<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file number: 333-50433
AP HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 06-1269403
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
900 N. Michigan Avenue, (312) 274-2000
Chicago, Illinois 60611-1542 (Registrant's Telephone Number,
(Address of Principal Executive Offices) Including Area Code)
Former name, address and fiscal year, if changed since last report:
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
<PAGE>
AP HOLDINGS, INC.
FORM 10-Q INDEX
<TABLE>
<CAPTION>
Part I. Financial Information
<S> <C> <C>
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999................................................................................. 3
Condensed Consolidated Statements of Operations for the three
months ended March 31, 2000 and March 31, 1999........................................................ 4
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2000 and March 31, 1999........................................................ 5
Notes to Condensed Consolidated Financial Statements.................................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................. 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................................ 13
Part II. Other Information
Item 1. Legal Proceedings..................................................................................... 14
Item 2. Changes in Securities and Use of Proceeds............................................................. 14
Item 3. Defaults upon Senior Securities....................................................................... 14
Item 4. Submission of Matters to a Vote of Security Holders................................................... 14
Item 5. Other Information..................................................................................... 14
Item 6. Exhibits and Reports on Form 8-K...................................................................... 14
Signatures....................................................................................................... 15
Exhibits......................................................................................................... 16
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
AP HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
ASSETS --------------- -----------------
(Unaudited) (see Note)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................... $ 6,080 $ 5,215
Notes and accounts receivable, net...................................... 43,885 42,715
Prepaid expenses and supplies........................................... 1,579 1,645
--------- ---------
Total current assets..................................................... 51,544 49,575
Leaseholds and equipment, net............................................ 32,263 32,659
Advances and deposits.................................................... 1,530 2,040
Cost in excess of net assets acquired.................................... 115,196 114,923
Intangible and other assets.............................................. 13,266 14,073
--------- ---------
Total assets............................................................ $ 213,799 $ 213,270
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable........................................................ $ 28,807 $ 25,289
Accrued and other current liabilities................................... 33,413 35,138
Current portion of long-term borrowings................................. 1,324 1,328
--------- ---------
Total current liabilities................................................ 63,544 61,755
Long-term borrowings, excluding current portion.......................... 220,638 215,421
Other long-term liabilities.............................................. 8,821 11,116
Redeemable preferred stock............................................... 32,962 31,924
Common stock of subsidiary subject to put/call rights;
5.01 shares issued and outstanding...................................... 4,589 4,589
Stockholders' deficit:
Class A voting common stock, $.01 par value per share, 20,000 shares
authorized, no shares outstanding...................................... -- --
Class B voting common stock, $.01 par value per share, 20,000 shares
authorized, 8,800 shares issued, 7,920 share outstanding............... 1 1
Additional paid-in capital.............................................. 2,088 2,088
Advances to and deposits with affiliate................................. (4,866) (4,820)
Accumulated other comprehensive income.................................. (206) 428
Accumulated deficit..................................................... (113,772) (109,232)
Total stockholders' deficit.............................................. --------- ---------
(116,756) (111,535)
--------- ---------
Total liabilities and stockholders' deficit............................. $ 213,799 $ 213,270
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
3
<PAGE>
AP HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Gross customer collections................................ $366,100 $316,600
======== ========
Parking services revenue:
Lease contracts.......................................... $ 47,431 $ 49,877
Management contracts..................................... 15,660 10,992
-------- --------
63,091 60,869
Cost of parking services:
Lease contracts.......................................... 42,640 44,019
Management contracts..................................... 6,288 3,880
-------- --------
48,928 47,899
-------- --------
Gross profit.............................................. 14,163 12,970
General and administrative expenses....................... 9,110 7,006
Restructuring and other special charges................... 250 150
Depreciation and amortization............................. 2,541 1,799
-------- --------
Operating income.......................................... 2,524 4,015
Interest expense (income):
Interest expense......................................... 5,787 4,981
Interest income.......................................... (113) (67)
-------- --------
5,674 4,914
-------- --------
Loss before minority interest and income
taxes.................................................... (3,412) (899)
Minority interest......................................... 73 167
Income tax expense........................................ 17 153
-------- --------
Net loss.................................................. (3,502) (1,219)
Preferred stock dividends................................. (1,038) (851)
-------- --------
Net loss available for common
stockholders.............................................. $ (4,540) $ (2,070)
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
AP HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Operating activities:
Net loss.................................................. $(3,502) $ (1,219)
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation and amortization............................ 2,541 1,799
Change in operating assets and liabilities, net of
acquisitions............................................ (347) (11,497)
------- --------
Net cash used in operating activities..................... (614) (10,917)
Investing activities:
Purchase of leaseholds and equipment...................... (1,393) (2,386)
Purchase of leaseholds and equipment by joint ventures.... -- (159)
------- --------
Net cash used in investing activities..................... (1,393) (2,545)
Financing activities:
Proceeds from long-term borrowings........................ 3,800 5,000
Payments on long-term borrowings.......................... (107) (1,080)
Payments on joint venture borrowings...................... (187) --
-------- --------
Net cash provided by financing activities................. 3,506 3,920
Effect of exchange rate on cash and cash equivalents...... (634) --
------- --------
Increase (decrease) in cash and cash equivalents.......... 865 (9,542)
Cash and cash equivalents at beginning of period.......... 5,215 19,183
------- --------
Cash and cash equivalents at end of period................ $ 6,080 $ 9,641
======= ========
Supplemental disclosures:
Cash paid during the period for:
Interest................................................. $ 7,277 $ 7,005
Taxes.................................................... 456 52
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
AP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(in thousands, unaudited)
1. Interim Financial Data
AP Holdings ("Holdings") is a subsidiary of Holberg Industries, Inc.
("Holberg"), which owns 84% of the outstanding voting stock and 69% of the
preferred stock of APCOA/Standard Parking, Inc. ("APCOA/Standard" or "the
Company"). APCOA/Standard accounts for all of Holdings' assets and Holdings
conducts substantially all of its business through APCOA/Standard.
The accompanying unaudited condensed consolidated financial statements of
Holdings, have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements.
In the opinion of management, all adjustments (consisting only of
adjustments of a normal and recurring nature) considered necessary for a fair
presentation of the financial position and results of operations have been
included. Operating results for the three-month period ended March 31, 2000 are
not necessarily indicative of the results that might be expected for the fiscal
year ending December 31, 2000. The financial statements presented in this Report
should be read in conjunction with the consolidated financial statements and
footnotes thereto included in Holdings' 1999 Form 10-K filed March 31, 2000.
Certain reclassifications have been made to the 1999 financial information
to conform to the 2000 presentation.
6
<PAGE>
AP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Continued
2 Restructuring and Other Special Charges
Included in "Restructuring and other special charges" in the accompanying
condensed consolidated statements of operations are the following:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Incremental integration costs and other $ 119 $ 150
Costs associated with terminated transactions 131 --
----- -----
$ 250 $ 150
===== =====
</TABLE>
The integration costs relate primarily to actions to facilitate the
accounting system consolidation and activities to realign, centralize and
reorganize administrative and other support functions. The costs associated with
terminated transactions relate to expense incurred for acquisition activity that
was terminated.
3. Borrowing Arrangements
APCOA/Standard's $140,000 9 1/4% Senior Subordinated Notes were issued in
September of 1998 and are due in March of 2008. The Notes are registered with
the Securities and Exchange Commission. The Notes were exchanged for
unregistered notes with substantially identical terms, which had been issued
earlier in 1998 to finance the acquisition of Standard and retire certain
existing indebtedness, and for general working capital purposes.
Holdings' 11 1/4% Senior Discount Notes were issued in September of 1998
and are due in March of 2008. The Discount Notes are registered with the
Securities and Exchange Commission. The issuance was exchanged for unregistered
notes with substantially identical terms, which had been issued earlier in 1998
to finance the March 1998 acquisitions of Standard.
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
March 31, 2000, borrowings under the Facility aggregated $21,900 and there were
letters of credit outstanding against this Facility of $1,250.
The Notes and Senior Credit Facility contain covenants that limit
APCOA/Standard from incurring additional indebtedness and issuing preferred
stock, restrict dividend payments, limit transaction with affiliates and
restrict certain other transactions. Substantially all of APCOA/Standard's net
assets are restricted under these provisions and covenants (See Note 4).
7
<PAGE>
4. Subsidiary Guarantors
All of the Company's direct or indirect wholly owned domestic subsidiaries,
other than inactive subsidiaries, fully, unconditionally, jointly and severally
guarantee the Senior Subordinated Notes. Separate financial statements of the
guarantor subsidiaries are not separately presented because, in the opinion of
management, such financial statements are not material to investors. The non-
guarantor subsidiaries include joint ventures, wholly owned subsidiaries of the
Company organized under the laws of foreign jurisdictions and inactive
subsidiaries, all of which are included in the consolidated financial
statements. The following is summarized combining financial information for the
Company, the guarantor subsidiaries of the Company and the non-guarantor
subsidiaries of the Company:
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
APCOA/Standard Subsidiaries Subsidiaries Eliminations Total
--------------- ------------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
- -------------------
March 31, 2000
Cash and cash equivalents............................. $ 3,300 $ 577 $ 2,203 $ -- $ 6,080
Notes and accounts receivable......................... 39,779 1,676 2,430 -- 43,885
Current assets........................................ 44,238 2,514 4,792 -- 51,544
Leaseholds and equipment, net......................... 17,522 8,892 5,849 -- 32,263
Cost in excess of net assets acquired, net............ 19,382 90,402 5,412 -- 115,196
Investment in subsidiaries............................ 103,977 -- -- (103,977) --
Total assets.......................................... 193,689 107,230 16,857 (103,977) 213,799
Accounts payable...................................... 15,125 9,348 4,334 -- 28,807
Current liabilities................................... 41,336 12,404 9,804 -- 63,544
Long-term borrowings, excluding current portion....... 164,428 185 5,379 -- 169,992
Redeemable preferred stock............................ 50,646 -- -- -- 50,646
Common stock subject to put/call rights............... 4,589 -- -- -- 4,589
Total stockholders' equity (deficit).................. (73,592) 92,564 1,152 (103,977) (83,793)
Total liabilities and stockholders' equity (deficit).. 193,689 107,230 16,857 (103,977) 213,799
December 31, 1999
Cash and cash equivalents............................. 2,569 $ 1,963 683 $ -- $ 5,215
Notes and accounts receivable......................... 34,973 2,606 5,136 -- 42,715
Current assets........................................ 39,130 4,608 5,837 -- 49,575
Leaseholds and equipment, net......................... 17,204 9,263 6,192 -- 32,659
Cost in excess of net assets acquired, net............ 19,536 92,590 2,797 -- 114,923
Investment in subsidiaries............................ 102,639 -- -- (102,639) --
Total assets.......................................... 187,655 112,225 16,029 (102,639) 213,270
Accounts payable...................................... 15,860 5,962 3,467 -- 25,289
Current liabilities................................... 41,423 10,439 9,893 -- 61,755
Long-term borrowings, excluding current portion....... 160,667 371 5,103 -- 166,141
Redeemable preferred stock............................ 49,280 -- -- -- 49,280
Common stock subject to put/call rights............... 4,589 -- -- -- 4,589
Total stockholders' equity (deficit).................. (76,402) 98,889 541 (102,639) (79,611)
Total liabilities and stockholders' equity (deficit).. 187,655 112,225 16,029 (102,639) 213,270
Income Statement Data:
- ----------------------
Three Months Ended March 31, 2000
Parking Revenue....................................... $ 29,073 $ 23,158 $10,860 $ -- $ 63,091
Gross profit.......................................... 7,775 4,472 1,916 -- 14,163
Restructuring and other unusual costs................. 119 -- -- -- 119
Depreciation and amortization......................... 948 1,252 341 -- 2,541
Operating income...................................... 5,517 (4,547) 1423 -- 2,393
Interest expense, net................................. 4,062 (7) 159 -- 4,214
Equity in earnings of subsidiaries.................... (3,362) -- -- 3,362 --
Net income (loss)..................................... (1,911) (4,529) 1,167 3,362 (1,911)
Three Months Ended March 31, 1999
Parking Revenue....................................... $ 26,919 $ 23,644 $10,306 $ -- $ 60,869
Gross profit.......................................... 6,684 5,782 504 -- 12,970
Restructuring and other unusual costs................. 150 -- -- -- 150
Depreciation and amortization......................... 965 607 227 -- 1,799
Operating income...................................... 3,115 880 20 -- 4,015
Interest expense, net................................. 3,408 27 160 -- 3,595
Equity in earnings of subsidiaries.................... 601 -- -- (601) --
Net income (loss)..................................... 100 775 (174) (601) 100
</TABLE>
8
<PAGE>
AP HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statement of Cash Flow Data:
- ----------------------------
Three Months Ended March 31, 2000
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating activities......... $ (748) $ (1,386) $ 1,520 $ -- $ (614)
Investing activities:
Purchase of leaseholds and equipment................... (1,393) -- -- -- (1,393)
------- -------- -------- ----- --------
Net cash provided by (used in) investing activities.........
Financing activities:
Proceeds from long-term borrowings..................... 3,800 -- -- -- 3,800
Payments on long-term borrowings....................... (107) -- -- -- (107)
Payments on Joint Venture borrowings................... (187) -- -- -- (187)
------- -------- -------- ----- ---------
Net cash provided by (used in) financing activities......... 3,506 3,506
Effect of exchange rate changes............................. (634) -- -- -- (634)
Three Months Ended March 31, 1999
Net cash provided by (used in) operating activities........ $(8,984) $ (369) $(1,564) $ -- $(10,917)
Investing activities: --
Purchase of leaseholds and equipment...................... (2,264) (122) -- -- (2,386)
Purchase of leaseholds and equipment by joint ventures..... -- -- (159) -- (159)
Net cash used in investing activities...................... (2,264) (122) (159) -- (2,545)
Financing activities:
Proceeds from long-term borrowings........................ 5,000 -- -- -- 5,000
Payments on long-term borrowings.......................... (1,080) -- -- -- (1,080)
Net cash provided by financing activities.................. 3,920 -- -- -- 3,920
</TABLE>
9
<PAGE>
PART I FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
AP Holdings ("Holdings") is a subsidiary of Holberg Industries, Inc.
("Holberg"), which owns 84% of the outstanding voting stock and 69% of the
preferred stock of APCOA/Standard Parking, Inc. ("APCOA/Standard" or "the
Company"). APCOA/Standard accounts for all of Holdings' assets and Holdings
conducts substantially all of its business through APCOA/Standard.
APCOA/Standard Parking, Inc. ("APCOA/Standard" or "the Company") operates
in a single reportable segment operating parking facilities under two types of
arrangements: management contracts and leases. Under a management contract,
APCOA/Standard typically receives a base monthly fee for managing the property,
and may also receive an incentive fee based on the achievement of facility
revenues above a base amount. In some instances, APCOA/Standard also receives
certain fees for ancillary services. Typically, all of the underlying revenues,
expenses and capital expenditures under a management contract flow through to
the property owner, not to APCOA/Standard. Under lease arrangements,
APCOA/Standard generally pays to the property owner either a fixed annual
rental, a percentage of gross customer collections or a combination thereof.
APCOA/Standard collects all revenues under lease arrangements and is responsible
for most operating expenses, but it is typically not responsible for major
maintenance or capital expenditures. As of March 31, 2000, APCOA/Standard
operated approximately 78% of its 1,834 parking facilities under management
contracts and approximately 22% under leases.
Parking services revenue--leases. Lease parking services revenues consist
of all gross customer collections received at a leased facility.
Parking services revenue--management contracts. Management contract
revenues consist of management fees, including both fixed and revenue-based, and
fees for ancillary services such as accounting, equipment leasing, consulting,
and other value-added services with respect to managed locations, but exclude
gross customer collections at such locations. Management contracts generally
provide APCOA/Standard a management fee regardless of the operating performance
of the underlying facility.
Cost of parking services--leases. Cost of parking services under lease
arrangements consist of (i) contractual rental fees paid to the facility owner
and (ii) all operating expenses incurred in connection with operating the leased
facility. Contractual fees paid to the facility owner are based on either a
fixed contractual amount or a percentage of gross revenue, or a combination
thereof. Generally under a lease arrangement, APCOA/Standard is not responsible
for major capital expenditures or property taxes.
Cost of parking services--management contracts. Cost of parking services
under management contracts is generally passed through to the facility owner,
therefore these costs are not included in the results of operations of the
Company. Several APCOA/Standard contracts, however, require APCOA/Standard to
pay for certain costs that are offset by larger management fees. These contracts
tend to be large airport properties with high cost structures.
General and administrative expenses. General and administrative expenses
include primarily salaries, wages, travel and office related expenses for the
headquarters and field office and supervisory employees.
Summary of Operating Facilities
The following table reflects the Company's facilities at the end of the
periods indicated:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999 March 31, 1999
------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
Managed facilities..................... 1,439 1,436 1,207
Leased facilities...................... 395 398 447
----- ----- -----
Total facilities....................... 1,834 1,834 1,654
===== ===== =====
</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.
10
<PAGE>
Results of Operations
Gross customer collections consist of gross receipts collected at all
leased and managed properties, including unconsolidated affiliates. Gross
customer collections increased $49.5 million, or 15.6%, to $366.1 million in the
first quarter of 2000 compared to $316.6 million in the first quarter of 1999.
This increase is attributable to the addition of 180 locations during the
period.
In analyzing gross margins of APCOA/Standard, it should be noted that the
cost of parking services incurred in connection with the provision of management
services is generally paid by the clients. Margins for lease arrangements are
significantly impacted by variables other than operating performance, such as
variability in parking rates in different cities and widely varying space
utilization by parking facility type.
The following should be read in conjunction with the Condensed Consolidated
Financial Statements and notes thereto in Item 1.
Three Months Ended March 31, 2000 Compared to Three Months ended March 31, 1999
Parking services revenue--leases. Lease revenue decreased $2.5 million, or
4.9% to $47.4 million in the first quarter of 2000 as compared to $49.9 million
in the first quarter of 1999. This resulted from the net reduction of 52 leases
through contract expirations, conversions to management contracts and the loss
of one large airport contract in the second half of 1999.
Parking services revenue--management contracts. Management contract revenue
increased $4.7 million, or 42.5%, to $15.7 million in the first quarter of 2000
as compared to $11.0 million in the first quarter of 1999. This resulted from
the net increase of 232 contracts through internal growth and 1999 acquisitions.
Cost of parking services--leases. Cost of parking for leases decreased $1.4
million, or 3.1%, to $42.6 million for the first quarter of 2000 from $44.0
million in the first quarter of 1999. This decrease resulted from the reduction
of 52 leases through terminations and conversions to management contracts. Gross
margin for leases declined to 10.1% for the first quarter of 2000 compared to
11.7% for the first quarter of 1999.
Cost of parking services--management contracts. Cost of parking for
management contracts increased $2.4 million, or 62.1%, to $6.3 million for the
first quarter of 2000 from $3.9 million in the first quarter of 1999. This
increase resulted from the addition of a net total of 232 new contracts through
internal growth and acquisitions. Gross margin for management contracts declined
to 59.8% in the first quarter of 2000 compared to 64.7% for the first quarter of
1999. Most management contracts have no cost of parking services related to them
as all costs are reimbursable to the Company. However, several contracts
(primarily large airport properties and several urban locations) require the
Company to pay for certain costs which are offset by larger management fees. The
increase in cost of parking management contracts was related to the addition of
several contracts of this type.
General and administrative expenses. General and administrative expenses
increased $2.1 million, or 30.0%, to $9.1 million for the first quarter of 2000
as compared to $7.0 million, for the first quarter of 1999. This increase
resulted from costs associated with acquired companies in 1999, inflation, and
investment in the Company's infrastructure.
Restructuring and other special charges. The Company recorded $0.3 million
of restructuring and other special charges in the first quarter of 2000, as
compared to $0.2 million in the first quarter of 1999, relating to terminated
transaction costs and actions to facilitate the accounting system consolidation
and other support functions.
Liquidity and Capital Resources
As a result of day-to-day activity at the parking locations, APCOA/Standard
collects significant amount of cash. Under lease contracts, this revenue is
deposited into local APCOA/Standard bank accounts, with a portion remitted to
the clients in the form of rental payments according to the terms of the leases.
Under management contracts, some clients require APCOA/Standard to deposit the
daily receipts into a local APCOA/Standard bank account. Others require the
deposit into a client account, and some have a segregated account for the
receipts and disbursements of the property.
Locations with revenues deposited into the APCOA/Standard banks enable the
Company to operate with a negative working capital. This negative working
capital arises from the liability that is created for the amount of revenue that
will be remitted to the clients in the form of rents or net profit distributions
subsequent to month end, after the books
11
<PAGE>
are closed and reconciled. Since the Company operates with a revolving Senior
Credit Facility, all funds held for future remittance to the clients are used to
reduce the credit line until the payments are made to the clients.
Locations with revenue deposited into client accounts or segregated
accounts can, depending upon timing of rent or net profit distributions, result
in significant amounts of cash being temporarily inaccessible to the Company for
use for operating needs. Additionally, the ability to utilize cash deposited
into local APCOA/Standard accounts is dependent upon the movement of that cash
into the Company's corporate account. For these reasons, the Company from time
to time carries significant cash balances, while utilizing its Senior Credit
Facility.
The Company had cash and cash equivalents of $6.1 million at March 31, 2000
compared to $5.2 million at December 31, 1999.
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Net cash used in operating activities totaled $0.6 million for the first
quarter of 2000 compared to $10.9 million for the first quarter of 1999. Cash
used during 2000 included a $6.5 million interest payment on the Senior Credit
Facility, a $1.2 million increase in accounts receivable due to an increase in
the number of locations, offset by increases in accounts payable and other
liabilities of $5.0 million and a decrease in other assets of $1.3 million. Cash
used during 1999 included $5.5 million for the purchase of an insurance tail
policy to cover claims for all years prior to 1999 under APCOA's previous
insurance program, $1.7 million for cash restructuring charges and increases in
accounts receivable relating to acquired contracts and existing locations of
$3.3 million.
Cash used in investing activities totaled $1.4 million for the first
quarter of 2000 compared to $2.5 million for the first quarter of 1999. Cash
used in investing activities in the first quarter of 2000 resulted from capital
purchases to secure and/or extend leased facilities and investments in
management information system enhancements. Cash used in the first quarter of
1999 resulted from capital purchases including the furnishing and improvement of
the Company's combined office space in Chicago, investment in management
information system enhancements, and capital investments to secure and/or extend
leased facilities.
Cash generated from financing activities totaled $3.5 million in the first
quarter of 2000. The 2000 activity included $3.8 million in borrowings from the
revolving Senior Credit Facility, partially offset by repayments on long-term
and joint venture borrowings of $0.3 million. The 1999 activity included $5.0
million in borrowings from the revolving Senior Credit Facility, partially
offset by repayments on long-term borrowings of $1.1 million.
Other Liquidity and Capital Resources Information
The Company's Senior Credit Facility ("the Facility") provides for cash
borrowings up to $35 million and letters of credit up to $5 million, at variable
rates based, at the Company's option, either on LIBOR, the overnight federal
funds rate, or the bank's base rate. From time to time the company utilizes the
Facility to provide readily-accessible cash for working capital purposes. The
Facility includes covenants that limit the Company from incurring additional
indebtedness, issuing preferred stock or paying dividends, and contains certain
other restrictions. At March 31, 2000, the Company had $1.3 million of letters
of credit outstanding under the Facility and borrowings against the Facility
aggregated $21.9 million. The Facility was amended on March 30, 2000, with the
principle changes to the agreement providing for revisions to interest rates
charged on borrowings and certain financial covenants.
The Company's primary capital requirements are for working capital, capital
expenditures and debt service. The Company believes that cash flow from
operating activities, cash and cash equivalents and borrowings under the Senior
Credit Facility will be adequate to meet the Company's short-term liquidity
requirements prior to the maturity of its long-term indebtedness, although no
assurance can be provided in this regard.
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.
Year 2000
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late
12
<PAGE>
1999, the Company completed its remediation and testing of systems. As a result
of those planning and implementation efforts, the Company experienced no
significant disruptions in mission critical information technology and non-
information technology systems and believes those systems successfully responded
to the Year 2000 date change. The Company is not aware of any material problems
resulting from Year 2000 issues, with its products, its internal systems, or the
products and services of third parties. The Company will continue to monitor its
mission critical computer applications and those of its suppliers and vendors
throughout the year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly.
Special Cautionary Notice Regarding Forward-Looking Statements
This quarterly report contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act 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 the Company's
expectations concerning its future profitability, the discussion of the
Company's strategic relationships, discussions about Year 2000 compliance plans,
and the Company's operating and growth assumptions regarding certain matters,
including anticipated cost savings, in preparation of the unaudited financial
information. Investors are cautioned that forward-looking statements involve
risks and uncertainties. Although the Company believes that the assumptions
underlying the forward-looking statements contained herein are reasonable, any
of the assumptions could be inaccurate and, therefore, there can be no assurance
that the forward-looking statements included will prove to be accurate. In light
of the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
Cautionary Statements
Holdings and the Company continue to be subject to certain factors that
could cause Holdings and the Company's results to differ materially from
expected and historical results (see the "Risk Factors" set forth in the
Company's Registration Statement on Form S-4 (No. 333-50433) filed on April 17,
1998, as amended on June 9, 1998, July 15, 1998, August 11, 1998 and August 14,
1998 (the "Registration Statement)).
Item 3. 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.
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 existing
such an environment. Due to the uncertainty of the specific changes and their
possible effects, the foregoing sensitivity analysis assumes no changes in the
Company's financial structure.
AP Holdings' parent company is Holberg Industries, Inc. ("Holberg"); a
privately held diversified service company located in Greenwich, Connecticut.
Holberg also owns AmeriServe Food Distribution, Inc. ("AmeriServe"), one of the
nation's largest food service distributors servicing quick-service and casual
dining restaurants in the United States, Canada and Mexico. AmeriServe filed for
bankruptcy protection under Chapter 11 of the Bankruptcy Code on January 31,
2000.
AP Holdings and AmeriServe are separate and distinct companies with
independent sources of funding. However, the AmeriServe Chapter 11 filing is a
default under certain debt instruments of Holberg. As a result of such defaults,
the creditors of Holberg could take control of Holberg or its subsidiary, AP
Holdings, Inc. ("Holdings"). A change in control of Holberg or Holdings would
also constitute a change in control of APCOA under the APCOA/Standard debt
instruments and of Holdings under its bond indenture. In the event of such a
change in control of APCOA/Standard or Holdings, the terms of APCOA/Standard's
senior bank credit facility and subordinated bond indenture and of Holdings'
bond indenture permit the APCOA/Standard and Holdings creditors, if they believe
it were in their interest to do so, to call for immediate payment under such
instruments, and APCOA/Standard's or Holdings' failure to pay on such terms
would
13
<PAGE>
constitute a default thereunder. Holberg and its creditors are negotiating to
restructure the debt and eliminate the defaults created as a result of the
AmeriServe Chapter 11 filing. Although Holberg currently expects to complete the
restructuring of the debt, and further currently expects that is creditors will
not in any event seek to obtain control of Holberg or Holdings, there can be no
assurance that Holberg will be successful in restructuring its debt and
eliminating the existing defaults, or that Holberg's creditors will not seek to
obtain control of Holberg or Holdings, and should APCOA/Standard's or Holdings'
indebtedness be accelerated as a result of any action by Holberg's creditors,
there is no assurance that APCOA/Standard or Holdings would have sufficient
funds to satisfy such obligations.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
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.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
Number Description
------ -----------
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-4 (No. 333-50437) filed on
April 17, 1998, as amended on June 9, 1998, July 15, 1998,
August 11, 1998 and August 14, 1998 (the "Registration
Statement")).
3.2 Amended and Restated By-Laws of the Company (incorporated by
reference to Exhibit 3.2 to the Registration Statement).
4.1 Indenture, dated as of March 30, 1998, amended as of July 6,
1998, September 21, 1998 and January 12, 1999 by and among the
Company, the Subsidiary Guarantors and State Street Bank and
Trust Company (incorporated by reference to Exhibit 4.1 to the
Registration Statement).
4.2 Form of New Note (included as Exhibit A to Exhibit 4.1).
4.3 Form of New Note Guarantee (included as Exhibit D to Exhibit
4.1).
4.7 First Amendment to Senior Credit Facility dated November 12,
1999 by and among the Company, the Lenders, and N.A. Bank One as
agent for Lenders (incorporated by reference to Exhibit 4.7 of
the Company's September 10, 1999 Form 10Q).
4.8 Second Amendment to the Senior Credit Facility dated March 30,
2000 by and among the Company, the Lenders and Bank One N.A., as
agent for the Lenders (incorporated by reference to Exhibit 4.8
of the Company's December 31, 1999 10K).
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
No current report on Form 8-K was filed by the Company during the quarter
ended March 31, 2000.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
AP Holdings, Inc.
(Registrant)
May 15, 2000
By:
_________________________________________________
John V. Holten
Chief Executive Officer, President and
Director (Principal Executive Officer)
May 15, 2000
By:
_________________________________________________
Theodore C. Pulkownik
Treasurer (Principal Financial
and Accounting Officer)
15
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-4 (No. 333-50437) filed on April
17, 1998, as amended on June 9, 1998, July 15, 1998, August 11,
1998 and August 14, 1998 (the "Registration Statement").
3.2 Amended and Restated By-Laws of the Company (incorporated by
reference to Exhibit 3.2 to the Registration Statement).
4.1 Indenture, dated as of March 30, 1998, amended as of July 6, 1998,
September 21, 1998 and January 12, 1999 by and among the Company,
the Subsidiary Guarantors and State Street Bank and Trust Company
(incorporated by reference to Exhibit 4.1 to the Registration
Statement).
4.2 Form of New Note (included as Exhibit A to Exhibit 4.1).
4.3 Form of New Note Guarantee (included as Exhibit D to Exhibit 4.1).
4.7 First Amendment to Senior Credit Facility dated November 12, 1999
by and among the Company, the Lenders, and N.A. Bank One as agent
for Lenders (incorporated by reference to Exhibit 4.7 of the
Company's September 10, 1999 form 10Q).
4.8 Second Amendment to the Senior Credit Facility dated March 30,
2000 by and among the Company, the Lenders and Bank One N.A., as
agent for the Lenders (incorporated by reference to Exhibit 4.8
of the Company's December 31, 1999 10K).
27.1 Financial Data Schedule
16
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