director of the Company:
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
John V. Holten....................... 42 Director and Chairman
Myron C. Warshauer................... 59 Director and Chief Executive Officer
G. Walter Stuelpe, Jr................ 54 Director and President
Herbert W. Anderson, Jr.............. 40 Executive Vice President -- Operations
Michael J. Celebrezze................ 41 Executive Vice President -- Chief Financial Officer
James V. LaRocco, Jr................. 54 Executive Vice President -- Corporate Development
Robert N. Sacks...................... 46 Executive Vice President -- General Counsel and
Secretary
Douglas R. Warshauer................. 31 Executive Vice President -- Marketing/Business
Development
Steven A. Warshauer.................. 44 Executive Vice President -- Operations
James A. Wilhelm..................... 44 Executive Vice President -- Operations
Michael K. Wolf...................... 49 Executive Vice President -- Chief Administrative
Officer and Associate General Counsel
Gunnar E. Klintberg.................. 50 Director, Vice President
Patrick J. Meara..................... 36 Director
A. Petter Ostberg.................... 36 Vice President
</TABLE>
Myron C. Warshauer. Mr. Warshauer has served as President and Chief
Executive Officer of Standard since 1973, and has been associated with Standard
since 1963. Mr. Warshauer received his B.S. Degree in Finance from the
University of Illinois in 1962, and received a Masters Degree in Business
Administration from Northwestern University in 1963.
Herbert W. Anderson, Jr. Mr. Anderson joined APCOA in 1994, and has served
as Corporate Vice President -- Urban Properties from 1995 to 1998. Mr. Anderson
was made Executive Vice President of Operations in 1998, overseeing the
Company's Central Division. Mr. Anderson graduated from LaSalle University and
began his career in the parking industry in 1984. Mr. Anderson is a member of
the Board of the National Parking Association.
James V. LaRocco, Jr. Mr. LaRocco has been associated with APCOA since
1962, starting in an operations position at the Los Angeles International
Airport, and has served as Executive Vice President since 1995. His prior
positions have included Division Manager, Regional Manager and Vice President.
Douglas R. Warshauer. Mr. Warshauer joined Standard in 1994, initially
serving as Vice President. Mr. Warshauer is the son of Myron C. Warshauer. Upon
receiving his Masters of Management Degree with distinction from the J.L.
Kellogg School of Management at Northwestern University, Mr. Warshauer became
Standard's Executive Vice President for Finance. Mr. Warshauer also holds a
Bachelors Degree with highest honors in Social Science from the University of
California at Berkeley. Since 1998, Mr. Warshauer has held the position of
Executive Vice President, Marketing and Business Development.
Steven A. Warshauer. Mr. Warshauer joined Standard in 1982, initially
serving as Vice President, then becoming Senior Vice President. Mr. Warshauer is
the cousin of Myron C. Warshauer. Since January 1, 1998, he has served as
Executive Vice President. Mr. Warshauer is currently responsible for the
Company's Chicago and Eastern Divisions. Mr. Warshauer is a Certified Public
Accountant and a member of both the American Institute of Certified Public
Accountants and the Illinois Society of Certified Public Accountants. Mr.
Warshauer received his Bachelor of Science Degree from the University of
Northern Colorado in 1976 with dual majors in Accounting and Finance. Prior to
joining Standard, he practiced with a national accounting firm.
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<PAGE> 21
James A. Wilhelm. Mr. Wilhelm joined Standard in 1985, serving as
Executive Vice President since January 1, 1998. Mr. Wilhelm is currently
responsible for managing the Company's Western and Airport Divisions, which
include parking facilities in Chicago and sixteen other cities throughout the
United States and Canada. Mr. Wilhelm received his B.A. Degree from Northeastern
Illinois University in 1976. Mr. Wilhelm is a member of the National Parking
Association and the International Parking Institute.
Michael K. Wolf. Mr. Wolf joined Standard as Senior Vice President and
General Counsel in 1990, after sixteen years in the private practice of law. Mr.
Wolf was subsequently appointed Executive Vice President, Chief Administrative
Officer in 1998. Prior to joining Standard, Mr. Wolf was a partner of the
international law firm of Jones, Day, Reavis & Pogue, resident in the Chicago
office, where his primary concentration was in the field of real estate. Mr.
Wolf received his B.A. Degree in 1971 from the University of Pennsylvania, and
in 1974 received his J.D. Degree from Washington University, where he served as
Notes and Comments editor of the Washington University Law Quarterly. Upon
graduation from law school, Mr. Wolf was elected to the Order of the Coif.
Patrick J. Meara. Mr. Meara became a director of the Company upon
consummation of the Combination. Mr. Meara is a Senior Vice President of JMB
Realty Corporation, which held an interest in Standard prior to the Combination,
and acquired an interest in the Company as a result of the Combination.
ITEM 11. EXECUTIVE COMPENSATION
AP Holdings has no paid employees. Information set forth in the table
reflects compensation earned by such individuals for services with
APCOA/Standard, APCOA, Standard or its respective subsidiaries. The following
table sets forth information for 1998, 1997 and 1996 with regard to compensation
for services rendered in all capacities.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
FISCAL OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- --------------------------- ------ --------- -------- ------------ ------------
($) $ $ ($)
<S> <C> <C> <C> <C> <C>
Myron C. Warshauer.................. 1998 481,158(1) -- 24,041(3) 40,166(4)
Chief Executive Officer and 1997 98,265 -- 41,229(3) 42,102(4)
President of Standard 1996 53,290 -- 28,795(3) 41,630(4)
G. Walter Stuelpe, Jr............... 1998 426,901(1) 183,500 309,424(5) 16,145(2)
President 1997 413,953(1) 216,600 8,111(5) 21,000(2)
1996 405,129(1) 222,100 5,562(5) 17,000(2)
Michael K. Wolf..................... 1998 424,480(1) -- -- --
Executive Vice President and 1997 376,400 -- -- --
General Counsel of Standard 1996 313,800 -- -- --
James A. Wilhelm.................... 1998 306,846(1) -- -- --
Executive Vice President 1997 202,519(1) 100,000 -- --
Operations 1996 174,711(1) 85,000 -- --
James V. LaRocco, Jr................ 1998 190,305(1) 66,500 227,723(6) 12,000(2)
Executive Vice President 1997 189,396(1) 62,390 -- 22,000(2)
Corporate Development 1996 172,006(1) 64,539 -- 19,300(2)
</TABLE>
- ---------------
(1) The amount shown includes amounts contributed by the Company to its 401(k)
plans under a contribution matching program.
(2) The amount shown reflects deposits made by APCOA/Standard on behalf of
Named Executive Officers into a supplemental pension plan pursuant to which
the Named Executive Officers will be entitled to monthly cash retirement
and death benefit payments.
(3) The amount shown includes car allowances, club dues, health insurance
premiums and legal fees related to estate planning.
(4) The amount shown reflects premiums paid by Standard on behalf of Myron C.
Warshauer for life insurance policies to which Mr. Warshauer is entitled to
the cash surrender value.
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<PAGE> 22
(5) The amount shown includes car allowances, club dues, health and term life
insurance premiums, and in 1998, amounts paid by the Company to Mr. Stuelpe
in connection with his relocation to the Chicago area.
(6) The amount shown includes car allowance, term life insurance premiums, and
retention bonus.
DIRECTOR COMPENSATION
Directors of AP Holdings and Directors of the Company do not receive
compensation for serving on AP Holdings' and the Company's Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee in the year ended
December 31, 1998. The Company intends to form a Compensation Committee in 1999.
The members of such committee have not yet been determined. During 1998, no
executive officer of the Company served as a member of the Compensation
Committee of another entity.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Employment Agreement between the Company and Myron C. Warshauer (the
"Warshauer Employment Agreement") provides that Myron C. Warshauer serve as
Chief Executive Officer of the Company, and be appointed as a member of the
Board of Directors of the Company (the "Board") and each committee of the Board,
for a period beginning on the date of the consummation of the Combination and
ending on Myron C. Warshauer's 65th birthday (the "Employment Period"). Myron C.
Warshauer will receive during the Employment Period an annual base salary of
$600,000 ("Annual Base Salary"). The Warshauer Employment Agreement also
provides for certain perquisites.
Under the Warshauer Employment Agreement, if Myron C. Warshauer's
employment were to be terminated by Myron C. Warshauer for Good Reason (as
defined below), or by the Company other than for Cause (as defined below), death
or Disability (as defined below), the Company would be obligated to (i) pay
Myron C. Warshauer a lump sum cash payment in an amount equal to the aggregate
Annual Base Salary that he would have received for the remainder of the
Employment Period, reduced to present value using as a discount rate the
"applicable federal rate," as defined in Section 1274(d) of the Internal Revenue
Code of 1986, as amended, and (ii) continue to provide for the same period
welfare benefits to Myron C. Warshauer and/or his family, at least as favorable
as those that would have been provided to them under the Warshauer Employment
Agreement if Myron C. Warshauer's employment had continued until the end of the
Employment Period, provided, however, that during any period when Myron C.
Warshauer is eligible to receive such benefits under another employer-provided
plan, such benefits provided by the Company may be made secondary to those
provided under such other plan. If Myron C. Warshauer's employment were to be
terminated by reason of his Disability during the Employment Period, the Company
would be obligated to pay Myron C. Warshauer, or his legal representative, as
applicable, the Annual Base Salary for the duration of the Employment Period in
effect at the time of the termination of employment.
In addition to the above compensation and benefits, if Myron C. Warshauer's
employment were to be terminated for any reason other than by the Company for
Cause, the Company would be obligated, beginning on the date of such termination
in the case of a voluntary termination by Myron C. Warshauer, and beginning on
Myron C. Warshauer's 65th birthday in all other cases, and ending on the first
to occur of Myron C. Warshauer's 75th birthday and Myron C. Warshauer's death
(such ending date, the "Cutoff Date"), to (i) pay Myron C. Warshauer $200,000
annually, adjusted for inflation and (ii) provide Myron C. Warshauer with an
executive office and secretarial services. In consideration for such benefits,
Myron C. Warshauer is obligated to provide reasonable consulting services to the
Company from the date of termination of his employment through the Cutoff Date.
As used in the Warshauer Employment Agreement: (i) "Cause" means (a)
illegal conduct, or gross misconduct, that results in material damage to the
business or reputation of the Company; or (b) any willful and continued failure
by Myron C. Warshauer to perform his duties under the Warshauer Employment
Agreement,
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<PAGE> 23
(ii) "Disability" means that Myron C. Warshauer has been unable, for a period of
180 consecutive days, or for periods aggregating 180 business days in any period
of twelve months, to perform a material portion of his duties under the
Warshauer Employment Agreement, as a result of physical or mental illness or
injury, and a physician selected by the Company has determined that Myron C.
Warshauer's incapacity is total and permanent, and (iii) "Good Reason" means (a)
the relocation of Myron C. Warshauer's principal place of business outside of
the central business district and northern suburbs of Chicago; (b) a material
reduction in Myron C. Warshauer's responsibilities; (c) the assignment to Myron
C. Warshauer of duties inconsistent with his position as set forth in the
Warshauer Employment Agreement; (d) a change in Myron C. Warshauer's title from
that required under the Warshauer Employment Agreement; (e) a removal of Myron
C. Warshauer from the Board or any committee thereof; (f) a requirement that
Myron C. Warshauer report to anyone other than the Chairman of the Board; or (g)
any material breach by the Company of any other term of the Warshauer Employment
Agreement.
The Warshauer Employment Agreement also provides that during the period
beginning on the date of the consummation of the Combination and ending on Myron
C. Warshauer's 75th birthday (the "Noncompetition Period"), Myron C. Warshauer
shall not, without written consent of the Board, engage in or become associated
with any business or other endeavor that engages in construction, ownership,
leasing, design and/or management of parking lots, parking garages, or other
parking facilities or consulting with respect thereto, provided, however, that
Myron C. Warshauer may own or sell investments in certain parking facilities
("Permitted Investments") during the Noncompetition Period, and may own or sell
any interest in any other real estate ("Other Real Estate") at any time after
the Employment Period for the remainder of the Noncompetition Period. The
Warshauer Employment Agreement provides that, if such Permitted Investment or
Other Real Estate includes a parking facility, Myron C. Warshauer shall initiate
negotiations, or, under certain circumstances, use reasonable and good-faith
efforts to cause such negotiations, with the Company in an attempt to determine
mutually agreeable terms pursuant to which the Company will manage or lease the
parking facility and, if such negotiations fail, that, under certain
circumstances, the Company shall have a right of first refusal with respect to
any management agreement or lease that may be negotiated with any independent
third party.
Pursuant to the Warshauer Employment Agreement, the Company shall establish
a stock option or phantom stock option plan (the "Option Plan") providing for
grants of actual or phantom options with respect to the common stock of the
Company ("Company Common Stock"), under which Myron C. Warshauer will be granted
options to purchase a number of shares of the Company Common Stock equal to 1%
of the total number of shares of Company Common Stock. All such options will
have a term of ten years from the date of the grant. The Option Plan was to be
implemented within 120 days after the Closing Date. The Company and Mr.
Warshauer have agreed to delay implementation of the Option Plan until the
establishment of a general stock option plan for the Company, which plan is
expected to be implemented in 1999.
Mr. Stuelpe's current employment agreement with the Company provides for an
initial four year term with default annual renewals, and is scheduled to lapse
on December 31, 2000. The agreement also provides for an annual base salary of
$423,306 in 1998, plus an annual bonus equal to eight percent of an amount
substantially based on the amount by which the Company's EBITDA, subject to
certain adjustments, exceeds a certain floor amount, as well as certain other
benefits. Mr. Stuelpe agrees not to disclose confidential information if such
disclosure would have a material adverse effect on the Company. During the term
of the employment agreement, and for two years after its termination, or, under
certain circumstances, until receipt of the final salary payment due under the
terms of the agreement, Mr. Stuelpe shall not render services to, or have any
ownership interest in, any business which is competitive with the Company.
If Mr. Stuelpe's employment is terminated by reason of his death or
Disability (as defined in the agreement), the Company is obligated to pay Mr.
Stuelpe's designated beneficiary, in the case of termination by reason of death,
and Mr. Stuelpe, in the case of termination by reason of Disability, (i) an
amount equal to Mr. Stuelpe's annual base salary at the time of his death; (ii)
the annual bonus for the year in which the termination of employment occurred,
prorated for the numbers of days Mr. Stuelpe was employed during that year; and
(iii) certain other benefits.
If Mr. Stuelpe's employment is terminated other than for death or
Disability, and without Cause (as defined in the agreement) or within six months
following a Change of Control (as defined in the agreement), the
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<PAGE> 24
Company is required to pay Mr. Stuelpe (a) his salary (i) through the date that
the agreement was scheduled to terminate as if Mr. Stuelpe had continued to be
employed by the Company, in the case of a termination without Cause and (ii) for
a minimum period of twenty-four months after the termination of employment, in
the case of a Change of Control; (b) the annual bonus for the year in which the
termination of employment occurred, prorated for the number of days Mr. Stuelpe
was employed during that year; and (c) certain other benefits.
In connection with the relocation of the Company's corporate offices to
Chicago, in June of 1998, Mr. Stuelpe was granted a $250,000 loan from the
Company, bearing interest at the Federal AFR rate. The loan and accrued interest
thereon is payable in equal annual installments in June of each of the next
three years (the "Annual Payment Date"). If, however, Mr. Stuelpe remains in the
continual employment of Company as of each Annual Payment Date, one-third of the
loan and accrued interest thereon shall be forgiven by the Company. Any amounts
thus forgiven shall be treated as additional compensation to Mr. Stuelpe, and
Mr. Stuelpe will be made whole for all federal, state and local income taxes
resulting from such forgiveness.
Mr. Wolf's current employment agreement with the Company provides for a
three-year term, scheduled to lapse on March 26, 2001, default annual renewals,
and an annual base salary of not less than $376,400, subject to annual review,
plus an annual bonus based on a percentage of the annual base salary to be
mutually agreed upon by the Company and Mr. Wolf, as well as certain other
benefits. Mr. Wolf shall hold all confidential information in strict confidence
and not publish or otherwise disclose any portion thereof to any person
whatsoever except with the prior written consent of the Company. During the term
of the employment agreement and for two years after its termination (or eighteen
months if such termination follows a Change in Control (as defined in the
agreement)), Mr. Wolf shall not render services to, or have any ownership
interest in, any business which is competitive with the Company in certain
geographic areas.
If Mr. Wolf's employment is terminated by reason of his death, the Company
is obligated to pay Mr. Wolf's estate an amount equal to the sum of (i) Mr.
Wolf's annual base salary through the end of the calendar month in which death
occurs and (ii) any earned and unpaid annual bonus, vacation pay and other
vested benefits.
If Mr. Wolf's employment is terminated by reason of his Disability (as
defined in the agreement), the Company is obligated to pay Mr. Wolf or his legal
representative (a) an amount equal to Mr. Wolf's annual base salary for the
duration of the employment period in effect on the date of termination, reduced
by amounts received under any disability benefit program and (b) any earned and
unpaid annual bonus and other vested benefits.
If Mr. Wolf's employment is terminated by the Company other than for death
or Disability and without Cause (as defined in the agreement), the Company is
required to continue (A) to pay Mr. Wolf for the remainder of the employment
period in effect immediately before the date of termination his annual base
salary and annual bonus(es) through the end of the then-current employment
period and (B) to provide Mr. Wolf and/or his family with certain other
benefits.
If Mr. Wolf's employment is terminated by the Company for any reason other
than Cause during the three-year period following a Change in Control (as
defined in the agreement), the Company is obligated to (x) pay Mr. Wolf an
amount ("Severance Pay") equal to the greater of (1) one and one-half times the
sum of (I) Mr. Wolf's current annual base salary plus (II) the amount of any
bonus paid to Mr. Wolf in the preceding twelve months and (2) the annual base
salary and annual bonuses through the end of the then-current employment period
and (y) continue to provide Mr. Wolf with certain other benefits for a certain
period of time. If Mr. Wolf terminates his employment voluntarily following a
Change in Control, he shall not be entitled to Severance Pay, provided, however,
that any such termination by Mr. Wolf for Good Reason (as defined in the
agreement) shall not be considered a voluntary termination and Mr. Wolf will be
treated as if he had been terminated by the Company other than for Cause.
Mr. Wilhelm's current employment agreement with the Company provides either
party with the right to terminate the employment agreement for any reason,
without the requirement of specifying a reason, and an annual base salary of
$303,846, subject to annual review, as well as certain other benefits. Mr.
Wilhelm shall hold all confidential information in strict confidence and not
publish or otherwise disclose any portion thereof to any person whatsoever
except with the prior written consent of the Company. During the term of the
employment
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<PAGE> 25
agreement and for two years after its termination or eighteen months if such
termination follows a Change in Control (as defined in the agreement), Mr.
Wilhelm shall not render services to, or have any ownership interest in, any
business which is competitive with the Company in certain geographic areas. If
Mr. Wilhelm's employment is terminated by the Company, the Company is required
to provide not less than 90 days advance written notice, except the Company may
terminate Mr. Wilhelm's employment immediately for Cause (as defined in the
agreement). If Mr. Wilhelm terminates his employment, Mr. Wilhelm is required to
give the Company written notice, but the termination is not effective until the
Company specifies the termination date in writing, provided however, the
termination date specified by the Company shall be no later than 90 days after
the date of the Company's receipt of notice of termination from Mr. Wilhelm.
If Mr. Wilhelm's employment is terminated for any reason, the Company is
obligated to pay Mr. Wilhelm or Mr. Wilhelm's estate, as applicable, an amount
equal to the sum of (a) Mr. Wilhelm's annual base salary through the date of
termination and (b) accrued but unused vacation pay and other vested benefits.
If Mr. Wilhelm's employment is terminated by the Company for any reason
other than Cause during the three-year period following a Change of Control (as
defined in the agreement), then the Company is obligated to (a) pay Mr.
Wilhelm's current annual salary plus the amount of any bonus paid to Mr. Wilhelm
in the preceding twelve months and (b) contract to provide Mr. Wilhelm with
certain other benefits for a certain period of time. If Mr. Wilhelm terminates
his employment voluntarily following a Change in Control, he shall not be
entitled to Severance Pay, provided however, that any such termination by Mr.
Wilhelm for Good Reason (as defined in the agreement) shall not be considered a
voluntary termination and Mr. Wilhelm will be treated as if he had been
terminated by the Company other than for Cause.
Mr. LaRocco's employment agreement with the Company was terminated
effective March 30, 1998, in connection with the Combination. Effective April 1,
1998, the Company and Mr. LaRocco entered into a transition employment agreement
for an eighteen-month term, scheduled to end on September 30, 1999. This
agreement provides for annual payments of not less than $190,000, plus other
payments in the following amounts: severance pay of $157,872, paid on April 10,
1998, a severance bonus of $66,500 payable on September 30, 1998, $76,000
payable in April 1999 and up to $76,000 payable in April 2000, as well as
certain other benefits. Mr. LaRocco has agreed not to disclose confidential
information for any reason whatsoever. During the term of the agreement, and for
one year after its termination if the agreement is terminated other than without
Cause (as defined in the agreement), Mr. LaRocco shall not render services to,
or have any ownership interest in, any business which is competitive with the
Company. The agreement does not contain change of control provisions.
If the agreement is terminated by reason of Mr. LaRocco's death or
Disability (as defined in the agreement), the Company is obligated to pay Mr.
LaRocco's designated beneficiary, in the case of termination by reason of death,
and Mr. LaRocco, in the case of termination by reason of Disability, (i) an
amount equal to Mr. LaRocco's annual base payment at the time of his death plus
$9,600, which represents the estimated annual value of the right to use a
company automobile, (ii) the other payments due for the year of termination and
(iii) certain other benefits.
The Company expects to enter into a new employment agreement with Mr.
LaRocco prior to the expiration of his current transition employment agreement,
which is scheduled to end on September 30, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
AP HOLDINGS
The following table sets forth certain information regarding the beneficial
ownership of the common stock of AP Holdings, par value $0.01 per share ("AP
Holdings Common Stock"), by (i) each person known to AP Holdings to own
beneficially more than 5% of AP Holdings Common Stock, (ii) each director of AP
Holdings, (iii) each Named Executive Officer of AP Holdings, and (iv) all
executive officers and directors of AP Holdings, as a group. All information
with respect to beneficial ownership has been furnished to AP Holdings by the
25
<PAGE> 26
respective stockholders of AP Holdings. Except as otherwise indicated in the
footnote, each beneficial owner has the sole power to vote and to dispose of all
shares held by such older.
<TABLE>
<CAPTION>
AMOUNT OF NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP SHARES OUTSTANDING
- ---------------- ---------------------------- ------------------
<S> <C> <C>
Holberg*.................................... 7,260 shares of Common Stock(1) 91.7%
G. Walter Stuelpe, Jr.**.................... 276.6 shares of Common Stock 3.5
Michael J. Celebrezze**..................... 27.7 shares of Common Stock 0.3
Robert N. Sacks**........................... 27.7 shares of Common Stock 0.3
James V. LaRocco, Jr. **.................... 138.3 shares of Common Stock 1.7
John V. Holten*............................. (2)
Orkla ASA ("Orkla")**....................... (3)
Directors and Executive Officers as a
Group..................................... 66.3
</TABLE>
- ---------------
* The address of Holberg is 545 Steamboat Road, Greenwich, Connecticut 06830.
The address of Orkla and the business address of Mr. Holten is the same as
that of Holberg.
** The address of Messrs. Stuelpe, Celebrezze, Sacks and LaRocco is 900 North
Michigan Avenue, Chicago, Illinois 60611-1542.
(1) Holberg also owns the Holdings Preferred Stock. See "Certain Relationships
and Related Party Transactions -- Preferred Stock.
(2) Mr. Holten owns all of the outstanding common stock of the corporate parent
of Holberg, which parent entity owns approximately 66% of the outstanding
common stock of Holberg, which in turn owns 91.67% of the outstanding
common stock of Holdings.
(3) Orkla owns approximately 34% of the outstanding common stock of Holberg.
THE COMPANY
The following table sets forth certain information regarding the beneficial
ownership of Company Common Stock by (i) each person known to the Company to own
beneficially more than 5% of Company Common Stock, (ii) each director of the
Company, (iii) each Named Executive Officer and (iv) all executive officers and
directors of the Company, as a group. All information with respect to beneficial
ownership has been furnished to the Company by the respective stockholders of
the Company. Except as otherwise indicated in the footnotes, each beneficial
owner has the sole power to vote and to dispose of all shares held by such
holder.
<TABLE>
<CAPTION>
AMOUNT OF NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP SHARES OUTSTANDING
- ---------------- ---------------------------- ------------------
<S> <C> <C>
AP Holdings................................. 26.3 shares of Common Stock 84.0%
John V. Holten**............................ (1)
Orkla ASA ("Orkla")**....................... (2)
Dosher Partners, L.P.*...................... 1.25 shares of Common Stock(3) 4.0
Waverly Partners, L.P.*..................... 1.25 shares of Common Stock(4) 4.0
Myron C. Warshauer*......................... (3)(4)
SP Associates++............................. 2.5 shares of Common Stock(5) 8.0
G. Walter Stuelpe, Jr.*..................... (6)
James V. LaRocco, Jr.*...................... (7)
Directors and Executive Officers as a
Group..................................... (1)(3)(4)(6)(7)(8)
</TABLE>
- ---------------
* The address of AP Holdings, Dosher Partners, L.P., Waverly Partners, L.P.
and the business address of Messrs. Warshauer, Stuelpe and LaRocco is 900 N.
Michigan Avenue, Chicago, Illinois 60611-1542.
** The address of Orkla and the business address of Mr. Holten is 545 Steamboat
Road, Greenwich, Connecticut 06830.
26
<PAGE> 27
++ The address of SP Associates is 900 North Michigan Avenue, Chicago,
Illinois 60611-1542.
(1) Mr. Holten owns all of the outstanding common stock of the corporate parent
of Holberg Industries, Inc. ("Holberg"), which parent entity owns
approximately 66% of the outstanding common stock of Holberg, which in turn
owns 91.67% of the outstanding common stock of AP Holdings.
(2) Orkla owns approximately 34% of the outstanding common stock of Holberg.
(3) All of the interests in Dosher Partners, L.P. are beneficially owned by
Myron C. Warshauer and trusts for the benefit of certain members of his
family. Mr. Warshauer disclaims beneficial ownership of the assets of
Dosher Partners, L.P., including the shares of Common Stock held by it, to
the extent those interests are held for the benefit of such trusts.
(4) Waverly Partners, L.P. ("Waverly") is a limited partnership in which Myron
C. Warshauer is general partner. Mr. Warshauer disclaims beneficial
ownership of the assets of Waverly, including the shares of Common Stock
held by it.
(5) SP Associates is a general partnership controlled by affiliates of JMB
Realty Corp.
(6) Mr. Stuelpe owns approximately 3.5% of the common stock of AP Holdings.
(7) Mr. LaRocco owns approximately 1.8% of the common stock of AP Holdings.
(8) Certain other executive officers of APCOA/Standard in the aggregate own
approximately 3.1% of the common stock of AP Holdings.
27
<PAGE> 28
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
COMPANY STOCKHOLDERS AGREEMENT
Upon consummation of the March 30, 1998 combination with Standard ("the
Combination"), the Company entered into a Stockholders Agreement (the
"Stockholders Agreement") with Dosher Partners, L.P. ("Dosher"), and SP
Associates (collectively, the "Standard Parties") and Holberg and AP Holdings
(collectively with the Standard Parties, the "Stockholders"). The Stockholders
Agreement provides, among other things, for (i) prior to the earliest of (a) the
seventh anniversary of the consummation of the Combination, (b) the termination
of Myron C. Warshauer's employment with the Company under certain circumstances
and (c) the consummation of an initial public offering of Company Common Stock
(as such offering will be defined in the Stockholders Agreement), certain
obligations of Holberg to allow Dosher the opportunity to acquire all, but not
less than all, of the Company Common Stock held by Holberg and/or its affiliates
before Holberg may directly or indirectly sell an amount of Company Common Stock
which would constitute a Control Transaction (as defined in the Stockholders
Agreement); provided that, under certain circumstances, Holberg may sell such
shares to a party other than Dosher if the terms of such other party's offer are
more favorable to Holberg, (ii) until the consummation of an initial public
offering of Company Common Stock, certain rights of each Standard Party to
purchase shares of Company Common Stock to the extent necessary to maintain such
Standard Party's percentage ownership of the Company, (iii) the right of the
Standard Parties to participate in, and the right of Holberg to require the
Standard Parties to participate in, certain sales of Company Common Stock, (iv)
following the third anniversary of the consummation of the Combination and prior
to an initial public offering of Company Common Stock, certain rights of the
Company to purchase, and certain rights of the Standard Parties to require the
Company to purchase, shares of Company Common Stock at prices determined in
accordance with the Stockholders Agreement and (v) certain additional
restrictions on the rights of the Standard Parties to transfer shares of Company
Common Stock. The Stockholders Agreement also contains certain provisions
granting the Stockholders certain rights in connection with registrations of
Company Common Stock in certain offerings and provides for indemnification and
certain other rights, restrictions and obligations in connection with such
registrations.
Effective October 1, 1998, Dosher transferred a 4% interest in
APCOA/Standard common stock to Waverly Partners, L.P. ("Waverly"), a limited
partnership in which Myron C. Warshauer is general partner, Douglas Warshauer
individually is a limited partner and Douglas Warshauer as Trustee for the
Douglas Warshauer Family Trust is a limited partner. Waverly and each original
signatory to the Stockholders Agreement consented to the transfer pursuant to a
Consent and Joinder to Stockholders' Agreement dated as of October 1, 1998.
AP HOLDINGS STOCKHOLDERS AGREEMENT
AP Holdings is party to a Stockholders Agreement with Holberg, and each of
the members of APCOA management who is a stockholder of AP Holdings, which
provides for, among other things, (i) a board of directors consisting of three
or more Holberg nominees, and one management nominee, (ii) certain restrictions
on the sale, assignment, transfer, encumbrance or other disposition of the
common stock of AP Holdings, (iii) certain first offer, repurchase and put/call
rights (a summary of which is set forth below), with respect to the AP Holdings
common stock held by the management investors (iv) certain pre-emptive rights in
favor of the management investors with respect to the issuance of AP Holdings
common stock, and (v) certain put/call rights with respect to the AP Holdings
common stock held by Delaware North. As of August 4, 1998, AP Holdings
repurchased the shares of its common stock and warrants formerly held by
Delaware North for $4.0 million in cash. In connection with such repurchase, the
Delaware North nominee to the AP Holdings Board of Directors resigned as a
director of AP Holdings.
The AP Holdings Stockholders Agreement provides that, subject to any direct
or indirect restrictions imposed by financing agreements or arrangements entered
into by AP Holdings or the Company, upon the termination of employment of a
management investor for death, retirement, complete disability, or otherwise,
(a) such management investor, or his estate or heir (in the case of death,
retirement or complete disability), shall have the right to cause AP Holdings
to, and (b) AP Holdings shall have the right to, repurchase such management
investor's AP Holdings common stock, at a purchase price, which, under some
circumstances, is partially payable
28
<PAGE> 29
in subordinated notes, equal to, (X) in the case of a termination of employment
for death, retirement or complete disability or by AP Holdings without Cause (as
defined in the AP Holdings Stockholders Agreement) or a voluntary termination of
employment by such management investor, the greatest of, or (Y) in the case of a
termination of employment by AP Holdings for Cause, the lowest of, (i) the price
per share paid by such management investor for such AP Holdings common stock,
(ii) the adjusted book value per share of AP Holdings common stock and (iii) the
sum, on a per share basis, of (x) the product of the cash contribution from
operations of AP Holdings for the immediately preceding four fiscal quarters
multiplied by 6.84 minus (y) the amount of debt reflected in AP Holdings most
recent consolidated financial statements.
TAX SHARING AGREEMENT
The Company is a party to the Tax Sharing Agreement, dated April 28, 1989,
by and among Holberg, AP Holdings and the Company (the "Tax Sharing Agreement"),
which applies to each of Holberg's consolidated return years beginning with
1989. The Tax Sharing Agreement provides that each member of Holberg's
affiliated group, including the Company, will pay to Holberg the amount of
federal income tax that such member would be required to pay on a separate
return basis for the year in question, except that the amount that the Company
is required to pay to Holberg will not exceed the tax liabilities of the Company
on a separate return basis for all taxable years to which the Tax Sharing
Agreement applies and for which the Company joined in the Holberg consolidated
return, computed as if the Company had actually filed separate returns for all
such years and taking into account any net operating loss carryforward the
Company would have had if it had filed a separate return for all such years.
Holberg is not required to make a payment to the Company by virtue of the
utilization by the Holberg affiliated group of any net operating loss generated
by the Company. In the event that the consolidated federal income tax liability
of the Holberg affiliated group is adjusted for any taxable period, whether by
means of an amended return, claim for refund, or tax audit by the Internal
Revenue Service, the liability of the Company under the Tax Sharing Agreement
will be recomputed to give effect to such adjustments.
PREFERRED STOCK
Prior to the consummation of the Combination, Holberg held $8.7 million of
preferred stock of APCOA. A portion of the proceeds of the financing obtained in
conjunction with the combination with Standard (see Note B of the Notes to
Consolidated Financial Statements) was used to redeem $8.0 million of the
preferred stock. The remaining $0.7 million was contributed to the capital of
the Company.
The preferred stock issued by the Company to AP Holdings in conjunction
with the combination with Standard has the same maturity as the debt securities
of AP Holdings issued to finance the preferred stock contribution, has an
initial liquidation preference equal to the issue price of such debt securities,
increases in liquidation preference at the same rate as such debt securities
accrue interest, such that the liquidation preference of the preferred stock
will at all times be equal to the then principal amount of such debt securities,
and accrues cash dividends commencing at such times as such debt securities
commence to accrue cash interest, at the same rate as such debt securities.
MANAGEMENT CONTRACTS AND RELATED ARRANGEMENTS WITH AFFILIATES
The Company has a management contract to operate one parking facility in
Chicago with an Illinois land trust which is beneficially owned by a partnership
in which Myron C. Warshauer, Steven A. Warshauer and Stanley Warshauer have an
equity interest. All expenses that are typically borne by a facility owner under
a management contract, such as salaries, wages and benefits associated with
employees at the parking facility and an allocable portion of such costs for
supervisory management personnel, the cost of uniforms, supplies, insurance,
utilities and other direct operating costs ("property-level expenses") are paid
by the facility owner. Pursuant to the management contract, the Company received
a management fee of approximately $39,000 in 1998. However, certain
subordination provisions in the loan agreement between the facility owner and
its lender would result in the non-payment of this management fee if operating
revenues are insufficient to defray all operating expenses and debt service
costs relating to the property.
29
<PAGE> 30
The Company has a management contract with the Buckingham Plaza Limited
Partnership ("BPLP") to operate the parking facility at a condominium complex in
Chicago of which BPLP was the developer. Myron C. Warshauer and SP Associates
own an equity interest in one of BPLP's limited partners. The Company receives
an annual management fee of $20,200 pursuant to such management contract. The
Company estimates that such management fee is no less than would normally be
obtained through arms-length negotiations.
The Company has management contracts to operate two surface parking lots in
Chicago. Myron C. Warshauer, Steven A. Warshauer, Stanley Warshauer, Michael K.
Wolf and SP Associates own membership interests in a limited liability company
that is a member of the limited liability companies that own such surface
parking lots. The Company receives a total of $39,300 in management fees
annually under such management contracts. The Company estimates that such
management fees are no less favorable than would normally be obtained through
arms-length negotiations.
The Company operates the Clark Fullerton Self Park, a parking facility in
which Myron C. Warshauer had a 50% equity interest. The facility owner pays all
of the property-level expenses, and the Company earned a management fee of
$25,000 during 1998. Myron C. Warshauer sold his interest in this facility
during the first quarter of 1999.
The Company provides office and related support services to Auditorium
Garage, Inc. ("Auditorium"), an Illinois corporation owned by Stanley Warshauer
and his wife, in conjunction with Auditorium's management of a parking facility.
Auditorium reimbursed the Company for the general and administrative costs
associated with providing these services of $19,500 in 1998.
Myron C., Stanley and Steven A. Warshauer own an equity interest in two
parking facilities in Chicago. One of those facilities, the State Oak Garage, is
managed by the Company on terms that the Company believes are no less favorable
than would normally be obtained through arms-length negotiations. The Company
earned a management fee of $39,000 in 1998 at such facility. The other parking
facility (the "Theater District Garage") is leased to Standard/Tremont Parking
Corporation ("Standard Tremont"), an Illinois corporation that is owned by
Stanley Warshauer, Steven A. Warshauer and Myron C. Warshauer. The Company
provides office and related support services to Standard Tremont, in conjunction
with Standard Tremont's management of the Tremont Facility. Standard Tremont
reimburses the Company for the general and administrative costs associated with
providing these services, which reimbursement totaled $15,000 in 1998.
The Company pays 12.5% of the lease net operating income derived from one
parking facility to Warshauer Management Corporation for services rendered in
obtaining the right to operate the facility.
SP Associates is an affiliate of JMB Realty Corp., from which the Company
leases office space for its corporate offices in Chicago. Payments pursuant to
the lease agreement aggregated approximately $230,000 during 1998.
The Company purchases workers' compensation and health insurance covering
certain parking facilities from JMB Insurance Agency, Inc., an affiliate of JMB
Realty Corp. which in turn is an affiliate of SP Associates. The Company
estimates that the premiums and commissions paid for such insurance are
comparable to premiums it would pay for comparable coverage from an unrelated
third party. Additionally, the Company paid $25,000 to JMB Insurance Agency,
Inc. for consulting services during 1998.
In March of 1998, the Company acquired a lease for $1.4 million from an
entity which is 15% owned by certain members of the management group. The lease
is for a term of eleven years and calls for annual rent of $185,000 per year
plus percentage rent if the property achieves certain earnings levels. In 1998
APCOA/Standard earned $116,800 in net lease revenue under this agreement. The
Company believes the terms of this agreement are no less favorable than would
normally be obtained through arms-length negotiations.
LIABILITY INSURANCE
The Company participates in a master insurance program with Holberg which
serves to reduce the insurance costs of the combined group. In connection with
the insurance program, during 1998 the Company placed
30
<PAGE> 31
$2.2 million on deposit with an affiliate for insurance collateral purposes.
This amount is included in intangible and other assets in the accompanying
consolidated balance sheets.
In January of 1999, the Company completed the combination of its insurance
programs into one program. In connection therewith the Company purchased
coverage for its previously self-insured layer, and a tail policy to eliminate
future exposure from retrospective adjustments.
CONSULTING AGREEMENT WITH SIDNEY WARSHAUER
Consummation of the Combination was conditioned by Standard, among other
things, upon the execution of a Consulting Agreement (the "Agreement") between
the Company and Sidney Warshauer, the father of Myron C. Warshauer. Sidney
Warshauer is 83 years old.
The Agreement provides that Sidney Warshauer render such services as may be
requested, from time to time, by the Board of Directors of the Company (the
"Board") and/or the Chief Executive Officer of the Company, consistent with Mr.
Warshauer's past practices and experience, for a period beginning on the date of
the consummation of the Combination and ending on Sidney Warshauer's death.
Sidney Warshauer will receive, during such period, annual payments of $552,000
along with certain other benefits.
The Agreement provides that, from the date of the closing of the
Combination until his death, Sidney Warshauer will not disclose Company
confidential information or compete with the Company. The Agreement is not
terminable by the Company for any reason other than the death of Sidney
Warshauer, or a breach by Sidney Warshauer of his obligations under the
Agreement with respect to non-disclosure of Company confidential information or
his obligation to refrain from engaging in competition with the Company. The
parties intended that all payments under the Agreement represent additional
purchase price in the form of supplemental retirement benefits in recognition of
Sidney Warshauer's significant contributions to Standard. The actuarial value,
as of March 30, 1998, of the payments under the Agreement was approximately $5.0
million. See Note B of the Notes to the Consolidated Financial Statements.
CERTAIN OTHER MATTERS RELATING TO HOLBERG
Holberg has received customary investment banking and advisory fees from
APCOA in connection with certain prior transactions, and received a $1.0 million
advisory fee (and reimbursement of expenses) upon consummation of the
Combination. The Company also may pay an annual management fee to Holberg and
otherwise reimburse Holberg for certain expenses incurred by Holberg on behalf
of the Company. In addition, the Company currently leases a plane on behalf of
Holberg. Holberg pays all costs under the lease other than amounts that may be
charged to the Company in connection with use of the plane and indemnifies the
Company for all obligations under the lease. All of these fees and other amounts
paid to Holberg are subject to the limits and restrictions imposed by the
Indenture.
APCOA/Standard and Holberg and its affiliates periodically engage in
bi-lateral loans and advances. These loans and advances are interest bearing at
a variable rate that approximates the prime interest rate. The accumulated
interest is added to, or deducted from (as appropriate), the balance in the loan
or advance account. In connection with the Combination, APCOA made a $6.5
million non-cash distribution to Holberg of the receivable in such amount due
from Holberg to APCOA, at the date of the Combination.
31
<PAGE> 32
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Report:
1. Financial Statements.
Report of Independent Auditors
Audited Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 1998 and 1997
For the years ended December 31, 1998, 1997 and 1996:
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial statement schedule.
Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission
of the schedule, or because the information required is included in
the consolidated financial statements or the notes thereto.
32
<PAGE> 33
3. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 Purchase Agreement, by and among AP Holdings and Donaldson,
Lufkin & Jenrette Securities Corporation, dated as of March
25, 1998 (incorporated by reference to Exhibit 1.1 to the
Registrant's Registration Statement Form S-4 No. 333-50433
filed April 17, 1998, August 11, 1998 and August 14, 1998,
(the "Registration Statement")).
2.1 Combination Agreement, dated as of January 15, 1998, by and
between APCOA, Inc. and the Standard Owners (incorporated by
reference to Exhibit 2.1 to the Registration Statement).
3.1 Restated Certificate of Incorporation of AP Holdings
(incorporated by reference to Exhibit 3.1 to the
Registration Statement).
3.2 By-Laws of AP Holdings (incorporated by reference to Exhibit
3.2 to the Registration Statement).
4.1 Indenture, dated as of March 30, 1998, by and among AP
Holdings and State Street Bank and Trust Company, with
respect to the New Notes (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).
10.2 Credit Agreement, dated as of March 30, 1998, by and among
the Company, The First National Bank of Chicago, as Agent
and Lender, and the Other Financial Institutions party
thereto (incorporated by reference to Exhibit 10.2 to the
Registration Statement).
10.3 Stockholders' Agreement, dated as of March 30, 1998, by and
among Dosher Partners, L.P., SP Associates, Holberg, AP
Holdings and the Company (incorporated by reference to
Exhibit 10.3 to the Registration Statement).
10.4 Stockholders Agreement, dated as of April 14, 1989, by and
among AP Holdings, Holberg, and each member of the
management of the Company who is a stockholder of AP
Holdings (incorporated by reference to Exhibit 10.4 to the
Registration Statement).
10.5 Tax Sharing Agreement, dated as of April 28, 1989, as
amended as of March 30, 1998, by and among Holberg, AP
Holdings and the Company (incorporated by reference to
Exhibit 10.5 to the Registration Statement).
10.6 Employment Agreement between the Company and Myron C.
Warshauer (incorporated by reference to Exhibit 10.6 to the
Registration Statement).
10.7 Employment Agreement between the Company and G. Walter
Stuelpe, Jr. (incorporated by reference to Exhibit to the
Registration Statement).
10.8 Executive Transition Agreement between the Company and James
V. LaRocco, Jr. (incorporated by reference to Exhibit 10.8
to the Registration Statement).
10.12 Employment Agreement between the Company and Michael K. Wolf
(incorporated by reference to Exhibit 10.12 to the
Registration Statement).
10.13 Deferred Compensation Agreement between the Company and
Michael K. Wolf (incorporated by reference to Exhibit 10.13
to the Registration Statement).
10.14 Company Retirement Plan for Key Executive Officers
(incorporated by reference to Exhibit 10.14 to the
Registration Statement).
10.15 Consulting Agreement between the Company and Sidney
Warshauer (incorporated by reference to Exhibit 10.1 to the
Registration Statement).
10.17 Consent and Joinder to Stockholders' Agreement dated as of
October 1, 1998 by and among the Company, Dosher Partners,
L.P., SP Associates, Holberg, AP Holdings and Waverly.
10.18 Employment Agreement between the Company and James A.
Wilhelm.
21.1 Subsidiaries of AP Holdings (incorporated by reference to
Exhibit 21.1 to the Registration Statement).
25.1 Statement of Eligibility and Qualification of Trustee on
Form T-1 of State Street Bank and Trust Company under the
Trust Indenture Act of 1939 (incorporated by reference to
Exhibit 25.1 to the Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
33
<PAGE> 34
INDEX TO HISTORICAL FINANCIAL STATEMENTS
AP HOLDINGS, INC.
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-3
Consolidated Statements of Operations for each of the three
years in the period
ended December 31, 1998................................... F-5
Consolidated Statements of Stockholders' Equity (Deficit)
for each of the three years in the period
ended December 31, 1998................................... F-6
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1998............... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
F-1
<PAGE> 35
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
Board of Directors
AP HOLDINGS, INC.
We have audited the accompanying consolidated balance sheets of AP
Holdings, Inc. ("AP Holdings") as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1998. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of AP
Holdings' management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amount and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AP Holdings at
December 31, 1998 and 1997, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
ERNST & YOUNG LLP
Chicago, Illinois
March 30, 1999
F-2
<PAGE> 36
AP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1997
-------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 19,183 $ 3,322
Notes and accounts receivable, less allowances of $1,743
in 1998 and $443 in 1997............................... 32,639 13,806
Prepaid expenses and supplies............................. 2,806 1,126
-------- -------
Total current assets................................... 54,628 18,254
Leaseholds and equipment:
Equipment................................................. 10,878 10,024
Leasehold improvements.................................... 18,663 13,981
Leaseholds................................................ 41,417 31,293
Construction in progress.................................. 2,549 417
-------- -------
73,507 55,715
Less accumulated depreciation and amortization............ 45,889 43,375
-------- -------
27,618 12,340
Other Assets:
Advances and deposits..................................... 3,318 1,509
Cost in excess of net assets acquired, less accumulated
amortization of $5,558 and $3,412 in 1998 and 1997,
respectively........................................... 108,741 18,457
Intangible and other assets, less accumulated amortization
of $4,679 and $3,433 in 1998 and 1997, respectively.... 17,943 4,013
Due from affiliate........................................ 409 4,522
-------- -------
130,411 28,501
-------- -------
Total assets........................................... $212,657 $59,095
======== =======
</TABLE>
F-3
<PAGE> 37
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1997
-------- -------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 18,184 $16,401
Accrued rent.............................................. 7,262 5,649
Compensation and payroll withholdings..................... 11,067 1,924
Property, payroll and other taxes......................... 4,955 3,111
Accrued insurance and expenses............................ 20,340 4,126
Current portion of long-term borrowings................... 1,939 4,102
-------- -------
Total current liabilities.............................. 63,747 35,313
Long-term borrowings, excluding current portion:
Obligations under credit agreements....................... 144,957 27,729
Senior Discount Notes, 11 1/4%, due 2008.................. 44,174 --
Other..................................................... 2,535 6,452
-------- -------
191,666 34,181
Other long-term liabilities................................. 11,675 3,132
Redeemable preferred stock of subsidiary.................... -- 8,728
Common stock of subsidiary subject to put/call rights; 5.01
shares issued and outstanding............................. 4,589 --
Common stock, 880 shares issued and outstanding and warrants
to purchase 200 common shares, subject to put/call
rights.................................................... -- 4,000
Stockholders' deficit:
Preferred stock, 12% quarterly, cumulative, par value $.01
per share, 10,000 shares authorized, 2,970.74 shares at
December 31,1998 and 2,800.20 shares at December 31,
1997 issued and outstanding............................ 28,364 25,201
Common stock, par value $0.01 per share, 20,000 shares
authorized; 8,800 shares issued, 7,920 shares
outstanding............................................ 1 1
Additional paid-in capital................................ 2,088 7,871
Accumulated deficit....................................... (89,473) (59,332)
-------- -------
Total stockholders' deficit............................... (59,020) (26,259)
-------- -------
Total liabilities and stockholders' deficit............ $212,657 $59,095
======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 38
AP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------
1998 1997 1996
---------- -------- --------
<S> <C> <C> <C>
Gross customer collections.............................. $1,026,085 $476,183 $430,696
========== ======== ========
Parking services revenue:
Lease contracts....................................... $ 162,568 $ 99,594 $120,286
Management contracts.................................. 32,949 18,110 18,123
---------- -------- --------
195,517 117,704 138,409
Costs and expenses:
Cost of parking services:
Lease contracts....................................... 144,086 85,355 107,375
Management contracts.................................. 11,144 9,491 8,783
---------- -------- --------
155,230 94,846 116,158
General and administrative............................ 23,506 13,528 13,017
Restructuring and other unusual charges............... 18,050 -- --
Depreciation and amortization......................... 7,435 3,767 4,888
---------- -------- --------
Total costs and expenses................................ 204,221 112,141 134,063
---------- -------- --------
Operating income (loss)................................. (8,704) 5,563 4,346
Other expenses (income):
Interest expense...................................... 15,792 3,713 3,409
Interest income....................................... (1,251) (470) (532)
---------- -------- --------
14,541 3,243 2,877
Income (loss) before minority interest, income taxes and
extraordinary item.................................... (23,245) 2,320 1,469
Minority interest....................................... 487 321 424
Income tax expense...................................... 430 140 106
---------- -------- --------
Income (loss) before extraordinary item................. (24,162) 1,859 939
Extraordinary item...................................... 2,816 -- --
---------- -------- --------
Net income (loss)....................................... (26,978) 1,859 939
Preferred stock dividends............................... (3,163) (3,697) (3,293)
---------- -------- --------
Net income (loss) available for common stockholders..... $ (30,141) $ (1,838) $ (2,354)
========== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 39
AP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------ --------------
NUMBER NUMBER ADDITIONAL
OF PAR OF PAR PAID-IN ACCUMULATED
SHARES VALUE SHARES VALUE CAPITAL DEFICIT TOTAL
-------- ------- ------ ----- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance (deficit) at
January 1, 1996.............. 2,210.51 $19,894 7,898 $ 1 $7,871 $(54,804) $(27,038)
Net income..................... 939 939
Preferred stock dividends...... 277.43 2,497 (3,293) (796)
Increase common stock and
warrants subject to put/call
rights to current value...... (192) (192)
-------- ------- ----- --- ------ -------- --------
Balance (deficit) at
December 31, 1996............ 2,487.94 22,391 7,898 1 7,871 (57,350) (27,087)
Net income..................... 1,859 1,859
Preferred stock dividends...... 312.26 2,810 (3,697) (887)
Increase common stock and
warrants subject to put/call
rights to current value...... (144) (144)
Issuance of common stock....... 22
-------- ------- ----- --- ------ -------- --------
Balance (deficit) at
December 31, 1997............ 2,800.20 25,201 7,920 1 7,871 (59,332) (26,259)
Net loss....................... (26,978) (26,978)
Preferred stock dividends...... 170.54 3,163 (3,163) --
Non-cash distribution to
affiliate.................... (6,511) (6,511)
Contribution to capital........ 728 728
-------- ------- ----- --- ------ -------- --------
Balance (deficit) at
December 31, 1998............ 2,970.74 $28,364 7,920 $ 1 $2,088 $(89,473) $(59,020)
======== ======= ===== === ====== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 40
AP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
1998 1997 1996
-------- ------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................................... $(26,978) $ 1,859 $ 939
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operations:
Depreciation and amortization............................ 7,435 3,767 4,888
Provision for impairment of assets....................... 2,600 -- --
Interest accreted on long-term borrowings................ 3,491 -- --
Changes in operating assets and liabilities, net of
acquisitions:
Notes and accounts receivable......................... (14,133) (3,495) 1,041
Prepaid assets........................................ 477 273 163
Other assets.......................................... (816) 216 (1,071)
Accounts payable...................................... (4,834) 294 (845)
Accrued liabilities................................... 18,776 (2,982) (1,209)
Due from affiliates................................... (2,399) 999 (1,864)
-------- ------- --------
Net cash provided by (used in) operating activities........ (16,381) 931 2,042
INVESTING ACTIVITIES
Purchase of leaseholds and equipment....................... (7,691) (2,357) (2,552)
Purchase of leaseholds and equipment by joint ventures..... (828) (480) (1,181)
Increase in other assets................................... (461) (906) --
Businesses acquired, net of cash acquired.................. (87,045) 151 --
Proceeds from disposition of leaseholds and equipment...... -- -- 384
-------- ------- --------
Net cash used in investing activities...................... (96,025) (3,592) (3,349)
FINANCING ACTIVITIES
Proceeds from long-term borrowings......................... 180,683 4,269 12,244
Payments on long-term borrowings........................... (32,298) (829) (11,483)
Proceeds from joint venture borrowings..................... -- 400 2,665
Payments on joint venture borrowings....................... (530) (389) (1,414)
Payments of debt issuance costs............................ (7,588) -- (724)
Redemption of redeemable preferred stock................... (8,000) -- --
Redemption of common stock subject to put/call rights...... (4,000) -- --
-------- ------- --------
Net cash provided by financing activities.................. 128,267 3,451 1,288
-------- ------- --------
Increase (decrease) in cash and cash equivalents........... 15,861 790 (19)
Cash and cash equivalents at beginning of year............. 3,322 2,532 2,551
-------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR................... $ 19,183 $ 3,322 $ 2,532
======== ======= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE> 41
AP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
AP Holdings, Inc. ("AP Holdings"), is a subsidiary of Holberg Industries,
Inc. ("Holberg"), and owns 84% of the voting stock of APCOA/Standard Parking,
Inc. ("APCOA/Standard" or "the Company"), formerly known as APCOA, Inc.
("APCOA"). APCOA/Standard and its subsidiaries and affiliates manage, operate
and develop parking properties throughout the United States and Canada. The
Company is a majority-owned subsidiary of AP Holdings, Inc. ("AP Holdings"). The
Company provides on-site management services at multi-level and surface
facilities in the two major markets of the parking industry: urban parking and
airport parking. The Company manages approximately 1,600 parking facilities,
containing approximately 800,000 parking spaces in over 60 cities across the
United States and Canada.
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of AP Holdings, the Company, its wholly owned subsidiaries,
and joint ventures in which the Company has more than 50% ownership interest.
Minority interest recorded in the consolidated statement of operations is the
joint venture partner's noncontrolling interest in consolidated joint ventures.
Minority interest included in the consolidated balance sheets was $147 and $276
at December 31, 1998 and 1997, respectively. Investments in joint ventures of
50% or less ownership interest are reported on the equity method. Investments in
joint ventures accounted for using the equity method in the consolidated balance
sheets were $32 and $273 at December 31, 1998 and 1997, respectively. All
significant intercompany profits, transactions and balances have been eliminated
in consolidation.
GROSS CUSTOMER COLLECTIONS -- Gross customer collections represent gross
receipts collected at all leased and managed properties, including
unconsolidated affiliates.
PARKING REVENUE -- The Company recognizes gross receipts from leased
locations and management fees earned from management contract properties as
parking revenue as the related services are provided. Also included in parking
revenue were $1,207 in 1997 and $147 in 1996 from gains on sales of parking
contracts in the ordinary course of business.
COST OF PARKING SERVICES -- The Company recognizes costs for leases and
nonreimbursed costs from managed facilities as cost of parking services. Cost of
parking services consists primarily of rent and payroll related costs.
ADVERTISING COSTS -- Advertising costs are expensed as incurred and are
included in general and administrative expenses. Advertising expenses aggregated
$343, $440 and $414 for 1998, 1997 and 1996, respectively.
CASH AND CASH EQUIVALENTS -- Cash equivalents represent funds temporarily
invested in money market instruments with maturities of one to five days. Cash
equivalents are stated at cost, which approximates market value.
LEASEHOLDS AND EQUIPMENT -- Leaseholds, equipment and leasehold
improvements are stated at cost. Leaseholds (cost of parking contracts) are
amortized on a straight-line basis over the average contract life of 7 years.
Equipment is depreciated on the straight-line basis over the estimated useful
lives of approximately 5 years on average. Leasehold improvements are amortized
on the straight-line basis over the terms of the respective leases or the
service lives of the improvements, whichever is shorter (average of
approximately 7 years). Depreciation and amortization includes losses on
abandonments of leaseholds of $260, $478 and $481 in 1998, 1997 and 1996,
respectively.
COST IN EXCESS OF NET ASSETS ACQUIRED (GOODWILL) -- Cost in excess of net
assets acquired arising from acquisitions is amortized using the straight-line
method over 40 years. The carrying value of goodwill is continually evaluated to
determine a possible impairment in value. If undiscounted cash flows over the
remaining
F-8
<PAGE> 42
AP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
amortization period indicate that goodwill may not be recoverable, the carrying
value of goodwill is reduced by the estimated shortfall of cash flows on a
discounted basis.
INTANGIBLE ASSETS -- Legal and other costs incurred to acquire certain
parking businesses and establish parking joint ventures ($991 at December 31,
1998) are being amortized on a straight-line basis over seven years, the
estimated life of the underlying parking contracts. Debt issuance costs of
$7,020 and $775 at December 31, 1998 and 1997, respectively, are amortized over
the terms of the credit agreements using the straight-line method. Additionally,
$6,317 of intangibles, consisting primarily of a covenant not to compete (see
Note B) have been capitalized as of December 31, 1998
FINANCIAL INSTRUMENTS -- The carrying values of cash, accounts receivable
and accounts payable are reasonable estimates of their fair value due to the
short-term nature of these financial instruments. The Company's 9.25% Senior
Subordinated Notes are included in the Consolidated Balance Sheet at $140,000,
which represents the aggregate face value of the notes. Market value at December
31, 1998 aggregated $128,800. AP Holdings' 11.25% Senior Discount Notes have
been included in the Consolidated Balance Sheet at their issuance price plus
accreted interest. Market value at December 31, 1998 aggregated $37,100. Other
long-term assets and debt have a carrying value that approximates fair value.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
RECENT ACCOUNTING PRONOUNCEMENTS -- Effective January 1, 1998, the Company
adopted the Financial Accounting Standard Board's Statement No. 130, "Reporting
Comprehensive Income," which establishes the standards for reporting and
displaying comprehensive earnings and its components as part of a full set of
financial statements. Since the Statement applies only to the presentation of
comprehensive income, it did not have any impact on the Company's results of
operations, financial position or cash flows. In addition, the Company does not
have any elements of comprehensive income as defined.
Additionally, effective January 1, 1998 the Company adopted Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information."
Statement No. 131 replaces Statement No. 14, and establishes standards for
reporting segment information in annual and interim financial statements,
including disclosures about services, geographic customers and major areas. The
Company operates in a single business segment: parking property management.
Further, the Company operates primarily in the United States, and operating
results and assets outside of the United States are not material to the
Company's financial statements. No customer accounted for more than 10% of the
Company's revenue in 1998, 1997 or 1996. Accordingly, adoption of Statement No.
131 has had no impact on the Company's financial statements and accompanying
footnote disclosures.
Implementation of SOP 98-5, "Reporting on the Costs of Start-Up
Activities," effective January 1, 1999, will not have a material impact on the
Company's financial position or results of operations.
RECLASSIFICATIONS -- Certain amounts previously presented in the financial
statements of prior periods have been reclassified to conform to current year
presentation.
NOTE B. 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 Corp. 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,
F-9
<PAGE> 43
AP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
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
Notes D and H.
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
preliminary purchase price allocation, based on the estimated 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............................... 2,326
Prepaid expenses............................................ 545
Leaseholds and equipment.................................... 7,971
Consulting and non-compete agreement........................ 5,000
Cost in excess of net assets acquired....................... 73,641
Other assets................................................ 782
Accounts payable and accrued expenses....................... (2,758)
Other costs and liabilities................................. (4,628)
-------
$84,590
=======
</TABLE>
The put/call value 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.
During the year ended December 31, 1997, the Company completed three
acquisitions for an aggregate purchase price of $1,000 in cash and $1,200 in
notes payable. The acquisitions other than Standard did not have a material
impact on the Company and have not been included in the pro forma information
below. The following unaudited pro forma results of operations for 1998 and 1997
assume the acquisition of Standard occurred at the beginning of each period
presented:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Net revenue...................................... $210,075 $181,356
Loss before extraordinary item................... (19,697) (3,710)
</TABLE>
F-10
<PAGE> 44
AP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
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 periods 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, of which $1,000 was repaid in March of 1998. The $2,250 balance
is payable over 20 years with interest based on prime. 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 million
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, including direct acquisition costs,
and up to $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 these businesses were not material to the
consolidated results of APCOA/Standard.
NOTE C. RESTRUCTURING AND OTHER UNUSUAL CHARGES
During 1998, management performed an analysis of the costs associated with
implementing the business plan of consolidating the Company's headquarters in
Chicago and costs related to Company staff reductions. Included in
"restructuring and other unusual charges" in the accompanying consolidated
statement of operations for the year ended December 31, 1998 are the following
(expenses are cash unless otherwise stated):
<TABLE>
<S> <C>
Employee severance costs.................................... $ 6,900
Employee relocation costs................................... 5,000
Increase in insurance reserves.............................. 2,600
Impairment and abandonment of assets that will no longer be
used (non-cash expense)................................... 2,600
Other....................................................... 950
-------
$18,050
=======
</TABLE>
The $6,900 of employee severance costs consists of cash compensation and
related expenses to 54 people for whom employment was terminated. The $5,000 of
employee relocation costs are in connection with 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 $2,600 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 $2,600 of capitalized organization costs and leasehold improvements.
Of the $15,450 cash restructuring and other unusual charges identified
above, $9,900 was disbursed during 1998. It is expected that substantially all
actions related to the Company's consolidation plan will be completed by early
1999 and the remaining cash component will be disbursed by the middle of 1999.
F-11
<PAGE> 45
AP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
On September 30, 1998, the planned consolidation of the Company's
headquarters in Chicago was completed and the planned reduction in
administrative headcount was realized.
NOTE D. BORROWING ARRANGEMENTS
Long-term borrowings consist of:
<TABLE>
<CAPTION>
AMOUNT OUTSTANDING
DECEMBER 31
-------------------
INTEREST RATE(S) DUE DATE 1998 1997
---------------- ------------ -------- -------
<S> <C> <C> <C> <C>
Senior Subordinated Notes............... 9.25% March 2008 $140,000 $ --
Senior Discount Notes................... 11.25% March 2008 44,174 --
Prudential term note.................... 9.18% Paid in 1998 -- 18,000
Prudential term note.................... 8.92% Paid in 1998 -- 5,000
Key Bank revolver....................... 7.82-8.75% Paid in 1998 -- 6,529
Joint venture debentures................ 11.00-15.00% Various 4,993 5,523
Capital leases and other................ Various Various 4,438 3,231
-------- -------
193,605 38,283
Less current portion.................... 1,939 4,102
-------- -------
$191,666 $34,181
======== =======
</TABLE>
APCOA/Standard's 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 issuance was 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.
AP 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 purchase of new preferred stock of the Company.
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
December 31, 1998, there were letters of credit outstanding against this
Facility of $5,900.
The Notes, Discount Notes, and Senior Credit Facility contain covenants
that limit AP Holdings and APCOA/Standard from incurring additional indebtedness
and issuing preferred stock, restrict dividend payments, limit transactions with
affiliates and restrict certain other transactions. Substantially all of AP
Holdings' and APCOA/Standard's net assets are restricted under these provisions
and covenants (See Note I).
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.
Consolidated joint ventures have entered into four agreements for
stand-alone development projects providing nonrecourse funding. These joint
venture debentures are collateralized by the specific contracts that were funded
and approximate the net book value of the related assets.
F-12
<PAGE> 46
AP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
The Company has entered into capital leases and various financing
agreements, which were used for the purchase of equipment and on November 1,
1997, the Company signed interest free promissory notes in the amount of $1,123
to purchase the remaining interest of an unconsolidated subsidiary. The notes
were paid in January, 1998.
The Company paid interest of $8,572; $3,878 and $3,230 in 1998, 1997, and
1996, respectively.
The aggregate maturities of borrowings outstanding at December 31, 1998 are
as follows:
<TABLE>
<S> <C>
1999........................................................ $ 1,939
2000........................................................ 773
2001........................................................ 700
2002........................................................ 516
2003........................................................ 510
2004 and thereafter......................................... 189,167
--------
$193,605
========
</TABLE>
NOTE E. INCOME TAXES
AP Holdings is included in the consolidated federal income tax return filed
with its affiliates and has a tax sharing agreement with the affiliates. AP
Holdings' income tax provision is determined on a separate return basis. Income
tax expense consists of foreign, state and local taxes.
At December 31, 1998, AP Holdings has net operating loss carryforwards of
$38,905 for income tax purposes that expire in years 2004 through 2018. Net
operating loss carryforwards have been utilized to eliminate federal income tax
expense in 1997 and 1996.
A reconciliation of AP Holdings' reported income tax expense to the amount
computed by multiplying income (loss) before minority interest and income taxes
by the effective federal income tax rate is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ---- ----
<S> <C> <C> <C>
Statutory provision (benefit)............................... $(8,661) $789 $499
Benefit from carryforward of net operating losses........... -- (789) (499)
Change in valuation allowance............................... 8,661 -- --
Foreign, state and local income taxes....................... 430 140 106
------- ---- ----
Income tax expense.......................................... $ 430 $140 $106
======= ==== ====
</TABLE>
F-13
<PAGE> 47
AP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
AP Holdings' deferred tax assets and liabilities as of December 31, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Net operating loss carryforwards............................ $15,173 $ 8,111
Book over tax depreciation and amortization................. 318 1,234
Casualty/liability insurance................................ 990 699
Accrued compensation........................................ 3,179 (55)
Other, net.................................................. 2,450 361
------- -------
22,110 10,350
Less: valuation allowance for deferred tax assets........... 22,110 10,350
------- -------
Net deferred tax assets..................................... $ -- $ --
======= =======
</TABLE>
For financial reporting purposes, a valuation allowance for deferred tax
assets will continue to be recorded until realization is more likely than not.
NOTE F. BENEFIT PLANS
The Company offers deferred compensation arrangements for certain key
executives, and sponsors an employees' savings and retirement plan in which
certain employees are eligible to participate. Subject to their continued
employment by the Company, employees offered supplemental pension arrangements
will receive a defined monthly benefit upon attaining age 65. At December 31,
1998 and 1997, the Company has accrued $4,415 and $1,733, respectively,
representing the present value of the future benefit payments. Participants in
the savings and retirement plan may elect to contribute a portion of their
compensation to the plan. The Company, in turn, contributes an amount in cash or
other property as required by the plan. Expenses related to these plans amounted
to $418, $461 and $473 in 1998, 1997 and 1996, respectively.
The Company also contributes to two multi-employer defined contribution and
nine multi-employer defined benefit plans which cover certain union employees.
Expenses related to these plans were $732, $418 and $561 in 1998, 1997 and 1996,
respectively.
NOTE G. LEASES
The Company operates parking facilities under operating leases expiring on
various dates, generally prior to the year 2012. Certain of the leases contain
options to renew at the Company's discretion.
At December 31, 1998, the Company was committed to install in future years,
at an estimated cost of $2,497, certain capital improvements at leased
facilities.
F-14
<PAGE> 48
AP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
Future annual rent expense is not determinable due to the application of
percentage factors based on revenues. At December 31, 1998, the Company's
minimum rental commitments, under all non-cancelable leases with remaining terms
of more than one year, are as follows:
<TABLE>
<S> <C>
1999........................................................ $25,765
2000........................................................ 24,629
2001........................................................ 21,268
2002........................................................ 17,689
2003........................................................ 11,413
2004 and thereafter......................................... 49,100
</TABLE>
Rent expense, including percentage rents, was $105,452; $69,113 and $90,419
in 1998, 1997 and 1996, respectively.
In the normal course of business, the Company is involved in disputes,
generally regarding the terms of lease agreements. In the opinion of management,
the outcome of these disputes and litigation will not have a material adverse
effect on the consolidated financial position or operating results of the
Company.
NOTE H. RELATED PARTIES TRANSACTIONS
Due from affiliate includes amounts due from Holberg of $409 as the result
of various transactions between the Company and Holberg including net cash
transferred and reimbursement of certain expenses paid by Holberg on
APCOA/Standard's behalf. Interest is recorded on amounts due based on current
investment rates of return.
In connection with the acquisition of Standard, the Company made a $6,511
non-cash distribution to Holberg of a receivable for that amount, due from
Holberg to the Company.
The Company used $8,728 of proceeds from the financing obtained in
connection with the acquisition of Standard to redeem $8,000 of preferred stock
held by Holberg. The remaining $728 was contributed by Holberg to the capital of
the Company.
Until January of 1999, the Company participated in a master insurance
program with Holberg which serves to reduce the insurance costs of the combined
group. In connection with the insurance program, during 1998 the Company placed
$2,200 on deposit with an affiliate for insurance collateral purposes. This
amount is included in intangible and other assets in the accompanying
consolidated balance sheets.
In January of 1999, the Company completed the combination of its insurance
programs into one program, and purchased a guaranteed cost program. In
connection therewith the Company purchased coverage for its previously
self-insured layer, and a tail policy to eliminate future exposure from
retrospective adjustments. The cost of the buyout was $5,600, of which $2,600
was included in restructuring and other unusual charges (see Note C).
F-15
<PAGE> 49
AP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
NOTE I. SUBSIDIARY GUARANTORS
All of the Company's direct or indirect wholly owned domestic subsidiaries,
including Standard, other than inactive subsidiaries, fully, unconditionally,
jointly and severally guarantee the Senior Subordinated Notes discussed in Note
D. 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 APCOA/Standard, the guarantor subsidiaries
of the Company and the non-guarantor subsidiaries of the Company:
<TABLE>
<CAPTION>
APCOA/ GUARANTOR NON-GUARANTOR
STANDARD SUBSIDIARIES SUBSIDIARIES ELIMINATION TOTAL
-------- ------------ ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
1998
Balance Sheet Data:
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 portion.................... 142,716 277 4,499 -- 147,492
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
Income Statement Data:
Parking revenue....................... $ 82,764 $ 76,087 $36,666 $ -- $195,517
Gross profit.......................... 20,034 18,173 2,080 -- 40,287
Restructuring charge.................. 18,050 -- -- -- 18,050
Depreciation and amortization......... 3,533 2,955 947 -- 7,435
Operating income (loss)............... (9,782) 807 271 -- (8,704)
Interest expense (income), net........ 10,311 (12) 639 -- 10,938
Equity in earnings of subsidiaries.... (46) -- -- 46 --
Net income (loss)..................... (23,375) 809 (855) 46 (23,375)
</TABLE>
F-16
<PAGE> 50
AP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
APCOA/ GUARANTOR NON-GUARANTOR
STANDARD SUBSIDIARIES SUBSIDIARIES ELIMINATION TOTAL
-------- ------------ ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Cash Flows Data:
Net cash provided by (used in)
operating activities............... $(25,476) $ 3,816 $ 1,532 $ -- $(20,128)
Investing activities:
Purchase of leaseholds and
equipment........................ (6,217) (1,476) (828) -- (8,521)
Businesses acquired................ (90,863) 3,818 -- -- (87,045)
Other.............................. (712) -- -- -- (712)
Net cash provided by (used in)
investing activities............... (97,792) 2,342 (828) -- (96,278)
Financing activities:
Proceeds from long-term
borrowings....................... 140,000 -- -- -- 140,000
Payments on long-term borrowings... (32,298) -- (530) -- (32,828)
Payments of debt issuance costs.... (7,588) -- -- -- (7,588)
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............... 132,797 -- (530) -- 132,267
</TABLE>
F-17
<PAGE> 51
AP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
APCOA/ GUARANTOR NON-GUARANTOR
STANDARD SUBSIDIARIES SUBSIDIARIES ELIMINATION TOTAL
-------- ------------ ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
1997
Balance Sheet Data:
Notes and accounts receivable......... $ 10,587 $ 326 $ 2,893 -- $ 13,806
Current assets........................ 12,801 1,292 4,161 -- 18,254
Leaseholds and equipment, net......... 6,246 227 5,867 -- 12,340
Cost in excess of net assets acquired,
net................................ 16,190 1,432 835 -- 18,457
Investment in subsidiaries............ 3,652 -- -- (3,652) --
Total assets.......................... 46,000 3,477 13,270 (3,652) 59,095
Accounts payable...................... 13,574 1,756 1,071 -- 16,401
Current liabilities................... 26,593 2,178 6,542 -- 35,313
Long-term borrowings, excluding
current portion.................... 28,747 -- 5,434 -- 34,181
Redeemable preferred stock............ 8,728 -- -- -- 8,728
Total stockholders' equity
(deficit).......................... (20,229) 1,219 403 (3,652) (22,259)
Total liabilities and stockholders'
equity............................. 46,000 3,477 13,270 (3,652) 59,095
Income Statement Data:
Parking revenue....................... $ 80,079 $ 3,439 $34,186 $ -- $117,704
Gross profit.......................... 18,400 940 3,518 -- 22,858
Depreciation and amortization......... 2,836 65 866 -- 3,767
Operating income...................... 4,451 419 693 -- 5,563
Interest expense (income), net........ 2,654 -- 589 -- 3,243
Equity in earnings of subsidiaries.... 202 -- -- (202) --
Net income (loss)..................... 1,859 419 (217) (202) 1,859
Cash Flows Data:
Net cash provided by (used in)
operating activities............... $ (173) $ 704 $ 400 $ -- $ 931
Investing activities:
Purchase of leaseholds and
equipment........................ (2,357) -- (480) -- (2,837)
Other.............................. (1,467) 81 631 -- (755)
Net cash provided by (used in)
investing activities............... (3,824) 81 151 -- (3,592)
Financing activities:
Proceeds from long-term
borrowings....................... 4,269 -- 400 -- 4,669
Payments on long-term borrowings... (685) -- (533) -- (1,218)
Net cash provided by (used in)
financing activities............... 3,584 -- (133) -- 3,451
</TABLE>
F-18
<PAGE> 52
AP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
APCOA/ GUARANTOR NON-GUARANTOR
STANDARD SUBSIDIARIES SUBSIDIARIES ELIMINATION TOTAL
-------- ------------ ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
1996
Income Statement Data:
Parking revenue....................... $ 75,797 $ 2,914 $59,698 $ -- $138,409
Gross profit.......................... 18,412 669 3,170 -- 22,251
Depreciation and amortization......... 3,745 166 977 -- 4,888
Operating income...................... 2,722 198 1,426 -- 4,346
Interest expense (income), net........ 2,340 (18) 555 -- 2,877
Equity in earnings of subsidiaries...... 663 -- -- (663) --
Net income (loss)....................... 939 216 447 (663) 939
Cash Flows Data:
Net cash provided by (used in) operating
activities:........................... $ 2,012 $ 286 $ (256) $ -- $ 2,042
Investing activities:
Purchase of leaseholds and
equipment........................ (2,481) (71) (1,181) -- (3,733)
Other.............................. 384 -- -- -- 384
Net cash used in investing activities... (2,097) (71) (1,181) -- (3,349)
Financing activities:
Proceeds from long-term
borrowings....................... 12,244 -- 2,665 -- 14,909
Payments on long-term borrowings... (11,483) -- (1,414) -- (12,897)
Payments of debt issuance costs.... (724) -- -- -- (724)
Net cash provided by financing
activities............................ 37 -- 1,251 -- 1,288
</TABLE>
F-19
<PAGE> 53
AP HOLDINGS, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER ACQUISITIONS AT END
OF YEAR EXPENSES ACCOUNTS BALANCE DEDUCTIONS(1) OF YEAR
---------- ---------- -------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Deducted from asset accounts
Allowance for doubtful accounts... $402 $ 7 -- -- $(94) $ 315
Year ended December 31, 1997:
Deducted from asset accounts
Allowance for doubtful accounts... 315 139 -- -- (11) 443
Year ended December 31, 1998:
Deducted from asset accounts
Allowance for doubtful accounts... 443 317 -- 1,000 (17) 1,743
</TABLE>
- ---------------
(1) Represents uncollectible accounts written off, net of recoveries.
F-20
<PAGE> 54
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.
By: /s/ G. WALTER STUELPE, JR.
------------------------------------
G. Walter Stuelpe, Jr.
Chief Executive Officer, President
and Director
Date
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ Chief Executive Officer, President 3/30/99
- --------------------------------------------- and Director (Principal Executive
G. Walter Stuelpe, Jr. Officer)
/s/ Treasurer (Principal Financial and 3/30/99
- --------------------------------------------- Accounting Officer)
Michael J. Celebrezze
/s/ Chairman and Director 3/30/99
- ---------------------------------------------
John V. Holten
/s/ Assistant Secretary and Director 3/30/99
- ---------------------------------------------
Gunnar E. Klintberg
/s/ Attorney-in-Fact 3/30/99
- ---------------------------------------------
Robert N. Sacks
</TABLE>
<PAGE> 55
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C>
1.1 Purchase Agreement, by and among AP Holdings and Donaldson,
Lufkin & Jenrette Securities Corporation, dated as of March
25, 1998 (incorporated by reference to Exhibit 1.1 to the
Registrant's Registration Statement Form S-4 No. 333-50433
filed April 17, 1998, August 11, 1998 and August 14, 1998,
(the "Registration Statement")).............................
2.1 Combination Agreement, dated as of January 15, 1998, by and
between APCOA, Inc. and the Standard Owners (incorporated by
reference to Exhibit 2.1 to the Registration Statement).....
3.1 Restated Certificate of Incorporation of AP Holdings
(incorporated by reference to Exhibit 3.1 to the
Registration Statement).....................................
3.2 By-Laws of AP Holdings (incorporated by reference to Exhibit
3.2 to the Registration Statement)..........................
4.1 Indenture, dated as of March 30, 1998, by and among AP
Holdings and State Street Bank and Trust Company, with
respect to the New Notes (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).....
10.2 Credit Agreement, dated as of March 30, 1998, by and among
the Company, The First National Bank of Chicago, as Agent
and Lender, and the Other Financial Institutions party
thereto (incorporated by reference to Exhibit 10.2 to the
Registration Statement).....................................
10.3 Stockholders' Agreement, dated as of March 30, 1998, by and
among Dosher Partners, L.P., SP Associates, Holberg, AP
Holdings and the Company (incorporated by reference to
Exhibit 10.3 to the Registration Statement).................
10.4 Stockholders Agreement, dated as of April 14, 1989, by and
among AP Holdings, Holberg, and each member of the
management of the Company who is a stockholder of AP
Holdings (incorporated by reference to Exhibit 10.4 to the
Registration Statement).....................................
10.5 Tax Sharing Agreement, dated as of April 28, 1989, as
amended as of March 30, 1998, by and among Holberg, AP
Holdings and the Company (incorporated by reference to
Exhibit 10.5 to the Registration Statement).................
10.6 Employment Agreement between the Company and Myron C.
Warshauer (incorporated by reference to Exhibit 10.6 to the
Registration Statement).....................................
10.7 Employment Agreement between the Company and G. Walter
Stuelpe, Jr. (incorporated by reference to Exhibit 10.7 to
the Registration Statement).................................
10.8 Executive Transition Agreement between the Company and James
V. LaRocco, Jr. (incorporated by reference to Exhibit 10.8
to the Registration Statement)..............................
10.12 Employment Agreement between the Company and Michael K. Wolf
(incorporated by reference to Exhibit 10.12 to the
Registration Statement).....................................
10.13 Deferred Compensation Agreement between the Company and
Michael K. Wolf (incorporated by reference to Exhibit 10.13
to the Registration Statement)..............................
10.14 Company Retirement Plan for Key Executive Officers
(incorporated by reference to Exhibit 10.14 to the
Registration Statement).....................................
10.15 Consulting Agreement between the Company and Sidney
Warshauer (incorporated by reference to Exhibit 10.1 to the
Registration Statement).....................................
10.17 Consent and Joinder to Stockholders' Agreement dated as of
October 1, 1998 by and among the Company, Dosher Partners,
L.P., SP Associates, Holberg, AP Holdings and Waverly.......
10.18 Employment Agreement between the Company and James A.
Wilhelm.....................................................
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C>
21.1 Subsidiaries of AP Holdings (incorporated by reference to
Exhibit 21.1 to the Registration Statement).................
25.1 Statement of Eligibility and Qualification of Trustee on
Form T-1 of State Street Bank and Trust Company under the
Trust Indenture Act of 1939 (incorporated by reference to
Exhibit 25.1 to the Registration Statement).................
27.1 Financial Data Schedule.....................................
</TABLE>
<PAGE> 1
CONSENT AND JOINDER
TO
STOCKHOLDERS AGREEMENT
THIS CONSENT AND JOINDER (this "Agreement") to that certain
Stockholders Agreement (the "Stockholders Agreement"), dated as of March 30,
1998, by and among APCOA/Standard Parking, Inc., a Delaware corporation (the
"Company"), and Dosher Partners, L.P., a Delaware limited partnership
("Dosher"), SP Associates, an Illinois general partnership ("SP Associates"),
Holberg Industries, Inc., a Delaware corporation ("Holberg"), and AP Holdings,
Inc., a Delaware corporation ("AP Holdings" and, together with Dosher, SP
Associates and Holberg, the "Existing Stockholders"), is made and entered into
as of October 1, 1998, by and among the Company, the Existing Stockholders and
Waverly Partners, L.P., an Illinois limited partnership (the "New Stockholder").
Capitalized terms used herein but not otherwise defined shall have the meanings
set forth in the Stockholders Agreement.
WHEREAS, Dosher desires to transfer 1.25238075 shares of common stock,
par value $1.00 per share, of the Company ("Company Common Stock") to the New
Stockholder (the "Transfer");
WHEREAS, Dosher will continue to own 1.25238075 shares of Company
Common Stock following the Transfer;
WHEREAS, the consent of the Company and the Existing Stockholders is
required for the Transfer to be effective under the terms of the Stockholders
Agreement; and
WHEREAS, the Stockholders Agreement requires the New Stockholder to
become a party to the Stockholders Agreement, and the New Stockholder desires to
and agrees to do so in accordance with the terms hereof;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. Consent to Transfer. Subject to the terms and upon the conditions
set forth herein, including the undertakings and agreements of the New
Stockholder in paragraphs 2 and 3 hereof, the Company and the Existing
Stockholders hereby consent to the Transfer and to the New Stockholder becoming
a Stockholder under the Stockholders Agreement.
2. Agreement to be Bound. The New Stockholder hereby agrees that, upon
execution of this Agreement, it shall become a party to the Stockholders
Agreement and shall be fully bound by, and subject to, all of the covenants,
terms and conditions of the Stockholders Agreement as though an original party
thereto, and shall, for all purposes of the Stockholders Agreement, be
considered (i) a Stockholder, (ii) a Standard Party and (iii) an MW Party. In
addition, the New Stockholder hereby acknowledges and agrees that the shares of
Company Common Stock acquired by the New Stockholder pursuant to the Transfer
shall be deemed Shares for the purposes of the Stockholders Agreement and shall
be subject to such restrictions and limitations, and shall have such rights, as
are set forth in the Stockholders Agreement. Dosher hereby acknowledges and
agrees that (i) the shares of Company Common Stock owned by it following the
Transfer shall continue to be deemed Shares for the purposes of the Stockholders
Agreement and shall continue to be subject to such restrictions and limitations,
and shall continue to have such rights, as are set forth in the Stockholders
Agreement; (ii) it shall, for all purposes of the Stockholders Agreement,
continue to be considered (a) a Stockholder, (b) a Standard Party and (c) an MW
Party; and (iii) all references to Dosher in the Stockholders Agreement,
including, without limitation, the references to Dosher in Section 4.1 of the
Stockholders Agreement, shall continue to be deemed to be references to Dosher.
<PAGE> 2
3. Covenant to Vote; Covenant to Act. The New Stockholder hereby
agrees, following the Transfer, to vote, in person or by proxy, all of the
Shares owned by it, at any annual or special meeting of stockholders of the
Company called for any purpose or by consensual action of the stockholders of
the Company without a meeting, with respect to any matter to be voted upon by
the stockholders of the Company, in the same manner as Dosher shall vote the
Shares owned by it an any such annual or special meeting of stockholders of the
Company or by any such consensual action of the stockholders of the Company
without a meeting. In addition, the New Stockholder hereby agrees that, with
respect to any action to be taken by each of Dosher and the New Stockholder
under the terms of the Stockholders Agreement or otherwise in each of Dosher's
and the New Stockholder's capacity as a stockholder of the Company, the New
Stockholder shall act, or refrain from acting, in the same manner as Dosher
shall act, or refrain from acting, with respect to any such action to be taken.
4. Successors and Assigns. This Agreement shall bind and insure to the
benefit of and be enforceable by the Company, the Existing Stockholders and the
New Stockholder and their respective successors and assigns permitted under the
Stockholders Agreement.
5. Notices. For purposes of Section 9.5 of the Stockholders Agreement,
all notices, demands or other communications to the New Stockholder shall be
directed to:
Waverly Partners, L.P.
900 North Michigan Avenue, Suite 1600
Chicago, Illinois 60611
Attention: Myron C. Warshauer, General Partner
Telecopy Number: (312) 640-6187
6. One Agreement. The Stockholders Agreement and this Agreement shall
be understood and construed as one agreement, fully as if the New Stockholder
had been an original party to the Stockholders Agreement, including the
provisions hereof, and the administrative, ministerial and miscellaneous
provisions of the Stockholders Agreement, including the provisions set forth in
Article IX thereof, shall apply, mutatis mutandis, equally to this Agreement.
* * * * *
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
APCOA/STANDARD PARKING, INC.
By: /s/
----------------------------------------
Name: G. Walter Stuelpe, Jr.
Title: President
SP ASSOCIATES
By: SP MANAGERS, L.P.
MANAGING PARTNER
By: STANDARD MANAGERS, INC.,
GENERAL PARTNER
By:
----------------------------------------
Name:
Title:
HOLBERG INDUSTRIES, INC.
By:
----------------------------------------
Name:
Title:
AP HOLDINGS, INC.
By: /s/
-----------------------------------------
Name: G. Walter Stuelpe, Jr.
Title: President & Chief Executive Officer
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
APCOA/STANDARD PARKING, INC.
By:
----------------------------------------
Name:
Title:
SP ASSOCIATES
By: SP MANAGERS, L.P.
MANAGING PARTNER
By: STANDARD MANAGERS, INC.,
GENERAL PARTNER
By: /s/
----------------------------------------
Name: Patrick Meara
Title: Vice President
HOLBERG INDUSTRIES, INC.
By:
----------------------------------------
Name:
Title:
AP HOLDINGS, INC.
By:
----------------------------------------
Name:
Title:
<PAGE> 5
DOSHER PARTNERS, L.P.
By:
----------------------------------------
Name:
Title:
WAVERLY PARTNERS, L.P.
By:
----------------------------------------
Name:
Title:
<PAGE> 6
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
July 6, 1998, among S&S Parking, Inc., Century Parking, Inc. and Sentry Parking
Corporation (collectively, the "New Subsidiary Guarantors"), each a California
corporation and wholly-owned subsidiary of APCOA/Standard Parking, Inc., a
Delaware corporation (the "Company"), the Company and State Street Bank and
Trust Company, as trustee under the indenture referred to below (the "Trustee").
Capitalized terms used herein and not defined herein shall have the meaning
ascribed to them in the Indenture (as defined below).
WITNESSETH
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of March 30, 1998, providing
for the issuance of an aggregate principal amount of $140,000,000 of 9 1/4%
Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes");
WHEREAS, Section 11.5 of the Indenture provides that under certain
circumstances the Company may cause, and Section 11.3 of the Indenture provides
that under certain circumstances the Company must cause, certain of its
subsidiaries to execute and deliver to the Trustee a supplemental indenture
pursuant to which such subsidiaries shall unconditionally guarantee all the
Company's Obligations under the Senior Subordinated Notes pursuant to a Note
Guarantee on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantors and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of the Senior Subordinated Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall
have the meanings assigned to them in the Indenture.
2. AGREEMENT TO NOTE GUARANTEE. The New Subsidiary Guarantors hereby agree,
jointly and severally with all other Subsidiary Guarantors, to guarantee the
Company's Obligations under the Senior Subordinated Notes and the Indenture on
the terms and subject to the conditions set forth in Article 11 of the Indenture
and to be bound by all other applicable provisions of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer,
employee, incorporator, shareholder or agent of any Subsidiary Guarantor, as
such, shall have any liability for any obligations of the Company or any
Subsidiary Guarantor under the Senior Subordinated Notes, any Note Guarantees,
the Indenture or this Supplemental Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Senior Subordinated Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Senior
Subordinated Notes.
4. NEW YORK LAW TO GOVERN. The internal law of the State of New York shall
govern and be used to construe this Supplemental Indenture.
5. COUNTERPARTS. The parties may sign any number of copies of this Supplemental
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for convenience only and
shall not affect the construction hereof.
7. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental Indenture
or for or in respect of the correctness of the recitals of fact contained
herein, all of which recitals are made solely by the New Subsidiary Guarantors.
[SIGNATURE PAGES FOLLOW]
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated as of July 6, 1998
APCOA/STANDARD PARKING, INC.
By: /s/
--------------------------------------------
Name: Michael J. Celebrezze
Title: Executive Vice President and Chief
Financial Officer
S&S PARKING, INC.
By: /s/
--------------------------------------------
Name: Michael J. Celebrezze
Title: Vice President and Treasurer
CENTURY PARKING, INC.
By: /s/
--------------------------------------------
Name: Michael J. Celebrezze
Title: Vice President and Treasurer
SENTRY PARKING CORPORATION
By: /s/
--------------------------------------------
Name: Michael J. Celebrezze
Title: Vice President and Treasurer
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/
--------------------------------------------
Name: Elizabeth C. Hammer
Title: Vice President
<PAGE> 1
BENEFITS PLAN AND AGREEMENT
STANDARD PARKING CORPORATION
AND
JAMES A. WILHELM
This Benefit Plan and Agreement ("Plan") has been adopted and entered
into as of this 22nd day of December, 1986, by and between STANDARD PARKING
CORPORATION ("Standard"), an Illinois corporation, and JAMES A. WILHELM
("Wilhelm"), currently of Chicago, Illinois.
RECITALS:
A. Standard presently is engaged in the business of developing,
operating, managing and leasing motor vehicle parking facilities and the
rendering of consulting services to developers, operators, managers and lessees
of parking facilities.
B. Pursuant to a certain Executive Employment Agreement dated November
1, 1985 (the "Executive Employment Agreement") between various companies related
to or affiliated with Standard, as "the Employer Corporations", and Wilhelm, as
"the Executive", Wilhelm is rendering services on a full time basis to Standard
and such Employer Corporations. This Plan is intended to provide to Wilhelm
certain benefits in addition to those to which he is entitled under the
Executive Agreement and is not intended to otherwise modify or affect any of the
terms and provisions of the Executive Employment Agreement, including all of
Wilhelm's duties, obligations and restrictions thereunder.
C. Standard values the services of Wilhelm and wishes to encourage
Wilhelm to continue his employment with Standard and/or one or more of the
Affiliates in a capacity which involves the rendering of supervisory services in
connection the operation of parking facilities with respect to which Standard or
an Affiliate is the operator, manager or of such parking facilities.
D. Standard wishes to adopt a plan which will provide Wilhelm (or his
designated beneficiaries) with certain death and retirement benefits, subject to
certain specified conditions.
<PAGE> 2
CLAUSES:
In consideration of the foregoing Recitals and other good and valuable
consideration, the parties hereby adopt and enter into the Plan as hereinafter
set forth.
ARTICLE ONE
DEFINITIONS
1.1 "Affiliate" shall mean and include: (i) any corporation, the
controlling voting stock of which is owned by Standard or the principal
shareholders of Standard; (ii) any partnership, a general partner of which is a
shareholder of Standard; (iii) any other business enterprise, the controlling
interest of which is beneficially owned by a shareholder of Standard or any of
the foregoing; (iv) any corporation which is included in the definition of "the
Employer Corporations" in the Executive Employment Agreement; and (v) any
company or business enterprise for whom Standard or any Affiliate is rendering
consulting or similar services with respect to the development, operation,
management or leasing of a parking facility.
1.2 "Cause" shall mean the happening of any of one or more of the
following: Wilhelm shall be convicted of a felony by a Court of competent
jurisdiction; Standard or an Affiliate determines, in its sole discretion but
based upon reasonable criteria and assumptions, that Wilhelm has committed
fraud, embezzlement or any other act of material dishonesty against Standard or
an Affiliate; Wilhelm shall willfully and in bad faith make public statements or
take or cause to be taken any actions which reflect in a material adverse manner
upon Standard or an Affiliate or the business of any of the foregoing; Wilhelm
shall materially breach any covenants contained in this Plan or his Executive
Employment Agreement; or Wilhelm shall, directly or indirectly, engage or
participate on an equity or other basis in a business which is competitive of
the business of Standard or any Affiliate.
1.3 "Guaranteed Cash Value" shall mean the present value, as of the
last anniversary of the Policy to which premiums have been paid, of future
benefits provided by the Policy, as such present value is determined in
accordance with or as indicated in the Table of Values set forth in the Policy,
less any outstanding loans and loan interest.
1.4 "Wilhelm's Employment" shall mean the continuous employment of
Wilhelm, without interruption for any reason (including Permanent Disability)
for a period exceeding thirty (30) business days, in a supervisory, managerial
or executive position, from time to time, by Standard or any of its
2
<PAGE> 3
Affiliates or by any successor of any of them or any surviving corporation
resulting from a merger of any of them with another corporation.
1.5 "Permanent Disability" shall mean an inability due to bodily
injury, sickness or disease for Wilhelm to perform substantially all of the
duties of his employment with Standard, as such employment exists immediately
prior to the commencement of such bodily injury, sickness or disease.
1.6 "Policy" shall mean the insurance policy on the life of Wilhelm
which, for the purposes set forth in Section 2.1, Standard intends to acquire
and maintain during Wilhelm's Employment.
1.7 "Policy Year" shall mean a policy year as defined in the Policy.
1.8 "Total Cash Value" shall mean the cash surrender value of the
Policy as of the last anniversary of the Policy to which premiums have been
paid, such cash surrender value being the sum of (a) the Guaranteed Cash Value,
(b) any due and unpaid dividend, (c) the Guaranteed Cash Value of any dividend
additions, (d) the value of any dividends left at interest and (e) any unearned
loan interest, and less any outstanding loans and loan interest.
1.9 "Withdrawable Dividends" shall mean a current dividend (if any)
payable under the Policy, dividends left in the Policy at interest and the cash
value of paid-up additional insurance purchased with dividends payable under the
Policy.
ARTICLE TWO
PURPOSE AND IMPLEMENTATION OF PLAN
2.1 The purpose of this Plan is to provide Wilhelm with certain
specified retirement benefits and/or a death benefit equal to the amount of
death benefit payable under an insurance policy on his life (the "Policy"),
taking into account for such purpose contemplated withdrawals from the Policy
from time to time to fund retirement benefits to be paid hereunder to Wilhelm
after he attains age sixty-five (65); provided, however, that Standard is to
retain from such death benefit payable under the Policy and the death benefit
payable to Wilhelm is to be reduced by the greater of (a) the Guaranteed Cash
Value of the Policy immediately preceding Wilhelm's death or (b) the aggregate
amount of premiums or other sums paid by Standard or an Affiliate in connection
with the maintenance of the Policy prior to Wilhelm's death. The policy is to be
acquired and maintained by Standard during Wilhelm's Employment and is intended
to be acquired with premium rates which do not exceed Three Thousand Three
Hundred Sixty-Eight Dollars ($3,368.00) per year. The Policy is intended to be
fully paid for upon Wilhelm attaining
3
<PAGE> 4
age sixty-five (65) or upon his prior death, provided that Wilhelm's Employment
continues until the occurrence of either such event. Provided that Wilhelm's
Employment continues until he attains age sixty-five (65), Standard intends to
pay to Wilhelm the sum of Seventy-Five Thousand Dollars ($75,000.00) per year
until the earlier of Wilhelm's eightieth birthday or his death. During such
period, Standard also intends to withdraw the sum of Seventy-Five Thousand
Dollars ($75,000.00) per year from Withdrawable Dividends. Upon the death of
Wilhelm (before or after attaining age 65), Standard further intends to pay, to
whomsoever Wilhelm may designate as beneficiary, or to his estate if there is no
named beneficiary, an amount equal to the death benefit heretofore described in
this Section 2.1.
2.2 To implement the funding of this Plan, application has been made by
Standard with the Guardian Life Insurance Company for an insurance policy on the
life of Wilhelm which is intended to provide an initial and minimum death
benefit of $100,000 and sufficient dividend accumulations (including dividends
which are reflected in the cash value of paid-up additional insurance purchased
with such dividends) which, together with current dividends, will enable
Standard to withdraw from such dividends the sum of Seventy-Five Dollars
($75,000.00) per year from and after Wilhelm attains age sixty-five (65) and
until he attains age eighty (80), or until his death if prior to attaining age
eighty (80). At such time as the Policy shall issue, a true, correct and
complete copy thereof shall be attached hereto as Exhibit "A" and shall become a
part hereof. The Policy and all rights thereunder, including the right to the
proceeds thereof, are to be owned exclusively by Standard and at all times shall
be subject to the claims of Standard's creditors.
2.3 It is the express intention of the parties that all annual payments
to be made to Wilhelm under this Plan shall be made by Standard only to the
extent of Withdrawable Dividends existing at the time that each annual payment
is due to Wilhelm and that the death benefit payable for the benefit of Wilhelm
under this Plan shall be paid by Standard only to the extent of the death
benefit received by Standard under the Policy, less the amount to be retained by
Standard from the death benefit received under the Policy as described in
Section 2.1.
2.4 It is intended by both parties that this Plan shall not
constitute an employment agreement for a fixed term.
4
<PAGE> 5
ARTICLE THREE
UNDERTAKING OF STANDARD
3.1 During Wilhelm's Employment, Standard shall pay all premiums due in
connection with the Policy and, until Wilhelm attains age sixty-five (65), shall
have all policy dividends used to purchase paid-up additional life insurance
under the Policy and shall make such elections under the Policy as are
appropriate for such purpose.
3.2 Standard shall have and at all times retain all ownership and
related rights in the Policy (subject at all times to the claims of Standard's
creditors) and, except for the withdrawals described in Section 2.3, agrees that
during Wilhelm's Employment it will not borrow against the cash value of the
Policy or otherwise encumber or hypothecate the Policy or any interest therein
for any purpose whatsoever.
3.3 Subject to the conditions and limitations set forth in this Section
3.3 and the other terms and provisions set froth in this Plan, Standard agrees
to pay to or for the benefit of Wilhelm the benefits hereinafter described:
(a) Provided that Wilhelm's Employment continues until he
attains age sixty-five (65), Standard thereafter shall pay to Wilhelm
the sum of Seventy-Five Thousand Dollars ($75,000.00) per year until
the earlier of Wilhelm's eightieth birthday or his death. The payment
of such sum shall be made on or before the sixtieth day of the first
Policy Year following Wilhelm's 65th birthday and on or before the
sixtieth day of each succeeding Policy Year which commences prior to
the earlier of Wilhelm's eightieth birthday or his death.
Notwithstanding anything contained herein to the contrary, Standard
shall be required to make each sum annual payment only to the extent of
Withdrawable Dividends existing at the time that such annual payment is
due to Wilhelm. Such payments to be made to Wilhelm shall not to be
reduced, however, by reason of any portion or all of Withdrawable
Dividends not being available to fund such payments because of claims
of creditors.
(b) Upon the death of Wilhelm during Wilhelm's Employment or
after attaining age 65 if Wilhelm's Employment continues until he
attains age 65, Standard shall pay to whomsoever Wilhelm may designate
as beneficiary, or to his
5
<PAGE> 6
estate if there is no named beneficiary, an amount equal to the full
death benefit payable under the Policy (if any) less an amount equal to
the greater of (i) the Guaranteed Cash Value of the Policy immediately
preceding Wilhelm's death or (ii) the aggregate amount of premiums or
other sums paid by Standard or an Affiliate in connection with the
maintenance of the Policy prior to Wilhelm's death. For the foregoing
purpose, if Wilhelm's death occurs after he attains age sixty-five
(65), the death benefit payable under the Policy shall be determined on
the basis of the sum of Seventy-Five Thousand Dollars ($75,000) having
been withdrawn from Withdrawable Dividends on the first day of each
Policy Year beginning after Wilhelm's sixty-fifth (65th) birthday
(whether or not such sum or any other sum in fact has been withdrawn).
(c) In the event that, prior to Wilhelm attaining age 65,
Wilhelm's Employment terminates by reason of Permanent Disability and
the cause of such Permanent Disability is such that it qualifies as
disability for the purpose of any applicable disability waiver of
premium option with regard to the Policy and premiums are thereby
deemed to have been paid pursuant to such option, then, to the extent
of Withdrawable Dividends existing from time to time, the obligation to
make annual payments pursuant to subsection (a) shall not terminate by
reason of the termination of Wilhelm's Employment, and the death
benefit payable pursuant to subsection (b) shall be payable if the
Policy has remained in force until the death of Wilhelm by reason of
the waiver of premiums pursuant to such option.
(d) Annual payments made by Standard to Wilhelm after he has
attained the age of sixty-five (65) shall be deemed to constitute
deferred compensation paid by Standard to Wilhelm. A lump sum payment
made by Standard to the designated beneficiary or estate of Wilhelm
following his death shall be deemed to constitute a death benefit paid
by Standard by reason of Wilhelm's death.
6
<PAGE> 7
ARTICLE FOUR
UNDERTAKINGS OF WILHELM
4.1 Wilhelm shall fully cooperate in submitting to such examinations
and provide such other information as the insurance company may require from
time to time to enable Standard to obtain and maintain the Policy.
4.2 Wilhelm shall not take or fail to take action which will either
increase Standard's premium cost for the Policy or which would, directly of
indirectly, cause that Policy to lapse or otherwise be cancelled by the issuing
insurance company.
ARTICLE FIVE
RIGHTS IN THE EVENT OF
TERMIANTION OF EMPLOYMENT PRIOR TO AGE 65
5.1 In the event that Wilhelm's Employment is terminated prior to
attaining age 65, by reason of his resignation or otherwise at his instance or
by Standard or an Affiliate (as the case may be) at its instance for Cause,
except as a result of Permanent Disability, then all the benefits payable to
Wilhelm under the Policy shall lapse and terminate. In that event Standard,
shall have the option: (i) to cancel the Policy and obtain and retain all
amounts then payable as a result of such cancellation; or (ii) continue the
Policy in full force and effect designating itself or whomsoever it may elect as
beneficiary thereunder; or (iii) otherwise deal with the Policy in any manner
allowable by law under the terms of the Policy. In case of Wilhelm's Permanent
Disability, Standard shall continue to maintain said insurance as if such
disability had not occurred.
5.2 In the event that Wilhelm's Employment is terminated prior to
attaining age 65, by reason of Permanent Disability or at the instance of
Standard or an Affiliate (as the case may be) other than for Cause:
(a) If prior to Wilhelm having attained age forty-seven (47),
then Wilhelm shall have the option, to be exercised by giving written
notice to Standard within ninety (90) days followed the termination of
Wilhelm's Employment, to purchase the Policy by paying Standard an
amount equal to the greater of (i) the then Total Cash Value of the
Policy, without deduction for any penalties or charges which would be
applicable upon surrender of the Policy, or (ii) the aggregate amount
of premiums or other sums paid by Standard or an Affiliate in
connection with the maintenance of the Policy. Upon exercise by Wilhelm
of an option hereunder to
7
<PAGE> 8
purchase the Policy, Wilhelm thereafter shall be vested with full
rights of ownership in the Policy, free of all claims thereto by
Standard. If so requested in writing by Wilhelm, Standard agrees to
cooperate with Wilhelm in borrowing against the Total Cash Value of the
Policy in order to provide the required for payment to Standard.
(b) If subsequent to Wilhelm having attained age forty-seven
(47), then Wilhelm shall have the option, to be exercised by giving
written notice to Standard within ninety (90) days following the
termination of Wilhelm's Employment, to purchase the Policy by paying
Standard an amount equal to the greater of (i) the then Guaranteed Cash
Value of the Policy, without deduction for any penalties or charges
which would be applicable upon surrender of the Policy, or (ii) the
aggregate amount of premiums or other sums paid by Standard or an
Affiliate in connection with the maintenance of the Policy.
(c) Upon exercise by Wilhelm of an option hereunder to
purchase the Policy and the transfer and assignment of the Policy to
Wilhelm pursuant to such exercise, Wilhelm thereafter shall be vested
with full rights of ownership in the Policy, free of all claims thereto
by Standard. If so interested in writing by Wilhelm, Standard agrees to
cooperate with Wilhelm in borrowing against the cash value of the
Policy in order to provide the required amount for payment to Standard.
Following the transfer and assignment of the Policy to Wilhelm pursuant
to his exercise of an option hereunder to purchase the Policy, Standard
shall have no further obligations pursuant to this Plan and shall be
entitled to receive from Wilhelm, at its request and as a condition to
such transfer and assignment, a release executed by Wilhelm as to all
of Standard's obligations pursuant to this Plan. Any such release shall
be in form and substance reasonably acceptable to Standard.
5.3 For the purposes of this ARTICLE FIVE, the determination as to
whose instance at which Wilhelm's Employment is terminated and whether or not
Cause exists shall be made solely by Standard. Any such determination by
Standard shall be made with the use of reasonable judgment and criteria.
8
<PAGE> 9
ARTICLE SIX
MISCELLANEOUS
6.1 This Plan shall be construed and the performance hereunder
determined in accordance with the laws of the State of Illinois.
6.2 If the application for insurance as described herein shall be
rejected by the insurance company or if the premium rate payable therefor shall
exceed Three Thousand Three Hundred Sixty-Eight Dollars ($3,368.00) per year and
Standard shall be unwilling to pay the increased amount, then this Plan shall be
deemed to have been terminated and of no further force and effect.
6.3 This Plan shall be binding respectively upon the heirs, successors,
legal representatives of the parties hereto. The parties have executed this Plan
as of the date first above written.
STANDARD PARKING CORPORATION
By: /s/ Myron Wakshaver,
-------------------------
President
/s/ James A. Wilhelm
----------------------------
James A. Wilhelm
9
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