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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1997.
[ ] 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
CENTRAL PARKING CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
Tennessee 62-1052916
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2401 21st Avenue South,
Suite 200, Nashville, Tennessee 37212
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (615) 297-4255
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Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock $0.01 par Value Name of each Exchange on which registered
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(Title of Class) 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
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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 19, 1997, was $302,865,351. 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 Outstanding at December 19, 1997
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Common Stock, $0.01 par value 26,314,179
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on March 9, 1998 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, 1997 are incorporated by
reference into Part II of this Form 10-K.
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PART I
ITEM 1. BUSINESS
GENERAL
Central Parking Corporation, ("the Company"), founded in 1968, is a
leading provider of parking services in the United States. As of September 30,
1997, the Company operated 1,644 parking facilities containing approximately
699,000 parking spaces, including 149 international facilities with
approximately 64,710 parking spaces. The Company's facilities are located in 34
states, the District of Columbia, Canada, Puerto Rico, the United Kingdom,
Germany and Mexico. Since 1994, the Company has added on a net basis an average
of approximately 140 properties to its operations each year excluding
acquisitions and 138 from acquisitions. 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, 1997, the Company operated 877 parking facilities through management
contracts, leased 709 parking facilities, and owned 58, 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 clients have the option of obtaining
liability insurance independently or purchasing insurance from the
Company under the management contract. Because of its size and claims
experience, the Company can purchase such insurance at 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. The Company's management contract renewal rates
for the years ended September 30, 1995, 1996, and 1997, were 95.0% and
92.4% and 91.1% 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.
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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. All 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.
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 toll roads. Parking facilities
operated by the Company include, among others, certain terminals operated by BAA
Heathrow International Airport (London), the Prudential Center (Boston), 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 acquisitions, joint ventures and international expansion.
Acquisitions
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 on acquisitions that will
enable the Company to become a leader in selected current markets and achieve
synergistic savings from the elimination of duplicative management. The Company
believes it can improve acquired operations through more sophisticated operating
systems and more professional management. During 1997 the Company acquired the
following:
(a) Civic Parking LLC
On December 31, 1996, the Company purchased for cash Civic Parking, LLC ("Civic
Parking"), 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 had previously been operated by the Company under management
agreements, have a total of 7,464 parking spaces. The purchase price was
approximately $91.0 million which was financed through working capital and a
draw of $67.2 million on the Company's Revolving Credit Facility (see Notes 2, 7
and 8 to the Company's Consolidated Financial Statements).
On April 16, 1997, the Company sold 50% of the ownership units of Civic Parking
to an affiliate of Equity Capital Holdings, LLC for $46.0 million in cash. The
Company will continue to operate these garages pursuant to a lease and operating
agreement with Civic Parking, LLC.
(b) Square Industries, Inc.
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On January 18, 1997, the Company completed a cash tender to acquire all of the
outstanding shares of Square Industries, Inc. ("Square") for $54.8 million,
including transaction fees and other related expenses. In addition, the Company
assumed $23.2 million of existing Square debt. The purchase price was financed
through a draw on the Company's Revolving Credit Facility (see Note 8 to the
Company's Consolidated Financial Statements). Square operated 116 parking
facilities containing over 61,000 parking spaces, located primarily in the
northeast. As of September 30, 1997, the Company has refinanced $18.9 million of
the debt assumed from Square through a draw on the Revolving Credit Facility.
(c) Car Park Corporation
On May 29, 1997, the Company acquired the assets and related leases of Car Park
Corporation ("Car Park") for $3.5 million; consisting of 18 parking facilities
with approximately 2,600 parking spaces located in the San Francisco
metropolitan region. The purchase price was financed through a draw of
approximately $1.7 million on the Company's Revolving Credit Facility, and $1.8
million payable to the seller's in monthly installments over a four year term,
subject to early payoff at the seller's request (at a discounted rate).
(d) Diplomat Parking Corporation and Kinney Parking System.
On October 1, 1997, subsequent to the Company's fiscal year end, Diplomat
Parking Corporation was purchased for $21.7 million (see Note 17 to the
Company's Consolidated Financial Statements). Diplomat operates 164 parking
facilities containing over 37,000 parking spaces, located primarily in
Washington D.C. and Baltimore, Maryland. Additionally, the Company signed a
definitive agreement to acquire Kinney Parking System for approximately $188
million including cash and $37.0 million of the Company's common stock, plus
assumption of $18.6 million of debt (see Note 17 to the Company's Consolidated
Financial Statements). The Kinney purchase price is subject to adjustment for
certain events. Kinney operates approximately 400 facilities containing
approximately 171,000 parking spaces, primarily in the northeast.
Joint Ventures
The Company has pursued joint ventures as a growth strategy for two specific
opportunities. First, Central Parking's international expansion will continue to
focus on joint ventures when strategically beneficial or appropriate for
operational reasons (e.g., to overcome language and cultural barriers). In
growing its international operations, the Company has concluded that the value
of creating an alliance with local parking or real estate organizations exceeds
the foregone economics of starting to build the business and relationship from
the beginning. Secondly, in those domestic markets where Central Parking is
constructing a new parking facility (e.g., to service a night life entertainment
attraction or the like), the Company is strongly biased toward aligning the real
estate developer's economic interest with Central's economic interest. This
usually is most readily accomplished via equity ownership. To date, four such
domestic joint venture development projects have been struck, the largest being
Civic Parking LLC, and the most recent being the Arizona Stadium Parking Garage,
LLC deal with local Phoenix developers.
International
Parking is a relatively standard business and does not differ significantly
across international borders. The Company believes its aggressive strategy to
build European operations will allow it to begin penetrating that continent, as
it has in the U.S. By applying established business methods to new markets,
Central Parking has already achieved economies of scale overseas. European
operations are located in the United Kingdom (108 facilities), a joint venture
in Germany (5 facilities) and an Amsterdam business development office which
opened in 1995. Central Parking also maintains operations in Mexico through a
joint venture (32 facilities), Canada (4 facilities) and has a major consulting
project in Malaysia. Upon completion of the Kuala Lumpur City Center, Central
Parking will manage the parking operations under a management contract.
Revenues from foreign operations were $16.1 million, $13.2 million, and $18.1
million for the fiscal years 1995, 1996 and 1997, respectively. The increase in
1997 resulted primarily from the net addition of 20 leased or managed properties
in the United Kingdom. The decrease from 1995 to 1996 resulted from the
termination of a
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lease in the United Kingdom. Presently, the Company believes it has limited
exposure to foreign currency risk and has no foreign currency hedge programs.
The following table sets forth certain information regarding the number
of managed, leased, or owned facilities as of the specified dates:
<TABLE>
<CAPTION>
As of September 30,
1995 1996 1997
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<S> <C> <C> <C>
Managed facilities 715 770 877
Leased facilities 485 552 709
Owned facilities 31 37 58
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Total 1,231 1,359 1,644
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</TABLE>
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 and the United States 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
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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 620 management positions and hires approximately 250 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
70% of total compensation.
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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. Because of its operating results, increased cash flows, and
release from such contractual restraints, the Company has begun to make more
acquisitions and 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
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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 and Arizona
Center in Phoenix.
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 and
achieve synergistic savings from duplicative management. The Company believes it
can improve acquired operations through more sophisticated operating systems and
more professional management. During fiscal 1997, the Company acquired Square
Industries, Car Park, and Civic Parking LLC.
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 when 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 108 United Kingdom facilities, with operations in Birmingham,
Oxford, 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 32 facilities in
Mexico. The Company acquired four locations in Canada in January 1997 as a
result of the Square acquisition. The Company provides 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 as well as
meter enforcement. Revenues from foreign operations accounted for approximately
12.8%, 9.2%, and 8.1%, of the Company's total revenues for the years ended
September 30, 1995, 1996 and 1997, respectively. See Note 16 to the Company's
Consolidated Financial Statements.
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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 29 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, 1997, the Company employed approximately 9,300
individuals, including 5,000 full-time and 4,300 part-time employees. Management
believes that the Company's employee relations are good. Approximately 1700 U.S.
employees are represented by labor unions. Parking attendants and cashiers at
the
9
<PAGE> 10
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, Jersey City, Philadelphia,
Pittsburgh, San Francisco, Chicago and Puerto Rico. The Company has not
experienced any difficulty in negotiating collective bargaining agreements or
experienced any labor strikes.
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 and Park It!, for the on-street enforcement business in London and
Charlotte, North Carolina, respectively.
INSURANCE
The Company purchases comprehensive liability insurance covering
parking facilities owned, leased, and managed by the Company. Such
comprehensive liability insurance coverage is in the amount of $1 million per
occurrence and $1 million in the aggregate per facility. 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 Company's Consolidated Financial
Statements.
10
<PAGE> 11
ITEM 2. PARKING FACILITY PROPERTIES
The Company's facilities are currently organized into 12 regions, 11 in
North America (10 in the United States, one in Mexico) 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. 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, 1997:
<TABLE>
<CAPTION>
Number of Total Percentage of
Regions Cities Locations Managed Leased Owned Spaces Total Spaces
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Atlanta Atlanta, Birmingham, Charleston 115 65 50 - 63,451 9.1%
(SC),Charlotte, Columbia (SC),
Jackson (MS), Mobile
Denver Denver/Colorado Springs, Des 167 101 56 10 77,385 11.1%
Moines, Kansas City, Minneapolis-St.
Paul, Oklahoma City , St. Louis
European United Kingdom - Birmingham, 113 31 82 - 34,809 5.0%
London, Oxford, Newcastle
Germany - Berlin, Dresden,
Frankfurt
Florida Jacksonville, Miami/Ft. Lauderdale, 186 92 94 - 72,357 10.4%
Orlando, Puerto Rico, Tampa/St.
Petersburg
Los Angeles Los Angeles, Orange County (CA), 82 62 20 - 46,440 6.7%
Phoenix
Mid-Atlantic Baltimore, Norfolk, 140 91 44 5 64,623 9.3%
Philadelphia, Pittsburgh, Richmond,
Washington (D.C.)
Mexico Cuernavaca, Mexico City 32 19 13 - 21,051 3.0%
Mid Western Charleston (WV), Cincinnati, 111 71 39 1 67,877 9.7%
Cleveland, Columbus, Indianapolis,
Milwaukee, Ottawa, Toronto
Nashville Chattanooga, Knoxville, 238 103 113 22 50,354 7.2%
Lexington/Frankfort, Louisville,
Memphis, Nashville (1)
New York Hartford, Jersey City, New York, 152 55 87 10 65,948 9.4%
Providence, Stamford
San Francisco Oakland, Salt Lake City, 50 24 26 - 14,877 2.1%
San Francisco, Seattle
Texas Albuquerque, Austin, Dallas, El Paso 234 147 77 10 109,228 15.6%
Houston, New Orleans, San Antonio,
Tulsa
Other Boston, Chicago 24 16 8 - 9,749 1.4%
- --------------------------------------------------------------------------------------------------------------------------
Total 1,644 877 709 58 698,149 100.0%
==========================================================================================================================
</TABLE>
(1) Includes the Company's corporate headquarters in owned
facilities.
Joint Ventures. The Company has interests in joint ventures that own or
operate parking facilities located in Nashville, Denver, Phoenix, St. Louis,
Germany, and Mexico. In fiscal 1997, the Company acquired a 50% joint venture
ownership in St. Louis and operates four parking garages under a lease and
operating agreement. The
11
<PAGE> 12
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 thirty two 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.
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, 1997.
12
<PAGE> 13
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 splits in March 1996 and December
1997. Prior to October 10, 1995, there was no public market for these shares.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Three months ended December 31, 1995 $13.1111 $ 8.0000
Three months ended March 31, 1996 17.5833 12.0000
Three months ended June 30, 1996 21.3333 15.8333
Three months ended September 30, 1996 21.9167 16.6667
Twelve months ended September 30, 199 $21.9167 8.0000
Three months ended December 31, 1996 $24.5833 $21.2500
Three months ended March 31, 1997 22.5000 16.3333
Three months ended June 30, 1997 23.2083 16.0833
Three months ended September 30, 1997 31.3333 22.1667
Twelve months ended September 30, 1997 $31.3333 $16.0833
</TABLE>
(b) There were, as of September 30, 1997 approximately 7,000 holders of
the Registrant's Common Stock, as evidenced by depository and transfer agent
listings.
(c) Since February 21, 1997 the Company has distributed a quarterly
dividend of $0.015 per share. From the IPO till February 1997 the Company
declared a quarterly dividend equal to $.013 per share. Prior to the Initial
Public Offering on October 10, 1995, there were no dividends on Common Stock.
The Company declared dividends of $398,000 and $450,000 in 1994 and 1995,
respectively, on the Preferred Stock that was outstanding prior to the
recapitalization. There have been no shares of preferred stock outstanding since
the recapitalization. See Note 9 to the Company's 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, 1997 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, 1997 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, 1997 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, 1997, is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
13
<PAGE> 14
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 1998 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 1998 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 1998 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 1998 Annual Meeting of
Shareholders.
14
<PAGE> 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(a)(1) Financial Statements
The following financial statements and related notes of the Company
contained on pages 1 through 45 of the Company's Annual Report to
Shareholders for the fiscal year ended September 30, 1997 are
incorporated herein by reference.
Independent Auditors' Report...................................................................... 17
Consolidated Balance Sheets - September 30, 1996 and 1997......................................... 18
Consolidated Statements of Earnings - Fiscal Years Ended September 30, 1995,
1996, and 1997.................................................................................... 19
Consolidated Statement of Shareholders' Equity - Fiscal Years Ended September 30, 1995, 1996,
and 1997.......................................................................................... 20
Consolidated Statements of Cash Flows - Fiscal Years Ended September 30, 1995, 1996, and 1997..... 21
Notes to Consolidated Financial Statements........................................................ 22-45
</TABLE>
(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 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, 1997.
15
<PAGE> 16
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
December 26, 1997
/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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
/s/ Monroe J. Carell, Jr. Chairman of the Board, December 26, 1997
Monroe J. Carell, Jr. Chief Executive Officer
and Director
/s/ James H. Bond President & Chief December 26, 1997
James H. Bond Operating Officer;
Director
/s/ Stephen A. Tisdell Chief Financial Officer December 26, 1997
Stephen A. Tisdell (Principal Financial and
Accounting Officer)
/s/ Cecil Conlee Director December 26, 1997
Cecil Conlee
/s/ John W. Eakin Director December 26, 1997
John W. Eakin
/s/ Lowell Harwood Director December 26, 1997
Lowell Harwood
/s/ Edward G. Nelson Director December 26, 1997
Edward G. Nelson
/s/ William C. O'Neil, Jr. Director December 26, 1997
William C. O'Neil, Jr.
/s/ P.E. Sadler Director December 26, 1997
P.E. Sadler
</TABLE>
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DOCUMENT NUMBER
------ -------- ------
<S> <C> <C>
2.1 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.)
2.2 Agreement for Sales Purchase of Membership Interests, dated as of
November 22, 1996, by and among Central Parking System Realty,
Inc., Central Parking System Realty of Missouri, Inc., Gateway
Group, Inc., and SLC Holdings, LLC (Incorporated by reference
herein to Exhibit 2.2 to the Company's Current Report on Form 8-K
as filed on January 14, 1997.)
2.3 Agreement and plan of Merger dated as of December 6, 1996, by and
among Central Parking Corporation, Central Parking System--Empire
State, Inc., and Square Industries, Inc. (Incorporated by reference
to Exhibit (c)(1) to the Company's Tender Offer Statement on
Schedule 14D-1 filed by Central Parking Corporation on December
13,1996.)
2.4 Agreement for purchase and Sale of Membership Interest, dated as of
April 16, 1997, by and among EOP-St. Louis Parking Garages, LLC and
Central Parking System Realty of Missouri, Inc. (Incorporated by
reference herein to Exhibit 2.3 to the Company's Current Report on
Form 8-K as filed on April 30, 1997.)
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.)
3.3 Amended and Restated Charter of Central Parking Corporation
restated to incorporate the Amendment adopted February 28, 1997
(Incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement No. 333-23869 on Form S-3 as filed on March
23, 1997.)
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
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
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) Amendment to Monroe J Carell, Jr. Employment Agreement
(incorporated by reference to exhibit 10.3 to the Company's
10Q for quarter ended, March 31, 1997.)
(h) 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.)
(i) 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.)
(j) 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.)
(k) 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)
(l) 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 Corporation Deferred Stock Unit Plan (Incorporated
by reference to Exhibit A to the Company's Definitive Proxy
Statement on schedule DEF 14A as filed on January 14, 1997.)
10.5 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.)
10.6 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.)
10.7 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.)
10.8 Form of Management Contract (Incorporated by reference to Exhibit 10.14
to the
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C>
Company's Registration Statement No. 33-95640 on Form S-1.)
10.9 Form of Lease (Incorporated by reference to Exhibit 10.15 to the
Company's Registration Statement No. 33-95640 on Form S-1.)
10.10 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.)
10.11 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.)
10.12 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.)
10.13 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.)
10.14 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.)
10.15 Form of $300,000,000 Senior Credit Facility Commitment letter
("Acquisition Credit Facility") dated October 20, 1997 by and among
various banks with NationsBanc Montgomery Securities, Inc.,
Charlotte, as Agent, and Central Parking Corporation and its
affiliates.
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
------ --------
<S> <C>
11 Detail Computation of Per Share Earnings
13 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
</TABLE>
EXHIBIT INDEX
20
<PAGE> 1
EXHIBIT 10.15
October 20, 1997
Stephen A. Tisdell
Chief Financial Officer
Central Parking Corporation
2401 21st Avenue South, Suite 200
Nashville, TN 37212
Re: $300 Million Senior Credit Facilities
Dear Steve:
NationsBank of Tennessee, N.A. ("NationsBank") is pleased to offer to be the
Administrative Agent (in such capacity, the "Agent") for up to $300 million in
senior credit facilities (the "Facilities") to Central Parking Corporation and
its affiliates (the "Borrowers"), and to offer its commitment to underwrite the
entire amount of the Facilities, upon and subject to the terms and conditions of
this letter and the Summary of Terms and Conditions attached hereto as Annex I
(the "Term Sheet"). All capitalized terms used and not otherwise defined herein
shall have the meanings set forth in the Term Sheet. NationsBanc Montgomery
Securities, Inc. ("NMSI") is pleased to advise you of its commitment, as
Arranger and Syndication Agent for the Facilities, to form a syndicate of
financial institutions (the "Lenders") reasonably acceptable to you for the
Facilities. The Facilities are being offered in connection with the proposed
purchase by the Borrowers of Kinney System Holding Corp. ("Kinney").
The commitments of NationsBank and NMSI hereunder are subject to the
satisfaction of each of the following conditions precedent in a manner
acceptable to NationsBank and NMSI in their sole discretion:
(a) each of the terms and conditions set forth herein;
(b) each of the terms and conditions set forth in the Term Sheet;
(c) execution of a fee letter among the Borrowers, NationsBank and NMSI
prior to or concurrently with the acceptance of this letter by the
Borrowers;
(d) the negotiation, execution and delivery of definitive documentation
with respect to the Facilities consistent with the Term Sheet and
otherwise satisfactory to NationsBank and NMSI; and
(e) there not having occurred and being continuing since the date
hereof a material adverse change in the market for syndicated bank
credit facilities or a material disruption of, or a material adverse
change in, financial, banking or capital market conditions, in each
case as determined by NationsBank and NMSI in their sole discretion.
<PAGE> 2
Page 2
October 20, 1997
The commitments of NationsBank and NMSI hereunder are based upon the financial
and other information regarding the Borrowers and their subsidiaries and Kinney
and its subsidiaries previously provided to NationsBank and NMSI and are subject
to the condition, among others, that there shall not have occurred after the
date of such information, in the opinion of NationsBank and NMSI, any material
adverse change in the business, assets, liabilities (actual or contingent),
operations, condition (financial or otherwise) or prospects of the Borrowers or
Kinney, in each case together with their respective subsidiaries taken as a
whole. If the continuing review by NationsBank and NMSI of the Borrowers
discloses information relating to conditions or events not previously disclosed
to NationsBank and NMSI or relating to new information or additional
developments concerning conditions or events previously disclosed to NationsBank
and NMSI which NationsBank and NMSI in their sole discretion believe may have a
material adverse effect on the condition (financial or otherwise), assets,
properties, business, operations or prospects of the Borrowers or Kinney, in
each case together with their respective subsidiaries taken as a whole,
NationsBank and NMSI may, in their sole discretion, suggest alternative
financing amounts or structures that ensure adequate protection for the Lenders
or decline to participate in the Facilities.
You agree to actively assist NationsBank and NMSI in achieving a syndication of
the Facilities that is satisfactory to NationsBank, NMSI and you. In the event
that such syndication can not be achieved in a manner satisfactory to
NationsBank and NMSI under the structure outlined in the Term Sheet you agree to
cooperate with NationsBank and NMSI in developing an alternative structure that
will permit a satisfactory syndication of the Facilities. Syndication of the
Facilities will be accomplished by a variety of means, including direct contact
during the syndication between senior management and advisors of the Borrowers
and the proposed Lenders. To assist NationsBank and NMSI in the syndication
efforts, you hereby agree to (a) provide and cause your advisors to provide
NationsBank and NMSI and the other Lenders upon request with all information
reasonably deemed necessary by NationsBank and NMSI to complete syndication, (b)
assist NationsBank and NMSI upon their reasonable request in the preparation of
an Offering Memorandum to be used in connection with the syndication of the
Facilities and (c) otherwise assist NationsBank and NMSI in their syndication
efforts, including by making available officers and advisors of the Borrowers
and their subsidiaries from time to time to attend and make presentations
regarding the business and prospects of the Borrowers and their subsidiaries and
Kinney and its subsidiaries, as appropriate, at a meeting or meetings of
prospective Lenders. You further agree to refrain from engaging in any
additional financings for the Borrowers and their subsidiaries during such
syndication process unless otherwise agreed to by NationsBank and NMSI.
It is understood and agreed that NationsBank and NMSI, after consultation with
you, will manage and control all aspects of the syndication, including decisions
as to the selection of proposed Lenders and any titles offered to proposed
Lenders, when commitments will be accepted and the final allocations of the
commitments among the Lenders. It is understood that no Lender participating in
the Facilities will receive compensation from you outside the terms contained
herein and in the Term Sheet in order to obtain its commitment. It is also
understood and agreed that the amount and distribution of the fees among the
Lenders will be at the sole discretion of NationsBank and NMSI and that any
syndication prior to execution of definitive documentation will reduce the
commitment of NationsBank. No additional agents will be appointed without the
prior approval of NationsBank and NMSI.
You hereby represent, warrant and covenant that (i) all information, other than
the Projections (as defined below), which has been or is hereafter made
available to NationsBank and NMSI or the Lenders by you or any of your
representatives in connection with the transactions contemplated hereby
("Information") is and will be complete and correct in all material respects and
does not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained therein not
misleading and (ii) all financial projections concerning the Borrowers and
Kinney that have been or are hereafter made available to NationsBank and NMSI or
the Lenders by you or any of your representatives (the "Projections") have been
or will be prepared in good faith based upon reasonable assumptions. You
<PAGE> 3
Page 3
October 20, 1997
agree to furnish us with such Information and Projections as we may reasonably
request and to supplement the Information and the Projections from time to time
until the closing date for the Facilities so that the representation and
warranty in the preceding sentence is correct on such date. In arranging and
syndicating the Facilities, NationsBank and NMSI will be using and relying on
the Information and the Projections without independent verification thereof.
By acceptance of this offer, the Borrowers agree to pay all reasonable
out-of-pocket fees and expenses (including reasonable attorneys' fees as
outlined in a separate letter from Moore & Van Allen, PLLC plus out of pocket
expenses and expenses of due diligence) incurred before or after the date hereof
by the Agent or NMSI in connection with the Facilities and the syndication
thereof, regardless of whether or not the Facilities are closed.
In the event that NationsBank or NMSI becomes involved in any capacity in any
action, proceeding or investigation in connection with any matter contemplated
by this letter (including specifically, without limitation, the acquisition of
Kinney), the Borrowers will reimburse NationsBank and NMSI for their legal and
other expenses (including the cost of any investigation and preparation) as they
are incurred by NationsBank or NMSI. The Borrowers also agree to indemnify and
hold harmless NationsBank, NMSI and their affiliates and their respective
directors, officers, employees and agents (the "Indemnified Parties") from and
against any and all losses, claims, damages and liabilities, joint or several,
related to or arising out of any matters contemplated by this letter (including
specifically, without limitation, the acquisition of Kinney), unless and only to
the extent that it shall be finally judicially determined that such losses,
claims, damages or liabilities resulted primarily from the gross negligence or
willful misconduct of NationsBank or NMSI.
The provisions of the immediately preceding two paragraphs shall remain in full
force and effect regardless of whether definitive financing documentation for
the Facilities shall be executed and delivered and notwithstanding the
termination of this letter or the commitments of NationsBank and NMSI hereunder.
Neither this offer nor the undertaking and commitment contained herein may be
disclosed to or relied upon by any other person or entity other than your
accountants, attorneys and other advisors, without the prior written consent of
NationsBank and NMSI, except that following your acceptance hereof you may make
public disclosure hereof as required by law and you may disclose the terms
hereof to Kinney in connection with the proposed acquisition.
As described herein and in the Term Sheet, NMSI will act as Arranger and
Syndication Agent for the Facilities. NationsBank reserves the right to
allocate, in whole or in part, to NMSI certain fees payable to NationsBank in
such manner as NationsBank and NMSI agree in their sole discretion. You
acknowledge and agree that NationsBank may share with any of its affiliates
(including specifically NMSI) any information relating to the Facilities, the
Borrowers and their subsidiaries and affiliates.
This letter shall be governed by the laws of the State of Tennessee without
regard to its principles of conflicts of laws. This letter may be modified or
amended only in writing. This letter is not assignable by the Borrowers without
the prior written consent of NationsBank and NMSI. This letter supersedes and
replaces any and all proposals or commitment letters previously delivered by
NationsBank or NMSI to the Borrowers relating to the Facilities.
This offer will expire at 5:00 p.m. on October 31, 1997 unless the Borrowers
execute this letter and the related fee letter and returns each of them to the
Agent prior to that time (which may be by facsimile transmission), whereupon
this letter shall become a binding agreement. Thereafter, this undertaking and
commitment will expire at 5:00 p.m. on January 31, 1998 unless definitive
documentation for the Facilities is executed and delivered prior to that time.
<PAGE> 4
Page 4
October 20, 1997
Very truly yours,
NationsBank of Tennessee, N.A., NationsBanc Capital Markets, Inc.
Individually and as Agent
By: /s/ William H. Diehl By: /s/ Mary Lynn Moser
William H. Diehl Mary Lynn Moser
Title: Vice President Title: Managing Director
Accepted and Agreed to this 22 day of October, 1997:
Central Parking Corporation
By: /s/ Stephen A. Tisdell
Stephen A. Tisdell
Title: Chief Financial Officer
<PAGE> 1
EXHIBIT 11
CENTRAL PARKING CORPORATION
COMPUTATION OF EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARES
For the years ended September 30, 1995, 1996, and 1997
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Primary earnings per Common and
Common Equivalent Share:
Net earnings $ 9,944 $13,836 $20,205
Shares used in the computation (a):
Weighted average Common shares
outstanding 23,058 26,064 26,267
Dilutive effect of Common stock
equivalents -- 173 120
Shares used in earnings per Common and
Common equivalent share computation 23,058 26,237 26,387
Primary earnings per Common and
Common equivalent share:
Net earnings $ 0.43 $ 0.53 $ 0.77
Fully diluted earnings per Common and
Common equivalent share:
Net earnings $ 9,944 $13,836 $20,205
Shares used in the computation (a):
Weighted average Common shares
outstanding 23,058 26,064 $26,267
Dilutive effect of Common stock
equivalents -- 219 174
Shares used in earnings per Common and
Common equivalent share computations 23,058 26,283 26,441
Fully diluted earnings per common and
Common equivalent share:
Net earnings $ 0.43 $ 0.53 $ 0.76
</TABLE>
(a) Reflects the recapitalization, initial public offering of shares, and
subsequent stock splits of the Company described in Note 9 to the
Company's Consolidated Financial Statements.
<PAGE> 1
EXHIBIT 13
CENTRAL PARKING CORPORATION
1997 ANNUAL REPORT TO SHAREHOLDERS
---------------------
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below are selected consolidated financial data of the Company for each
of the periods indicated. The statements 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
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1994 1995 1996 1997 1997 vs 1996
Increase (Decrease)
Difference
$ %
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF EARNINGS DATA:
Revenues:
Parking $ 69,589 $ 82,890 $ 94,383 $109,272 $ 180,886 $ 71,614 65.5%
Management contract 25,829 29,278 31,772 34,044 42,090 8,046 23.6
Total revenues 95,418 112,168 126,155 143,316 222,976 79,660 55.6
Total costs and expenses 87,629 100,960 112,553 126,384 195,124 68,740 54.4
Operating earnings 7,789 11,208 13,602 16,932 27,852 10,920 64.5
Percentage of total revenues 8.2% 10.0% 10.8% 11.8% 12.5%
Interest income (expense), net (14) 691 1,462 2,303 (2,740) (5,043) (219.0)
Net gains on sales of
property and equipment 1,122 2,214 81 1,192 3,137 1,945 163.4
Equity in partnership and
joint venture earnings (losses) (247) 30 362 641 4,163 3,522 549.1
Earnings before income taxes 8,650 14,143 15,507 21,068 32,412 11,344 53.8
Income taxes 3,416 5,179 5,563 7,232 12,207 4,975 68.8
Income tax percentage of
earnings before income tax 39.5% 36.6% 35.9% 34.3% 37.7%
Net earnings 5,234 8,964 9,944 13,836 20,205 6,369 46.0
Percentage of total revenues 5.5% 8.0% 7.9% 9.7% 9.0%
PER SHARE DATA:
Net earnings $ .23 $ .39 $ .43 $ .53 $ .77 $ .24 45.3
Weighted average
common shares (1) 23,058 23,058 23,058 26,237 26,387 150 0.6
Net book value per common
shares outstanding at
September 30, (1) 1.01 1.38 1.79 2.93 3.68 .75 25.7
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
Increase (Decrease)
Difference
Year End September 30, $ %
1993 1994 1995 1996 1997 1997 vs 1996
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 3,193 $12,026 $10,218 $ 28,605 $ 9,979 $ (18,626) (65.1)%
Working capital (4,466) 1,987 2,676 19,707 (9,231) (28,938) (146.8)
Total assets 46,950 60,029 70,440 107,212 234,014 126,802 118.3
Long-term debt, less current
portion -- -- -- -- 73,252 73,252 N/A
Shareholders' equity 23,249 31,861 41,360 76,793 96,851 20,058 26.1
</TABLE>
<TABLE>
<CAPTION>
Increase (Decrease)
Difference
Year End September 30, $ %
1993 1994 1995 1996 1997 1997 vs 1996
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation and amortization $2,274 $2,594 $2,882 $3,420 $5,875 $2,455 71.8%
Employees (2) (5) 4,500 5,400 6,000 6,600 9,300 2,700 40.9
Number of shareholders (2) N/A N/A 3,000 5,500 8,000 2,500 45.5
Market capitalization (1) (3) N/A N/A N/A $ 568 $ 802 $ 234 41.2
Price earnings ratio (1) (2) N/A N/A N/A 40.9 39.6 N/A N/A
Return on Equity (4) 25.2% 32.5% 27.2% 23.4% 23.3% N/A N/A
</TABLE>
(1) Reflects the recapitalization, initial public offering of shares, and
subsequent stock splits of the Company described in Note 9 to the
Consolidated Financial Statements.
(2) Reflects information as of September 30 of the respective fiscal year,
rounded to the nearest hundred, except ratio data.
(3) Reflects information as of September 30 of the respective fisical year,
rounded to the nearest million.
(4) Reflects return on equity calculated using net earnings divided by
average shareholders' equity.
(5) Unaudited information.
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 provides parking services at multi-level parking facilities and
surface parking 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 and landlords include some of the nation's
largest owners and
2
<PAGE> 3
developers of mixed-use projects, major office building complexes, sports
stadiums, hotels, and toll roads. Parking facilities operated by the Company
include, among others, certain terminals operated by BAA Heathrow International
Airport (London), the Prudential Center (Boston), 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.
Central operates parking facilities under three types of arrangements:
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, record keeping, insurance, and facility marketing
services. In general, the Company is not responsible for structural, mechanical,
or electrical maintenance or repairs, or 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.
LEASE CONTRACTS
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 for the facility owner, regardless of 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.
FACILITY 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. All owned facility revenues flow directly to the Company.
Additionally, ownership provides the potential for realizing capital gains from
the
3
<PAGE> 4
appreciation of 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.
<TABLE>
<CAPTION>
Fiscal Years Ending September 30,
Historical Financial Summary Actual
($ Millions) 1994 1995 1996 1997
<S> <C> <C> <C> <C>
Parking revenues $ 82.9 $ 94.4 $ 109.3 $ 180.9
% Growth over prior year 19.1% 13.9% 15.8% 65.5%
Management contract revenues 29.3 31.8 34.0 42.1
% Growth over prior year 13.4% 8.5% 7.2% 23.6%
Total revenues 112.2 126.2 143.3 223.0
% Growth over prior year 17.6% 12.5% 13.6% 55.6%
Cost of parking and management contracts 86.8 96.8 109.0 171.7
% of total revenues 77.4% 76.8% 76.0% 77.0%
General and administrative expenses 14.2 15.7 17.4 23.4
% of total revenues 12.6% 12.5% 12.2% 10.5%
Operating earnings 11.2 13.6 16.9 27.9
% of total revenues 10.0% 10.8% 11.8% 12.5%
Depreciation & amortization 2.6 2.9 3.4 5.9
Interest income (expense), net 0.7 1.5 2.3 (2.7)
Equity in partnerships &
joint venture earnings - 0.4 0.6 4.2
Net gains on sales of
property & equipment 2.2 - 1.2 3.1
Net earnings 9.0 9.9 13.8 20.2
% of total revenues 8.0% 7.9% 9.7% 9.0%
</TABLE>
4
<PAGE> 5
As of September 30, 1997, the Company operated 877 facilities under management
contracts, leased 709 facilities, and owned 58 facilities, including operations
from foreign facilities. The following table summarizes domestic and foreign
facilities.
<TABLE>
<CAPTION>
September 30, 1997
Percent
Managed Leased Owned Total of Total
<S> <C> <C> <C> <C> <C>
Total U.S. and Puerto Rico 824 613 58 1,495 90.9%
United Kingdom 31 77 -- 108 6.6
Mexico(1) 19 13 -- 32 1.9
Germany(1) -- 5 -- 5 0.3
Canada 3 1 -- 4 0.3
Total Foreign 53 96 -- 149 9.1
Total Facilities 877 709 58 1,644 100.0%
</TABLE>
(1) Operated through 50% owned joint ventures
PARKING REVENUES
Parking revenues include revenue from leased and owned facilities. Parking
revenues in fiscal 1997 increased to $180.9 million from $109.3 million in
fiscal 1996, an increase of $71.6 million, or 65.5%. Of the $71.6 million
increase, $41.0 million, or 57.3% of the increase, resulted from the acquisition
of Square Industries, Inc. ("Square") and Car Park Corporation's ("Car Park")
leased and owned locations. The remaining increase of $30.6 million, or 42.7%,
is from a combination of the addition of 80 net locations, increased rates and
higher utilization of parking spaces at existing facilities.
Parking revenues from owned properties amounted to $5.4 million, $6.3 million,
and $14.3 million for the years ended September 30, 1995, 1996 and 1997,
respectively. Owned properties parking revenues, as a percentage of parking
revenues, accounted for 5.7% in 1995, 5.8% in 1996, and 7.9% in 1997.
Parking revenues from leased facilities amounted to $89.0 million, $103.0
million, and $166.6 million for the years ended September 30, 1995, 1996, and
1997, respectively. Leased properties parking revenues, as a percentage of
parking revenues, accounted for 94.3% in 1995, 94.2% in 1996, and 92.1% in 1997.
MANAGEMENT CONTRACT REVENUES
Management contract revenues include revenue from managed facilities. In fiscal
year 1997, management contract revenues increased 23.6% to $42.1 million,
primarily as a result of the addition of 36 managed facilities acquired in the
transaction with Square Industries. Management contract revenues amounted to
$31.8 million, $34.0 million and $42.1 million for the years ended September 30,
1995, 1996, and 1997, respectively.
5
<PAGE> 6
International
Parking is a relatively standard business and does not differ significantly
across international borders. The Company's aggressive strategy to build
European operations will allow it to begin penetrating that continent, as it has
in the U.S. By applying established business methods to new markets, Central
Parking has already achieved economies of scale overseas. European operations
are located in the United Kingdom (108 facilities), a joint venture in Germany
(5 facilities) and an Amsterdam business development office which opened in
1995. Central Parking also maintains operations in Mexico through a joint
venture (32 facilities), Canada (4 facilities) and has a major consulting
project in Malaysia. Upon completion of the Kuala Lumpur City Center in
Malaysia, Central Parking will manage the parking operations under a management
contract.
Revenues from foreign operations were $16.1 million, $13.2 million, and $18.1
million for the fiscal years 1995, 1996 and 1997, respectively. The increase in
1997 resulted primarily from the net addition of 20 leased and managed
properties in the United Kingdom. The decrease from 1995 to 1996 resulted from
the termination of a lease in the United Kingdom. Presently, the Company
believes it has limited exposure to foreign currency risk and has no foreign
currency hedge programs.
JOINT VENTURES
The Company has pursued joint ventures as a growth strategy for two specific
opportunities. First, Central Parking's international expansion will continue to
focus on joint ventures when strategically beneficial or appropriate for
operational reasons (e.g., to overcome language and cultural barriers). In
growing its international operations, the Company has concluded that the value
of creating an alliance with local parking or real estate organizations exceeds
the foregone economics of starting to build the business and relationship from
the beginning. Secondly, in those domestic markets where Central Parking is
constructing a new parking facility (e.g., to service a nightlife entertainment
attraction or the like), the Company is biased toward aligning the real estate
developer's economic interest with Central Parking's economic interest. This
usually is most readily accomplished via equity ownership. To date, four such
domestic joint venture development projects have been struck, the largest being
Civic Parking, LLC, in St. Louis, and the most recent being the Arizona Stadium
Parking Garage, LLC with local Phoenix developers.
ACQUISITIONS
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 on acquisitions that will
enable the Company to become a leader in selected current markets and achieve
6
<PAGE> 7
synergistic savings from the elimination of duplicative management. The Company
believes it can improve acquired operations through more sophisticated operating
systems and more professional management. During 1997 the Company acquired the
following:
(a) Civic Parking, LLC
On December 31, 1996, the Company purchased for cash Civic Parking, LLC ("Civic
Parking"), 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 had previously been operated by the Company under management
agreements, have a total of 7,464 parking spaces. The purchase price was
approximately $91.0 million, which was financed through working capital and a
draw of $67.2 million on the Company's Revolving Credit Facility (see Notes 2,
7, and 8 to the Company's Consolidated Financial Statements). On April 16, 1997,
the Company sold 50% of the ownership units of Civic Parking to an affiliate of
Equity Capital Holdings, LLC for $46.0 million in cash. The Company will
continue to operate these garages pursuant to a lease and operating agreement
with Civic Parking, LLC.
(b) Square Industries, Inc.
On January 18, 1997, the Company completed a cash tender to acquire all of the
outstanding shares of Square Industries, Inc. ("Square") for $54.8 million,
including transaction fees and other related expenses. In addition, the Company
assumed $23.2 million of existing Square debt. The purchase price was financed
through a draw on the Company's Revolving Credit Facility (see Note 8 to the
Company's Consolidated Financial Statements). As of September 30, 1997, the
Company has refinanced $18.9 million of the debt assumed from Square, through a
draw on the Revolving Credit Facility. Square operated 116 parking facilities
containing over 61,000 parking spaces, located primarily in the northeast.
(c) Car Park Corporation
On May 29, 1997, the Company acquired the assets and related leases of Car Park
Corporation ("Car Park") for $3.5 million; consisting of 18 parking facilities
with approximately 2,600 parking spaces located in the San Francisco
metropolitan area. The purchase price was financed through a draw of
approximately $1.7 million on the Company's Revolving Credit Facility (see Note
8 to the Company's Consolidated Financial Statements), and $1.8 million payable
to the sellers in equal monthly installments over a four year term, subject to
early payoff at seller's request (at a discounted rate).
(d) Diplomat Parking Corporation and Kinney Parking System.
On October 1, 1997, subsequent to the Company's fiscal year end, Diplomat
Parking Corporation was purchased for $21.7 million. Diplomat operates 164
parking facilities containing over 37,000
7
<PAGE> 8
parking spaces, located primarily in Washington, D.C. and Baltimore, Maryland.
Additionally, in November 1997, the Company signed a definitive agreement to
acquire Kinney Parking System for approximately $188 million including cash and
$37.0 million of the Company's common stock plus assumption of approximately
$18.6 million of debt. The Kinney purchase price is subject to adjustment for
certain events. Kinney operates approximately 400 facilities containing over
171,000 parking spaces, primarily in the northeast.
A summary of activity by type of facility is as follows:
<TABLE>
<CAPTION>
Year Ended September 30
1995 1996 1997
<S> <C> <C> <C>
Managed Facilities (1):
Beginning of year 626 715 770
Acquired during year -- -- 36
Added during year 120 114 164
Deleted during year (2)(3)(5) (31) (59) (93)
End of year 715 770 877
Renewal Rate 95.0% 92.4% 91.1%
Leased Facilities (1):
Beginning of year 436 485 552
Acquired during year -- -- 82
Added during year (3) 65 94 99
Deleted during year (5) (16) (27) (24)
End of year 485 552 709
Owned Facilities (1)(4):
Beginning of year 26 31 37
Acquired during year -- -- 20
Purchased during year(2) 5 6 5
Sold during year -- -- (4)
End of year 31 37 58
Total facilities (end of year) 1,231 1,359 1,644
Percentage net growth, including
acquisitions in number of facilities:
Managed (1)(2)(3) 14.2% 7.7% 13.9%
Leased (1)(3) 11.2% 13.8% 28.4%
Owned (1)(2)(4) 19.2% 19.4% 56.8%
Total facilities 13.1% 10.4% 21.0%
</TABLE>
(1) Includes 34 managed, 29 leased and 14 owned properties operated under joint
venture agreements at September 30, 1997.
(2) Includes the purchase in 1996 and 1997, of four properties that were
previously managed in both years.
(3) Includes the lease in 1996 and 1997, of one property and 11 properties that
were previously managed, respectively.
(4) Includes the Company's corporate headquarters in Nashville, Tennessee.
(5) Excluded from the above table at September 30, 1997, are six managed
on-street locations and two leased on-street locations which were reflected
as current year deletions.
8
<PAGE> 9
The Company purchases and sells parking properties incidental to its operations.
During 1997 the Company purchased a net total of 21 properties.
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.
<TABLE>
<CAPTION>
Year Ended September 30
1995 1996 1997
<S> <C> <C> <C>
Parking revenues 74.8% 76.2% 81.1%
Management contract revenues 25.2 23.8 18.9
Total revenues 100.0 100.0 100.0
Cost of parking and management
contracts 76.7 76.0 77.0
General and administrative expenses 12.5 12.2 10.5
Operating earnings 10.8 11.8 12.5
Interest income (expense), net 1.2 1.6 (1.3)
Net gains on sales of property
and equipment -- 0.8 1.4
Other 0.3 0.5 1.9
Earnings before income taxes 12.3 14.7 14.5
Income taxes 4.4 5.0 5.5
Net earnings 7.9% 9.7% 9.0%
</TABLE>
YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO YEAR ENDED SEPTEMBER 30, 1996
Parking revenues in fiscal 1997 increased to $180.9 million from $109.3
million in fiscal 1996, an increase of $71.6 million, or 65.5%. Of the $71.6
million increase, $41.0 million, or 57.3% of the increase, resulted from the
acquisition of Squares' and Car Parks' leased and owned locations. The remaining
increase of $30.6 million, or 42.7%, is from a combination of the net addition
of 76 locations, increased rates and higher utilization of parking spaces at
existing facilities.
Management contract revenues in fiscal 1997 increased to $42.1 million from
$34.0 million in fiscal 1996, an increase of $8.1 million, or 23.6%. Of the $8.1
million increase, $2.8 million, or 34.6% of the increase, resulted from the
Square and Car Park acquisitions. The remaining increase of $5.3 million, or
65.4%, is attributable to the net addition of 71 locations and increased
management fees on existing locations.
Revenues from foreign operations increased to $18.1 million in 1997 from $13.2
million in 1996. The increase of 37.4% in revenues from foreign operations
resulted primarily from the net addition of 20 locations in the United Kingdom
and increased revenues on existing locations.
9
<PAGE> 10
Cost of parking in fiscal 1997 increased to $159.9 million from $99.2 million
in fiscal 1996, an increase of $60.7 million, or 61.2%. Rent expense increased
$31.9 million, principally as a result of new locations from acquisitions and
additional percentage rent on existing locations. Of the remaining $28.8 million
increase in cost of parking, payroll expense accounted for $12.5 million. The
payroll expense increase was attributable to a combination of acquisitions, new
locations and increases on existing payroll. Cost of parking, as a percentage of
parking revenues, decreased to 88.4% in fiscal 1997 from 90.8% in fiscal 1996.
This decrease of 240 basis points 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 1997 increased to $11.8 million from
$9.8 million in the comparable period in 1996, an increase of $2.0 million, or
20.7%. 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 28.0% in fiscal 1997 from 28.7% in fiscal 1996.
The decrease in the percentage of management contract cost as a percentage of
management contract revenue is a result of increased management fees from a
combination of new and existing locations. The decrease in renewal rate for
management contracts to 91.1% in 1997, from 92.4% in 1996, is primarily
attributable to the loss of one large contract which included 9 management
locations. This trend is not expected to continue.
General and administrative expenses in fiscal 1997 increased to $23.4 million
from $17.4 million in fiscal 1996, an increase of $6.0 million, or 34.5%. This
increase was primarily a result of an increase in payroll expense of $4.2
million, associated with the additional general and administrative expenses of
acquired operations, as well as, opening of additional managed, leased, and
owned locations and additional incentive compensation payments as a result of
increased profits.
Interest income in fiscal 1997 decreased to $1.8 million from $2.3 million in
fiscal 1996. This decrease of $461,000 was primarily attributable to decreased
cash and cash equivalents during the year. Interest expense totaled $4.6 million
in 1997 compared to zero in 1996. The increased interest expense was a result of
borrowing to fund additional asset purchases and acquisitions during the year.
The weighted average balance outstanding for the period during which the Company
had debt outstanding, beginning December 31, 1996, was approximately $88.7
million at a weighted average interest rate of 7.1%.
Equity in partnership and joint venture earnings for fiscal 1997 increased to
$4.2 million from $641,000 in fiscal 1996. The increase of $3.5 million resulted
primarily from Civic Parking, LLC ($2.9 million) and increases in joint venture
earnings of the Mexican joint venture ($514,000 in 1997 versus $152,000 in
1996).
10
<PAGE> 11
The Company's effective income tax rate was 37.7% for fiscal 1997 compared to
34.3% for fiscal 1996. The rate increase was attributable to the increase in the
Company's federal income tax rate (see Note 11 to the Company's Consolidated
Financial Statements), the comparative decrease in the amount of tax exempt
income, the addition of nondeductible goodwill amortization and the increase in
the effective state income tax (see Note 11 to the Company's Consolidated
Financial Statements).
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, payroll expense accounted for $3.8 million. The payroll expense
increase was attributable to a combination of new locations and increases on
existing payroll. Costs of parking, as a percentage of parking revenues,
decreased to 90.8% in fiscal 1996 from 92.4% in fiscal 1995. This decrease of
160 basis points 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 $120,000, 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
11
<PAGE> 12
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 Company's 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.
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 acquisitions, 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 statements were impacted by the
acquisition of Civic Parking, LLC (December 1996), Square Industries (January
1997), Car Park (April 1997) and net gains on sales of property and equipment of
$1.1 million in the quarter ended March 31, 1996 and $3.1 million in the quarter
ended September 30, 1997. 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. The per share
numbers have been
12
<PAGE> 13
restated to reflect the three for two stock splits (see Note 9(c) to the
Company's Consolidated Financial Statements).
Amounts in thousands, except per share data
1996 Fiscal Year
<TABLE>
<CAPTION>
December 31 March 31 June 30 September 30
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
Net gains on sales of
property & equipment 41 0.1 1,142 3.2 (1) 0.0 10 0.0
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 $ 0.13 $ 0.13 $ 0.14 $ 0.13
</TABLE>
1997 Fiscal Year
<TABLE>
<CAPTION>
December 31 March 31 June 30 September 30
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $41,423 100.0% $55,925 100.0% $60,030 100.0% $65,598 100.0%
Operating earnings 5,129 12.4 7,109 12.7 7,706 12.8 7,908 12.1
Net gains on sales of
property & equipment 3 0.0 2 0.0 3 0.0 3,129 4.8
Earnings before
income taxes 6,000 14.5 6,993 12.5 8,242 13.7 11,177 17.0
Net earnings $ 3,899 9.4% $ 4,416 7.9% $ 5,275 8.8% $ 6,615 10.1%
Net earnings
per common share $ 0.15 $ 0.17 $ 0.20 $ 0.25
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for fiscal 1997 was $21.9 million,
an increase of $2.4 million from the net cash of $19.5 million provided by
operating activities during the same period in fiscal 1996. The primary factors
which contributed to this increase were increased net earnings.
Net cash used in investing activities was $92.0 million for fiscal 1997. The
acquisitions of Square and Car Park utilized cash of $50.0 million, net of cash
acquired; investments in partnerships, primarily Civic Parking, were $46.3
million; and property and equipment purchases represented $6.3 million. These
investment activities were partially offset by the sale of a property for $9.3
million that was acquired in the Square transaction and the sale of a
free-standing parking garage for
13
<PAGE> 14
approximately $13.2 million, of which $3.0 million of proceeds were cash (see
Note 3 to the Company's Consolidated Financial Statements). No gain or loss was
recognized on the sale of the Square property and a gain of $3.1 million was
recognized on the sale of the free-standing parking garage.
Net cash provided by financing activities for fiscal 1997 was $51.3 million.
Net borrowing from the Company's Revolving Credit Facility represented $70.8
million which was used to fund, in part, the acquisitions of Square, Civic
Parking and Car Park and to refinance $18.9 million of debt assumed in the
acquisition of Square.
Subsequent to September 30, 1997, the Company purchased Diplomat Parking
Corporation for approximately $21.7 million which was financed under the
Revolving Credit Facility (see Note 8 to the Company's Consolidated Financial
Statements). Additionally, the Company announced a definitive agreement to
purchase Kinney Parking System for approximately $188 million, plus assumption
of indebtedness of $16.0 million and including the issuance of common stock of
the Company in the amount $37.0 million. The Kinney purchase price is subject to
adjustment for certain events. To finance such an acquisition, the Company has
obtained a commitment for a $300 million Acquisition Credit Facility (see Note
17(c) to the Company's Consolidated Financial Statements).
Depending on the timing and magnitude of the Company's future investments
(either in the form of leased or purchased properties, joint ventures, or
acquisitions), the working capital necessary to satisfy current obligations is
anticipated to be generated from operations and the Revolving Credit Facility
and the new Acquisition Credit Facility (see Note 17(c) to the Company's
Consolidated Financial Statements). On March 24, 1997, the Company filed a
registration statement with the Securities Exchange Commission registering an
additional 3.3 million shares of common stock, but may adjust the number of
shares to reflect the stock split and increase the amount of proceeds. It is the
Company's intention to market these shares in the second fiscal quarter of 1998.
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.
REVOLVING CREDIT FACILITY
The Revolving Credit 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. Advances under the Revolving Credit Facility bear
interest at one of two rates, at the Company's option, either (i) the bank base
rate or (ii) the LIBOR plus a margin ranging from .25% to 1.25%, depending on
the occurrence of certain dates or events and achievement of certain financial
ratios. In accordance with the loan agreement, the Company permanently reduced
the facility from $150 million to $120 million as of April 16, 1997. The Company
anticipates that
14
<PAGE> 15
the borrowings under the Revolving Credit Facility will be refinanced from the
proceeds of the new Acquisition Credit Facility, and subsequently a debt or
equity offering. The Revolving Credit Facility contains certain covenants which
require the Company and its subsidiaries to maintain certain financial ratios
and restrict further indebtedness. As of September 30, 1997, the Company had
$70.8 million outstanding, and $48.0 million available for borrowing, under the
Revolving Credit Facility.
ACQUISITION CREDIT FACILITY COMMITMENT
In October 1997, the Company obtained a commitment for an aggregate $300
million senior credit facility (Acquisition Credit Facility), consisting of a
five year $200 million Revolving Credit Facility which will include a sublimit
of principal of $25 million in standby letters of credit and a $100 million five
year term loan with equal quarterly payments, beginning in year two, at an
interest rate during the first six months at LIBOR plus 125 basis points. At the
end of the six month period, the loan interest rate and commitment fee will
revert to a pricing grid based upon a number of financial ratios. The facility
commitment contains certain covenants which require the Company to maintain
certain financial ratios, restrict further indebtedness and limit the amount of
dividends paid. The Acquisition Credit Facility will replace the Revolving
Credit Facility upon closing of the Kinney System acquisition.
INTERNATIONAL FOREIGN CURRENCY EXPOSURE
The Company operates wholly owned subsidiaries in the United Kingdon,
Malaysia, Canada and the Netherlands. Additionally, the Company operates through
joint ventures in Germany and Mexico and subsequent to September 30, 1997 has
formed a joint venture to operate in Spain. The Company intends to invest in
foreign leased or owned facilities, usually through joint ventures, and may
become increasingly exposed to foreign currency fluctuations. The Company, in
limited circumstances, has denominated contracts in U.S. dollars to limit
currency exposure. Presently, the Company has limited exposure to foreign
currency risk and has no hedge programs. The Company anticipates implementing a
hedge program if such risk materially increases.
IMPACT OF INFLATION AND CHANGING PRICES
The primary sources of revenues to the Company are parking revenues from
owned and leased locations and management contract revenue (net of expense
reimbursements) on managed parking facilities. The Company believes that
inflation has had a limited impact on its overall operations for fiscal years
ended September 30, 1995, 1996 and 1997.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board
15
<PAGE> 16
issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share", which replaces APB Opinion No. 15. SFAS 128 calls for disclosure of
basic and diluted earnings per share. The pro forma basic and diluted earnings
per share calculated under SFAS 128 for the year ended September 30, 1997, do
not differ significantly from the amounts calculated under APB 15.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
129, "Disclosure of Information about Capital Structure". This pronouncement is
effective for periods ending after December 15, 1997. SFAS 129 requires
additional disclosure regarding characteristics and future redemptions of equity
instruments. Management has reviewed the provisions of SFAS 129 and does not
anticipate that it will have a significant impact on the Company's consolidated
financial statements or footnote disclosures.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income". This pronouncement is effective for fiscal
years beginning after December 15, 1997 and requires the reporting of
comprehensive income within the financial statements. Management does not
anticipate that the pronouncement will significantly impact the presentation of
the Company's consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", which
supersedes SFAS No. 14. This pronouncement is effective for fiscal years
beginning after December 15, 1997. Management is evaluating the impact of
reporting information about operating segments in the Company's consolidated
financial statements.
YEAR 2000
The Company has considered the impact of year 2000 issues on its computer
systems and applications and has developed a remediation plan. The general
ledger system is year 2000 compliant. Compliance activities are in process with
respect to field office systems and facilities' systems. Equipment upgrades and
revisions are expected to remedy field issues by the year 2000. The Company
believes the impact of the year 2000 will not have a significant impact on its
operations or liquidity.
16
<PAGE> 17
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, 1997 and 1996, 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, 1997.
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, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1997 in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Nashville, Tennessee
November 21, 1997
17
<PAGE> 18
CONSOLIDATED BALANCE SHEETS
Amounts in thousands, except share data
<TABLE>
<CAPTION>
September 30
1996 1997
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 28,605 $ 9,979
Management accounts receivable 8,982 11,004
Accounts and current portion of notes
receivable - other (including amounts due
from related parties of $459 in 1996 and
$544 in 1997) (Notes 3 and 7) 3,016 6,158
Prepaid expenses 4,549 9,394
Deferred income taxes (Note 11) 270 911
Refundable income taxes -- 2,154
Total current assets 45,422 39,600
Investments, at amortized cost (fair value
$4,631 in 1996 and $4,962 in 1997) (Note 4) 4,483 4,754
Notes receivable, less current portion
(including amounts due from related parties
of $7,120 in 1996 and $5,264 in 1997)
(Notes 3 and 7) 8,248 16,537
Property, equipment, and leasehold
improvements, net (Note 5) 38,188 79,057
Contract rights, net (Note 6) 5,815 5,021
Goodwill, net (Notes 2 and 6) -- 31,863
Investment in partnerships
and joint ventures (Note 7) 2,939 50,195
Other assets 2,117 6,987
$ 107,212 $ 234,014
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 8) $ -- $ 206
Accounts payable 11,275 25,097
Accrued payroll and related costs 5,059 8,256
Accrued expenses 900 4,020
Management accounts payable 7,788 10,381
Income taxes payable (Note 11) 693 871
Total current liabilities 25,715 48,831
Long-term debt (Notes 8 and 17) -- 73,252
Other liabilities -- 5,161
Deferred compensation (Note 12) 3,095 3,048
Deferred income taxes (Note 11) 1,609 6,871
Total liabilities 30,419 137,163
Shareholders' equity (Notes 9, 12 and 17):
Common stock, $0.01 par value; 50,000,000
shares authorized, 26,215,632 and
26,303,592 shares issued and outstanding
in 1996 and 1997, respectively 262 263
Additional paid-in capital 31,660 32,843
Foreign currency translation adjustment 59 193
Retained earnings 45,449 64,122
Deferred compensation on restricted stock (637) (570)
Total shareholders' equity 76,793 96,851
Commitments and contingencies
(Notes 2, 7, 8, 10, 12, 14 & 17)
$ 107,212 $ 234,014
</TABLE>
See accompanying notes to consolidated financial statements
18
<PAGE> 19
CONSOLIDATED STATEMENTS OF EARNINGS
Amounts in thousands, except per share data
<TABLE>
<CAPTION>
Year Ended September 30
1995 1996 1997
<S> <C> <C> <C>
Revenues:
Parking $ 94,383 $ 109,272 $180,886
Management contract 31,772 34,044 42,090
Total revenues 126,155 143,316 222,976
Costs and expenses:
Cost of parking 87,192 99,196 159,904
Cost of management contracts 9,650 9,769 11,793
General and administrative 15,711 17,419 23,427
Total costs and expenses 112,553 126,384 195,124
Operating earnings 13,602 16,932 27,852
Other income (expenses):
Interest income 1,462 2,303 1,842
Interest expense - - (4,582)
Net gains on sales of property
and equipment 81 1,192 3,137
Equity in partnership and joint
venture earnings (Note 7) 362 641 4,163
Earnings before income taxes 15,507 21,068 32,412
Income tax expense (Note 11):
Current 5,977 6,647 11,842
Deferred (414) 585 365
Total income taxes 5,563 7,232 12,207
Net earnings $ 9,944 $ 13,836 $ 20,205
Weighted average shares
(Notes 9 and 12) 23,058 26,237 26,387
Net earnings per share
(Notes 9 and 12) $ 0.43 $ 0.53 $ 0.77
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE> 20
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Amounts in thousands, except per share data
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 23,058 $231 $ 8,069 $ 46 $ 23,515 $ -- $ 31,861
Net earnings -- -- -- -- 9,944 -- 9,944
Preferred stock dividends -- -- -- -- (450) -- (450)
Foreign currency translation
adjustment -- -- -- 5 -- -- 5
Balance at September 30, 1995 23,058 231 8,069 51 33,009 -- 41,360
Net earnings -- -- -- -- 13,836 -- 13,836
Issuance of common stock net
of offering costs 2,798 28 19,986 -- -- -- 20,014
Issuance under restricted
stock plan 272 3 2,582 -- -- (705) 1,880
Common stock dividends -
$.05 per share -- -- -- -- (1,396) -- (1,396)
Exercise of stock options and
related tax benefits 88 -- 1,023 -- -- -- 1,023
Amortization of deferred
compensation -- -- -- -- -- 68 68
Foreign currency translation
adjustment -- -- -- 8 -- -- 8
Balance at September 30, 1996 26,216 262 31,660 59 45,449 (637) 76,793
Net earnings -- -- -- -- 20,205 -- 20,205
Issuance under restricted
stock plan -- -- 46 -- -- -- 46
Common stock dividends
$.06 per share -- -- -- -- (1,532) -- (1,532)
Exercise of stock options and
related tax benefits 88 1 1,137 -- -- -- 1,138
Amortization of deferred
compensation -- -- -- -- -- 67 67
Foreign currency translation
adjustment -- -- -- 134 -- -- 134
Balance at September 30, 1997 26,304 $263 $32,843 $193 $ 64,122 $(570) $ 96,851
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 21
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in thousands
<TABLE>
<CAPTION>
Year Ended September 30
1995 1996 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 9,944 $ 13,836 $ 20,205
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 2,120 2,500 4,049
Amortization of contract rights 762 852 839
Amortization of deferred compensation cost -- 68 67
Amortization of goodwill and non-compete
agreements -- -- 920
Equity in partnership and joint
venture earnings (362) (641) (4,163)
Distributions from partnerships and
joint ventures 367 1,023 2,920
Net gains on sales of property
and equipment (81) (1,192) (3,137)
Deferred income taxes (414) 585 365
Changes in operating assets
and liabilities, excluding
effects of acquisitions:
(Increase) decrease in management
accounts receivable (594) (2,211) (2,117)
(Increase) decrease in notes and
accounts receivable - other (1,757) 2,733 1,061
(Increase) decrease in prepaid expenses (79) (749) (3,266)
(Increase) decrease in refundable income taxes -- -- (533)
(Increase) decrease in other assets (901) 674 (1,511)
Increase (decrease) in accounts payable,
accrued expenses, other liabilities
and deferred compensation 1,925 730 6,093
Increase (decrease) in management
accounts payable 865 2,156 (68)
Increase (decrease) in income taxes payable 74 (872) 178
Net cash provided by operating activities 11,869 19,492 21,902
Cash flows from investing activities:
Proceeds from sales of property and equipment 95 1,467 12,529
Investments in notes receivable, net (4,000) (3,883) (1,682)
Purchase of assets held for resale -- -- (45,962)
Proceeds from sale of assets -- -- 45,962
Purchase of property, equipment, and
leasehold improvements (5,375) (16,684) (6,261)
Purchase of contract rights (9) (300) (45)
Investments in partnerships, joint ventures
and unconsolidated subsidiaries (2,545) (1,467) (46,319)
Acquisitions of companies, net of cash acquired -- -- (49,963)
Proceeds from maturities of investments -- 151 330
Purchase of investments (1,125) (388) (601)
Proceeds from sale of partnership 125 -- --
Net cash used by investing activities (12,834) (21,104) (92,012)
Cash flows from financing activities:
Dividends paid (848) (1,046) (1,488)
Net borrowings under revolving credit agreement -- -- 70,750
Principal repayments on notes payable -- -- (19,096)
Proceeds from issuance of common stock
and exercise of stock options, net -- 21,037 1,184
Net cash provided (used) by
financing activities (848) 19,991 51,350
Foreign currency translation 5 8 134
Net increase (decrease) in cash and
cash equivalents (1,808) 18,387 (18,626)
Cash and cash equivalents at beginning of period 12,026 10,218 28,605
Cash and cash equivalents at end of period $ 10,218 $ 28,605 $ 9,979
Non-cash transactions:
Exchange of properties, net of cash (Note 13) $ -- $ 2,644 $ --
Note receivable on property sale (Note 3) $ -- $ -- $ 10,225
Issuance of restricted stock (Note 12) $ -- $ 1,880 $ --
Effects of acquisition:
Estimated fair value of assets acquired $ 72,950
Purchase price in excess of the
net assets acquired (goodwill) 32,713
Estimated fair value of liabilities
assumed (49,144)
Cash paid 56,519
Less cash acquired (6,556)
Net cash paid for acquisitions $ 49,963
</TABLE>
See accompanying notes to consolidated financial statements
21
<PAGE> 22
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 193
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 five 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.
(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.
22
<PAGE> 23
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 $412,525,000, $457,176,000, and $583,131,000 for
the years ended September 30, 1995, 1996, and 1997, respectively.
Management accounts payable reflected on the accompanying consolidated
balance sheets is reflected net of cash of $4,892,000 and $5,348,000 at
September 30, 1996 and 1997, 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
For purposes of the statements of cash flows, the Company considers cash and
cash equivalents to include cash on hand, in banks, and short-term, highly
liquid investments with original maturities of three months or less.
(d) Investments
The Company accounts for investments in certain securities under Statement of
Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain
Investments in Debt and Equity Securities, which requires investments in equity
securities that have a readily determinable fair value and investments in debt
securities to be classified into one of 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. At September 30, 1996 and 1997,
all of the Company's investment securities were classified as held-to-maturity.
(e) Property, Equipment, and Leasehold Improvements
23
<PAGE> 24
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 and Joint Ventures
Investment in general, limited partnerships and joint ventures are accounted
for using the equity method of accounting. 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.
(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) Goodwill
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited, generally 25 years. The Company assesses the
recoverability of this intangible asset by determining whether the amortization
of the goodwill balance over its remaining life can be recovered through
undiscounted future operating cash flows of the acquired operation. The amount
of goodwill impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company's average cost
of funds. The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
(i) Lease Transactions and Related Balances
The Company accounts for operating lease obligations on a straight-line
basis. Contingent or percentage payments are recognized when operations indicate
such amounts will be payable. Lease obligations paid in advance are included in
prepaid expenses. The difference between actual lease payments and straight-line
lease expenses over the lease term is included in accrued expense or other
liabilities, as appropriate.
24
<PAGE> 25
(j) Impairment of Long-Lived Assets
The Company adopted the provisions of SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", on October 1, 1996. This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of this Statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.
(k) Income Taxes
The Company files a consolidated federal income tax return. The Company uses
the asset and liability method to account for income taxes. Under this method,
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. 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.
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.
(l) 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.
(m) Per Share and 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
25
<PAGE> 26
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 share and earnings per share data included herein have
been adjusted for a recapitalization of shares in October 1995, the
three-for-two stock split completed in March 1996 and the three-for-two stock
split as approved by the Company's Board of Directors in November 1997 (see
Note 9).
(n) 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 the differences
in exchange rates from period to period are included in the currency translation
adjustment in shareholders' equity.
(o) Fair Value of Financial Instruments
The Company discloses the fair values of most on-and-off balance sheet
financial instruments for which it is practicable to estimate the value. Fair
value disclosures exclude certain financial instruments such as trade
receivables and payables when carrying values approximate the fair value. Fair
value disclosures are not required for 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, 1997. Book value approximates fair value for
substantially all of the Company's assets and liabilities which fall under the
fair value disclosure requirements.
(p) Use of Estimates
Management of the Company has made certain estimates and assumptions relating
to the reporting of assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from these estimates.
(2) ACQUISITIONS
(a) Civic Parking, LLC
On December 31, 1996 the Company purchased for cash Civic Parking, LLC ("Civic
Parking"), a limited liability company, which owns four parking garages in St.
Louis: Kiener East, Kiener West, Stadium East and Stadium West. The four garages
had previously been operated by the Company under management agreements. The
$91.0 million purchase price was financed through working capital and a draw of
$67.2 million on the Company's Revolving Credit Facility (see Note 8). The
transaction was accounted for using
26
<PAGE> 27
the purchase method. The estimated fair value of the garages at the date of the
acquisition approximated the purchase price and, accordingly, management has
allocated the purchase price to the land and buildings acquired.
On April 16, 1997, the Company sold 50% of the membership units of Civic Parking
to an affiliate of Equity Capital Holdings, LLC for $46.0 million in cash. In
the initial allocation of the purchase price, the Company assigned $45.8 million
to the membership units that were sold; consisting of an estimated sale price of
$46.0 million and estimated net cash inflows for the holding period of $638
thousand offset by interest on incremental debt during the holding period of
$801 thousand. The difference between the sales price of $46.0 million and the
amount initially assigned to the membership units that were sold of $45.8
million, was recorded as an adjustment to the purchase price of the units
retained by the Company. Accordingly, no gain or loss was recognized. The
membership units retained by the Company have been accounted for in the
accompanying consolidated financial statements under the equity method and are
included in the Company's consolidated financial statements from December 31,
1996.
The Company will continue to operate these garages pursuant to a lease and
operating agreement with Civic Parking, LLC.
(b) Square Industries, Inc.
On January 18, 1997, the Company completed a cash tender to acquire all
of the outstanding shares of Square Industries, Inc. ("Square") for $54.8
million, including transaction fees and other related expenses. In addition, the
Company assumed $23.2 million of existing Square debt. The purchase price was
financed through a draw on the Company's Revolving Credit Facility (see Note 8).
As of September 30, 1997, the Company has refinanced $18.9 million of the debt
assumed from Square through a draw on the Revolving Credit Facility.
Square operated parking facilities primarily in the northeast. The Square
acquisition was accounted for using the purchase method and, accordingly, the
results of operations of Square have been included in the Company's consolidated
financial statements from January 18, 1997. The purchase price has been
allocated to Square's assets and liabilities based on their estimated fair
values at the date of acquisition. The excess of the purchase price over the
fair value of the net assets acquired of $29.3 million is being amortized on a
straight-line basis over 25 years.
(c) Car Park Corporation
On May 29, 1997, the Company acquired certain assets and leases of Car
Park Corporation ("Car Park") for $3.5 million; consisting
27
<PAGE> 28
of parking facilities in the San Francisco metropolitan area. The purchase price
was financed through a draw of approximately $1.7 million on the Company's
Revolving Credit Facility, and $1.8 million payable to the sellers in equal
monthly installments over a four year term, subject to early payoff at seller's
request (at a discounted rate). The acquisition was accounted for as a purchase
and, accordingly, the results of operations of Car Park have been included in
the Company's consolidated financial statements from the date of acquisition.
The following unaudited pro forma condensed results of operations give
effect to the acquisitions of Square, Civic Parking and Car Park as if such
transactions had occurred at the beginning of each period presented (in
thousands except for earnings per share):
<TABLE>
<CAPTION>
Twelve Months Ended
September 30,
1996 1997
<S> <C> <C>
Total revenues $212,145 $246,825
Earnings before income taxes 24,292 33,463
Net earnings 15,477 20,317
Earnings per share $ 0.59 $ 0.77
Weighted average common shares & common
share equivalents 26,237 26,387
</TABLE>
The foregoing unaudited proforma amounts are based upon certain assumptions
and estimates, including, but not limited to, the recognition of estimated cost
savings related to general and administrative expenses to be eliminated
prospectively in connection with the Square acquisition, interest expense on
debt incurred to finance the acquisitions and amortization of goodwill over 25
years. The unaudited proforma amounts do not necessarily represent results which
would have occurred if the acquisitions had taken place on the basis assumed
above, nor are they indicative of the results of future combined operations.
(3) NOTES AND ACCOUNTS RECEIVABLE
Included in notes receivable are the Series B Bonds purchased in April 1994
relating to the Commerce Street Joint Venture (see Note 7(b)) in the amounts of
$1,553,000 and $760,000 at September 30, 1996 and 1997, respectively. The Bonds
require monthly interest and principal payments at the index rate (prime) plus
250 basis points (11% at September 30, 1997) 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 development bonds
described in Note 7(b). The remainder of the Series B Bonds are owned by the
other joint venture partner.
Included in notes receivable at September 30, 1996 and 1997, are loans
totaling $2.5 million and $2.4 million, respectively,
28
<PAGE> 29
from a joint venture in Denver, Colorado (see Note 7(c)). The interest rates
range from 9.5% to 10% and repayments are based on an amortization schedule for
one portion and sales tax and property tax revenues for the second portion.
Also included in notes receivable at September 30, 1996 and 1997 are loans
totaling $2.9 million and $2.2 million, respectively, to a foreign affiliate, of
which the Company holds a 50% equity interest. These loans bear interest between
10% and 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 the year 2000
and is secured by leasehold interests of the joint venture. The outstanding
balance at September 30, 1996 and 1997, respectively, was $426,000 and $337,000.
The Company sold a parking garage in July 1997. As part of the sale, the
Company received $3 million in cash and a note for $10.2 million secured by a
mortgage. The note is a balloon note, with principal due in full on or before
July 7, 2000. The note requires quarterly interest payments at 8.25%. The
Company recognized a gain of $3.1 million on this sale, which is included in net
gains on sales of property and equipment in the accompanying consolidated
statements of earnings.
The remainder of notes receivable consist of miscellaneous amounts ranging
from $142,000 to $488,000 at September 30, 1996, and $78,000 to $434,000 at
September 30, 1997 and earn interest at rates ranging from 9.75% to 10.5%.
(4) 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):
<TABLE>
<CAPTION>
September 30,
1996 1997
<S> <C> <C>
Amortized cost $4,483 $4,754
Unrealized gains 174 213
Unrealized losses 26 5
Fair value $4,631 $4,962
</TABLE>
The amortized cost and approximate fair value of debt securities at September
30, 1997 by average estimated maturity are shown below (in thousands):
29
<PAGE> 30
<TABLE>
<CAPTION>
Securities
Held-To-Maturity
Amortized Cost Fair Value
<S> <C> <C>
Due in one year or less $ 690 $ 653
Due after one year
through five years 1,444 1,581
Due after five years
through ten years 1,890 1,958
Due after ten years 730 770
Total securities $4,754 $4,962
</TABLE>
There were no sales of investment securities during the years
ended September 30, 1995, 1996 or 1997.
(5) PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
A summary of property, equipment, and leasehold improvements and related
accumulated depreciation and amortization is as follows (in thousands):
<TABLE>
<CAPTION>
September 30,
1996 1997
<S> <C> <C>
Leasehold improvements $ 2,076 $10,537
Buildings 14,026 13,573
Garage and other operating equipment 5,397 10,805
Furniture and fixtures 2,473 3,519
Aircraft 3,956 3,955
27,928 42,389
Less accumulated
depreciation and amortization 8,278 15,722
19,650 26,667
Land 18,538 52,390
Property, equipment and
leasehold improvements, net $38,188 $79,057
</TABLE>
(6) INTANGIBLE ASSETS
(a) Contract Rights
The Company and its subsidiaries manage certain parking facilities which are
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 (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):
30
<PAGE> 31
<TABLE>
<CAPTION>
September 30,
1996 1997
<S> <C> <C>
Contract rights $ 8,981 $ 9,026
Less accumulated amortization 3,166 4,005
Contract rights, net $ 5,815 $ 5,021
</TABLE>
(b) Goodwill
Goodwill at September 30, 1997 resulted from:
<TABLE>
<S> <C>
Purchase price of Square and Car Park $58,295
Less fair value of net assets
acquired 25,582
Excess of purchase price over
net assets acquired (goodwill) 32,713
Less accumulated amortization 850
Goodwill, net $31,863
</TABLE>
(c) Other
Included in other assets are unamortized balances related to non-competition
agreements of $413,000 at September 30, 1997.
(7) INVESTMENTS IN PARTNERSHIPS AND JOINT VENTURES
The following tables reflect the financial position and results of operations
for the partnerships and joint ventures as of September 30, 1996 and 1997, and
for the three years ended September 30, 1997 (in thousands). Except for the
Company's investment in Civic Parking LLC, summary financial information of the
partnerships and joint ventures has not been presented since such information is
not material to the Company's Consolidated Financial Statements.
<TABLE>
<CAPTION>
Investment and Accumulated
Losses in Partnerships Investment in Equity in Partnerships &
and Joint Ventures Limited Partnerships Joint Venture Earnings
1996 1997 1996 1997 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Civic Parking, LLC $ -- $ 45,421 $ -- $ -- $ -- $ -- $2,877
Commerce Street Joint
Venture (1,017) (868) -- -- 305 400 504
LoDo Parking Garage,
LLC 1,308 1,270 -- -- 96 77 126
Larimer Square Parking
Associates 951 1,014 -- -- 12 22 59
Arizona Stadium Parking
Garage, LLC -- 1,500 -- -- -- -- --
Other Partnerships 463 618 1,234 1,240 (51) 142 597
$ 1,705 $ 48,955 $1,234 $1,240 $ 362 $ 641 $4,163
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
Joint Venture Other
Non-Recourse Debt Assets
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Civic Parking LLC $ -- $ -- $ -- $ --
Commerce Street Joint
Venture 7,848 7,606 -- --
LoDo Parking Garage,
LLC -- -- -- --
Larimer Square Parking
Associates 3,647 3,554 -- --
Arizona Stadium Parking
Garage, LLC -- 1,800 -- --
Other Partnerships -- 4,524 221 536
$11,495 $17,484 $221 $536
</TABLE>
(a) Civic Parking, LLC
As explained in Note 2(a), the Company acquired its 50% joint venture ownership
in Civic Parking, in the current year. The results of operations include 50% of
Civic Parking's net earnings from January 1, 1997 to September 30, 1997. The
four parking garages are located in St. Louis, Missouri and contain retail
spaces. Unaudited summary information for Civic Parking is as follows:
<TABLE>
<CAPTION>
September 30, 1997
<S> <C>
Financial position:
Land, property and equipment, net $90,925
Cash 1,669
Other assets 175
Liabilities (768)
Net assets $92,001
</TABLE>
<TABLE>
<CAPTION>
Period from January 1, 1997 to
September 30, 1997
<S> <C>
Results of operations:
Revenue $7,668
Cost of operations 2,458
Net earnings $5,210
Cash flow distributed to partners $3,680
</TABLE>
(b) 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
32
<PAGE> 33
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 rates terms. The
outstanding principal amount of Series A Bonds is reflected in the above table
at September 30, 1996 and 1997. In addition, the Company held $1,553,000 and
$760,000 of Series B Bonds relating to Commerce Street Joint Venture at
September 30, 1996 and 1997, respectively (see Note 3).
(c) Larimer Square Parking Associates
In October 1994, the Company acquired 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 venture partners. 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.
(d) 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 parking facility. The
Company invested $1,375,000 in the joint venture and manages this parking
facility for the joint venture.
(e) Arizona Stadium Parking Garage, LLC
During the year ended September 30, 1997, construction began on the Arizona
Stadium parking garage. The Company invested $1.5 million in this joint venture.
33
<PAGE> 34
(f) Central Parking System Deutschland, GmbH
The Company acquired in April 1996 a 50% interest in a joint venture that
manages and leases various parking structures in Germany. The Company invested
$210,000 in this joint venture.
(g) Realty Parking Properties II
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 5.0% during 1997. Such investment is
accounted for using the cost method.
(8) LONG TERM DEBT
Long term debt includes the Revolving Credit Facility, which is unsecured,
expires January 31, 2000, provides that the Lenders may extend the term until
January 31, 2001, upon the request of the Company. Advances under the Revolving
Credit Facility bear interest at one of two rates, at the Company's option,
either (i) the bank base rate or (ii) the LIBOR plus a margin ranging from .25%
to 1.25%, depending on the occurrence of certain dates or events and achievement
of certain financial ratios. In accordance with the loan agreement, the Company
permanently reduced the Revolving Credit Facility from $150 million to $120
million as of April 16, 1997. The Revolving Credit Facility contains certain
covenants which require the Company and its subsidiaries to maintain certain
financial ratios and restrict further indebtedness. As of September 30, 1997 the
Company had $70.8 million outstanding, and $48.0 million available for
borrowing, under the Revolving Credit Facility. The average interest rate for
the period during which the Company had debt outstanding, beginning December 31,
1996, was 7.1% and the interest rate at the end of the year was 6.7%. Commitment
fees for the unused portion of the Revolving Credit Facility approximate 0.25%
of the unused balance. The commitment fees are included in interest expense in
the accompanying consolidated statements of earnings. The Company anticipates
that the borrowings under the Revolving Credit Facility will be refinanced from
the proceeds of the Acquisition Credit Facility described in Note 17(c), or a
subsequent debt or equity offering.
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
34
<PAGE> 35
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 Revolving Credit Facility.
Prior to April 1996, the Company had various revolving credit agreements
which were terminated. The Company did not use such lines in 1994, 1995, or
1996.
In addition to the Revolving Credit Facility, the Company also has several
notes payable outstanding, totaling $2.7 million, which are secured by related
real estate and equipment and bear interest at rates ranging from 6.46% to
11.0%. These balances mature from dates in 1998 to 2006. The Company has $4.7
million of outstanding letters of credit. Of these letters of credit, $1.3
million reduces availability under the Revolving Credit Facility.
(9) SHAREHOLDERS' EQUITY
(a) Recapitalization
On October 16, 1994, 5,532 shares of Class B Preferred stock of the Company
were converted into 176,441 shares of nonvoting common stock. On March 16, 1995,
the remaining 417 shares of Class B Preferred stock were converted into 13,282
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. At the February 28,1997 Annual Meeting,
shareholders approved an increase in the authorized common stock to 50,000,000
shares. 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 (split adjusted) as follows:
<TABLE>
<CAPTION>
Number of Number of
Canceled Shares
Class Shares Issued
<S> <C> <C>
A-1 Preferred 3,100 65,200
A-2 Preferred 5,200 125,775
A-3 Preferred 5,000 121,764
A-4 Preferred 2,650 62,316
Nonvoting Common 1,040,223 11,449,463
Voting Common 850,500 11,233,482
1,906,673 23,058,000
</TABLE>
For purposes of calculating the exchange ratio for
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<PAGE> 36
recapitalization, the Company utilized $10.00 (adjusted for the stock splits) 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 and subsequent stock splits.
The Company declared dividends of $398,000 and $450,000 in 1994 and 1995,
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 2,796,750 shares were sold by the Company for net proceeds
of $20.0 million.
(c) Stock Splits
On November 21, 1997 the Company's Board of Directors approved a
three-for-two stock split to be effected on December 12, 1997. On March 19, 1996
the Company effected a three-for-two stock split. All share and per share
amounts have been adjusted to reflect both stock splits.
(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):
<TABLE>
<CAPTION>
Year Ended
September 30,
<S> <C>
1998 $ 66,054
1999 57,427
2000 45,188
2001 40,548
2002 34,720
Thereafter 171,854
Total future operating
lease commitments $415,791
</TABLE>
Included in the future minimum rental commitments under operating leases are
aggregate payments of $83,917,000 resulting from commitments incurred under the
agreement described in Note 6(a).
Rental expense for all operating leases is as follows (in
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<PAGE> 37
thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
1995 1996 1997
<S> <C> <C> <C>
Rentals:
Minimum $30,022 $38,882 $66,177
Contingent 21,009 19,330 23,952
Total rentals $51,031 $58,212 $90,129
</TABLE>
(11) INCOME TAXES
Income tax expense consists of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
1995 1996 1997
<S> <C> <C> <C>
Current:
Federal $ 4,951 $ 5,585 $ 9,940
Targeted jobs credit,
net of federal tax benefit (216) -- (98)
Net federal current tax expense 4,735 5,585 9,842
State 655 639 1,312
Non-U.S 587 423 688
5,977 6,647 11,842
Deferred:
Federal (363) 585 378
State -- -- --
Non-U.S (51) -- (13)
(414) 585 365
Total income tax expense
from earnings $ 5,563 $ 7,232 $ 12,207
</TABLE>
Total income taxes are allocated as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
1995 1996 1997
<S> <C> <C> <C>
Income tax expense from earnings $5,563 $ 7,232 $ 12,207
Currently deductible amounts included
in goodwill for financial
statement purposes -- -- (1,423)
Shareholders' equity, tax
benefit derived from
non-statutory stock
options exercised -- (310) (213)
Total income taxes $5,563 $ 6,922 $ 10,571
</TABLE>
Provision has not been made for U.S. or additional foreign taxes on
approximately $2,110,000, $2,863,000, and $2,878,000 at September 30, 1995,
1996, and 1997, 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 to earnings before income taxes is summarized as
follows (in thousands):
37
<PAGE> 38
<TABLE>
<CAPTION>
Year Ended September 30,
1995 1996 1997
$ % $ % $ %
<S> <C> <C> <C> <C> <C> <C>
U.S. Federal statutory
rate on earnings
before income taxes $5,272 34.0% $7,164 34.0% $11,344 35.0%
State and city income
taxes, net of
federal income
tax benefit 432 2.8 422 2.0 853 2.6
Targeted jobs credits,
net of federal
tax benefit (216) (1.4) -- -- (98) (.3)
Tax-exempt interest
income (145) (.9) (312) (1.5) (88) (.3)
Nondeductible goodwill amortization -- -- -- -- 282 .9
Other 220 1.4 (42) (.2) (86) (.2)
Income tax expense $5,563 35.9% $7,232 34.3% $12,207 37.7%
</TABLE>
Sources of deferred tax assets and deferred tax liabilities are as follows
(in thousands):
<TABLE>
<CAPTION>
September 30,
1996 1997
<S> <C> <C>
Deferred tax assets:
Deferred compensation expense $ 1,515 $ 1,620
Prepaid expenses -- 197
Contribution carry forwards -- 3,080
Net operating losses -- 1,151
Deferred and capitalized expenses -- 380
Accrued expenses and reserves 205 439
Other 131 172
Total gross deferred
tax assets 1,851 7,039
Deferred tax liabilities:
Deferred tax gain on
sales of properties (2,583) (1,230)
Deferred installment gain on
sale of property -- (2,062)
Timing differences in
recognition of partnership
earnings (243) (482)
Property, plant and equipment,
due to differences in
depreciation (322) (8,324)
Other (42) (11)
Total gross deferred
tax liabilities (3,190) (12,109)
Valuation allowance on net
operating losses -- (890)
Net deferred tax liabilities $(1,339) $ (5,960)
</TABLE>
38
<PAGE> 39
Net operating losses and contribution carry forwards expire between 2002 and
2012. Management believes that it is more likely than not that the results of
operations will generate sufficient taxable income to realize current deferred
tax assets after giving consideration to the valuation allowance. The valuation
allowance has been provided for loss and contribution carry forwards for which
recoverability is not deemed to be more likely than not.
(12) EMPLOYEE BENEFIT PROGRAMS
(a) Stock Plans
All share amounts and prices have been adjusted to reflect the effects of the
stock splits 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 1,417,500 common shares have been reserved for issuance
under these two plans combined. Options representing 425,375 shares, net of
cancellations, had been granted under this plan at September 30, 1997. 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,
1997, 273,816 shares had been issued through the restricted stock plan. Expense
related to the vesting of restricted stock is recognized by the Company over the
vesting period. Shares in the amount of 267,750 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 11,250 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 4,500 shares on that date. A total of 225,000 shares have
been reserved for issuance under the plan. Options to purchase 112,500 shares
had been granted at fair market value on the date of grant under this plan at
September 30, 1997.
The following table summarizes the transactions pursuant to the Company's
stock option plans for the last two fiscal years:
39
<PAGE> 40
<TABLE>
<CAPTION>
Number Option Price
of Shares Per Share
<S> <C> <C>
Outstanding at September 30, 1995 - $ - to $ -
Granted 449,250 $ 8.00 to $21.67
Exercised 89,175 $ 8.00
Canceled 40,650 $ 8.00
Outstanding at September 30, 1996 319,425 $ 8.00 to $21.67
Granted 281,975 $21.25 to $30.50
Exercised 45,525 $ 8.00
Canceled 18,000 $21.25
Outstanding at September 30, 1997 537,875 $ 8.00 to $30.50
</TABLE>
The Company accounts for these plans under Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees, and accordingly, no
compensation cost has been recognized. If compensation cost for these plans had
been determined consistent with SFAS No. 123, "Accounting for
Stock-Based-Compensation", the Company's net earnings and earnings per share
would have been reduced to the following pro forma amounts:
<TABLE>
<S> <C> <C>
Net Earnings As reported for fiscal year ended
September 30, 1997 $20,205
Pro formas as
adjusted under SFAS 123 $19,238
As reported for fiscal year
ended September 30, 1996 $13,836
Pro forma as adjusted under
SFAS 123 $12,840
Earnings per Common Share As reported for fiscal year
ended September 30, 1997 $ .77
Pro forma as adjusted under
SFAS 123 $ .72
As reported for fiscal year
ended September 30, 1996 $ .53
Pro forma, as adjusted under
SFAS 123 $ .49
</TABLE>
The estimated weighted average fair value of the options granted were $3.60
for 1996 option grants and $11.90 for 1997 option grants using the Black-Scholes
option pricing model with the following assumptions: dividend yield based on
historic dividend rates at the date of grant, volatility of 35%, risk free
interest based on the treasury bill rate of 10 year instruments at the date of
grant, and an expected life of ten years for all grants.
The Company also has an Employee Stock Purchase Plan which began April 1,
1996, under which 450,000 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
40
<PAGE> 41
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, 1997, 26,899 shares had
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 $886,000, $971,000, and
$1,136,000 in years 1995, 1996 and 1997, 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 $4,560,000,$4,371,000, and $5,160,000 in years 1995, 1996 and
1997, 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 267,750 shares of
restricted common stock under the Company's restricted stock plan. Further, the
officer may 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
41
<PAGE> 42
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 is being 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
$782,000, $412,000, and $88,000 in fiscal years 1995, 1996 and 1997,
respectively.
(e) Deferred Unit Plan
On December 19, 1996, the Board of Directors approved the adoption of the
Company's Deferred Stock Unit Plan (the "Deferred Stock Unit Plan" or the
"Plan". Under the plan, certain key employees will have the opportunity to defer
the receipt of certain portions of their cash compensation, instead receiving
shares of Common Stock following certain periods of deferral. Approximately nine
key employees will be eligible to participate in the plan. The plan is
administered by a committee, appointed by the board of directors of the Company
consisting of at least two non-employee "outside" directors of the Company.
The Company reserved 375,000 shares of Common Stock for issuance under the
1996 Deferred Stock Unit Plan. Participants may defer up to 50% of their salary.
As of September 30, 1997 no compensation has been deferred under this plan.
(f) 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
malfeasance.
42
<PAGE> 43
(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
leased the Nashville properties from the LLC for $290,000 per year for a 10 year
term and pays percentage rent. Total rent expense, including percentage rent,
was $290,000 and $354,000 in 1996 and 1997, respectively. 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. During 1997, the Company approved an increase in
the percentage rent clause which was approved by a majority of the Company's
disinterested directors. Management believes that such transactions have been on
terms no less favorable to the Company than those that could have been obtained
from unaffiliated persons.
(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, 1997, total letters of credit amounted to $3,630,000.
(15) SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments made for interest and income taxes were as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
1995 1996 1997
<S> <C> <C> <C>
Interest $ -- $ -- $ 4,368
Income taxes 5,877 7,209 10,899
</TABLE>
43
<PAGE> 44
(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):
<TABLE>
<CAPTION>
Year Ended September 30,
1995 1996 1997
<S> <C> <C> <C>
Total revenues:
Domestic $110,007 $130,141 $204,868
Foreign 16,148 13,175 18,108
Consolidated $126,155 $143,316 $222,976
Operating earnings:
Domestic $ 12,111 $ 15,873 $ 25,967
Foreign 1,491 1,059 1,885
Consolidated $ 13,602 $ 16,932 $ 27,852
Earnings before income taxes:
Domestic $ 13,953 $ 19,748 $ 30,065
Foreign 1,554 1,320 2,347
Consolidated $ 15,507 $ 21,068 $ 32,412
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
1996 1997
<S> <C> <C>
Identifiable assets:
Domestic $102,132 $227,471
Foreign 5,080 6,543
Consolidated $107,212 $234,014
</TABLE>
(17) SUBSEQUENT EVENTS
(a) Diplomat Acquisition
On October 1, 1997 the Company purchased Diplomat Parking Corporation
for $21.7 million which has parking facilities primarily located in Washington
D.C. and Baltimore, MD. The purchase was financed through the Company's
Revolving Credit Facility (see Note 8). The transaction will be accounted using
the purchase method.
(b) Kinney Acquisition
On November 7, 1997 the Company announced it had signed a definitive
purchase agreement to acquire Kinney System Holding Corporation for
approximately $188 million, consisting of cash and $37.0 million of the
Company's common stock, plus assumption of approximately $18.6 million of debt.
The purchase price is subject to adjustment for certain events. Management
intends to initially finance the purchase price through the new Acquisition
44
<PAGE> 45
Credit Facility, which will replace the present Revolving Credit Facility (see
Note 17(c)). The transaction will be accounted using the purchase method.
(c) Acquisition Credit Facility Commitment
On October 20, 1997 Company obtained a commitment for an aggregate $300
million facility consisting of a five year $200 million Revolving Credit
Facility which will include a sublimit of $25 million for standby letters of
credit and a $100 million five year term loan with scheduled repayment of $25
million per year, beginning in year two, at an interest rate during the first
six months at LIBOR plus 125 basis points. At the end of an initial six month
period, the interest rate on the facility and the commitment fee will revert to
a grid pricing based upon the Company achieving a number of certain financial
ratios. The facility commitment contains certain covenants which require the
Company to maintain certain financial ratios, restrict further indebtedness and
limit the amount of dividends paid. The Acquisition Credit Facility will replace
the Revolving Credit Facility (see Note 8) upon closing of the Kinney System
acquisition.
45
<PAGE> 1
EXHIBIT 21
CENTRAL PARKING CORPORATION
Subsidiaries of the Registrant as of September 30, 1997
Central Parking System of UK, Ltd. (UK)
Central Parking System Deutschland, GmbH (Germany) (50%)
Central Parking System of the Czech Republic, S.R.O. (Czech Republic)
Control Plus Parking System of UK, Ltd (UK)
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)
Central Parking System Realty of Missouri, Inc. (TN)
Denver Baseball Stadium Garage, Inc. (TN)
Larimer Development Corporation (TN)
Sheridan Heritage Development Corporation (TN)
Central Parking System, Inc. (TN)
Central Parking System - Airport Services, Inc. (TN)
Central Parking System of Alabama, Inc. (TN)
Central Parking System of Asia, 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)
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)
Central Parking System of Mississippi, Inc. (TN)
Central Parking System of New Orleans, Inc. (TN)
Central Parking System of New York, Inc. (TN)
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)
<PAGE> 2
Central Parking System of Wisconsin, Inc. (TN)
Square Industries, Inc. (NY)
26 & 9 Garage Corporation (NY)
161 Street Parking Corporation (NY)
211 W. 56th Street Garage Corporation (NY)
6 & 30 Garage Corporation (NY)
75 Wooster Street Corporation (NY)
303 W. 46th Street Corporation (NY)
403 Management Corporation (NY)
73-83 Third Avenue Corporation (NY)
70 E. 10th Street Square Corporation (NY)
802 Square Corporation (NY)
804 Square Corporation (NY)
711 West End Avenue Garage Corporation (NY)
Brewack Realty Corporation (NY)
Elzab Development Corporation (NY)
Medical Parking Management, Inc. (NY)
Institutional Parking Management, Inc. (NY)
Square 575 Lex Inc. (NY)
Square 804 Corporation (NY)
Square 964 Third Avenue Corporation (NY)
Square Cadman Corporation (NY)
Square Cooper Parking Corporation (NY)
Square Dedham Corporation (NY)
Square Dyckman Corporation (NY)
Square First Avenue Corporation (NY)
King-Green Parking Corporation (NY)
Square Industries Construction Corporation (NY)
Square Island Corporation (NY)
Square Kings Plaza Corporation (NY)
839 6th Corporation (NY)
Square Lex 51st Corporation (NY)
Square Metropolitan Corporation (NY)
Square Pacific Corporation (NY)
306 W. 44 Corporation (NY)
335 West 43 Corporation (NY)
112 W. 25th Street Square Corporation (NY)
Public Square Parking Corporation (OH)
400 Square Garage Corporation (NY)
Square 505 Corporation (NY)
Eighty Second And First Parking Corporation (NY)
8th Avenue Properties Corporation (NY)
Jamaica & Archer Avenue Garage Corporation (NY)
Square Penn Plaza, Inc. (NY)
Square Center Corporation (NY)
Square Clinton Corporation (NY)
Square Henry Corporation (NY)
Leslie Craig Corporation (NY)
Square Lafayette Garage Corporation (NY)
Square Lebanon Corporation (NY)
Square Park Slope Corporation (NY)
Square Rego Corporation (NY)
Square Peach West Corporation (GA)
Truban Realties, Ltd. (NY)
808 Square Corporation (NJ)
<PAGE> 3
Park/Fly, Inc. (NJ)
Square C. H. Corporation (NJ)
Square Mall Corporation (NJ)
Square Summit Corporation (NJ)
23rd & Arch Parking Corporation (PA)
Pennsylvania Square Corporation (PA)
Square 224 Corporation (PA)
Square Carlton Corporation (PA)
Square Washington Corporation (Washington, DC)
125 Halsey Corporation (NJ)
810 Square Corporation (NJ)
Square 532 Corporation (NJ)
Square Freehold Corporation (NJ)
Square Morristown Corporation (NJ)
Square Trenton Corporation (NJ)
714 Smithfield Corporation (PA)
Reboy Development Corporation (PA)
Square Academy Corporation (PA)
Square Center City Corporation (PA)
Square Rochelle Corporation (NY)
4 West Park Street Corporation (NJ) 50%
Atlantic Square Corporation (NJ)
Square Bachrach Corporation (NJ)
Square Halsey Corporation (NJ)
Square Newport Corporation (NJ)
Square Fulton Corporation (PA)
805 Square Corporation (PA)
S.L. Schwartz, Inc. (PA)
Square Arch Corporation (PA)
Square Chestnut Corporation (PA)
Square Stewart Corporation (NY)
400 Carnegie Avenue Corporation (NJ)
Broad Newark Corporation (NJ)
Square Brighton Corporation, Inc. (NJ)
Square Harborside Corporation (NJ)
Square Palisades Corporation (NJ)
1111 Walnut Corporation (PA)
Square Wilmington Corporation (DE)
Square Rodman Corporation (PA)
Square Arena Corporation (PA)
Square Fort Duquesne, Inc. (PA)
Square West End Avenue Corporation (NY)
6 & 8 West Park Street, Inc. (NJ)
Medical Parking Management of NJ, Inc. (NJ)
Square Brunswick Corporation (NJ)
Square Kentucky Corporation (NJ)
Square Shore Corporation (NJ)
11th & Sansom Parking Corporation (PA)
Arch Square Corporation (PA)
SII Corporation (PA)
Square Boulevard Corporation (PA)
Square Fourth Avenue Corporation (PA)
Square York Corporation (NY)
643 Broad Street Corporation (NJ)
Revenue Control Service Corporation (NJ)
<PAGE> 4
Square Central Corporation (NJ)
Square Liberty Corporation (NJ)
Square South Corporation (NJ)
12th and Sansom Parking Corporation (PA)
Metro Auto Parking, Inc. (PA)
Square 100 Forbes Corporation (PA)
Square Broad Corporation (PA)
Square Historic Corporation (PA)
Square Liberty Corporation (PA)
Square Plaza Corporation (PA)
Steel Parking Corporation (PA)
Square / Jefferson Corporation (PA)
Square Locust Corporation (PA)
Square Sansom Corporation (PA)
Willow Parking Corporation (PA)
Square Juniper Corporation (PA)
Square Market Corporation (PA)
Square South Corporation (PA)
Square Gregg, Inc. (PA)
Square Kennedy Corporation (PA)
Square MDM Corporation (PA)
Square Third Avenue Corporation (PA)
275 Washington Parking Corporation (MA)
Square 3rd & Lombard Corporation (PA)
Square Palace Corporation (PA)
Square Walnut Corporation (PA)
Square Boston Corporation (MA)
Square Lehigh Corporation (PA)
Square Pittsburgh Corporation (PA)
Square Wash Corporation (PA)
Georgian Square Corporation (MD)
808 Square Corporation (NY)
337 West 43 Corporation (NY)
333-335 W. 43 Corporation (NY)
331 West 43 Corporation (NY)
United Parking Services, Inc. (Canada)
1093246 Ontario, Inc. (Canada)
774201 Ontario, Inc. (Canada)
Square Parking Canada, Inc. (NY)
811462 Ontario, Inc. (Canada)
Square 88, LLC (IN) 90% *
Square 88 Corporation (DE)
955 Penn Corporation
Indiana Square Corporation
Square Plus Operating Corporation (NY)
Gailgal Holding Corporation (NY)
Square 30th Street Corporation (NY)
Square 43rd Corporation (NY)
S.P. Parking, Inc. (NY)
Square Alpha Corporation (NY)
Square Plus Operating of New Jersey, Inc. (NJ)
Square Philadelphia Corporation (PA)
Square Industries of Atlanta, Inc. (GA)
Square Peach Corporation (GA) 80%
* Indicates subsidiaries that are owned and therefore listed under more
than one subsidiary.
<PAGE> 1
EXHIBIT 23
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Central Parking Corporation and Subsidiaries:
We consent to the use of our reports incorporated herein by reference.
KPMG PEAT MARWICK LLP
Nashville, Tennessee
December 24, 1997
<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 SPLITS DESCRIBED IN NOTE 9 TO THE CONSOLIDATED FINANCIAL STATEMENT.
</LEGEND>
<CIK> 0000949298
<NAME> CENTRAL PARKING CORPORATION
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1997
<PERIOD-END> SEP-30-1996 SEP-30-1997
<CASH> 28,605 9,979
<SECURITIES> 0 0
<RECEIVABLES> 11,998 17,162
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 45,422 39,600
<PP&E> 38,188 79,057
<DEPRECIATION> 3,420 5,875
<TOTAL-ASSETS> 107,212 234,014
<CURRENT-LIABILITIES> 25,715 48,831
<BONDS> 0 0
0 0
0 0
<COMMON> 262 263
<OTHER-SE> 76,531 96,588
<TOTAL-LIABILITY-AND-EQUITY> 107,212 234,014
<SALES> 143,316 222,976
<TOTAL-REVENUES> 147,452 232,118
<CGS> 108,965 171,697
<TOTAL-COSTS> 126,384 195,124
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 4,582
<INCOME-PRETAX> 21,068 32,412
<INCOME-TAX> 7,232 12,207
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 13,836 20,205
<EPS-PRIMARY> .53 .77
<EPS-DILUTED> .53 .77
</TABLE>
