SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996.
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 001-13950
Exact Name of Registrant as Specified in Its Charter:
CENTRAL PARKING CORPORATION
State or Other Jurisdiction of Incorporation or Organization:
Tennessee
I.R.S. Employer Identification No.: 62-1052916
Address of Prncipal Executive Offices: 2401 21st Avenue South,
Suite 200, Nashville, Tennessee
Zip Code: 37212
Registrant's Telephone Number, Including Area Code: (615) 297-4255
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Class: Common Stock $0.01 par Value
Name of each Exchange on which registered: New York Stock Exchange
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 _
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 III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the Common Stock held by non-affiliates of
the registrant, based on the closing price of the Common Stock on the New
York Stock Exchange on December 18, 1996, was $128,908,072. For purposes
of this response, the registrant has assumed that its directors,
executive officers, and beneficial owners of 5% or more of its Common
Stock are the affiliates of the registrant.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date.
Class: Common Stock, $0.01 par value
Outstanding at December 18, 1996: 17,489,768
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on February 28, 1997 are incorporated by
reference into Part III of this Form 10-K. Portions of the Registrant's
Annual Report to Shareholders for the fiscal year ended September 30,
1996 are incorporated by reference into Part II of this Form 10-K.
PART I
ITEM 1. BUSINESS
GENERAL
The Company, founded in 1968, is a leading provider of
parking services in the United States. As of September 30, 1996,
the Company operated 1,359 parking facilities containing
approximately 546,000 spaces, including 109 international
facilities with approximately 40,578 spaces, located in 32 states,
the District of Columbia, Puerto Rico, the United Kingdom, Germany
and Mexico. Since 1993, the Company has added on a net basis an
average of approximately 137 properties to its operations each
year. Since its inception, the Company has sought to increase the
level of integrity and professionalism in the parking industry.
Management believes the Company's reputation for professional
integrity is the cornerstone of its success and differentiates it
from competitors. The Company's leadership position in the
parking industry is a result of applying professional management
strategies to a consolidating industry historically managed by
small local operators, understanding the needs of the parking
public, applying technology to parking services, retaining
employees through proprietary training programs, and utilizing an
incentive compensation system that rewards performance.
The Company operates parking facilities under three general
types of arrangements: management contracts, leases, and fee
ownership. As of September 30, 1996, the Company operated 770
parking facilities through management contracts, leased 552
parking facilities, and owned 37, either independently or in joint
ventures with third parties. The general terms and benefits of
these three types of arrangements are described as follows:
MANAGEMENT CONTRACTS. The Company's responsibilities under
a management contract as a facility manager include hiring,
training, and staffing parking personnel, and providing
collections, accounting, recordkeeping, insurance, and
facility marketing services. In general, the Company is not
responsible for structural, mechanical, or electrical
maintenance or repairs, or for providing security or guard
services. The Company generally receives a base monthly fee
for managing these facilities plus fees for ancillary
services such as insurance, accounting, equipment leasing,
and consulting and often receives a percentage of facility
revenues above a base amount. Under the Company's typical
management contract, the facility owner pays a minimum
management fee and operating expenses such as taxes, license
and permit fees, insurance, payroll and accounts receivable
processing, and wages of personnel assigned to the facility.
In addition, the facility owner also pays for maintenance,
repair costs, and capital improvements. The typical
management contract is for a term of one to three years and
is renewable, typically for successive one-year terms. The
Company's management contract renewal rates for the years
ended September 30, 1996, 1995, and 1994, were 92.4%, 95.0%,
and 97.3%, respectively.
LEASES. In contrast to management contracts, lease
arrangements are typically for terms of three to ten years,
with a renewal term, and provide for a contractually
established payment to the facility owner regardless of the
operating earnings of the parking facility. The Company's
rent is generally either a flat annual amount, a percentage
of gross revenues, or a combination thereof. Under its
leases, the Company is responsible for all facets of the
parking operations, including utilities and ordinary and
routine maintenance, but is generally not responsible for
major maintenance, repair, or property taxes. The leased
facilities require a longer commitment and a larger capital
investment by the Company than managed facilities but
provide a more stable source of revenue and a greater
opportunity for long-term revenue growth.
FEE OWNERSHIP. Ownership of parking facilities, either
independently or through joint ventures, typically requires
a larger capital investment than managed or leased
facilities but provides maximum control over the operation
of the parking facility and all growth in owned facility
revenue flows directly to the Company. Additionally,
ownership provides the potential for realizing capital gains
from the appreciation in the value of underlying real
estate. The Company typically targets ownership
opportunities in cities in which it currently operates,
focusing on unrelated sites that are being used as parking
facilities. The Company also seeks joint venture partners
who are established local or regional developers pursuing
financing alternatives for development projects. Joint
ventures typically involve a development where the parking
facility is a part of a larger multi-use project, allowing
the Company's joint venture partners to benefit from a
capital infusion to the project. Joint ventures offer the
revenue growth potential of ownership with a partial
reduction in capital requirements. Prior to 1994, the
Company's ability to purchase properties was limited by a
contractual arrangement with Realty Parking Properties II
L.P. (see "Item 2 Parking Facility Properties --- Parking
Consultant to Fund").
The Company provides parking management services at multi-
level parking facilities and surface lots. It also provides
parking consulting services, shuttle services, valet services,
parking meter enforcement services, and billing and collection
services. The Company distinguishes itself from its competitors
by combining a reputation for professional integrity and quality
management with operating strategies designed to increase the
revenues of parking operations for its clients. The Company's
clients include some of the nation's largest owners and developers
of mixed-use projects, major office building complexes, sports
stadiums, hotels, and municipalities. Parking facilities operated
by the Company include, among others, certain terminals operated
by BAA Heathrow International Airport (London), the Prudential
Center (Boston), Ericsson Stadium (Charlotte), Busch Stadium (St.
Louis), Reunion Arena (Dallas), Cinergy Field (Cincinnati), Coors
Field (Denver), Oriole Park at Camden Yards (Baltimore), and
various parking facilities owned by the Hyatt and Westin hotel
chains, the Rouse Company, Faison Associates, May Department
Stores, Equity Office Properties, and Crescent Real Estate. None
of these clients account for more than 5% of the Company's total
revenues.
The Company's early growth was generated by the new
construction of large office buildings, hotels, retail centers,
and mixed-use developments in the United States. However, when
domestic commercial development began declining in the late
1980's, the Company instituted a "take-away" strategy to replace
existing operators by offering value added services at competitive
prices, thus increasing clients' profitability. The Company also
has grown in recent years as a direct result of the purchase of
contract rights and international expansion. In 1992, the Company
purchased for $8 million the contract rights to manage 103 parking
facilities owned, leased, or managed by an unrelated parking
company, which accounted for approximately 22% of the Company's
revenues in fiscal 1996. The Company has a separate contract for
each facility. The contract rights are amortized over the various
facility contract terms through 2004. The Company believes these
contracts should experience the same general renewal rates the
Company has experienced in its overall business operations.
Additionally, although the Company did not begin operating
internationally until the early 1990's, the United Kingdom
operations accounted for approximately 9% of the Company's
revenues in fiscal 1996. The Company also operates five parking
facilities through a joint venture in Germany, 16 parking
facilities through a joint venture in Mexico, 17 parking
facilities in Puerto Rico, provides parking consulting services in
Malaysia, and has a business development office in the
Netherlands.
The following table sets forth certain information regarding
the number of managed, leased, or owned facilities as of the
specified dates:
As of September 30,
1996 1995 1994
Managed facilities 770 715 626
Leased facilities 552 485 436
Owned facilities 37 31 26
Total 1,359 1,231 1,088
INDUSTRY
The parking industry is highly fragmented, consisting of a
few nationwide companies and a large number of smaller operators,
including a substantial number of companies providing parking as
an ancillary service in connection with property management or
ownership. The primary industry participants are almost
exclusively privately-held companies. Management believes the
parking industry is consolidating as property managers favor
larger-scale operations, more reliable operating systems, better
revenue controls, and an increased emphasis on customer service.
Overall parking industry expansion is created by new
construction. Since new construction in the United States slowed
in the late 1980's and has only gradually begun to increase in
recent years, growth in parking companies in the 1990's has
generally resulted from take-aways from other parking companies.
Take-aways and new construction are essential to growth in the
parking industry because of the limitations on growth 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.
Management believes that most commercial real estate
developers and property owners view services such as parking as
potential profit centers rather than cost centers. These parties
outsource parking operations to parking management companies in an
effort to maximize profits or leverage the original rental value
to a third-party lender. Parking management companies can
increase profits by using managerial skills and experience,
operating systems, and operating controls unique to the parking
industry.
Privatization of government operations and facilities could
provide new opportunities for the parking industry. Cities and
municipal authorities may consider retaining private firms to
operate facilities and parking-related services in an effort to
reduce operating budgets and increase efficiency. Privatization
in the United Kingdom has already provided significant expansion
opportunities for private parking companies.
OPERATING STRATEGY
The Company's operating strategy is to increase revenues and
profitability of its owned, leased, and managed parking facilities
through containing costs and realizing economies of scale;
emphasizing the importance of marketing; maintaining strict cash
control; using a decentralized management structure; providing
strong training programs for employees; enhancing management
information systems; offering ancillary services; working to
retain parking patrons; and selecting strategic facility sites.
CONTAIN COSTS AND REALIZE ECONOMIES OF SCALE. In order to
provide competitively priced services, the Company must contain
costs. The Company has sought to contain its labor costs by
creating a decentralized structure of well-trained, highly
motivated managers that is complemented by computerized parking
and accounting systems. Managers are trained to analyze staffing
and cost control issues, and each facility is carefully tracked on
a monthly basis to determine whether financial results are within
budgeted ranges. In its early stages, the Company grew by adding
management contracts much more rapidly than it added more capital-
intensive leased or owned facilities. This strategy allowed the
Company to grow and create economies of scale for certain
administrative and accounting functions with relatively little
capital investment. In addition, the Company's size has allowed
it to invest in sophisticated technology systems, such as
computerized card tracking and accounting systems. The Company is
experimenting with a variety of automated parking settlement
systems that could enhance revenue by increasing the efficiency
and accuracy of payment collection, lowering labor costs, and
reducing lost revenue at parking facilities. Furthermore, the
Company will not enter a new market unless management believes it
has the opportunity to rapidly obtain the market presence
necessary to support the required overhead costs.
EMPHASIZE SALES AND MARKETING EFFORTS. The Company's
management is actively involved in developing and maintaining
business relationships and in exploring opportunities for growth.
The Company's incentive compensation system rewards managers who
are able to develop new business, and this incentive system is the
cornerstone of the Company's culture. The Company's marketing
efforts are designed to expand its operations by developing
lasting relationships with major developers and asset managers,
business and government leaders, and other high quality clients.
The Company implements its marketing strategy by encouraging
managers to pursue new opportunities at the local level while
simultaneously selectively targeting key clients and projects at a
national level.
MAINTAIN CASH CONTROL. Strict cash control is critical to
the Company and its clients. The Company's cash control
procedures are based on a ticketing system supervised by high
level managers and include on-site spot checks, multiple daily
cash deposits, local audit functions, managerial oversight and
review, and internal audit procedures. All tickets and gate
counts are reconciled daily against cash collected. Management
believes its cash control procedures are effective in minimizing
the loss of revenues at parking facilities.
DECENTRALIZE MANAGEMENT STRUCTURE. The Company has achieved
what management believes is a successful balance between
centralized and decentralized management. Because its business is
dependent, in large part, on personal relationships, the Company
provides its managers with a significant degree of autonomy in
order to encourage prompt and effective responses to local market
demands. In conjunction with this local operational authority,
the Company provides, through its corporate office, services that
typically are not readily available to independent operators such
as management support, marketing and business expertise, training,
and financial and information systems. The Company retains
centralized control, however, over those functions necessary to
monitor service quality and cash control integrity and to maximize
operational efficiency. Services performed at the corporate level
include billing, quality improvement oversight, financial and
accounting functions, policy and procedure development, systems
design, and corporate acquisitions and development.
TRAINING PROGRAMS AND INCENTIVE COMPENSATION. Management
believes that the Company's management training program is a
significant factor in the Company's success. Formalized in 1986,
this program is designed to identify and hire individuals that
meet a variety of criteria intended to enhance the likelihood of
success. Employees participating in the Company's management
program are generally required to have a college degree. The
Company has approximately 500 management positions and hires
approximately 100 managers a year. New managers in the Company's
management trainee program are assigned to a particular facility
where they are supervised as they manage one to five employees.
The management trainee program lasts approximately one year and
teaches a wide variety of skills, including organizational skills,
basic management techniques, and basic accounting. Upon
successful completion of this stage of the program, management
trainees are promoted to facility manager in charge of a
particular parking facility. The Company continues to train
facility managers for an additional year, at which time the
successful managers are typically promoted to position of area
manager. Area managers oversee several facilities and report to
an operations manager. Operations managers oversee all or a
portion of a city and report to a general manager. Each general
manager is responsible for both managing a particular city and
focusing on marketing the Company's services in that city.
General managers are entitled to a bonus based on the performance
of the Company's operations in that city. All positions at the
general manager level and above require a substantial time
commitment to marketing and business development.
The Company's incentive compensation system rewards managers
at the general manager level and above for the profitability of
their respective areas of responsibility. Each person
participating in the incentive program generally receives a
substantial portion of their compensation from this incentive
compensation system. Incentive compensation payments typically
range from 20% to 50% of total compensation.
ENHANCE MANAGEMENT INFORMATION SYSTEMS. In the last five
years, the Company has completely re-engineered and replaced all
of its accounting and operations software. Central to this effort
has been the development of industry-specific software models,
such as the Parker Accounts Receivable System, a proprietary
software system used to generate a range of reports related to
receivables and to audit access control systems for the Company's
parking facilities. The Company's distributed systems, which
include payroll, revenue collection, and monthly line-item
budgeting, provide local management access to data pertinent to
their operations, while allowing corporate review of all data.
The Company also provides bookkeeping services through an
accounting division that maintains separate financial statements
for large or complex facilities.
OFFER ANCILLARY SERVICES. The Company provides services
that are complementary to parking facility management, with a
particular emphasis on consulting services. For example, the
Company's operations in the United Kingdom grew out of a single
consulting arrangement. Other ancillary services include parking
meter enforcement services, on-street parking services, car
pooling coordination, shuttle van services, and public
transportation services. These ancillary services do not
constitute a significant portion of the Company's revenues, but
management believes that the provision of ancillary services can
be important in obtaining new business and preparing the Company
for future changes in the parking industry.
RETAIN PARKING PATRONS. In order for the Company to
succeed, its parking patrons must have a positive experience at
Company facilities. Accordingly, the Company stresses the
importance of having safe, clean facilities and cordial employees.
Each facility manager has primary responsibility for the
environment at the facility, and is evaluated on his or her
ability to retain parking patrons. The Company also monitors
customer satisfaction through customer surveys and "mystery
parker" programs.
SELECT FACILITY SITES. In existing markets, the facility
site selection process begins with identification of a possible
facility site and the analysis of projected revenues and costs at
the site by general managers and regional managers. The managers
then conduct an examination of a location's potential demand based
on traffic patterns and counts, area demographics, and potential
competitors. Pro forma financial statements are then developed
and a Company representative will meet with the property owner to
discuss the terms and structure of the agreement.
GROWTH STRATEGY
Historically, the Company's operations have grown primarily
through the addition of management contracts. Concentration on
management contracts was a function of client demands for such
arrangements coupled with the Company's capital and contractual
restraints that limited leasing and fee ownership opportunities.
See "Item 2 Parking Facility Properties --- Parking Consultant to
Fund." Because of its operating results, increased cash flows,
and release from such contractual restraints, the Company has
begun to make more capital intensive investments in leasing and
ownership of parking facilities. The Company currently intends to
increase the relative number of leased and owned facilities in its
total operations, and to convert managed facilities to leased or
owned facilities when possible. The Company will, however,
continue to pursue management contracts with clients or potential
clients who prefer that arrangement. Set forth below are the key
elements of the Company's growth strategy.
INCREASE MARKET SHARE. The Company plans to continue to add
properties to its operations by focusing its marketing efforts on
increasing market share at the local level, targeting asset
managers and developers with a national presence, and pursuing
specific projects associated with high-use, special-purpose
facilities.
LOCAL. At the local level the Company's sales and marketing
efforts are decentralized and are directed towards
identifying new expansion opportunities within a particular
city or region. Managers are trained to develop the
business contacts necessary to generate new opportunities
and to monitor their local markets for take-away and
outsourcing opportunities. The Company provides its
managers with a significant degree of autonomy in order to
encourage prompt and effective responses to local market
demands, which is complemented by management support and
marketing training through the Company's corporate offices.
In addition, a manager's compensation is dependent, in part,
upon his or her success in developing new business. By
developing business contacts locally, the Company's managers
often get the opportunity to bid on projects when asset
managers and property owners are dissatisfied with current
operations and also learn in advance of possible new
projects.
NATIONAL. At the national level, the Company's marketing
efforts are undertaken primarily by upper-level management
who target developers, governmental entities, the
hospitality industry, mixed-use projects, and medical
facilities. These efforts are directed at operations that
generally have national name recognition, substantial demand
for parking related services, and the potential for nation-
wide growth. For example, the Company's current clients
include, among other national property ownership companies
and hotel chains, the Rouse Company, Faison Associates,
Equity Office Properties, May Department Stores, Crescent
Real Estate, Westin Hotels, and Hyatt Hotels. None of these
clients account for more than 5% of the Company's total
revenues. Management believes that providing high-quality,
efficient services to such companies will lead to additional
opportunities as those clients continue to expand their
operations. Outsourcing by parking facility owners will
continue to be a source for additional facilities, and
management believes the Company's experience and reputation
with large asset managers give it a competitive advantage in
this area.
SPECIALIZED HIGH-USE FACILITIES. The Company targets
facilities that are located to take advantage of a mixed
customer base. These locations generally are in
metropolitan areas and are convenient to entertainment,
tourist, and leisure attractions, such as downtown sporting
areas, or are associated with 24-hour facilities, such as
hospitals and airports. Such facilities combine commuter
demand with off-hour demand resulting in relatively higher
utilization. For example, the Company has targeted special
event parking and currently operates parking facilities at,
or convenient to, sports venues such as Madison Square
Garden, the new Boston Garden, Busch Stadium, Cinergy Field,
Ericsson Stadium (Carolina Panthers), Oriole Park at Camden
Yards, Coors Field, and Reunion Arena. The Company also
targets facilities near urban entertainment and tourist
destinations such as its operations at CoCo Walk in Miami,
One Colorado Place in Pasadena, California, Larimer Square
in Denver, and Harbor Place in Baltimore. Examples of
current mixed-used facility clients include Crown Center in
Kansas City, Prudential Center in Boston, Arizona Center in
Phoenix, and Canary Wharf in London.
ACQUIRE ADDITIONAL OPERATORS. Although the Company
historically has focused primarily on adding individual facility
operations rather than on acquiring competing companies,
management believes that the Company can benefit from acquiring
regional operators. The Company's acquisition strategy focuses
primarily upon acquisitions in attractive new markets and
acquisitions that will enable the Company to become a leading
provider in selected current markets. The Company believes it can
improve acquired operations through more sophisticated operating
systems and more professional management.
EXPAND INTERNATIONAL OPERATIONS. Management believes that
there are significant international growth opportunities,
particularly for well-capitalized companies that are interested in
making significant investments in equipment and construction,
either independently or with foreign partners. The Company's
international operations began in the early 1990's with the
formation of an international division, which is now one of the
fastest growing areas of the Company. Operations in London began
in 1991 with a single consulting agreement. Later in 1991, the
Company was awarded a contract to manage Terminal 4 of Heathrow
International Airport. Since then, the Company has expanded its
Heathrow operations to include Terminal 1 and has a total of 88
United Kingdom facilities, with operations in Birmingham,
Newcastle, and London. To complement its parking business in the
United Kingdom, the Company also provides parking meter
enforcement and ticketing services for three local governments
that have privatized these services. The Company began expansion
into Mexico in July 1994 by forming a joint venture with Fondo
Opcion, an established Mexican developer and now operates 16
facilities in Mexico. The Company also operates 17 facilities in
Puerto Rico and provided consulting services in Kuala Lumpur,
Malaysia related to the operation of a 5,400 space parking
facility servicing one of the largest development projects in the
world. The Company has a business development office in the
Netherlands to pursue expansion into other European countries. In
1996, the Company acquired a 50% equity interest in a joint
venture which operates five facilities in Germany. Revenues from
foreign operations accounted for approximately 9.2%,12.8%, and
13.6% of the Company's total revenues for the years ended
September 30, 1996, 1995 and 1994, respectively. See Note 16 to
Notes to Consolidated Financial Statements.
COMPETITION
The parking industry is fragmented and highly competitive,
with limited barriers to entry. The Company faces direct
competition for additional facilities to manage, lease, or own 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 have the potential to compete with parking
companies. 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 leased or managed
facilities could adversely affect the Company's business.
Management believes that it competes for clients based on
rates charged for services; ability to generate revenues for
clients; ability to anticipate and respond to industry changes;
range of services; and ability to expand operations. The Company
has a reputation as a leader in the industry and as a provider of
high quality services. The Company also is one of the largest
companies in the parking industry and is not limited to a single
geographic region. The Company has the financial strength to make
capital investments as an owner or joint venture partner that
smaller or more leveraged companies cannot make. The Company's
size has also allowed it to centralize administrative functions
that give the decentralized managerial operations cost-efficient
support. Moreover, the Company has obtained broad experience in
managing and operating facilities of a wide variety over the past
28 years. Additionally, the Company is able to attract and retain
quality managers through its incentive compensation system that
directly rewards successful sales and marketing efforts and places
a premium on profitable growth.
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 facilities in New York City are, for example,
subject to certain governmental restrictions concerning numbers of
cars, pricing, and certain prohibited practices. The Company is
also affected by laws and regulations (such as zoning ordinances)
that are common to any business that owns 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.
Environmental laws also may adversely affect the Company.
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 ownership or operation of
parking facilities, the Company may be potentially liable for any
such costs. In addition, the Company could incur significant
costs defending against claims of liability.
Various other governmental regulations affect the Company's
operation of parking facilities, both directly and indirectly,
including the Americans with Disabilities Act ("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. Management
believes that the parking facilities the Company owns and operates
are in substantial compliance with these requirements.
EMPLOYEES
As of September 30, 1996, the Company employed approximately
6,600 individuals, including 3,400 full-time and 3,200 part-time
employees. Management believes that the Company's employee
relations are good. Approximately 600 U.S. employees are
represented by labor unions. Parking attendants and cashiers at
the New York City facilities are represented by various union
locals, including Teamsters Local No. 272. Other cities in which
some of the Company's employees are represented by labor unions
are Miami, Philadelphia, San Francisco and Chicago.
SERVICE MARKS AND TRADEMARKS
The Company has registered its logo with the United States
Patent Office. The Company has also reinstated its application
for registration of the name "Central Parking System." This
application was initially opposed by two parties. One party has
recently withdrawn its opposition but continues to use the name
"Central Parking" in the Chicago area. The second party, which
operates only in Atlantic City, New Jersey, has expressed a
willingness to limit its use to such area, although there can be
no assurance that the Company will receive a binding commitment
from such party. The Company uses the name "Chicago Parking
System" in Chicago, the name CPS Parking in Seattle and Milwaukee,
and the name Control Plus in London.
INSURANCE
The Company purchases comprehensive liability insurance
covering parking facilities owned, leased, and managed by the
Company. In addition, the Company purchases group insurance with
respect to all Company employees, whether such persons are
employed at owned, leased, or managed facilities. Because of the
size of the operations covered, the Company purchases these
policies at prices that, management believes, represent a discount
to the prices that would be charged to parking facility owners on
a stand-alone basis. Pursuant to its management contracts, the
Company charges its customers for insurance at rates it believes
approximate market rates based upon its review of the applicable
market. In each case, the Company's clients have the option of
purchasing their own policies, provided the Company is named as an
additional insured; however, because the Company's fees for
insurance are generally competitive with market rates, the
Company's clients have historically chosen to pay the Company's
insurance fees. A reduction in the number of clients that
purchase insurance through the Company, however, could have a
material adverse effect on the operating earnings of the Company.
In addition, although the Company's cost of insurance has not
fluctuated significantly in recent years, a material increase in
insurance costs due to increased claims experienced by the Company
could adversely affect the profit associated with insurance
charges pursuant to management contracts and could have a material
adverse effect on the operating earnings of the Company.
FOREIGN AND DOMESTIC OPERATIONS
Information about the Company's foreign and domestic operations
is incorporated by reference to Note 16 to the Consolidated
Financial Statements
ITEM 2. PARKING FACILITY PROPERTIES
The Company's facilities are currently organized into 12
regions, 11 in North America and one which is comprised of the
United Kingdom and Germany. Each region is supervised by a
regional manager who reports directly to a Senior Vice President
or the President. Regional managers oversee four to six general
managers who each supervise the Company's operations in a
particular city. The following table summarizes certain
information regarding the Company's facilities as of September 30,
1996.
Number of Total Percentage of
REGIONS - Cities Locations Managed Leased Owned Spaces Total Spaces
ATLANTA 94 45 49 --- 38,050 7.0%
Atlanta,
Birmingham,
Charleston (SC),
Charlotte,
Columbia (SC),
Jackson (MS),
Mobile
DALLAS-FT. WORTH 128 79 43 6 51,111 9.3%
Dallas-Ft. Worth,
Oklahoma City,
San Antonio,
Tulsa
EUROPEAN
United Kingdom 93 11 82 --- 28,689 5.3%
Birmingham,
London,
Newcastle
Germany
Berlin,
Dresden,
Frankfurt,
Hamburg,
Schwerin
FLORIDA 166 95 71 --- 67,498 12.3%
Jacksonville,
Miami/Ft. Lauderdale,
Orlando,
Puerto Rico,
Tampa/St. Petersburg
HOUSTON 113 79 34 --- 59,818 11.0%
Albuquerque,
Austin,
El Paso,
Houston,
New Orleans
LOS ANGELES 75 56 19 --- 43,607 8.0%
Los Angeles,
Orange County (CA),
Phoenix
MID-ATLANTIC 100 77 20 3 46,416 8.5%
Baltimore,
Hartford,
Norfolk,
Philadelphia,
Providence,
Richmond,
Washington (D.C.)
MIDWEST 98 62 36 --- 53,827 9.9%
Charleston (WV),
Cincinnati,
Cleveland,
Columbus,
Milwaukee,
Pittsburgh
NASHVILLE 217 97 99 21 (1) 45,432 8.3%
Chattanooga,
Knoxville,
Lexington/Frankfort,
Louisville,
Memphis,
Nashville
NEW YORK 64 25 39 --- 23,621 4.3%
New York,
Jersey City,
Stamford
SAN FRANCISCO 30 21 9 --- 9,296 1.7%
Oakland,
Salt Lake City,
San Francisco,
Seattle
ST. LOUIS 143 96 41 6 57,001 10.4%
Denver/Colorado Springs,
Des Moines,
Kansas City,
Minneapolis-St. Paul,
St. Louis
OTHER 38 27 10 1 21,623 4.0%
Boston,
Chicago,
Mexico City
TOTAL 1,359 770 552 37 545,989 100.0%
(1) Includes the Company's corporate headquarters.
JOINT VENTURES. The Company has interests in joint ventures
that own or operate parking facilities located in Nashville,
Denver, Germany, and Mexico. The Company has a 50% interest in a
joint venture that owns a parking complex on Commerce Street in
Nashville, and the Company operates the parking at this complex
under a management contract with the joint venture. The Company
has a similar interest in two joint ventures in Denver and one
joint venture in Germany. The Company is also a joint venture
partner with Fondo Opcion and operates twelve facilities on behalf
of that joint venture in Mexico City.
MBE PARTNERSHIPS. The Company is currently a party to ten
separate minority business enterprise partnerships formed by the
Company and a minority businessperson to manage various
facilities. The Company owns 60% to 70% of the partnership
interests in each partnership and typically receives management
fees before partnership distributions are made to the partners.
ACQUISITION OF CONTRACT RIGHTS. In August 1992, the Company
purchased for $8 million the contract rights to manage 103 parking
facilities which are owned, leased, or managed by an unrelated
parking company. Of these 103 facilities, 39 were included in
parking revenues and their related costs and 64 were included in
management contract revenues and their related costs. The Company
has a separate contract for each facility. The contract rights
are amortized over the various facility contract terms through
2004. The Company believes these contracts should experience the
same general renewal rates the Company has experienced in its
overall business operations. This arrangement generated parking
revenues from the facilities totalling approximately $28.8
million, $30.3 million, and $30.8 million for fiscal 1996, 1995,
and 1994, respectively. Additionally, management contract
revenues generated from the facilities were approximately $3.2
million, $3.0 million, and $3.1 million for fiscal 1996, 1995, and
1994, respectively. See Note 5 to Consolidated Financial
Statements.
PARKING CONSULTANT TO FUND. In March 1991, the Company
agreed to act as a consultant to Realty Parking Properties II
L.P., a $34.8 million publicly held fund sponsored by Alex Brown
Realty, Inc. (the "Fund"), which was formed to acquire interests
in land and facilities to be used for parking operations and
incidental ancillary uses. The Fund's investment strategy
emphasized surface commercial parking lots believed by the Fund to
have significant future potential value for eventual sale as
development sites. In connection with the formation of the Fund,
the Company purchased 3.0% of the outstanding units for
approximately $1.1 million. Pursuant to the Parking Consultant
Agreement with the Fund, the Company was required until March 1994
to provide information to the Fund concerning any land or parking
structure available for acquisition that the Company believed (i)
would be suitable for investment by the Fund, (ii) was or could be
readily convertible into and useable as a profitable parking
facility, and (iii) had an acquisition cost of at least $1.0
million or was contiguous to a parking facility already owned by
the Fund or certain of its affiliates. In this regard, the
Company was also required to offer the Fund a right-of-first-
refusal on sales of certain land or parking facilities by the
Company. As compensation for the Company's services provided in
connection with any property acquisition, the Fund was required to
pay a fee to the Company equal to a percentage of such property's
acquisition cost. Pursuant to the Parking Consulting Agreement,
the Company was also required, subject to certain conditions, to
lease properties acquired by the Fund based upon the Company's
recommendation. Rental payments by the Company under the ten year
net leases are calculated on the basis of the cost of the property
and include a percentage of gross receipts over a base amount. In
addition, if a lease is terminated because of the sale of the
property, the Company is entitled to a consulting fee equal to a
percentage of the contract price and a fee for termination of the
lease equal to a percentage of the gain on sale. The Parking
Consulting Agreement terminated in March 1994. Currently, the
Company leases seven properties from the Fund.
ITEM 3. LEGAL PROCEEDINGS
The ownership of property and provision of services to the
public entails an inherent risk of liability. Although the
Company is engaged in routine litigation incidental to its
business, in the opinion of management, there is no legal
proceeding to which the Company is a party which, if decided
adversely to the Company, would be material to the Company's
financial condition, liquidity, or results of operations. The
Company takes steps to attempt to disclaim its liability for
personal injury and property damage claims by printing disclaimers
on its ticket stubs and by placing warning signs in the facilities
it owns or operates. The Company also carries liability insurance
that management believes meets industry standards; however, there
can be no assurance that any future legal proceedings (including
any related judgments, settlements or costs) will not have a
material adverse effect on the Company's financial condition,
liquidity, or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matter was submitted to a vote of the Company's security-
holders during the fourth quarter of the fiscal year ended
September 30, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) The Registrant's Common Stock has been traded on the
New York Stock Exchange under the symbol PK since October 10,
1995. The following is a list of the high and low closing prices
by fiscal quarters for the last fiscal year, as recorded by the
New York Stock Exchange. All share prices have been adjusted to
reflect the effects of the three-for-two stock split in March
1996. Prior to October 10, 1995, there was no public market for
these shares.
High Low
Three months ended December 31, 1995 $ 19.8750 $ 12.0000
Three months ended March 31, 1996 27.2500 18.0000
Three months ended June 30, 1996 34.1250 23.7500
Three months ended September 30, 1996 33.2500 23.6250
Twelve months ended September 30, 1996 $34.1250 $12.0000
(b) There were, as of September 30, 1996 approximately
5,500 holders of the Registrant's Common Stock, as evidenced by
depository and transfer agent listings.
(c) During fiscal 1996, a split-adjusted equivalent of
$0.02 per share was distributed to holders of the Registrant's
Common Stock in each of the four fiscal quarters. Prior to the
Initial Public Offering on October 10, 1995, there were no
dividends on Common Stock. The Company declared dividends of
$450,000 and $398,000 in 1995 and 1994, respectively, on the
Preferred Stock that was outstanding prior to the
recapitalization. See Note 9 to the Consolidated Financial
Statements.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The information set forth under the caption "Five Year
Selected Consolidated Financial Data " in the Company's Annual
Report to Shareholders for the fiscal year ended September 30,
1996 is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's Annual Report to Shareholders for the
fiscal year ended September 30, 1996 is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The information set forth under the captions "Independent
Auditors' Report", "Consolidated Balance Sheets", "Consolidated
Statements of Earnings", "Consolidated Statements of Shareholders'
Equity", "Consolidated Statements of Cash Flows", and "Notes to
Consolidated Financial Statements" in the Company's Annual Report
to Shareholders for the fiscal year ended September 30, 1996 is
incorporated herein by reference.
The Company's unaudited operating results for each fiscal
quarter within the two most recent fiscal years, as set forth
under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's
Annual Report to Shareholders for the fiscal year ended September
30, 1996, is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Information concerning this Item is incorporated by
reference to the Company's definitive proxy materials for the
Company's 1997 Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning this Item is incorporated by
reference to the Company's definitive proxy materials for the
Company's 1997 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information concerning this Item is incorporated by
reference to the Company's definitive proxy materials for the
Company's 1997 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning this Item is incorporated by
reference to the Company's definitive proxy materials for the
Company's 1997 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
The following financial statements and related
notes of the Company contained
on pages 16 through 31 of the Company's Annual
Report to Shareholders for the
fiscal year ended September 30, 1996 are
incorporated herein by reference.
Independent Auditors' Report 16
Consolidated Balance Sheets -
September 30, 1996 and 1995 17
Consolidated Statements of Earnings - Fiscal Years
Ended September 30, 1996, 1995, and 1994 18
Consolidated Statement of Shareholders' Equity -
Fiscal Years Ended
September 30, 1996, 1995, and 1994 19
Consolidated Statements of Cash Flows - Fiscal Years
Ended September 30, 1996, 1995, and 1994 20
Notes to Consolidated Financial Statements 21-32
(a)(2) FINANCIAL STATEMENT SCHEDULES
None
Financial statement schedules have been omitted
because they are not applicable or because the
required information is otherwise furnished.
(a)(3) EXHIBITS
The exhibits listed in the Index to Exhibits, which
appears on pages E-__ through E-___ of this
Form 10-K, are incorporated herein by reference or
filed as part of this Form 10-K.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Registrant
during the last quarter of the fiscal
year ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CENTRAL PARKING CORPORATION
Date: December 24, 1996 By: /s/ Stephen A. Tisdell
Stephen A. Tisdell
Chief Financial Officer
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 in the capacities and on the
dates indicated.
Signature Title Date
/s/ Monroe J. Carell, Jr. Chairman of the Board, December 24, 1996
Monroe J. Carell, Jr. Chief Executive Officer
and Director
/s/ James H. Bond President & Chief December 24, 1996
James H. Bond Operating Officer;
Director
/s/ Stephen A. Tisdell Chief Financial Officer December 24, 1996
Stephen A. Tisdell (Principal Financial and
Accounting Officer)
/s/ John W. Eakin Director December 24, 1996
John W. Eakin
/s/ Edward G. Nelson Director December 24, 1996
Edward G. Nelson
/s/ William C. O'Neil Director December 24, 1996
William C. O'Neil
EXHIBIT INDEX
Exhibit Page
Number Document Number
2 Plan of Recapitalization, effective October 9, 1995
(Incorporated by reference to Exhibit 2 to the
Company's Registration Statement No. 33-95640
on Form S-1.)
3.1 Form of Amended and Restated Charter of the Registrant
(Incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement No. 33-95640
on Form S-1.)
3.2 Amended and Restated Bylaws of the Registrant
(Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement No. 33-95640
on Form S-1.)
4 Form of Common Stock Certificate (Incorporated by
reference to Exhibit 4.1 to the Company's
Registration Statement No. 33-95640 on Form S-1.)
10.1 Executive Compensation Plans and Arrangements
(a) 1995 Incentive and Nonqualified Stock
Option Plan for Key Personnel
(Incorporated by reference to Exhibit
10.1 to the Company's Registration
Statement No. 33-95640 on Form S-1.)
(b) Form of Option Agreement under Key
Personnel Plan (Incorporated by reference
to Exhibit 10.2 to the Company's
Registration Statement No. 33-95640 on
Form S-1.)
(c) 1995 Restricted Stock Plan (Incorporated
by reference to Exhibit 10.5.1 to the
Company's Registration Statement No.
33-95640 on Form S-1.)
(d) Form of Restricted Stock Agreement
(Incorporated by reference to Exhibit
10.5.2 to the Company's Registration
Statement No. 33-95640 on Form S-1.)
(e) Form of Employment Agreements with
Executive Officers (Incorporated by
reference to Exhibit 10.7 to the Company's
Registration Statement No.
33-95640 on Form S-1.)
(f) Monroe J. Carell, Jr. Employment Agreement
(Incorporated by reference to Exhibit 10.8
to the Company's Registration Statement
No. 33-95640 on Form S-1.)
(g) Monroe J. Carell, Jr. Revised Deferred
Compensation Agreement, as amended
(Incorporated by reference to Exhibit 10.9
to the Company's Registration Statement
No. 33-95640 on Form S-1.)
(h) James H. Bond Employment Agreement
(Incorporated by reference to Exhibit 10.10
to the Company's Registration Statement No.
33-95640 on Form S-1.)
(i) Performance Unit Agreement between Central
Parking Corporation and James H. Bond
(Incorporated by reference to Exhibit
10.11.1 to the Company's Registration
Statement No. 33-95640 on Form S-1.)
(j) Modification of Performance Unit
Agreement of James H. Bond (Incorporated by
reference to Exhibit 10.1(j) to the Company's
Annual Report on Form 10-K filed on
December 27, 1995)
(k) James H. Bond Severance Agreement
(Incorporated by reference to Exhibit
10.17 to the Company's Registration
Statement No. 33-95640 on Form S-1.)
10.2 1995 Nonqualified Stock Option Plan for Directors
(Incorporated by reference to Exhibit 10.3 to
the Company's Registration Statement No.
33-95640 on Form S-1.)
10.3 Form of Option Agreement under Directors Plan
(Incorporated by reference to Exhibit 10.4
to the Company's Registration Statement
No. 33-95640 on Form S-1.)
10.4 Central Parking System, Inc. Profit Sharing Plan, as
amended (Incorporated by reference to Exhibit
10.6 to the Company's Registration
Statement No. 33-95640 on Form S-1.)
10.5 Form of Indemnification Agreement for Directors
(Incorporated by reference to Exhibit 10.12 to the
Company's Registration Statement No.
33-95640 on Form S-1.)
10.6 Indemnification Agreement for Monroe J. Carell, Jr.
(Incorporated by reference to Exhibit 10.13 to
the Company's Registration Statement
No. 33-95640 on Form S-1.)
10.7 Form of Management Contract (Incorporated by
reference to Exhibit 10.14 to the Company's
Registration Statement No. 33-95640 on
Form S-1.)
10.8 Form of Lease (Incorporated by reference to
Exhibit 10.15 to the Company's
Registration Statement No. 33-95640 on Form S-1.)
10.9 1996 Employment Stock Purchase Plan
(Incorporated by reference to Exhibit 10.16 to
the Company's Registration Statement No. 33-
95640 on Form S-1.)
10.10 Exchange Agreement between the Company and
Monroe J. Carell, Jr.
(Incorporated by reference to Exhibit 10.18
to the Company's Registration
Statement No. 33-95640 on Form S-1.)
10.11 Separation Agreement between the Company and
Calvin L. Friddle (Incorporated by reference
to Exhibit 10.19 to the Company's Registration
Statement No. 33-95640 on Form S-1.)
10.12 Form of $150,000,000 Credit Agreement dated
December 12, 1996 by and among various
banks with SunTrust Bank, Nashville,
N.A. as Agent, and Central Parking Corporation
and certain of its subsidiaries (Incorporated
by reference to Item 11(b)(1) to the Company's Tender
Offer Statement on Schedule 14D-1 as filed on
December 13, 1996).
10.13 Agreement and Plan of Merger, dated as of December 6,
1996, by Central Parking System -- Empire State,
Inc., an indirect wholly-owned subsidiary of Central
Parking Corporation and Square Industries
(Incorporated by reference to Item 11(c)(1) to the
Company's Tender Offer Statement on Schedule 14D-1 as
filed on December 13, 1996).
11 Detail Computation of Per Share Earnings E-__
13 Annual Report to Shareholders E-__
21 Subsidiaries of the Registrant E-__
23 Consent of KPMG Peat Marwick LLP E-__
27 Financial Data Schedule E-__
EXHIBIT 11
CENTRAL PARKING CORPORATION
COMPUTATION OF EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARES
For the years ended September 30, 1996, 1995, and 1994
(Amounts in thousands, except per share amounts)
1996 1995 1994
Primary earnings per Common and
Common Equivalent Share:
Net earnings $13,836 $ 9,944 $ 8,964
Shares used in the computation (a):
Weighted average Common shares
outstanding 17,376 15,372 15,372
Dilutive effect of Common stock
equivalents 115 - -
Shares used in earnings per Common and
Common equivalent share computation 17,491 15,372 15,372
Primary earnings per Common and
Common equivalent share:
Net earnings $ 0.79 $ 0.65 $ 0.58
Fully diluted earnings per Common and
Common equivalent share:
Net earnings $13,836 $ 9,944 $ 8,964
Shares used in the computation (a):
Weighted average Common shares
outstanding 17,376 15,372 15,372
Dilutive effect of Common stock
equivalents 146 - -
Shares used in earnings per Common and
Common equivalent share computations 17,522 15,372 15,372
Fully diluted earnings per common and
Common equivalent share:
Net earnings $ 0.79 $ 0.65 $ 0.58
(a) Reflects the recapitalization, initial public offering of shares, and
subsequent stock split of the Company described in Note 9 to the
Consolidated Financial Statements.
EXHIBIT 13 - CENTRAL PARKING CORPORATION
1996 ANNUAL REPORT TO SHAREHOLDERS
1996
Selected Consolidated Financial Data
Set forth below are selected consolidated financial data of the Company for each
of the periods indicated. The statement of earnings, per share, and balance
sheet data were derived from the audited consolidated financial statements of
the Company. All of the information set forth below should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Amounts in thousands, except per share data
Year Ended September 30,
1996 1995 1994 1993 1992
STATEMENT OF EARNINGS DATA:
Revenues:
Parking $109,272 $ 94,383 $ 82,890 $69,589 $ 26,940
Management contract 34,044 31,772 29,278 25,829 19,054
Total revenues 143,316 126,155 112,168 95,418 45,994
Costs and expenses:
Cost of parking 99,196 87,192 76,952 66,168 24,391
Cost of management contracts 9,769 9,650 9,812 9,087 6,232
General and administrative 17,419 15,711 14,196 12,374 9,113
Total costs and expenses 126,384 112,553 100,960 87,629 39,736
Operating earnings 16,932 13,602 11,208 7,789 6,258
Net gains on sales of
property and equipment 1,192 81 2,214 1,122 2,424
Earnings before income taxes 21,068 15,507 14,143 8,650 8,430
Income taxes 7,232 5,563 5,179 3,416 3,045
Net earnings 13,836 9,944 8,964 5,234 5,385
PER SHARE DATA:
Net earnings $0.79 $0.65 $0.58 $0.34 $0.35
Weighted average
common shares (1) 17,491 15,372 15,372 15,372 15,372
September 30,
1996 1995 1994 1993 1992
BALANCE SHEET DATA:
Cash and cash equivalents $28,605 $10,218 $12,026 $ 3,193 $ 2,542
Working capital 19,707 2,676 1,987 (4,466) (3,873)
Total assets 107,212 70,440 60,029 46,950 45,097
Long-term debt, less current
portion - - - - 7,594
Shareholders' equity 76,793 41,360 31,861 23,249 18,315
Year Ended September 30,
1996 1995 1994 1993 1992
OTHER DATA:
Depreciation and amortization $ 3,420 $ 2,882 $ 2,594 $ 2,274 $ 1,384
(1) Reflects the recapitalization, initial public offering of shares, and
subsequent stock split of the Company described in Note 9 to the
Consolidated Financial Statements.
1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of the results of operations should be read in
conjunction with the Consolidated Financial Statements and Notes thereto.
OVERVIEW
The Company operates facilities under three types of arrangements: management
contracts, leases and fee ownership. Parking revenues consist of the Company's
revenues from leased and owned locations. Management contract revenues consist
of management fees (both fixed and percentage of revenues on contracts) and
negotiated fees for ancillary services such as insurance, accounting, equipment
leasing, and consulting. With respect to insurance, the Company's clients have
the option of obtaining insurance on their own or having the Company provide the
insurance as part of the services provided under the management contract.
Because of its size and claims experience, the Company can purchase such
insurance at significant discounts to comparable market rates and, management
believes, at lower rates than the Company's clients can generally obtain on
their own. Accordingly, the Company generates profits on the insurance provided
under its management contracts. Joint venture operations are accounted for under
the equity method and are reflected through equity in partnership and joint
venture earnings (losses).
Parking revenues from owned properties amounted to $6.3 million, $5.4 million
and $4.6 million for the years ended September 30, 1996, 1995 and 1994,
respectively. Owned properties parking revenues as a percentage of parking
revenues accounted for 5.8% in 1996, 5.7% in 1995 and 5.6% in 1994.
Parking revenues from leased facilities amounted to $102.9 million, $89.0
million and $78.3 million for the years ended September 30, 1996, 1995 and 1994,
respectively. Leased properties parking revenues as a percentage of parking
revenues accounted for 94.2% in 1996, 94.3% in 1995 and 94.4% in 1994.
In August 1992, the Company purchased for $8 million the right to manage 103
parking facilities, which are owned, leased or managed by an unrelated third
party parking services company. Of these 103 facilities, 39 are included in
parking revenues and their related costs and 64 are included in management
contract revenues and their related costs. The Company has a separate contract
for each facility. The contract rights are amortized over the various facility
contract terms through 2004. The Company believes these contracts should
experience the same general renewal rates the Company has experienced in its
overall business operations. See Note 5 to the Consolidated Financial
Statements.
As of September 30, 1996, the Company operated 770 facilities under
management contracts, leased 552 facilities, and owned 37 facilities,
including operations from foreign facilities. The following table
summarizes domestic and foreign operations.
September 30, 1996
Percent
Managed Leased Owned Total of Total
Total U.S. and Puerto Rico 747 466 37 1,250 92.0%
United Kingdom 11 77 - 88 6.5%
Mexico 12 4 - 16 1.2%
Germany - 5 - 5 0.3%
Total Foreign 23 86 - 109 8.0%
Total Facilities 770 552 37 1,359 100.0%
A summary of activity by type of facility is as follows:
Year Ended September 30,
1996 1995 1994
Managed Facilities (1):
Beginning of year 715 626 557
Added during year 114 120 84
Deleted during year (2)(3) 59 31 15
End of year 770 715 626
Renewal Rate 92.4% 95.0% 97.3%
Leased Facilities (1):
Beginning of year 485 436 367
Added during year (3) 94 65 80
Deleted during year 27 16 11
End of year 552 485 436
Owned Facilities (1)(4)(5):
Beginning of year 31 26 24
Purchased during year (2) 6 5 4
Sold during year - - 2
End of year 37 31 26
Total facilities (end of year) 1,359 1,231 1,088
Percentage growth in number of facilities:
Managed (1)(2)(3) 7.7% 14.2% 12.4%
Leased (1)(3) 13.8% 11.2% 18.8%
Owned (1)(2)(4)(5) 19.4% 19.2% 8.3%
Total facilities 10.4% 13.1% 14.8%
(1) Includes 33 managed, 13 leased and 3 owned properties operated under joint
venture agreements.
(2) Includes the purchase in 1996 of four properties that were previously
managed.
(3) Includes the lease in 1996 of one property that was previously managed.
(4) Includes the Company's corporate headquarters in Nashville, Tennessee.
(5) Prior to March 1994, the Company was contractually obligated to first offer
to a third party certain opportunities to purchase parking properties.
Net gains derived from sales of property and equipment were $1.2 million,
$81 thousand, and $2.2 million for fiscal years 1996, 1995, and 1994,
respectively.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information derived
from the Company's consolidated financial statements expressed as a percentage
of total revenues.
Year Ended September 30,
1996 1995 1994
Parking revenues 76.2% 74.8% 73.9%
Management contract revenues 23.8 25.2 26.1
Total revenues 100.0 100.0 100.0
Cost of parking and management
contracts 76.0 76.7 77.3
General and administrative expenses 12.2 12.5 12.7
Operating earnings 11.8 10.8 10.0
Interest income, net 1.6 1.2 0.6
Net gains on sales of property
and equipment 0.8 - 2.0
Other 0.5 0.3 -
Earnings before income taxes 14.7 12.3 12.6
Income taxes 5.0 4.4 4.6
Net earnings 9.7% 7.9% 8.0%
Year Ended September 30, 1996 Compared to Year Ended September 30, 1995
Parking revenues in fiscal 1996 increased to $109.3 million from $94.4 million
in fiscal 1995, an increase of $14.9 million, or 15.8%. This increase resulted
primarily from the net addition of 73 leased and owned locations as well as from
a combination of rate increases and higher utilization of parking spaces at
existing facilities.
Management contract revenues in fiscal 1996 increased to $34.0 million from
$31.8 million in fiscal 1995, an increase of $2.2 million, or 7.2%. This
increase resulted from a net increase in the number of management contracts
from 715 to 770, a net increase of 7.7%.
Revenues from foreign operations decreased to $13.2 million from $16.1 million
in 1995. The decrease in revenues from foreign operations resulted primarily
from the termination of a lease in the United Kingdom.
Cost of parking in fiscal 1996 increased to $99.2 million from $87.2 million
in fiscal 1995, an increase of $12.0 million, or 13.8%. Rent expense increased
$7.1 million, principally as a result of the new locations and additional
percentage rent on existing locations. Of the remaining $4.9 million increase
in cost of parking, additional payroll expense accounted for $3.8 million.
The payroll expense increase was attributable to a combination of new locations
and increases on existing payroll. Cost of parking as a percentage of parking
revenues decreased to 90.8% in fiscal 1996 from 92.4% in fiscal 1995. This
decrease of 1.6% was attributable predominantly to the spreading of a number
of fixed costs, primarily rent and property costs, over a larger revenue base.
Cost of management contracts in fiscal 1996 increased to $9.8 million from
$9.7 million in the comparable period in 1995, an increase of $100,000, or 1.2%.
This increase was attributable to an increase in the number of managed locations
and higher costs incurred at existing locations associated with increased
revenues.
Cost of management contracts as a percentage of management contract revenues
decreased to 28.7% in fiscal 1996 from 30.4% in fiscal 1995. The decrease in
the percentage of management contract cost as a percentage of management
contract revenue is a result of increased management fees. The decrease in
renewal rate for management contracts to 92.4% in 1996 from 95.0% in 1995
is primarily attributable to the discontinuance of low margin management
contracts.
General and administrative expenses in fiscal 1996 increased to $17.4 million
from $15.7 million in fiscal 1995, an increase of $1.7 million, or 10.9%. This
increase was primarily a result of an increase in payroll expense of $1.2
million associated with the opening of additional managed, leased, and owned
locations and additional incentive compensation payments as a result of
increased profits.
Interest income in fiscal 1996 increased to $2.3 million from $1.5 million
in fiscal 1995. This increase of $800,000 was primarily attributable to an
increase in additional investments added from the proceeds of the October
1995 Initial Public Offering ("IPO") of $20.0 million and the net cash
flow generated from operations. See Note 9(b) to the Consolidated
Financial Statements.
Equity in partnership and joint venture earnings for fiscal 1996 increased
to $641,000 from $362,000 in fiscal 1995. The increase of $279,000 resulted
primarily from improvements in joint venture earnings as a result of the
Mexican joint venture having net earnings of $152,000 in 1996 versus a
loss in 1995 of $145,000.
The Company's effective income tax rate was 34.3% for fiscal 1996
compared to 35.9% for fiscal 1995. The rate decrease was attributable to an
increase in tax exempt interest income and an overall reduction in the
effective state income tax rates, offset by the elimination of targeted
jobs tax credits in 1996.
Year Ended September 30, 1995 Compared to Year Ended September 30, 1994
Parking revenues in fiscal 1995 increased to $94.4 million from $82.9
million in fiscal 1994, an increase of $11.5 million, or 13.9%. This
increase resulted primarily from the net addition of 54 leased and owned
locations as well as from a combination of rate increases and higher
utilization of parking spaces at existing facilities.
Management contract revenues in fiscal 1995 increased to $31.8 million
from $29.3 million in fiscal 1994, an increase of $2.5 million, or 8.5%.
This increase resulted from a net increase in the number of management
contracts from 626 to 715, a net increase of 14.2%.
Revenues from foreign operations increased to $16.1 million from
$15.3 million in 1994.
Cost of parking in fiscal 1995 increased to $87.2 million from $77.0
million in fiscal 1994, an increase of $10.2 million, or 13.3%. Rent
expense increased $6.4 million, principally as a result of the new
locations and additional rent on existing locations. In addition, all
other costs of parking expenses increased as a result of the net increase
in the number of new locations, except for payroll expense which
decreased by $448,000. Cost of parking as a percentage of parking
revenues decreased to 92.4% in fiscal 1995 from 92.8% in fiscal 1994.
This slight decrease was attributable predominantly to the spreading of
a number of fixed costs, primarily payroll and property costs, over a
larger revenue base.
Cost of management contracts in fiscal 1995 decreased to $9.7 million
from $9.8 million in the comparable period in 1994, a decrease of
$162,000, or 1.7%. This decrease was attributable to a decrease
in insurance expense offset by a net increase in the number of managed
locations and higher costs incurred at existing locations associated
with increased revenues. Cost of management contracts as a percentage
of management contract revenues decreased to 30.4% in fiscal 1995 from
33.5% in fiscal 1994.
General and administrative expenses in fiscal 1995 increased to $15.7
million from $14.2 million in fiscal 1994, an increase of $1.5 million,
or 10.7%. This increase was primarily a result of an increase in
payroll expense of $715,000 associated with the opening of additional
managed, leased, and owned locations and additional incentive compensation
payments as a result of increased profits.
Interest income in fiscal 1995 increased to $1.5 million from $730,000 in
fiscal 1994. This increase of $732,000 was attributable to an average increase
in investment dollars and an increase in average interest rates.
Equity in partnership and joint venture earnings for fiscal 1995 increased
to $362,000 from $30,000 in fiscal 1994. The increase resulted primarily from
improvements in joint venture earnings from increased parking volume in the
operations of Commerce Street Joint Venture and a reduction in the interest
expense of the joint venture through a refunding of the joint venture's
industrial revenue bonds. See Note 7(a) to the Consolidated Financial
Statements.
The Company's effective income tax rate was 35.9% for fiscal 1995 compared
to 36.6% for fiscal 1994. This decrease was attributable to an overall
reduction in the effective state income tax rate net of reduced targeted
jobs tax credits.
Quarterly Results
The Company experiences fluctuations in its quarterly net earnings as a
result, in part, of recognition of intermittent gains on sales of properties.
Additionally, the Company has and may continue to experience fluctuations in
revenues and related expenses due to preopening costs, travel and transportation
patterns affected by weather, and local and national economic conditions. The
following table sets forth certain quarterly statement of earnings data for each
of the Company's last eight fiscal quarters and the percentage of net revenues
represented by the line items presented (except in the case of per share
amounts). The quarterly statement of earnings data set forth below was derived
from unaudited financial statements of the Company and includes all adjustments,
consisting only of normal recurring adjustments, which the Company considers
necessary for a fair presentation thereof.
Amounts in thousands, except per share data
1996 Fiscal Year
December 31 March 31 June 30 September 30
Total revenues $33,251 100.0% $35,680 100.0% $37,504 100.0% $36,881 100.0%
Operating earnings 4,135 12.4 3,595 10.1 4,870 13.0 4,332 11.7
Earnings before
income taxes 4,929 14.8 5,332 14.9 5,668 15.1 5,139 13.9
Net earnings $ 3,228 9.7% $ 3,465 9.7% $ 3,707 9.9% $ 3,436 9.3%
Net earnings
per common share $ 0.19 $ 0.20 $ 0.21 $ 0.20
1995 Fiscal Year
December 31 March 31 June 30 September 30
Total revenues $29,868 100.0% $31,156 100.0% $32,382 100.0% $32,749 100.0%
Operating earnings 3,780 12.7 3,141 10.1 3,497 10.8 3,184 9.7
Earnings before
income taxes 4,128 13.8 3,530 11.3 4,157 12.8 3,692 11.3
Net earnings $ 2,641 8.8% $ 2,260 7.3% $ 2,661 8.2% $ 2,382 7.3%
Net earnings
per common share $ 0.17 $ 0.15 $ 0.17 $ 0.15
Liquidity and Capital Resources
During the year ended September 30, 1996, the Company had earnings before
taxes, depreciation and amortization of $24.5 million compared to $18.4 million
in fiscal 1995. During fiscal years ended September 30, 1996, 1995, and 1994,
the Company generated cash flows from operating activities of $18.5 million,
$11.5 million, and $12.9 million, respectively. Additionally, the Company
generated proceeds from sales of property and equipment during such periods of
$1.5 million, $95,000, and $2.8 million, respectively. The decrease of $1.4
million in cash flow from operating activities from fiscal 1994 to 1995 was a
result of increases in net earnings offset by net decreases in the components of
working capital. The increase of $7.0 million in cash flow from operating
activities in 1996 was a result of increases in net earnings and net increases
in the components of working capital.
The Company had cash, cash equivalents, and non-current investments of $33.1
million and $14.5 million at September 30, 1996 and 1995, respectively. The
increase of $18.6 million was primarily a result of the proceeds received from
the IPO and increased cash flow from operating activities offset by increases in
capital expenditures.
The Company has a $20 million unsecured credit facility (the "Credit
Facility"). Borrowings under the Credit Facility bear interest at the London
Interbank Offered Rate ("LIBOR") plus 1.125%. There have been no borrowings
under the Credit Facility since its inception in April 1996. The agreement
governing the Credit Facility contains certain covenants with which the Company
must comply, including restrictions on dividends, sales of assets, and foreign
investments.
Prior to 1990, the Company relied substantially on management contracts which
typically require little or no capital expenditures by the Company for growth of
its operations. Since 1990, the Company has focused on increasing its mix of
leased and owned properties and, as a part of its growth strategy, will require
more capital to expand its business. Generally, lease locations require
equipment purchases of $50,000 to $1.0 million per location, depending upon size
of the location and equipment requirements. Investments in fee properties can
range from $500,000 to as much as $10.0 million per location. The Company
intends to pursue these opportunities independently or through joint ventures,
both in the United States and abroad. As a result, the Company may become
increasingly exposed to foreign currency fluctuations. Presently, the Company
has limited exposure to foreign currency risk and anticipates implementing a
hedge program if such risk materially increases. The Company has not created
such a program to date.
On November 22, 1996, the Company signed a definitive agreement to acquire for
cash Civic Parking, LLC, a limited liability company, which owns four parking
garages in St. Louis: Kiener East, Kiener West, Stadium East and Stadium West.
The four garages, which are presently operated by the Company under management
agreements, have a total of 7,464 parking spaces.
On December 6, 1996, the Company signed a definitive purchase agreement to
acquire all of the outstanding shares of Square Industries, Inc. ("Square
Industries"). Square Industries currently has approximately 1.2 million shares
of common stock outstanding, plus stock options and warrants equivalent to
approximately 555,000 shares which will also be acquired on similar terms to the
outstanding common stock. Approximately 8% of the purchase price will be
deposited by the Company in escrow as contingent consideration for distribution
to either the shareholders of Square Industries or the Company based upon the
resolution of two specific matters, subject to adjustment as provided in the
escrow agreement. The transaction will be a cash tender offer followed by a
cash merger to acquire any shares not previously tendered. As a result of the
transaction, Square Industries will become a wholly owned subsidiary of the
Company. The transaction has been recommended by the Boards of Directors of the
Company and Square Industries. The Company filed its notice of tender offer
with the Securities and Exchange Commission on December 13, 1996 and launched
the tender offer immediately thereafter.
The total funds required by the Company to consummate the two acquisitions
noted above is estimated at approximately $170 million, including fees and
expenses and retirement of approximately $22 million of existing Square
Industries debt. The Company will finance such transactions from current
working capital and the revolving credit provisions of a $150 million loan
agreement (the "Acquisition Facility") with a commercial bank and certain other
lenders (the "Lenders") dated December 12, 1996.
The Acquisition Facility, which is unsecured, expires January 31, 2000,
provided that the Lenders may extend the term until January 31, 2001, upon the
request of the Company. Revolving loans under the Acquisition Facility bear
interest at one of two rates, at the Company's option, either (i) the bank's
base rate plus .5% or (ii) the LIBOR plus a margin ranging from .25% to 1.5%
depending on the occurrence of certain dates or events, achievement of certain
financial ratios and the Company's senior unsecured debt rating from Standard
and Poor's or Moody's. The Company must permanently reduce the amount available
for borrowing under the Acquisition Facility to $120 million by February 28,
1997, provided that the Lenders may extend such date to April 30, 1997 upon the
payment of a commitment fee by the Company. The Company must also permanently
reduce the amount available for borrowing under the Acquisition Facility to $85
million by September 30, 1997, or earlier upon the occurrence of certain events,
provided that the Lenders may extend the September 30 date to December 31, 1997
and again to March 31, 1998, in each case upon the payment of an extension fee
by the Company. The Company anticipates that the borrowings under the
Acquisition Facility will be repaid out of cash flow, a refinancing, or the
proceeds of a debt or equity offering. The Acquisition Facility contains
customary representations, warranties and covenants of the Company and its
subsidiaries, including financial covenants relating to maintenance of ratios
and restrictions on further indebtedness.
Depending on the timing and magnitude of the Company's future investments
(either in the form of lease or purchase of parking properties, joint ventures,
or acquisitions), the working capital necessary to satisfy current obligations
is anticipated to be generated from operations and the new revolving credit
facility. If the Company identifies investment opportunities requiring cash in
excess of the Company's cash flows and the existing credit facility, the
Company may seek additional sources of capital, including the sale or issuance
of Common Stock.
1996
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Central Parking Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Central
Parking Corporation and Subsidiaries as of September 30, 1996 and 1995, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the years in the three-year period ended September 30, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements 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 amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Central
Parking Corporation and Subsidiaries as of September 30, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1996 in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Nashville, Tennessee
November 22, 1996, except as to Note 17, which is as of December 13, 1996
Consolidated Balance Sheets
Amounts in thousands, except share data
September 30,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 28,605 $ 10,218
Management accounts receivable 8,982 6,771
Accounts and current portion of notes
receivable - other (including amounts due
from related parties of $459 in 1996
and $28 in 1995) (Notes 2 and 7) 3,016 5,732
Prepaid expenses 4,549 3,800
Deferred income taxes (Note 11) 270 -
Total current assets 45,422 26,521
Investments, at amortized cost (fair value
$4,631 in 1996 and $4,430 in 1995) (Note 3) 4,483 4,246
Notes receivable, less current portion
(including amounts due from related parties
of $7,120 in 1996 and $2,648 in 1995
(Notes 2 and 7) 8,248 4,382
Property, equipment, and leasehold
improvements, net (Note 4) 38,188 24,279
Contract rights, net (Note 5) 5,815 6,367
Investment in limited partnerships (Note 6) 1,234 990
Investment in general partnerships (Note 7) 1,705 1,450
Other assets 2,117 2,205
$107,212 $ 70,440
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,275 $ 10,952
Accrued payroll and related costs 5,059 4,608
Accrued expenses 900 968
Management accounts payable 7,788 5,632
Income taxes payable (Note 11) 693 1,565
Deferred income taxes (Note 11) - 120
Total current liabilities 25,715 23,845
Deferred compensation (Note 12) 3,095 4,601
Deferred income taxes (Note 11) 1,609 634
Total liabilities 30,419 29,080
Shareholders' equity (Notes 9, and 12):
Common stock, $0.01 par value; 30,000,000 shares
authorized, 17,477,088 and 15,372,000 shares issued
and outstanding in 1996 and 1995, respectively 175 160
Additional paid-in capital 31,747 8,140
Foreign currency translation adjustment 59 51
Retained earnings 45,449 33,009
Deferred compensation on restricted stock (Note 12) (637) -
Total shareholders' equity 76,793 41,360
Commitments and contingencies
(Notes 5, 7, 8, 10, 12, 14 and 17)
$107,212 $ 70,440
See accompanying notes to consolidated financial statements
Consolidated Statements of Earnings
Amounts in thousands, except per share data
Year Ended September 30,
1996 1995 1994
Revenues:
Parking $109,272 $ 94,383 $ 82,890
Management contract 34,044 31,772 29,278
Total revenues 143,316 126,155 112,168
Costs and expenses:
Cost of parking 99,196 87,192 76,952
Cost of management contracts 9,769 9,650 9,812
General and administrative 17,419 15,711 14,196
Total costs and expenses 126,384 112,553 100,960
Operating earnings 16,932 13,602 11,208
Other income (expenses):
Interest income 2,303 1,462 730
Interest expense - - (39)
Net gains on sales of property
and equipment 1,192 81 2,214
Equity in partnership and joint
venture earnings (Notes 6 and 7) 641 362 30
Earnings before income taxes 21,068 15,507 14,143
Income tax expense (Note 11):
Current 6,647 5,977 4,713
Deferred 585 (414) 466
Total income taxes 7,232 5,563 5,179
Net earnings $ 13,836 $ 9,944 $ 8,964
Weighted average shares (Note 9) 17,491 15,372 15,372
Net earnings per share (Note 9) $ 0.79 $ 0.65 $ 0.58
See accompanying notes to consolidated financial statements.
<TABLE>
Consolidated Statements of Shareholders' Equity
Amounts in thousands, except per share data
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Deferred
Additional Foreign Compensation
Number of Common Paid-In Currency on Restricted
Shares Stock Capital Translation Retained Stock
(Note 9) (Note 9) (Note 9) Adjustment Earnings Note (12) Total
Balance at September 30, 1993 15,372 $160 $ 8,140 $ - $14,949 $ - $23,249
Net earnings - - - - 8,964 - 8,964
Preferred stock dividends
(Note 9(a)) - - - - (398) - (398)
Foreign currency translation
adjustment - - - 46 - - 46
Balance at September 30, 1994 15,372 160 8,140 46 23,515 - 31,861
Net earnings - - - - 9,944 - 9,944
Preferred stock dividends
(Note 9(a)) - - - - (450) - (450)
Foreign currency translation
adjustment - - - 5 - - 5
Balance at September 30, 1995 15,372 160 8,140 51 33,009 - 41,360
Net earnings - - - - 13,836 - 13,836
Issuance of common stock net
of offering costs 1,865 12 20,002 - - - 20,014
Issuance under restricted
stock plan 181 2 2,583 - - (705) 1,880
Common stock dividends -
$.08 per share - - - - (1,396) - (1,396)
Exercise of stock options and
related tax benefits 59 1 1,022 - - - 1,023
Amortization of deferred
compensation - - - - - 68 68
Foreign currency translation
adjustment - - - 8 - - 8
Balance at September 30, 1996 17,477 $175 $31,747 $59 $45,449 $(637) $76,793
See accompanying notes to consolidated financial statements.
</TABLE>
Consolidated Statements of Cash Flows
Amounts in thousands
Year Ended September 30,
1996 1995 1994
Cash flows from operating activities:
Net earnings $13,836 $ 9,944 $ 8,964
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 2,500 2,120 1,837
Amortization of contract rights 852 762 757
Amortization of deferred compensation cost 68 - -
Equity in partnership and joint
venture earnings (641) (362) (30)
Net gains on sales of property
and equipment (1,192) (81) (2,214)
Deferred income taxes 585 (414) 466
Changes in operating assets
and liabilities:
(Increase) decrease in management
accounts receivable (2,211) (594) 312
(Increase) decrease in notes and
accounts receivable - other 2,733 (1,757) (559)
(Increase) decrease in prepaid expenses (749) (79) (1,008)
(Increase) decrease in other assets 674 (901) 3
Increase (decrease) in accounts payable,
accrued expenses, and deferred compensation 730 1,925 2,979
Increase (decrease) in management
accounts payable 2,156 865 386
Increase (decrease) in income taxes payable (872) 74 971
Net cash provided by operating activities 18,469 11,502 12,864
Cash flows from investing activities:
Proceeds from sales of property and equipment 1,467 95 2,791
Investments in notes receivable (3,883) (4,000) (1,615)
Purchase of property, equipment, and
leasehold improvements (16,684) (5,375) (4,334)
Purchase of contract rights (300) (9) -
Investments in general and limited partnerships
and unconsolidated subsidiaries (444) (2,178) -
Proceeds from maturities of investments 151 - -
Purchase of investments (388) (1,125) (362)
Proceeds from sale of partnership - 125 -
Net cash used by investing activities (20,081) (12,467) (3,520)
Cash flows from financing activities:
Principal repayments on notes payable
and long-term debt - - (257)
Dividends paid (1,046) (848) (300)
Proceeds from issuance of common stock
and exercise of stock options, net 21,037 - -
Net cash provided (used) by
financing activities 19,991 (848) (557)
Foreign currency translation 8 5 46
Net increase (decrease) in cash and
cash equivalents 18,387 (1,808) 8,833
Cash and cash equivalents at beginning of period 10,218 12,026 3,193
Cash and cash equivalents at end of period $ 28,605 $ 10,218 $ 12,026
Non-cash transactions:
Exchange of properties, net of cash (Note 13) $ 2,644 $ - $ -
Issuance of restricted stock (Note 12) $ 1,880 $ - $ -
See accompanying notes to consolidated financial statements.
1996
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
A summary of the significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows:
(a) Organization
Central Parking Corporation is a United States company chartered in the State
of Tennessee. The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries: Central Parking System, Inc. and its
twenty-seven wholly-owned U.S. subsidiaries ("CPS"); Central Parking System of
the United Kingdom, Ltd. and its wholly-owned subsidiary ("CPS-UK"); and Central
Parking System Realty, Inc. and its four wholly-owned subsidiaries ("Realty").
All significant intercompany transactions have been eliminated.
The Company provides parking consulting services and manages parking
facilities throughout the world, principally in the United States and United
Kingdom. The primary operations of the Company are conducted through CPS and
CPS-UK. These companies manage and operate owned or leased parking facilities,
manage and operate parking facilities owned or leased by third parties and
provide financial and other advisory services to clients.
The primary focus of Realty is to provide financing support to the affiliates.
Realty is engaged in the ownership and development of parking related real
estate, which is managed by one of the affiliated companies. Realty's real
estate activities are conducted through purchase, joint venture (either
corporate or partnership), or lending of capital. Realty also leases real estate
to affiliated parking companies.
The Company has a number of joint ventures, owned directly or indirectly by
the Company, to operate and develop parking garages through either corporate
joint ventures, general partnerships, limited liability companies, or limited
partnerships. The financial results of the Company's joint ventures are
accounted for under the equity method and are included in equity in partnership
and joint venture earnings in the accompanying consolidated statements of
earnings.
(b) Revenues
Parking revenues include the parking revenues from leased and owned locations.
Management contract revenues represent revenues (both fixed fees and additional
payments based upon parking revenues) from facilities managed for other parties,
and miscellaneous management fees for accounting, insurance and other ancillary
services such as consulting and transportation management services. Parking and
management contract revenues are recognized when earned.
Total managed, leased and owned parking revenues, representing gross revenues
processed by the Company, including the revenues of facilities managed by the
Company for other parties, was $457,176,000, $412,525,000 and $375,910,000 for
the years ended September 30, 1996, 1995 and 1994, respectively.
Management accounts payable reflected on the accompanying consolidated balance
sheets is reflected net of cash of $4,892,000 and $2,161,000 at September 30,
1996 and 1995, respectively. Such cash balances belong to the owners of the
various managed facilities, but they are held by the Company and are used to pay
expenses of the managed facilities and ultimately to settle the balance due to
the owners of the managed facilities.
(c) Cash and Cash Equivalents
The Company considers cash and cash equivalents to include cash on hand, in
banks, and short-term investments which include certificates of deposit, which
mature in 30 days or less, short-term tax exempt bonds and a tax-exempt
institutional money market fund, which is available for withdrawal within no
more than 30 days notice.
(d) Investments
Effective October 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in
Debt and Equity Securities. SFAS No. 115 requires investments in equity
securities that have a readily determinable fair value and investments in debt
securities to be classified into three categories, as follows: (i) held-to-
maturity debt securities, (ii) trading securities, and (iii) securities
available-for-sale.
Classification of a debt security as held-to-maturity is based on the
Company's positive intent and ability to hold such security to maturity. Such
securities are stated at amortized cost adjusted for amortization of premiums
and accretion of discounts, unless there is a decline in value which is
considered to be other than temporary, in which case the cost basis of such
security is written down to fair value and the amount of the writedown is
reflected in earnings. Securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading account
securities, which are valued at fair value with the unrealized gains and losses
included in earnings. Securities classified as available-for-sale are reported
at fair value with the unrealized gains and losses excluded from earnings and
reported, net of tax, in shareholders' equity.
Upon the adoption of SFAS No. 115, the Company classified all investment
securities as held-to-maturity securities.
(e) Property, Equipment, and Leasehold Improvements
Property, equipment, and leasehold improvements are recorded at cost.
Depreciation is provided principally on a straight-line basis over a period of
five to ten years for furniture, fixtures, and equipment, over the remaining
lives of the corresponding leases for leasehold improvements, and over thirty
years for buildings. Accelerated depreciation is used for income tax purposes.
(f) Investment in Partnerships
Investment in general and limited partnerships are accounted for under the
equity method of accounting.
(g) Contract Rights
Contract rights consist of capitalized payments made to third-party parking
service companies pursuant to agreements which provide the Company the
opportunity to manage or lease facilities owned, leased or previously managed by
such companies. Contract rights are allocated among respective locations and are
amortized on a straight-line basis over the terms of related agreements which
range from five to ten years.
(h) Income Taxes
The Company files a consolidated federal income tax return. In fiscal year
1994, the Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes. Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date. The adoption of the new standard had no material effect on the
consolidated financial statements.
Jobs tax credits are accounted for by the flow-through method, which
recognizes the credits as reductions of income tax expense in the year utilized.
The Company does not provide for federal income taxes on the accumulated
earnings considered permanently reinvested in foreign subsidiaries.
(i) Preopening Expenses and Computer Software Development Costs
The direct and incremental costs of hiring and training personnel associated
with the opening of new parking facilities and the internal development costs
associated with computer software are expensed as incurred.
(j) Per Share Data
Per share data has been computed on the basis of the weighted average number
of shares outstanding, including common stock equivalents, which consist of
stock options. In determining the number of dilutive common stock equivalents,
the Company includes average common shares attributable to dilutive stock
options using the treasury stock method. Fully diluted earnings per share is
not presented since it approximates earnings per common share. All shares and
earnings per share data included herein have been adjusted for a
recapitalization of shares, and subsequent three-for-two stock split as
approved by the Company's Board of Directors and shareholders as described in
Note 9 to the Consolidated Financial Statements.
(k) Foreign Currency Translation
The financial position and results of operations of the Company's foreign
subsidiaries and equity method joint ventures are measured using local currency
as the functional currency. Translation adjustments arising from differences in
exchange rates from period to period are included in the currency translation
adjustment in shareholders' equity.
(l) Fair Value of Financial Instruments
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
107, Disclosures about Fair Value of Financial Instruments, which requires
disclosure of the fair values of most on-and-off balance sheet financial
instruments for which it is practicable to estimate the value. The scope of
SFAS 107 excludes certain financial instruments such as trade receivables and
payables when carrying value approximates the fair value, employee benefit
obligations, lease contracts, and all non-financial instruments such as land,
buildings and equipment. The fair values of the financial instruments are
estimates based upon current market conditions and
quoted market prices for the same or similar instruments as of September 30,
1996. Book value approximates fair value for substantially all of the Company's
assets and liabilities which fall under the scope of SFAS 107.
(m) Use of Estimates
Management of the Company has made certain estimates and assumptions relating
to the reporting of assets and liabilities to prepare these financial statements
in conformity with generally accepted accounting principles. Actual results
could differ from these estimates.
(2) Notes and Accounts Receivables
Included in notes receivable are the Series B Bonds purchased in April 1994
relating to the Commerce Street Joint Venture (see Note 7(a)) in the amounts of
$1,553,000, and $1,576,000 at September 30, 1996 and 1995, respectively. The
Bonds require monthly interest and principal payments at the index rate (prime)
plus 250 basis points (10.75% at September 30, 1996) through 2011. The minimum
interest rate is 9.5% and the maximum interest rate is 12%. The Bonds are
secured by a mortgage on the project which is subordinate to the industrial
revenue bonds described in Note 7(a). The bonds are callable annually and are
guaranteed jointly and severally by the Company and the other joint venture
partner.
Also included in notes receivable at September 30, 1996 are loans totaling
$3.1 million to a foreign affiliate, of which the Company holds a 50% equity
interest. These loans bear interest at 15% and require principal payments over
various terms through 2001.
In October 1995 the Company loaned $500,000, in the form of a term note, to a
joint venture of which the Company holds a 10% equity interest. This note
requires monthly principal and interest payments at 10% through 2000 and is
secured by leasehold interests of the joint venture. The outstanding balance of
this note of $426,000 is included in notes receivable at September 30, 1996.
The remainder of notes receivable originated from notes on construction,
financing and miscellaneous equipment sales and range in amounts from $50,000 to
$1.5 million at September 30, 1996, and earn interest at rates ranging from 9.5%
to 15.00%.
(3) Investments
Investment securities consist of debt obligations of states and political
subdivisions and are classified by the Company as held-to-maturity securities
pursuant to SFAS No. 115.
The amortized cost, gross unrealized gains, gross unrealized losses, and
approximate fair values for such securities are presented as follows (in
thousands):
September 30,
1996 1995
Amortized cost $4,483 $4,246
Unrealized gains 174 190
Unrealized losses 26 6
Fair value $4,631 $4,430
The amortized cost and approximate fair values of debt securities at September
30, 1996 by average estimated maturity are shown below (in thousands):
Securities
Held-To-Maturity
Amortized Cost Fair Value
Due in one year or less $ 322 $ 328
Due after one year
through five years 1,676 1,771
Due after five years
through ten years 1,949 1,988
Due after ten years 536 544
Total securities $ 4,483 $ 4,631
There were no sales of investment securities in any of the reporting periods.
(4) Property, Equipment, and Leasehold Improvements
A summary of property, equipment, and leasehold improvements and related
accumulated depreciation and amortization is as follows (in thousands):
September 30,
1996 1995
Leasehold improvements $ 2,076 $ 2,194
Buildings 14,026 5,608
Garage and other operating equipment 5,397 5,401
Furniture and fixtures 2,473 2,317
Aircraft 3,956 3,640
27,928 19,160
Less accumulated
depreciation and amortization 8,278 7,260
19,650 11,900
Land 18,538 12,379
Property, equipment and
leasehold improvements, net $ 38,188 $ 24,279
(5) Contract Rights
The Company and its subsidiaries manage certain parking facilities owned,
leased or managed by an unrelated parking services company. Pursuant to these
arrangements, the Company made an initial payment and guarantees additional
annual payments through the term of the respective agreement. Such additional
payments are included in the future minimum payments discussed in Note 10. Such
additional payments may increase in the event parking revenues exceed certain
thresholds over the term of the agreement. In the event of a location
termination, the guaranteed additional annual payments referred to above are to
be reduced on a predetermined basis.
Contract rights and accumulated amortization are as follows (in thousands):
September 30,
1996 1995
Contract rights $ 8,981 $ 9,283
Less accumulated amortization 3,166 2,916
Contract rights, net $ 5,815 $ 6,367
(6) Investment in Limited Partnerships
Included in investment in limited partnerships is Realty Parking Properties
II, a limited partnership organized to acquire real estate properties. The
Company has a 3% limited partnership interest in this partnership of which its
total investment is $990,000. The Company earns a dividend based on cash flows
of acquired properties. The annualized percentage cash return averaged
approximately 4.5% during 1996 and 1995.
(7) Investment or Equity Losses of General Partnership in Excess of Capital
Contributions and Certain Related Party Transactions
(a) Commerce Street Joint Venture
Realty has a 50% interest in a joint venture that owns a parking complex in
Nashville, Tennessee. The complex consists of the original parking garage and
retail space (the "Original Facility") and an addition to the parking garage
(the "Addition") constructed several years after the completion of the Original
Facility.
The joint venture financed the Original Facility with industrial development
bonds in the original principal amount of $8,600,000 (the "Series A Bonds")
issued by The Industrial Development Board of the Metropolitan Government of
Nashville and Davidson County (the "Metro IDB"). The Metro IDB holds title to
the Original Facility, which it leases to the joint venture under a lease
expiring in 2016. The lease of the Original Facility obligates the venture to
make lease payments corresponding to principal and interest payable on Series A
Bonds and provides the venture with an option to purchase the Original Facility
at any time by paying the amount due under the Series A Bonds and making a
nominal purchase payment to the Metro IDB. The joint venture refinanced the
Series A Bonds in 1994 to achieve more favorable interest rate terms. The
outstanding principal amount of Series A Bonds was $6,295,000 and $6,495,000 at
September 30, 1996 and 1995, respectively. CPS, along with its joint venturer,
has jointly and severally guaranteed the Series A Bonds, up to a maximum
liability of $1,000,000. The complex was appraised in November 1994 for
$17,000,000.
The joint venture financed the Addition with $1,800,000 of industrial
development bonds (the "Series B Bonds") issued by the Metro IDB. The Metro IDB
holds title to the Addition, which it leases to the joint venture under a lease
expiring in 2007. The lease of the Addition obligates the joint venture to make
lease payments corresponding to principal and interest payable on the Series B
Bonds and provides the joint venture with an option to purchase the Addition at
any time by paying the amount due under the Series B Bonds and making a nominal
purchase payment to the Metro IDB. On April 8, 1994, Realty purchased the Series
B Bonds from the original holder. The outstanding principal amount of the Series
B Bonds was $1,553,000 and $1,576,000 at September 30, 1996 and 1995,
respectively.
Unaudited summary financial information for the Venture is as follows (in
thousands):
September 30,
1996 1995
Financial position:
Property and equipment, net $ 4,982 $ 5,290
Cash 459 577
Other assets 329 416
Liabilities (8,161) (8,415)
Net liabilities $ (2,391) $ (2,132)
Year Ended September 30,
1996 1995 1994
Results of operations:
Revenue $ 2,544 $ 2,342 $ 1,875
Cost of operations 1,808 1,757 1,745
Net earnings $ 736 $ 585 $ 130
Cash flow distributed
to partners $ 994 $ 630 $ -
(b) Larimer Square Parking Associates
The Company acquired in October 1994 a 50% interest in a joint venture to
construct a parking complex in Denver, Colorado. The complex, which was
completed in February 1996, was constructed and financed by the joint venturers
and third-party bank debt of the other venturer. The Company's share of the
venture's net earnings was $22,000 and $22,000 for the years ended September 30,
1996 and 1995, respectively. The Company invested $991,000 in the joint venture
and loaned the joint venture $1,100,000 in the form of a construction note,
bearing interest at 9.5%, which was converted to a term note in August 1996,
following completion of the project. An additional $1,430,000 was loaned by the
Company which will be repaid through sales tax and property tax revenues by the
Denver Urban Renewal Authority at an interest rate of 10%. The Company manages
the parking facility for the venture.
(c) LoDo Parking Garage, LLC
The Company acquired in March 1995 a 50% interest in a joint venture parking
complex in Denver, Colorado. The complex is a seven-story, 315 space parking
facility. The Company's share of the venture's net earnings was $77,000 and
$92,000 for the years ended September 30, 1996 and 1995, respectively. The
Company invested $1,375,000 in the joint venture and manages this parking
facility for the joint venture.
(d) Tennessee Candlewood Partnership
Prior to September 8, 1995, the Company owned approximately 24.1% of the
limited partnership interests in an apartment complex in Nashville, Tennessee.
Effective on September 8, 1995, the Company's Chairman purchased from the
Company the limited partnership interest for $123,000. The Company recognized
partnership losses of $0 and $4,000 for fiscal years ended September 30, 1995
and 1994, respectively. The Company's President and Chief Operating Officer owns
9.0% of the interests of such partnership.
(e) Central Parking System Deutschland, GmbH
The Company acquired in April 1996 a 50% interest in a joint venture that will
manage and lease various parking structures in Germany. The Company's share of
the venture's net loss for the six months of operations was $41,000 for the year
ended September 30, 1996. The Company invested $210,000 in this joint venture.
(8) Revolving Credit Facility and Line of Credit
In April 1996, the Company established a committed unsecured line of credit
totaling $20,000,000. Such line provides liquidity, if necessary, for the
Company and subsidiaries at LIBOR rates plus 1.125%. The agreement contains
covenants for certain financial tests, including minimum interest coverage, net
worth and maximum borrowings. The Company did not use such line during 1996.
This line of credit was terminated in conjunction with the loan agreement
discussed in Note 17.
Prior to April 1996, the Company had various revolving credit agreements which
were terminated. The Company did not use such lines in 1996, 1995, or 1994. See
Note 17 to the Consolidated Financial Statements.
(9) Shareholders' Equity
(a) Recapitalization
On October 16, 1994, 5,532 shares of Class B Preferred stock of the Company
were converted into 78,418 shares of nonvoting common stock. On March 16, 1995,
the remaining 417 shares of Class B Preferred stock were converted into 5,903
shares of nonvoting common stock. No Class B Preferred stock was outstanding at
September 30, 1996 or 1995.
As of September 29, 1995, the Board of Directors and shareholders of the
Company approved a plan of recapitalization which was effective immediately
prior to the effectiveness of the Company's initial public offering of common
stock on October 10, 1995 (see Note 9(b)). Under the plan of recapitalization,
the Company authorized the issue of 1,000,000 shares of Preferred stock and
30,000,000 shares of common stock. The Class A Preferred, nonvoting common and
voting common shares issued and outstanding as of the effective date of the plan
of recapitalization were canceled and exchanged for common stock as follows:
Number of Number of
Canceled Shares
Class Shares Issued
A-1 Preferred 3,100 28,978
A-2 Preferred 5,200 55,900
A-3 Preferred 5,000 54,117
A-4 Preferred 2,650 27,696
Nonvoting Common 462,321 5,088,650
Voting Common 378,000 4,992,659
10,248,000
For purposes of calculating the exchange ratio for recapitalization, the
Company utilized $15.00 as the price per share of the Company's common stock.
Weighted average common shares and net earnings per common share for all years
presented have been adjusted to reflect the recapitalization.
The Company declared dividends of $450,000 and $398,000 in 1995 and 1994,
respectively, on the Preferred stock that was outstanding prior to the
recapitalization.
(b) Initial Public Offering
On October 10, 1995, the Company completed an initial public offering of
common stock in which 1,243,000 shares were sold by the Company for net proceeds
of $20.0 million.
(c) Stock Split
On March 19, 1996 the Company effected a three-for-two stock split. This
split resulted in the net issuance of 5,805,816 new shares. The total shares
outstanding immediately following the split was 17,417,481. All share and share
price amounts in the Consolidated Financial Statements have been adjusted
accordingly.
(10) Operating Lease Commitments
The Company and its subsidiaries conduct a portion of their operations on
leased premises under operating leases expiring at various dates through 2045.
Lease agreements provide for minimum payments and contingent payments based upon
a percentage of revenue or a combination of both. Certain locations additionally
require the Company and its subsidiaries to pay real estate taxes and other
occupancy expenses.
Future minimum rental commitments under operating leases are as follows (in
thousands):
Year Ended
September 30,
1997 $ 43,456
1998 35,445
1999 30,271
2000 24,687
2001 21,460
Thereafter 74,383
Total future operating lease commitments $229,702
Included in the future minimum rental commitments under operating leases are
aggregate payments of $95,287,000 resulting from commitments incurred under the
agreement described in Note 5.
Rental expense for all operating leases is as follows (in thousands):
Year Ended September 30,
1996 1995 1994
Rentals:
Minimum $ 38,882 $ 30,022 $ 28,512
Contingent 19,330 21,009 13,325
Total rentals $ 58,212 $ 51,031 $ 41,837
(11) Income Taxes
Income tax expense consists of the following (in thousands):
Year Ended September 30,
1996 1995 1994
Current:
Federal $ 5,585 $ 4,951 $ 3,717
Targeted jobs credit,
net of federal tax benefit - (216) (217)
Net federal current tax expense 5,585 4,735 3,500
State 639 655 847
Non-U.S 423 587 366
6,647 5,977 4,713
Deferred:
Federal 585 (363) 467
State - - -
Non-U.S. - (51) (1)
585 (414) 466
Total income tax expense
from earnings $ 7,232 $ 5,563 $ 5,179
Total income taxes are allocated as follows (in thousands):
Year Ended September 30,
1996 1995 1994
Income from earnings $7,232 $5,563 $5,179
Shareholders' equity, tax
benefit derived from
non-statutory stock
options exercised (310) - -
Total income taxes $6,922 $5,563 $5,179
Provision has not been made for U.S. or additional foreign taxes on
approximately $2,863,000, $2,110,000, and $1,088,000 at September 30, 1996, 1995
and 1994, respectively, of undistributed earnings of a foreign subsidiary, as
those earnings are intended to be permanently reinvested.
A reconciliation between actual income taxes and amounts computed by applying
the federal statutory rate of 34% to earnings before income taxes is summarized
as follows (in thousands):
Year Ended September 30,
1996 1995 1994
U.S. Federal statutory
rate on earnings
before income taxes $ 7,164 $ 5,272 $ 4,809
State and city income
taxes, net of
federal income
tax benefit 422 432 559
Difference in U.S.
tax rate and
non-U.S. tax rate 12 (8) 14
Targeted jobs credits,
net of federal
tax benefit - (216) (217)
Tax-exempt interest
income (312) (145) (92)
Other (54) 228 106
Total income taxes expense $ 7,232 $ 5,563 $ 5,179
Sources of deferred tax assets and deferred tax liabilities are as follows
(in thousands):
September 30,
1996 1995
Deferred tax assets:
Deferred compensation expense $ 1,515 $ 1,380
Property, plant and
equipment, due to
differences in
depreciation - 82
Liability insurance reserves 205 217
Other 131 23
Total gross deferred
tax assets 1,851 1,702
Deferred tax liabilities:
Deferred tax gain on
sales of properties (2,583) (2,250)
Timing differences in
recognition of partnership
earnings (243) (83)
Property, plant and equipment,
due to differences in
depreciation (322) -
Other (42) (123)
Total gross deferred
tax liabilities (3,190) (2,456)
Net deferred tax liabilities $(1,339) $(754)
(12) Employee Benefit Programs
(a) Stock Plans
All share amounts and prices have been adjusted to reflect the effects of the
stock split discussed in Note 9(c).
In August 1995, the Board of Directors and shareholders approved a stock plan
for key personnel, which included a stock option plan and a restricted stock
plan. Under this plan incentive stock options, as well as nonqualified options
and other stock-based awards, may be granted to officers, employees and
directors. A total of 945,000 common shares have been reserved for issuance
under these two plans combined. Options representing 224,900 shares, net of
cancellations, had been granted at September 30, 1996. Options are granted with
an exercise price equal to the fair market value at the date of grant and
generally expire ten years after the date of grant. At September 30, 1996,
181,153 shares had been issued through the restricted stock plan. Expense
related to the vesting of restricted stock is recognized by the Company as
restrictions lapse. Shares in the amount of 178,500 granted under the
restricted stock plan were issued pursuant to the deferred compensation
agreement modification discussed in Note 12(d).
In August 1995, the Board of Directors and shareholders also approved a stock
plan for directors. This plan provides for the grant, upon each director's
initial election, of options to purchase 5,000 shares to each non-employee
director. In addition, each non-employee director who has served for a minimum
of six months on the last day of each fiscal year will receive additional
options to purchase 2,000 shares on that date. A total of 150,000 shares have
been reserved for issuance under the plan. Options to purchase 47,500 shares
had been granted under this plan at September 30, 1996.
The following table summarizes the transactions pursuant to the Company's
stock option plans for the last fiscal year:
Number Option Price
of Shares Per Share
Outstanding at September 30, 1995 - $ - to $ -
Granted 299,500 $12.00 to $32.50
Exercised 59,450 $12.00
Cancelled 27,100 $12.00
Outstanding at September 30, 1996 212,950 $12.00 to $32.50
The Company also has an Employee Stock Purchase Plan which began April 1,
1996, under which 300,000 shares of common stock have been reserved for
issuance. The Plan allows participants to contribute up to 10% of their normal
pay (as defined in the Plan) to a custodial account for purchase of the
Company's common stock. Participants may enroll or make changes to their
enrollment annually, and they may withdraw from the Plan at any time by giving
the Company written notice. Employees purchase stock annually following the end
of the Plan year at a price per share equal to the lesser of 85% of the closing
market price of the common stock on the first or the last trading day of the
Plan year. At September 30, 1996, no shares had yet been issued under this
plan.
(b) Profit Sharing Plan
The Company has a profit-sharing plan for domestic employees to which employer
contributions are at the discretion of the Board of Directors. Voluntary after-
tax contributions not in excess of 10% of compensation may be made by non-highly
compensated employees.
Eligible employees, 20 years or older, may become a participant in the Plan
after one year of continuous service, if the employee was employed prior to
reaching age 65. An employee's interest in the Plan vests after two years at the
rate of 20% each year, so that the employee is fully vested at the end of seven
continuous years of service.
Employer expense associated with this plan was $971,000, $886,000 and $770,000
in years 1996, 1995 and 1994, respectively.
(c) Incentive Compensation Agreements
The Company has incentive compensation agreements with certain key employees.
Participating employees receive an annual bonus based on profitability of the
operations for which they are responsible. Incentive compensation expense is
accrued during the year based upon management's estimate of amounts earned under
the related agreements. Incentive compensation under all such agreements was
approximately $4,371,000, $4,560,000 and $4,436,000 in years 1996, 1995 and
1994, respectively. In 1996, the cap on this bonus compensation for certain key
executives was decreased.
(d) Deferred Compensation Agreements
The Company has a deferred compensation agreement with the President and Chief
Operating Officer of the Company in which the officer is entitled to receive
upon retirement, payments in an aggregate amount equal to 5% of the increase in
the Company's cumulative after tax profits since September 30, 1983. Upon the
closing of the Company's initial public offering, the Company and the officer
modified the existing agreement by issuing to the officer 178,500 shares (split
adjusted) of restricted common stock under the Company's restricted stock plan.
Further, the officer wmay be entitled to receive additional shares of restricted
common stock until his normal retirement or, if earlier, the date of termination
of his employment, in an amount determined by a formula based upon the Company's
performance over such period. If the officer voluntarily terminates his
employment with the Company before his normal retirement, or if the Company
terminates his employment for cause, all shares of stock received and to be
received under the restricted stock plan are to be forfeited. The market value
of the restricted stock at the date of issuance was $670,000 greater than the
Company's deferred compensation liability. Accordingly, the Company recorded
deferred compensation expense in its shareholders' equity, which will be
amortized ratably over the remaining expected term of the officer's employment.
If it is determined that additional shares are to be issued under the agreement,
the Company will recognize compensation expense, spread ratably over the
remaining expected term of the officer's employment, equivalent to the market
value of such shares, subject to future market fluctuations prior to the
issuance of such shares.
The Company has a deferred compensation agreement that entitles the Chairman
and Chief Executive Officer to annual payments of $500,000 for a period of ten
years following his termination, for any reason other than death, in exchange
for a covenant not to compete. Thereafter, the officer is entitled to annual
payments of $300,000 until his death and, in the event his wife survives him,
she is entitled to annual payments of $300,000 until her death. The Company
recognizes annual compensation expense pursuant to this agreement equivalent to
the increase in the actuarially determined future obligation under the
agreement.
Compensation expense associated with these agreements was approximately
$412,000, $782,000 and $775,000 in fiscal years 1996, 1995 and 1994,
respectively.
(e) Severance Agreement
The Company entered into a severance agreement with the President and Chief
Operating Officer providing for a severance payment to him in cash or stock, at
the Company's election, in an amount currently equal to three weeks of his total
compensation for each year of employment with the Company, upon the termination
of his employment with the Company for any reason other than fraud or
intentional malfeasance.
(13) Related Parties
In October 1995, the Company exchanged two Nashville, Tennessee properties
for two Tulsa, Oklahoma, properties owned by the majority shareholders through a
Tennessee limited liability company ("the LLC") of which the Company's chairman
is chief manager and owner of fifty percent of the membership interests. The two
Nashville properties are surface lots located in downtown Nashville with an
appraised value of $2,840,000. The Tulsa properties are two surface parking lots
that the LLC purchased from an unrelated third party immediately prior to the
exchange for approximately $2.6 million. In the transaction, the Company
exchanged the Nashville properties at their appraised value and received the two
Tulsa properties and approximately $200,000 in cash from the LLC. The Company
will lease the Nashville properties from the LLC for $290,000 per year for a 10
year term. In addition, the Company will receive 25% of the gain in the event of
a sale of these properties during the term of the lease. See Notes 2 and 7.
(14) Contingencies
The Company is subject to various legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the ultimate
liability with respect to those proceedings and claims will not materially
affect the financial position, operations, or liquidity of the Company. The
Company maintains liability insurance coverage for individual claims in excess
of $50,000, subject to annual aggregate limits.
Certain contractual obligations are collateralized by irrevocable letters of
credit. At September 30, 1996, total letters of credit amounted to $2,397,000.
(15) Supplemental Cash Flow Information
Cash payments made for interest and income taxes were as follows (in
thousands):
Year Ended September 30,
1996 1995 1994
Interest $ - $ - $ 40
Income taxes 7,209 5,877 3,742
(16) Business Segments
The Company's business activities consist of domestic and foreign operations.
A summary of information about the Company's operations by segments is as
follows (in thousands):
Year Ended September 30,
1996 1995 1994
Total revenues:
Domestic $130,141 $110,007 $ 96,899
Foreign 13,175 16,148 15,269
Consolidated $143,316 $126,155 $112,168
Operating earnings:
Domestic $ 15,873 $ 12,111 $ 10,173
Foreign 1,059 1,491 1,035
Consolidated $ 16,932 $ 13,602 $ 11,208
Earnings before
income taxes:
Domestic $ 19,748 $ 13,953 $ 13,108
Foreign 1,320 1,554 1,035
Consolidated $ 21,068 $ 15,507 $ 14,143
Year Ended September 30,
1996 1995
Identifiable assets:
Domestic $102,132 $ 66,068
Foreign 5,080 4,372
Consolidated $107,212 $ 70,440
(17) Subsequent Events
On November 22, 1996, the Company signed a definitive agreement to acquire for
cash Civic Parking, LLC, a limited liability company, which owns four parking
garages in St. Louis: Kiener East, Kiener West, Stadium East and Stadium West.
The four garages, which are presently operated by the Company under management
agreements, have a total of 7,464 parking spaces.
On December 6, 1996, the Company signed a definitive purchase agreement to
acquire all of the outstanding shares of Square Industries, Inc. ("Square
Industries"). Square Industries currently has approximately 1.2 million shares
of common stock outstanding, plus stock options and warrants equivalent to
approximately 555,000 shares which will also be acquired on similar terms to the
outstanding common stock. Approximately 8% of the purchase price will be
deposited by the Company in escrow as contingent consideration for distribution
to either the shareholders of Square Industries or the Company based upon the
resolution of two specific matters, subject to adjustment as provided in the
escrow agreement. The transaction will be a cash tender offer followed by a
cash merger to acquire any shares not previously tendered. As a result of the
transaction, Square Industries will become a wholly owned subsidiary of the
Company. The transaction has been recommended by the Boards of Directors of the
Company and Square Industries. The Company filed its notice of tender offer
with the Securities and Exchange Commission on December 13, 1996 and launched
the tender offer immediately thereafter.
The total funds required by the Company to consummate the two acquisitions
noted above is estimated at approximately $170 million, including fees and
expenses and retirement of approximately $22 million of existing Square
Industries debt. The Company will finance such transactions from current
working capital and the revolving credit provisions of a $150 million loan
agreement (the "Acquisition Facility") with a commercial bank and certain other
lenders (the "Lenders") dated December 12, 1996.
The Acquisition Facility, which is unsecured, expires January 31, 2000,
provided that the Lenders may extend the term until January 31, 2001, upon the
request of the Company. Revolving loans under the Acquisition Facility bear
interest at one of two rates, at the Company's option, either (i) the bank's
base rate plus .5% or (ii) the LIBOR plus a margin ranging from .25% to 1.5%
depending on the occurrence of certain dates or events, achievement of certain
financial ratios and the Company's senior unsecured debt rating from Standard
and Poor's or Moody's. The Company must permanently reduce the amount available
for borrowing under the Acquisition Facility to $120 million by February 28,
1997, provided that the Lenders may extend such date to April 30, 1997 upon the
payment of a commitment fee by the Company. The Company must also permanently
reduce the amount available for borrowing under the Acquisition Facility to $85
million by September 30, 1997, or earlier upon the occurrence of certain events,
provided that the Lenders may extend the September 30 date to December 31, 1997
and again to March 31, 1998, in each case upon the payment of an extension fee
by the Company. The Company anticipates that the borrowings under the
Acquisition Facility will be repaid out of cash flow, a refinancing, or the
proceeds of a debt or equity offering. The Acquisition Facility contains
customary representations, warranties an covenants of the Company and its
subsidiaries, including financial covenants relating to maintenance of
ratios and restrictions on further indebtedness.
EXHIBIT 21
CENTRAL PARKING CORPORATION
Subsidiaries of the Registrant as of September 30, 1996
Central Parking System of UK, Ltd. (UK)
Central Parking System Deutschland, GmbH (Germany) (50%)
Control Plus Parking System of UK, Ltd (UK)
Central Parking System, Inc. (TN)
Central Parking System - Airport Services, Inc. (TN)
Central Parking System of Alabama, Inc. (TN)
Central Parking System of Connecticut, Inc. (TN)
Central Parking System of Florida, Inc. (TN)
Central Parking System of Georgia, Inc. (TN)
Central Parking System of Illinois, Inc. (TN) (d/b/a "CPS Parking")
Chicago Parking System, Inc. (TN)
Central Parking System of Iowa, Inc. (TN)
Central Parking System of Kansas City, Inc. (TN)
Central Parking System of Kentucky, Inc. (TN)
Central Parking System of Louisiana, Inc. (50%) (TN)
Central Parking System of Maryland, Inc. (TN)
Central Parking System of Massachusetts, Inc. (TN) (d/b/a "Meyers Parking
System")
Central Parking System of Mississippi, Inc. (TN)
Central Parking System of New York, Inc. (TN) (d/b/a "Meyers Parking System")
Central Parking System of North Carolina, Inc. (TN)
Central Parking System of Ohio, Inc. (TN)
Central Parking System of Oklahoma, Inc. (TN)
Central Parking System of Pennsylvania, Inc. (TN)
Central Parking System of Puerto Rico, Inc. (TN)
Central Parking System of Rhode Island, Inc. (TN)
Central Parking System of South Carolina, Inc. (TN)
Central Parking System of St. Louis, Inc. (TN)
Central Parking System of Tennessee, Inc. (TN)
Central Parking System of Texas, Inc. (TX)
Central Parking System of Virginia, Inc. (TN)
Central Parking System of Washington, Inc. (TN) (d/b/a "CPS Parking")
Central Parking System of Wisconsin, Inc. (TN) (d/b/a "CPS Parking")
Servicios Corporativos Para Estacionamientos, S.A. De C.V. (Mexico) (50%)
Central Parking System of Mexico, S.A. De C.V. (Mexico) (50%)
Central Parking System Realty, Inc. (TN)
Central Parking System Realty of New York, Inc. (TN)
Denver Baseball Stadium Garage, Inc. (TN)
Larimer Development Corporation (TN)
Sheridan Heritage Development Corporation (TN)
EXHIBIT 23
Accountants' Consent
The Board of Directors
Central Parking Corporation
We consent to incorporation by reference in the registration statements
(Nos. 33-98118, 33-98120, and 33-98122) on Form S-8 of our report dated
November 22, 1996, except as to Note 17, which is as of December 13, 1996,
relating to the consolidated balance sheets of Central parking Corporation and
subsidiaries as of September 30, 1996 and 1995, and the related consolidated
statements of earnings, shareholders' equity, and cash flows for each of the
years in the three-year period ended September 30, 1996, which report is
incorporated by reference in the September 30, 1996 annual report on Form 10-K
of Central Parking Corporation.
KPMG PEAT MARWICK LLP
/s/ KPMG PEAT MARWICK LLP
Nashville, Tennessee
December 23, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Share and per share amounts have been adjusted to reflect the effects
recapitalization and initial public offering in October 1995 and the
subsequent stock split in March 1996.
</LEGEND>
<CIK> 0000949298
<NAME> CENTRAL PARKING CORPORATION
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
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<RECEIVABLES> 11998 12503
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<CURRENT-ASSETS> 45422 26521
<PP&E> 38188 24279
<DEPRECIATION> 3420 2882
<TOTAL-ASSETS> 107212 70440
<CURRENT-LIABILITIES> 25715 23845
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0 0
0 0
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<OTHER-SE> 76618 41200
<TOTAL-LIABILITY-AND-EQUITY> 107212 70440
<SALES> 143316 126155
<TOTAL-REVENUES> 147452 128060
<CGS> 108965 96842
<TOTAL-COSTS> 126384 112553
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<INCOME-PRETAX> 21068 15507
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<NET-INCOME> 13836 9944
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