<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): March 19, 1999
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<TABLE>
<S> <C>
Exact name of registrant as specified in its charter: Central Parking Corporation
State or other jurisdiction of incorporation: Tennessee
Commission File Number: 001-13950
IRS Employer Identification Number: 62-1052916
Address of principal executive offices: 2401 21st Avenue South
Suite 200
Nashville, TN 37212
Registrant's telephone number, including area code: (615) 297-4255
Former name or former address, if changed since
last report: Not applicable
</TABLE>
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Central Parking Corporation (the "Company") hereby amends its
Form 8-K dated March 19, 1999, to include its restated financial statements,
combining Central Parking and Allright Holdings, Inc. ("Allright") for the years
ended September 30, 1997 and September 30, 1998.
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND
EXHIBITS
In connection with the Merger, the Company has restated its
Selected Financial Data, Management's Discussion and Analysis
of Financial Condition and Results of Operations, and its
Financial Statements to include the results of Allright for
the relevant periods.
<PAGE> 3
CENTRAL PARKING CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
On March 19, 1999, Central Parking completed a merger with Allright Holdings,
Inc. ("Allright"). The transaction constituted a tax-free reorganization and has
been accounted for as a pooling-of-interests under Accounting Principles Board
("APB") Opinion No. 16, "Business Combinations." Accordingly, Central Parking's
financial statements have been restated to reflect the combined results of
operations, financial position and cash flows of Central Parking and Allright as
if Allright had been part of Central Parking since Allright's inception date of
October 31, 1996. Prior to the consummation of the merger, Allright's fiscal
year end was June 30. In recording the business combination, Allright's
consolidated financial statements as of June30, 1997 and 1998 and for the eight
month period and year then ended, respectively, have been combined with Central
Parking's consolidated financial statements for the fiscal years ended September
30, 1997 and 1998, respectively. There were no material transactions between
Central Parking and Allright prior to the Merger. Certain reclassifications have
been made to Allright's historical financial statements to conform to Central
Parking's presentation.
Set forth below are selected consolidated financial data of the Company for each
of the periods indicated. The statement of earnings, per share, and balance
sheet data were derived from the audited consolidated financial statements of
the Company. All of the information set forth below should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<PAGE> 4
Amounts in thousands, except per share data
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------ 1998 vs 1997 Five Year
1994 1995 1996 1997 1998 Increase (Decrease) Growth Rate
--------- --------- --------- --------- --------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Revenues:
Parking $ 82,890 $ 94,383 $ 109,272 $ 295,692 $ 534,573 $ 238,881 80.8% 59.4%
Management contract 28,438 30,630 32,534 43,245 65,826 22,581 52.2 23.4
Total revenues 111,328 125,013 141,806 338,937 600,399 261,462 77.1 52.4
Total costs and expenses 100,120 111,411 124,874 298,511 528,747 230,236 77.1 51.6
Operating earnings 11,208 13,602 16,932 40,426 71,652 31,226 77.2 59.0
Percentage of total revenues (3) 10.1% 10.9% 11.9% 11.9% 11.9% -- -- --
Interest income (expense), net 691 1,462 2,303 (15,922) (26,205) (10,283) (64.6) --
Dividends on company-obligated
mandatorily redeemable
convertible securities of a
subsidiary trust -- -- -- -- (3,247) (3,247) N/A --
Net gains on sales of
property and equipment 2,214 81 1,192 3,118 (639) (3,757) (120.5) --
Equity in partnership and
joint venture earnings 30 362 641 4,238 5,246 1,008 23.8 --
Earnings before income tax 14,143 15,507 21,068 31,697 46,518 14,821 46.8 34.7
Income taxes 5,179 5,563 7,232 13,011 20,373 7,362 56.6 41.0
Income tax percentage of
earnings before income tax 36.6% 35.9% 34.3% 41.0% 43.8% -- -- --
Net earnings 8,964 9,944 13,836 17,654 26,145 8,491 48.1 30.8
Percentage of total revenues (3) 8.1% 8.0% 9.8% 5.2% 4.4% -- -- --
PER SHARE DATA:
Net earnings before extraordinary $ 0.39 $ 0.43 $ 0.54 $ 0.62 $ 0.76 $ 0.14 22.6
item - basic
Net earnings before extraordinary $ 0.39 $ 0.43 $ 0.53 $ 0.61 $ 0.74 $ 0.13 21.3
item - diluted
Basic weighted average common
shares 23,058 23,058 25,762 30,070 34,618 2,576 8.0
Diluted weighted average common
shares 23,058 23,058 26,042 30,512 35,312 2,800 8.6
Dividends per common share(3) $ -- $ -- $ 0.05 $ 0.05 $ 0.05 $ -- --
Net book value per common share
outstanding at September 30(3) $ 1.38 $ 1.79 $ 2.93 $ 5.28 $ 9.36 $ 4.08 $ 77.3
</TABLE>
<TABLE>
<CAPTION>
September 30,
-------------
1998 vs 1997
1994 1995 1996 1997 1998 Increase (Decrease)
-------- ---------- ---------- ---------- ---------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 12,026 $10,218 $ 28,605 $ 17,308 $ 39,495 $ 22,817 128.2%
Working capital 1,987 2,676 19,707 (17,520) (30,897) (13,377) (76.4)
Goodwill -- -- -- 65,428 288,170 $222,742 340.4
Total assets 60,029 70,440 107,212 598,693 954,022 355,329 59.4
Long-term debt and capital lease
obligations, less current portion -- -- -- 273,725 283,319 9,594 3.5
Company-obligated mandatorily
redeemable convertible securities
of subsidiary holding solely parent
debentures -- -- -- -- 110,000 110,000 N/A
Shareholders' equity 31,861 41,360 76,793 173,114 341,914 168,800 97.5
</TABLE>
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<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
1998 vs 1997
1994 1995 1996 1997 1998 Increase (Decrease)
---------- ----------- ----------- ----------- ----------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation and amortization $ 2,594 $ 2,882 $ 3,420 $13,547 $ 28,674 $15,127 111.7%
Employees (2) (3) 5,400 6,000 6,600 14,300 17,450 3,150 22.0
Number of shareholders (2) (3) N/A 3,000 5,500 7,000 8,100 1,100 15.7
Market capitalization in millions
(1) (2) (3) N/A N/A $ 568 $ 1,000 $ 1,840 $ 840 84.0
Price earnings ratio (1) (2) (3) N/A N/A 40.9 56.1 67.9 N/A N/A
Return on equity (3) (4) 32.5% 27.2% 23.4% 14.1% 10.2% N/A N/A
</TABLE>
(1) Reflects the recapitalization, initial and subsequent public offering of
shares, and subsequent stock splits of the Company described in Note 10 to
the Company's 1998 Consolidated Financial Statements.
(2) Reflects information as of September 30 of the respective fiscal year,
rounded to the nearest thousand, except ratio data.
(3) Unaudited information.
(4) Reflects return on equity calculated using net earnings divided by average
shareholders' equity.
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For Years Ending September 30, 1998, 1997, and 1996
The Company recommends that you read the accompanying audited consolidated
financial statements and footnotes found on pages 28 through 54 of this amended
Form 8-K along with this discussion and analysis.
On March 19, 1999, Central Parking completed a merger with Allright Holdings,
Inc. ("Allright"). The transaction constituted a tax-free reorganization and has
been accounted for as a pooling-of-interests under Accounting Principles Board
("APB") Opinion No. 16, "Business Combinations." Accordingly, prior period
financial statements presented have been restated to include the combined
results of operations, financial position and cash flows of Allright as if it
had been part of Central Parking from the date of Allright's inception, October
31, 1996. Refer to notes 1 and 2 to the accompanying consolidated financial
statements.
The following discussion of the results of operations should be read in
conjunction with the Consolidated Financial Statements and Notes thereto.
OVERVIEW
The Company operates parking facilities under three types of arrangements:
leases, fee ownership, and management contracts.
Parking revenues consist of revenues from leased and owned facilities. Cost
of parking relates to both leased and owned facilities and includes rent,
payroll and related benefits, depreciation (if applicable), maintenance,
insurance, and general operating expenses. Parking revenues in fiscal 1998
increased to $534.6 million from $295.7 million in fiscal 1997, an increase of
$238.9 million, or 80.8%. Of the $238.9 million increase, $102.6 million, or
42.9% of the increase, resulted from the acquisition of Diplomat Parking
Corporation ("Diplomat"), Kinney System Holding Corp ("Kinney"), Turner Parking
("Turner"), and Sterling Parking ("Sterling") leased and owned locations. The
remaining increase of $136.3 million, or 57.1%, resulted from a combination of
the addition of 174 net locations, increased rates and higher utilization of
parking spaces at existing facilities.
Parking revenues from owned properties amounted to $6.2 million, $40.9
million, and $62.1 million for the years ended September 30, 1996, 1997 and
1998, respectively. Owned properties parking revenues, as a percentage of all
parking revenues, amounted to 5.7% in 1996, 13.8% in 1997, and 11.6% in 1998.
Ownership of parking facilities, either independently or through joint ventures,
typically requires a larger capital investment than managed or leased facilities
but provides maximum control over the operation of the parking facility and the
greatest profit potential. As the owner, all changes in owned facility revenue
and expense flow directly to the Company. Additionally, the Company has the
potential to realize benefits of appreciation in the value of the underlying
real estate if the property is sold for owned facilities. Central Parking
assumes complete responsibility for all aspects of the property, including all
structural, mechanical, or electrical maintenance or repairs and property taxes.
Parking revenues from leased facilities amounted to $103.1 million, $254.8
million, and $472.5 million for the years ended September 30, 1996, 1997, and
1998, respectively. Leased properties parking revenues, as a percentage of
parking revenues, accounted for 94.3% in 1996, 86.2% in 1997, and 88.4% in 1998.
Leases generally provide for a contractually established payment to the facility
owner, which is either a fixed annual amount, a percentage of gross revenues, or
a combination thereof. As a result, Central Parking's revenues and profits in
its lease arrangements are dependent upon the performance of the facility.
Leased facilities require a longer commitment and a larger capital investment by
Central Parking than managed facilities but generally provide a more stable
source of revenue and a greater opportunity for long-term revenue growth. Under
its leases, the Company is typically responsible for all facets of the parking
operations, except for structural, mechanical, or electrical maintenance or
repairs, or property taxes. Lease arrangements are typically for terms of three
to ten years, with renewal options.
Management contract revenues include revenues from managed facilities. In
fiscal year 1998, management contract revenues increased 52.2% to $65.8 million,
primarily as a result of the addition of 543 managed facilities acquired in the
transactions with Diplomat, National Garages, Inc. ("National"), Kinney, Turner,
and Sterling, and from the net addition of 153 additional management locations.
Management contract revenues amounted to $32.5
<PAGE> 7
million, $43.2 million, and $65.8 million for the years ended September 30,
1996, 1997, and 1998, respectively. Management contract revenues consist of
management fees (both fixed and percentage of revenues) and fees for ancillary
services such as insurance, accounting, equipment leasing, and consulting. The
cost of management contracts includes insurance premiums and claims and other
indirect overhead. 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, Central Parking is not responsible under its
management contracts for structural, mechanical, or electrical maintenance or
repairs, or for providing security or guard services or for paying property
taxes. The typical management contract is for a term of one to three years and
generally is renewable for successive one-year terms, but is cancelable by the
property owner on short notice. The Company's renewal rates for each of the past
five fiscal years were in excess of 91%.
The Company's clients have the option of obtaining insurance on their own or
having Central Parking provide insurance as part of the services provided under
the management contract. Because of its size and claims experience, the Company
can purchase such insurance at significant discounts to comparable market rates
and, management believes, at lower rates than the Company's clients can
generally obtain on their own. Accordingly, Central Parking generates profits on
the insurance provided under its management contracts.
As of September 30, 1998, Central Parking operated 1,937 parking facilities
through management contracts, leased 2,565 parking facilities, and owned 261
parking facilities, either independently or in joint venture with third parties.
The following table sets forth certain information regarding the number of
managed, leased, or owned facilities as of the specified dates:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Managed.............................. 770 1,241 1,937
Leased............................... 552 2,024 2,565
Owned................................ 37 237 261
----- ----- -----
Total........................ 1,359 3,502 4,763
===== ===== =====
</TABLE>
A summary of the facilities operated by Central Parking as of September 30, 1998
is as follows:
<TABLE>
<CAPTION>
Percent
Managed Leased Owned Total of Total Spaces
------- ------ ----- ----- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total U.S. and Puerto Rico................. 1,797 2,405 259 4,461 93.7% 1,412,546
----- ----- --- ----- ----- ---------
United Kingdom............................. 79 80 -- 159 3.3% 55,527
Mexico (1)................................. 34 27 -- 61 1.3% 31,796
Germany (1)................................ -- 4 -- 4 0.1% 1,336
Canada..................................... 26 48 2 76 1.6% 38,776
Spain (1).................................. -- 1 -- 1 0.0% 542
Malaysia................................... 1 -- -- 1 0.0% 5,400
----- ----- -- ----- ----- ---------
Total foreign 140 160 2 302 6.3% 133,377
----- ----- -- ----- ----- ---------
Total facilities 1,937 2,565 261 4,763 100.0% 1,545,923
===== ===== === ===== ===== =========
</TABLE>
(1) Operated through 50% owned joint ventures
<TABLE>
<CAPTION>
Fiscal Years Ended September 30,
Historical Financial Summary ($ Millions) 1995 1996 1997 1998
- ------------------------------------------------------ ------- -------- -------- -------
<S> <C> <C> <C> <C>
Parking revenues 94.4 109.3 295.7 534.6
% Growth over prior year 13.9% 15.8% 170.6% 80.8%
Management contract revenues 30.6 32.5 43.2 65.8
% Growth over prior year 7.7% 6.2% 32.9% 52.2%
Total revenues 125.0 141.8 338.9 600.4
% Growth over prior year 12.3% 13.4% 139.0% 77.1%
Cost of parking and management contracts 95.7 107.5 259.8 456.7
% of total revenues 76.6% 75.8% 76.7% 76.1%
General and administrative expenses 15.7 17.4 37.0 63.7
% of total revenues 12.6% 12.3% 10.9% 10.6%
Goodwill and non-compete amortization -- -- 1.7 8.3
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C> <C> <C>
% of total revenues -- -- 0.5% 1.4%
Depreciation & amortization - excluding goodwill 2.9 3.4 11.9 20.4
Operating earnings 13.6 16.9 40.4 71.7
% of total revenues 10.9% 11.9% 11.9% 11.9%
Interest income (expense), net 1.5 2.3 (15.9) (26.2)
Dividends on company-obligated mandatorily redeemable securities
Of subsidiary trust holding solely parent debentures -- -- -- (3.2)
Equity in partnerships &
Joint venture earnings 0.4 0.6 4.2 5.2
Net gains on sales of
Property & equipment -- 1.2 3.1 (0.6)
Net earnings before extraordinary items 9.9 13.8 18.7 26.1
% of total revenues 8.0% 9.8% 5.5% 4.4%
------ ------ ------ ------
</TABLE>
The table below sets forth certain information regarding the Company's managed,
leased and owned facilities in the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Managed Facilities (1):
Beginning of year 715 770 1,241
--------------------------------------------------------------------------------------------------
Acquired or merged during year (2) -- 392 543
Added during year 114 218 294
Deleted during year (3)(4) (59) (139) (141)
--------------------------------------------------------------------------------------------------
End of year 770 1,241 1,937
--------------------------------------------------------------------------------------------------
Renewal Rate 92.3% 93.2% 91.4%
Leased Facilities (1):
Beginning of year 485 552 2,024
-------------------------------------------------------------------------------------------------
Acquired or merged during year(2) -- 1,394 380
Added during year (4) 94 260 368
Deleted during year (5) (27) (182) (207)
-------------------------------------------------------------------------------------------------
End of year 552 2,024 2,565
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Owned Facilities (1)(6):
Beginning of year 31 37 237
-------------------------------------------------------------------------------------------------
Acquired or merged during year (2)(3) -- 198 11
Purchased during year 6 12 20
Sold during year -- (10) (7)
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End of year 37 237 261
-------------------------------------------------------------------------------------------------
Total facilities (end of year) 1,359 3,502 4,763
-------------------------------------------------------------------------------------------------
Percentage net growth including acquisitions in
number of facilities:
Managed 7.7% 61.2% 56.1%
Leased 13.8% 266.7% 26.7%
Owned 19.4% 540.5% 10.1%
-------- -------- --------
Total facilities 10.4% 157.7% 36.0%
-------- -------- --------
</TABLE>
(1) Includes 38 managed, 39 leased and 15 owned properties operated under joint
venture agreements at September 30, 1998.
(2) Includes Allright merged locations of 254 managed, 1,273 leased and 178
owned in the fiscal 1997 acquisitions.
(3) Fiscal 1996 and 1997 include four facilities that were previously managed
and subsequently purchased.
(4) Includes Central Parking's lease in fiscal 1996, 1997 and 1998 of one
facility, 11 facilities, and two facilities, respectively, that were
previously managed.
(5) Excluded from the renewal rate calculation in the above table at September
30, 1997 are six managed on-street locations and two leased on-street
locations which are reflected as current year deletions.
(6) Includes the Company's corporate headquarters in Nashville, Tennessee.
Net gains/(losses) derived from sales of property and equipment were $1.2
million, $3.1 million, and $(639) thousand for fiscal 1996, 1997, and 1998,
respectively.
MERGER WITH ALLRIGHT
On March 19, 1999, Central Parking completed a merger with Allright Holdings,
Inc. ("Allright"), pursuant to which, approximately 7.0 million shares of
Central Parking stock, and approximately 0.5 million options and
<PAGE> 9
warrants to purchase such common stock of Central Parking were exchanged for
all of the outstanding shares of common stock and options and warrants to
purchase common stock of Allright. Each outstanding share of Allright common
stock and each outstanding option or warrant to purchase such common stock was
exchanged for 87.6367273 shares of Central Parking common stock. The transaction
constituted a tax-free reorganization and has been accounted for as a
pooling-of-interests under Accounting Principles Board ("APB") Opinion No. 16,
"Business Combinations." Accordingly, prior period financial statements
presented have been restated to include the combined results of operations,
financial position and cash flows of Allright as if it had been part of Central
Parking from the date of Allright's inception, October 31, 1996. Refer to notes
1 and 2 to the accompanying consolidated financial statements.
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,
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Parking revenues 77.1% 87.2% 89.0%
Management contract revenues 22.9 12.8 11.0
---------------------------------------------------------------------------------------------------
Total revenues 100.0 100.0 100.0
Cost of parking and management contracts 75.8 76.7 76.1
General and administrative expenses 12.3 10.9 10.6
Goodwill and noncompete amortization -- 0.5 1.4
---------------------------------------------------------------------------------------------------
Operating earnings 11.9 11.9 11.9
Interest income (expense), net 1.6 (4.8) (4.4)
Dividends on company-obligated mandatorily redeemable
securities of subsidiary trust holding solely
parent debentures -- -- (0.5)
Net gains on sales of property
and equipment 0.8 .9 (0.1)
Minority interest -- -- --
Equity in partnership and joint venture earnings 0.5 1.3 0.9
---------------------------------------------------------------------------------------------------
Earnings before income taxes 14.8 9.3 7.8
Income taxes 5.0 3.8 3.4
---------------------------------------------------------------------------------------------------
Net earnings before extraordinary item 9.8% 5.5% 4.4%
---------------------------------------------------------------------------------------------------
</TABLE>
YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO YEAR ENDED SEPTEMBER 30, 1997
Parking revenues include revenue from leased and owned facilities. Parking
revenues in fiscal 1998 increased to $534.6 million from $295.7 million in
fiscal 1997, an increase of $238.9 million, or 80.8%. Of the $238.9 million
increase, $102.6 million, or 42.9% of the increase, resulted from the following
acquisitions of leased and owned locations: Diplomat, $19.6 million; Kinney,
$81.7 million; Turner, $1.1 million; and Sterling, $0.2 million. With respect to
the Kinney acquisition, Central Parking achieved lower than expected increases
in revenues, particularly in the fourth quarter of fiscal 1998. Kinney was
acquired on February 12, 1998 and its partial year parking revenues of $81.6
million represent 15.3% of total fiscal year parking revenues. The Company's
operating results may be significantly impacted by the results derived from the
Kinney acquired locations. The remaining increase of $136.3 million, or 57.1%,
is from a combination of the addition of 174 net locations, increased rates and
higher utilization of parking spaces at existing facilities.
Management contract revenues in fiscal 1998 increased to $65.8 million from
$43.2 million in fiscal 1997, an increase of $22.6 million, or 52.2%. Of the
$22.6 million increase, $9.4 million, or 41.6%, resulted from the acquisitions
of Diplomat, $2.1 million; Kinney, $4.9 million; Turner, $0.5 million; Sterling,
$0.1 million and National, $1.8 million. The remaining increase resulted
primarily from the addition of 153 net new locations.
Revenues from foreign operations increased to $33.9 million in 1998 from $26.2
million in 1997. The increase of 29.4% in revenues from foreign operations
resulted primarily from the net addition of 51 locations in the United Kingdom
and increased revenues on existing locations.
Cost of parking in fiscal 1998 increased to $441.7 million from $248.1 million
in fiscal 1997, an increase of $193.6 million, or 78.1%. Rent expense increased
$114.7 million, principally as a result of new locations from merger and
<PAGE> 10
acquisitions and additional rent on existing locations. Of the remaining $78.9
million increase in cost of parking, payroll expense accounted for $48.9
million. The payroll expense increase was attributable to a combination of
acquisitions, new locations and increases in existing payroll. Cost of parking,
as a percentage of parking revenues, decreased to 82.6% in fiscal 1998 from
83.9% in fiscal 1997. This decrease 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 1998 increased to $15.0 million from
$11.8 million in the comparable period in 1997, an increase of $3.2 million, or
27.2%. 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 22.8% in fiscal 1998 from 27.3% in fiscal 1997.
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 renewal rates for management
contracts of 91.4% in 1998, and 93.2% in 1997, are generally consistent with the
Company's five year average renewal rates.
General and administrative expenses, excluding goodwill and non-compete
amortization, increased to $63.7 million from $37.0 million in fiscal 1997, an
increase of $26.7 million, or 72.2%. This increase was primarily a result of an
increase in payroll expense of $12.2 million associated with the additional
general and administrative expenses of acquired and merged operations, as well
as opening of additional managed, leased, and owned locations and additional
incentive compensation payments as a result of increased profits. General and
administrative expenses decreased as a percentage of total revenue to 10.6% in
1998 from 10.9% in 1997. This is a result of spreading of general and
administrative expenses over a broader revenue base.
Amortization expense of goodwill and non-compete agreements increased
significantly to $8.3 million in fiscal 1998 from $1.7 million in fiscal 1997,
an increase of $6.6 million. This increase was a result of $233.6 million in
goodwill and non-compete assets recorded in connection with the acquisitions of
Diplomat, National, Kinney, the remaining 50% of CPS-Louisiana, Turner, and
Sterling. Goodwill and non-compete agreements are amortized over periods ranging
from 5 to 30 years.
Interest income in fiscal 1998 increased to $4.0 million from $2.6 million in
fiscal 1997. This increase of $1.4 million was primarily attributable to
increased investment in notes receivable.
Interest expense and dividends on Company-obligated mandatorily redeemable
convertible securities of a subsidiary trust increased to $33.5 million in 1998
compared to $18.5 million in 1997. The increase in interest expense was
primarily attributable to the increase in indebtedness under the Company's
credit facilities and convertible securities. The weighted average balance
outstanding under such credit facilities and convertible securities was $245.3
million during 1998, at a weighted average interest rate of 7.4%.
Equity in partnership and joint venture earnings for fiscal 1998 increased to
$5.2 million from $4.2 million in fiscal 1997. The increase of $1.0 million
resulted primarily from increases in domestic partnerships and joint ventures of
$692,000, due largely to partnership interests acquired in connection with
Kinney, and an increase in equity in joint venture earnings of the German joint
venture of $296,000 over balances in the prior year.
The Company's effective income tax rate related to earnings before extraordinary
items was 43.8% for fiscal 1998 compared to 41.0% for fiscal 1997. The rate
increase was attributable to the increase in the Company's addition of
nondeductible goodwill amortization and the increase in the effective state
income tax rate (see Note 12 to the Company's Consolidated Financial
Statements).
YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO YEAR ENDED SEPTEMBER 30, 1996
Parking revenues in fiscal 1997 increased to $295.7 million from $109.3 million
in fiscal 1996, an increase of $186.4 million, or 170.6%. Of the $186.4 million
increase, $114.8 million or 61.6% of the increase resulted from the addition of
Allright and $41.0 million, or 22.0% of the increase, resulted from the
acquisition of Square and Car Park leased and owned locations. The remaining
increase of $30.6 million, or 16.4%, is from a combination of the net addition
of 80 locations, increased rates and higher utilization of parking spaces at
existing facilities.
<PAGE> 11
Management contract revenues in fiscal 1997 increased to $43.2 million from
$32.5 million in fiscal 1996, an increase of $10.7 million, or 32.9%. Of the
$10.7 million increase, $3.7 million or 34.3% is attributable to Allright and
$2.8 million or 26.2% of the increase resulted from the Square and Car Park
acquisitions. The remaining increase of $4.2 million, or 39.2%, is attributable
to the net addition of 79 locations and increased management fees on existing
locations.
Revenues from foreign operations increased to $26.2 million in 1997 from $13.2
million in 1996. The increase of 99.0% in revenues from foreign operations
resulted primarily from the net addition of 20 locations in the United Kingdom
and increased revenues on existing locations.
Cost of parking in fiscal 1997 increased to $248.1 million from $97.7 million in
fiscal 1996, an increase of $150.4 million, or 153.9%. Rent expense increased
$84.5 million, principally as a result of new locations from merger and
acquisitions and additional rent on existing locations. Of the remaining $65.9
million increase in cost of parking, payroll expense accounted for $33.4
million. The payroll expense increase was attributable to a combination of the
merger, acquisitions, new locations and increases in existing payroll. Cost of
parking, as a percentage of parking revenues, decreased to 83.9% in fiscal 1997
from 89.4% in fiscal 1996. This decrease was predominantly attributable 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 27.3% in fiscal 1997 from 30.0% 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 renewal rates for management
contracts of 93.2% in 1997, and 92.3% in 1996, are generally consistent with the
Company's five year average renewal rates.
General and administrative expenses excluding goodwill amortization in fiscal
1997 increased to $37.0 million from $17.4 million in fiscal 1996, an increase
of $19.6 million, or 112.5%. This increase was primarily a result of an increase
in payroll expense of $13.8 million, associated with the additional general and
administrative expenses of acquired operations, as well as the opening of
additional managed, leased, and owned locations and additional incentive
compensation payments as a result of increased profits. General and
administrative expenses excluding goodwill decreased as a percentage of total
revenues to 10.9% in 1997 from 12.3% in 1996. This is a result of spreading
general and administrative expenses over a broader revenue base.
Amortization of goodwill and non-compete agreements in fiscal 1997 amounted to
$1.7 million. The Company had no expenses from amortization of goodwill in
fiscal 1996. Amortization expense of goodwill was a result of $735 thousand in
goodwill amortization related to Allright and $920 thousand in goodwill and
non-compete amortization, recorded in connection with the acquisitions of Square
and Car Park. This amortization was a result of $32.7 million in goodwill and
non-compete assets recorded in connection with acquisitions of Square and
goodwill amortization of Allright.
Interest income in fiscal 1997 increased to $2.6 million from $2.3 million in
fiscal 1996. This increase of $272 thousand was primarily attributable to
increased investment in notes receivable.
Interest expense and dividends on Company-obligated mandatorily redeemable
convertible securities of a subsidiary trust totaled $18.5 million 1997 compared
to zero in 1996. Of the $18.5 million increase, $13.9 million was attributable
to Allright and $4.6 million is attributable to increased borrowing to fund
additional asset purchases and acquisitions during the year. The weighted
average balance outstanding under such credit facilities and convertible
securities was $287.0 million during 1997, at a weighted average interest rate
of 8.6%, beginning October 31, 1996.
Equity in partnership and joint venture earnings for fiscal 1997 increased to
$4.2 million from $641 thousand in fiscal 1996. The increase of $3.6 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).
The Company's effective income tax rate related to earnings before extraordinary
items was 41.0% for fiscal 1997 compared to 34.3% for fiscal 1996. The rate
increase was attributable to the increase in the Company's federal
<PAGE> 12
income tax rate, 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 rate (see Note 12 to the Company's Consolidated
Financial Statements).
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, pre-opening costs, travel and
transportation patterns affected by weather and calendar related events, and
local and national economic conditions. The Company's increased concentration of
parking facilities in the northeastern and mid-atlantic part of the United
States, primarily a result of the Edison Parking Management, L.P. ("Edison"),
Kinney, Square and Diplomat acquisitions, has increased the risk of weather
related fluctuations such as severe winter snow storms. Additionally, the
Company services the parking for a number of sports stadiums and arenas and can
be impacted by strikes and the success of various sports teams in playoff and
championship series. The following table sets forth certain quarterly statements
of earnings data for the eight fiscal quarters preceding the end of the fiscal
year 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 Square (January 1997), Car Park (May 1997),
Edison (June 1997), Diplomat (October 1997), National (December 1997), Kinney
(February 1998), CPS - Louisiana (March 1998), Turner (April 1998), Sterling
(July 1998) and net gains on sales of property and equipment of $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 restated to reflect the three for two stock splits (see
Note 10(d) to the Company's Consolidated Financial Statements).
Amounts in thousands, except per share data
<TABLE>
<CAPTION>
1997 Fiscal Year
December 31 March 31 June 30 September 30
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $ 40,997 100.0% $ 83,498 100.0% $102,636 100.0% $111,806 100.0%
Operating earnings 5,129 12.5 9,674 11.6 11,903 11.6 13,720 12.3
Net gains on sales of
Property & equipment 3 -- (10) -- (1) -- 3,126 2.8
Earnings before income taxes
and extraordinary item 6,000 14.6 6,187 7.4 7,542 7.3 11,968 10.7
Net earnings before extraordinary item $ 3,899 9.5% $ 3,418 4.1% $ 4,282 4.2% $ 7,087 6.3%
Earnings before extraordinary item
per share - basic $ 0.15 $ 0.11 $ 0.13 $ 0.22
Earnings before extraordinary item
per share - diluted $ 0.15 $ 0.11 $ 0.13 $ 0.22
<CAPTION>
1998 Fiscal Year
December 31 March 31 June 30 September 30
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $121,255 100.0% $142,800 100.0% $165,596 100.0% $170,748 100.0%
Operating earnings 14,599 12.0 17,510 12.3 19,654 11.9 19,889 11.6
Net gains on sales of
Property & equipment (38) -- (654) (.5) (17) -- 70 --
Earnings before
Income taxes 9,667 8.0 9,787 6.9 13,113 7.9 13,950 8.2
Net earnings $ 5,515 4.5% $ 6,034 4.2% $ 7,751 4.7% $ 6,844 4.0%
Earnings per share - basic $ 0.17 $ 0.18 $ 0.21 $ 0.21
Earnings per share - diluted $ 0.17 $ 0.18 $ 0.21 $ 0.21
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for fiscal 1998 was $75.8 million,
an increase of $46.6 million from net cash of $29.2 million provided by
operating activities during the same period in fiscal 1997. The primary factors
which contributed to this change were increased net earnings, increased
depreciation and amortization, and increases in management accounts payable,
accounts payable and accrued expenses during fiscal 1998.
<PAGE> 13
Net cash used in investing activities was $283.9 million for fiscal 1998, a
decrease in cash used in investing activities of $55.6 million from net cash of
$339.5 million used in investing activities during fiscal 1997. The acquisitions
of Edison, Diplomat, Kinney, National, Turner, and Sterling utilized cash of
$216.5 million, net of cash acquired and land, property and equipment purchases
used $72.2 million. In fiscal 1997, the initial formation of Allright utilized
cash of $220.8 million net of cash acquired. Other uses of cash during 1997 were
investment in notes receivable, $17.3 million; purchase of property, equipment
and leaseholds, $14.6 million; and investment in and advances to partnerships,
joint ventures, and unconsolidated subsidiaries, $47.7 million.
Net cash provided by financing activities for fiscal 1998 was $230.1
million, a decrease of $59.8 million from net cash of $289.9 million provided by
financing activities for fiscal 1997. The Company generated proceeds from
issuance of notes payable, Company-obligated mandatorily redeemable securities,
and common stock of $333.8 million, less principal repayments on notes and
capital leases of $107.8 million. This accounted for the majority of cash
provided by financing activities during fiscal 1998. Net borrowings under
revolving credit agreements, capital contributions, and proceeds from issuance
of notes payable of $306.0 million, less principal repayments on notes and
capital leases of $21.8 million accounted for the majority of cash provided by
financing activities during fiscal 1997.
On March 19, 1999, Central Parking established a new credit facility
providing for an aggregate of up to $400 million (the "New Credit Facility")
consisting of a five-year $200 million revolving credit facility including a
sublimit of $25 million for standby letters of credit, and a $200 million
five-year term loan. The principal amount of the term loan shall be repaid in
quarterly payments of $12.5 million commencing June 30, 2000 and continuing
until the loan is repaid. The New Credit Facility bears interest at either prime
rate plus 0.5% or LIBOR plus a margin of 1.12% through June 19, 1999 thereafter
reverts to a grid based pricing based upon the Company achieving certain
financial ratios. The New Credit Facility contains certain covenants including
those that require Central Parking to maintain certain financial ratios,
restrict further indebtedness and limit the amount of dividends paid. Central
Parking used the New Credit Facility to replace Central Parking's previous
credit facility and to refinance the existing debt of Allright Holdings, Inc.
The amount outstanding under the Company's New Credit Facility as of March 31,
1999 was $319 million, with a weighted average interest rate of 6.07% for the
period from March 19, 1999 through March 31, 1999.
The Company had previously established a credit facility (the "Previous Credit
Facility") providing for an aggregate availability of up to $300 million,
consisting of a five-year $200 million revolving credit facility, including a
sub-limit of $25 million for standby letters of credit, and a $100 million term
loan. The $100 million term loan was repaid with proceeds from debt and equity
offerings completed in March 1998, and the remaining balance of the revolving
credit facility was repaid with proceeds from the New Credit Facility.
In October 1996, Allright entered into a credit agreement for the purpose of
financing the purchase of Allright Corporation. Additionally, in October 1996,
Allright defeased all of its Industrial Development Revenue Bonds (IRBs) in the
amount of $17,892,093 and recorded an extraordinary loss of $1,534,000. At June
30, 1997 and 1998, $15,800,000 and $15,515,000, respectively, of the IRBs remain
outstanding in a trust secured by U.S. Treasury bills which were used to defease
these instruments. The credit facility was obtained in two tranches with two
sub-portions to the first tranche. The first tranche, sub-part A of $30 million,
bore an annual interest rate of one month LIBOR plus 3.00% through October 30,
1998, and LIBOR plus 3.25% thereafter. The first tranche, sub-part B of $125
million bore an annual interest rate of LIBOR plus 3.00% through October 31,
1998, and LIBOR plus 3.25% thereafter. The second tranche, of $30 million, bore
an annual interest rate of 12.25% up to October 30, 1998, and 12.5% thereafter.
All tranches were set to mature October 30, 1999. These obligations were repaid
upon consummation of the Merger from proceeds of the New Credit Facility,
described below. In connection with the repayment of such amounts, the Company
recognized an extraordinary loss of $1.5 million, ($1.0 million net of tax).
Allright obtained a revolving line of credit (Permitted Acquisition Loan)
with a maximum borrowing capacity of $75,000,000, maturing October 30, 1999. At
June 30, 1997 and 1998, borrowing capacity available under the Permitted
Acquisition Loan was approximately $62,497,000 and $43,740,000, respectively.
The Permitted Acquisition Loan provides for interest per annum equal to LIBOR
plus 3.75 percent on outstanding borrowings.
<PAGE> 14
On March 5, 1998, Allright obtained a revolving line of credit and letter of
credit agreement (Bank One Loan) with a maximum borrowing capacity of
$5,100,000, maturing October 1, 1999. At June 30, 1998, borrowing capacity
available under the Bank One Loan was $3,813,000. The Bank One Loan provides for
interest for interest per annum equal, at Allright's option, to either the Prime
Rate of interest or Libor plus 2.75 percent on outstanding borrowings.
The CSFB term loans and Permitted Acquisition Loan are secured by substantially
all of Allright's assets. The Bank One Loan is collateralized by a piece of
Allright's property.
MERGERS AND ACQUISITIONS
The Company's acquisition strategy focuses primarily on acquisitions that
will enable Central Parking to become a more efficient and cost-effective
provider in selected markets. Central Parking believes it can recognize
economies of scale by making acquisitions in markets where the Company already
has a presence, which allows Central Parking to reduce the overhead cost of the
acquired company by consolidating its management with that of Central Parking.
In addition, Central Parking seeks acquisitions in attractive new markets.
Management believes acquisitions are an effective means of entering new markets,
thereby quickly obtaining both operating presence and management personnel.
Central Parking also believes it generally can improve acquired operations by
applying its operating strategies and professional management techniques. The
Company's mergers and acquisitions over the last two years, are as follows:
MERGER
Allright Holdings, Inc. As discussed above, on March 19, 1999, Central
Parking completed the Merger with Allright. Prior to the Central
Parking/Allright Merger, Allright's fiscal year ended June 30. In recording the
business combination, Allright's fiscal year-end has been restated to reflect a
September year-end to conform to Central Parking's fiscal year-end. There were
no material transactions between Central Parking and Allright prior to the
Merger. Certain reclassifications have been made to Allright's historical
financial statements to conform to Central's presentation.
ACQUISITIONS
Civic Parking, LLC. On December 31, 1996, Central Parking purchased for
cash, Civic, 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 Central Parking 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 $67.2 million of borrowings under the
credit facility. Of the $91.0 million, $46.0 million was held for resale to a
joint venture partner and $45.0 million was recorded as an investment in joint
ventures. On April 16, 1997, Central Parking consummated the sale of 50% of
Civic to its joint venture partner, an affiliate of Equity Capital Holdings,
LLC, for $46.0 million in cash. Central Parking continues to operate these
garages pursuant to a lease and operating agreement with Civic.
Square Industries, Inc. On January 18, 1997, Central Parking completed a
cash tender to acquire all of the outstanding shares of Square for $54.8
million, including transaction fees and other related expenses. In addition,
Central Parking assumed $23.2 million of existing Square debt. The purchase
price was financed through borrowings under the credit facility. At the time of
the acquisition, Square operated 116 parking facilities containing over 61,000
parking spaces, located primarily in the Northeastern United States.
Car Park Corporation. On May 29, 1997, Central Parking acquired the assets
and related leases of 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 $1.7 million of
borrowings under the Company's then-existing credit facility, and $1.8 million
payable to the seller, which has been repaid in full.
Edison Parking Management, L.P. (the "Edison Partnership"). The Edison
Partnership is a limited partnership formed in June 1997 to operate parking
facilities throughout the Northeast United States under the "Edison ParkFast"
name. The controlling persons of Allright's joint venture partner have been
operating parking facilities in the Northeast under the "Edison ParkFast" name
since 1955. As of September 30, 1998, the Edison Partnership operated
approximately 103 locations in the greater metropolitan New York City area,
Philadelphia, Baltimore, and
<PAGE> 15
northern New Jersey, including Lincoln Center, the Metropolitan Museum of Art,
Columbia Presbyterian Hospital and various office buildings, apartment houses,
hotels, retail centers, commuter terminals, and entertainment facilities.
Diplomat Parking Corporation. On October 1, 1997, Central Parking acquired
the stock and certain assets of Diplomat for approximately $22.2 million in cash
and notes payable. The acquisition was financed through borrowings under the
credit facility. At the time of the acquisition, Diplomat operated 164 parking
facilities containing over 37,000 parking spaces, located primarily in
Washington, D.C. and Baltimore, Maryland.
National Garages, Inc. On December 1, 1997, Allright purchased substantially
all of the assets of National Garages, Inc. ("National"), a privately owned
parking company based in Detroit, which operates 210 facilities located
primarily in the Midwestern United States. The purchase price of approximately
$3.7 million was paid in cash and financed through working capital and $2.2
million in debt under Allright's previous revolving line of credit.
Kinney System Holding Corp. On February 12, 1998, Central Parking acquired
Kinney, a privately held company headquartered in New York City. Kinney has been
in the parking business for over 60 years. In addition to enhancing the
Company's presence in New York City, Kinney increased Central Parking's presence
in a number of other major metropolitan areas such as Boston, Philadelphia and
Washington, D.C. and broadened its geographic coverage in the following nine
states: Connecticut, Florida, Kentucky, Maryland, Massachusetts, New Hampshire,
New York, Pennsylvania, and Virginia. Kinney provides both self-parking and
valet parking services, and provides parking related services such as facility
design and development and consulting services.
Kinney operated 403 parking facilities containing approximately 168,800
spaces, including approximately 76,700 in the New York City metropolitan area,
42,800 in Boston, 31,100 in Philadelphia and 10,300 in Washington, D.C. At the
time of the acquisition, Kinney's facility mix was comprised of 225 leased
sites, 170 managed sites and 8 owned sites. The parking facilities operated by
Kinney include Yankee Stadium, the Waldorf-Astoria, Port Authority Bus Terminal,
World Financial Center, and the General Motors Building in New York City, The
Ritz-Carlton-Boston, Government Center in Boston, Spectrum-Philadelphia, and the
Four Seasons Hotel of Washington, D.C.
Consideration for the Kinney acquisition was approximately $208.8 million,
including $171.8 million in cash, including transaction fees and other related
expenses, and $37.0 million (882,422 shares) in Central Parking common stock. In
connection with this transaction, Central Parking assumed $10.3 million in
capital leases, refinanced $24.2 million in existing Kinney debt and assumed
$4.6 million of Kinney debt. Central Parking financed the Kinney acquisition
through borrowings under the Credit Facility, and ultimately from the issuance
of Central Parking common stock and Central Parking obligations pursuant to the
Preferred Securities. In connection with the Kinney acquisition, the remaining
50% interest in Spectrum Parking Associates ("Spectrum") was acquired for $3.6
million.
Central Parking System of Louisiana, Inc. Central Parking has historically
owned 50% of CPS-Louisiana and on March 30, 1998, purchased the remaining 50%
from Property Service Corporation for $2.5 million in Central Parking common
stock (52,631 shares). CPS-Louisiana manages and operates leased parking
facilities, manages and operates parking facilities owned or leased by other
parties, and provides financial and other advisory services.
Turner Parking System, Inc. On April 1, 1998, Central Parking purchased
substantially all of the assets of Turner, a privately-held parking company
headquartered in Dallas, Texas, for $3.8 million, including $3.0 million in cash
and $800,000 (16,842 shares) in Central Parking common stock. Central Parking
financed the cash portion of the Turner purchase with borrowings under the
Credit Facility.
Sterling Parking, Inc. On July 1, 1998, Central Parking purchased
substantially all of the assets of Sterling, a privately-held parking company
headquartered in Atlanta, Georgia for $4.3 million, including $2.1 million in
cash, including transaction fees and other related costs, and $2.2 million in
Central Parking common stock (54,358 shares). Central Parking financed the cash
portion of the Sterling purchase with borrowings under the Credit Facility. At
the time of the acquisition, Sterling operated 31 parking facilities in Georgia,
Florida, Virginia, California, and Kentucky.
<PAGE> 16
Allied Parking. On October 1, 1998, Allright purchased from Allied Parking,
Inc. ("Allied Parking") four leases relating to parking facilities in Manhattan,
with maturities ranging from 2006 to 2029 for approximately $14.2 million.
Allied agreed to lease to Allright two more lots for 19 years each in exchange
for a prepaid lease payment of $4.9 million. Allright also purchased the right
to use the "Allied Parking" name for $835,000.
On November 8, 1998, Allright purchased six additional leases from Allied
Parking with maturities ranging from 1999 to 2008 for $5.1 million. Allright
also purchased the right to use the "Allied Parking" name associated with these
leases for $300,000.
INTERNATIONAL FOREIGN CURRENCY EXPOSURE
The Company operates wholly owned subsidiaries in the United Kingdom,
Malaysia, Canada and the Netherlands. Total revenues from wholly owned foreign
operations amounted to 9.3%, 7.7%, and 5.7% for the years ended September 30,
1996, 1997, and 1998, respectively. Additionally, the Company operates through
joint ventures in Germany, Spain, and Mexico. 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. For the year ended September
30, 1998, revenues from the United Kingdom and Canada operations represented
65.2% and 32.4%, respectively, of total revenues generated by foreign
operations, excluding earnings from joint ventures.
ECONOMIC AND MONETARY UNION
On January 1, 1999, eleven of the fifteen members countries of the European
Union established fixed conversion rates between their existing sovereign
currencies and a new currency called the "euro." These countries agreed to adopt
the euro as their common legal currency on that date. The euro now trades on
currency exchanges and is available for non-cash transactions. Thereafter and
until January 1, 2002, the euro is scheduled to replace the sovereign legal
currencies of these countries. While the vast majority of Central Parking's
operations within the European Union are currently in the United Kingdom, a
European Member which is not scheduled to participate in the euro conversion,
the Company has operations in countries which have adopted the euro. The Company
has assessed the impact of the euro conversion to its operations in the
participating countries, including the need to adopt new information technology,
parking related equipment and other systems to accommodate euro-denominated
transactions, as well as the impact to currency risk and contractual
relationships. Based on management's assessment of the impact of the euro
conversion, Central Parking does not believe that the euro conversion will have
a material impact on its operations or financial condition.
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, 1996, 1997 and 1998.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." Statement 130 established standards for
reporting and display of comprehensive income and its components. Comprehensive
income is the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources.
Comprehensive income includes all changes in equity except those resulting from
investments by and distributions to owners. This pronouncement is effective for
fiscal years beginning after December 15, 1997 and requires the reporting of
comprehensive income within the financial statements. The Company adopted SFAS
130 in fiscal year 1999.
<PAGE> 17
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. The Company will adopted SFAS 131 in fiscal
year 1999. Management is evaluating the impact, if any, the pronouncement will
have on the presentation of the Company's consolidated financial statements.
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pensions and Other Post-retirement Benefits,"
which amends SFAS Nos. 87, 88, and 106. This pronouncement is effective for
fiscal years beginning after December 15, 1997. The Company has adopted SFAS 132
in fiscal year 1999. Management does not anticipate that the pronouncement will
significantly impact the presentation of Central Parking's consolidated
financial statements.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," effective for fiscal years
beginning after December 16, 1998. SOP 98-1 defines which costs incurred to
develop or purchase internal-use software should be capitalized and which should
be expensed. The company is in the process of determining what impact, if any,
this pronouncement will have its financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which supercedes
SFAS Nos. 80, 105, and 119. Statement 133 established reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts. Under SFAS No. 133, the Company would recognize all derivatives
as either assets or liabilities, measured at their fair value, in the statement
of financial position. This Statement is currently expected to be effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. Management is
evaluating the impact of SFAS 133 to Central Parking's consolidated financial
statements.
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 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.
The Company periodically reviews the carrying value of long-lived intangible
assets such as goodwill, contract rights, and non-compete agreements to
determine if the net book values of such assets continue to be recoverable over
the remainder of the original estimated useful life. In performing this review
for recoverability, the Company estimates the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized. Since
the assets involved are held and used in the operations of the Company,
consideration is also given to actions or remediations the Company might take in
order to achieve the original estimates of cash flows. Adoption of this
Statement did not have a material impact on the Company's financial position,
results of operations, or liquidity.
YEAR 2000
The Company has considered the impact of Year 2000 issues on its computer
systems and applications and has developed remediation plans. These plans are
part of the Company's ongoing business strategies to incorporate advanced
technologies in its information systems, and were contemplated in advance of
Year 2000 issues. The expenditures for system upgrades will be accounted for as
regular capital expenditures and will be depreciated over their estimated useful
lives of 3 - 5 years. The ongoing expenses of training and testing are expensed
as they are incurred. Through September 30, 1998, the Company has spent in
excess of $4 million upgrading its computer information systems in accordance
with its plans for technological enhancement. Such expenditures are not material
to the Company's liquidity. Based on tests and other information currently
available, Central Parking
<PAGE> 18
believes that the upgraded information systems that have been installed are
Year 2000 compliant. The Company believes that systems being contemplated will
also be Year 2000 compliant. System hardware and software that in management's
estimation are not Year 2000 compliant have been fully depreciated. Central
Parking is in the process of testing newly installed systems to determine their
compliance with Year 2000 issues, and, while testing is not yet complete, the
Company believes that all such systems are Year 2000 compliant. Management
believes that it has enough time to fully test and foresee all significant
remaining Year 2000 issues on its information systems and, therefore, does not
have any other contingency plan in place for such systems.
Central Parking uses some fee calculation devices that compute parking fees
and statistical data, and also automate the ingress and egress control
mechanisms at certain parking facilities. Based on contacts with the vendors of
such equipment, Central Parking expects them to make available reasonably priced
upgrades to address Year 2000 issues. Central Parking believes that less than
20% of its operations have fee calculation devices with any Year 2000 issues
with regard to carrying out its parking business. However, the vendors have
given no assurance that such fee computation devices will be Year 2000 compliant
on any given date before December 31, 1999. In the event remediation is not
complete at any of these sites prior to the Year 2000, and a failure of such
equipment were to occur due to processing incompatibilities in the Year 2000,
manual override systems are in place at all locations. Given the limited
technology required to operate such facilities, management believes all material
operations could adequately be performed manually. Such contingency plans are
currently deployed in the events of power failures or other business
interruptions at locations where these devices are located.
Certain property management systems are not currently Year 2000 compliant,
however, alternative systems are being implemented and tested that will
adequately address the Year 2000 issue. The Company believes all such systems
will be fully Year 2000 compliant by December 1999. In the event such systems
are not completely installed, or are not Year 2000 compliant, the Company has
manual back up systems that will adequately perform all material fuctions.
Central Parking is communicating, by means of Year 2000 questionnaires, with
each of its major vendors to determine third party compliance with Year 2000
issues. Although Central Parking cannot require its vendors to respond,
follow-up with each party is being conducted to try and determine and resolve
any Year 2000 issues. Central Parking is also requiring all vendors to warrant
that all software and hardware purchased by Central Parking is fully Year 2000
compliant. While Central Parking does not expect to be materially affected by
any third party's Year 2000 issues, no assurance can be given that a third
party's failure to adequately address their Year 2000 issues could not
materially effect Central Parking's business or financial results.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This report includes various forward-looking statements that are subject to
risks and uncertainties. Forward-looking statements include discussions
concerning future results of operations of the Company including, without
limitation, statements preceded by, followed by or that otherwise include the
words "believes," "expects," "anticipates," "intends," "estimates" or similar
expressions. For those statements, Central Parking claims the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
The following important factors, in addition to those discussed elsewhere in
this report, could affect the future financial results of the Company and could
cause actual results to differ materially from those expressed in
forward-looking statements contained in this document:
- successfully integrating Allright and its other acquisitions
- successful implementation of the Company's operating and growth strategy,
including possible strategic acquisitions;
- fluctuations in quarterly operating results caused by a variety of
factors including the timing of gains on sales of owned facilities,
preopening costs, the effect of weather on travel and transportation
patterns, and local, national and international economic conditions;
<PAGE> 19
- the ability of the Company to form and maintain its strategic
relationships with certain large real estate owners and operators;
- global and/or regional economic factors and potential changes in laws and
regulations, including, without limitation, changes in federal, state and
international laws regulating the environment.
<PAGE> 20
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 1998, 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, 1998. 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 did not audit the consolidated
financial statements of Allright Holdings, Inc., a wholly-owned subsidiary,
which statements reflect total assets constituting 61 percent and 43 percent as
of September 30, 1997 and 1998, and total revenues constituting 35 percent and
36 percent for the years ended September 30, 1997 and 1998, respectively, of the
related consolidated totals. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it related to
the amounts included for Allright Holdings, Inc., is based solely on the report
of the other auditors.
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.
The consolidated financial statements give retroactive effect to the merger of
Central Parking Corporation and Allright Holdings, Inc. on March 19, 1999, which
has been accounted for as a pooling of interests as described in note 1 to the
consolidated financial statements.
In our opinion, based on our audits and the reports of the other auditors, 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 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended September 30, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Nashville, Tennessee
June 3, 1999
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Allright Holdings, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Allright
Holdings, Inc. (a Delaware Corporation) and Subsidiaries (Allright or the
Company) as of June 30, 1998 and 1997, and the related consolidated statements
of operations, stockholders' equity and cash flows of the Company for the year
ended June 30, 1998, and the period from October 31, 1996, through June 30,
1997, and of the Predecessor Company (as defined in Note 1) for the period from
July 1, 1996, through October 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 signficant 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 Allright as of June
30, 1998 and 1997, and the consolidated results of operations, changes in
stockholders' equity and cash flows of the Company for the year ended June 30,
1998, and the period from October 31, 1996, through June 30, 1997, and of the
Predecessor Company for the period from July 1, 1996, through October 30, 1996,
in conformity with generally accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, the Predecessor
Company was acquired by Allright Acquisition, Inc. in a purchase transaction
effective as of October 31, 1996. The acquisition was accounted for as a
purchase and, accordingly, the purchase price was allocated to the assets and
liabilities of the Predecessor Company based on their estimated fair values at
October 31, 1996. Accordingly, the financial statements of the Company are not
comparable to those of the Predecessor Company.
ARTHUR ANDERSEN LLP
Houston, Texas
October 9, 1998
<PAGE> 22
CENTRAL PARKING CORPORATION
Consolidated Balance Sheets
Amounts in thousands, except share data
<TABLE>
<CAPTION>
September 30,
1997 1998
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,308 $ 39,495
Management accounts receivable 12,047 19,847
Accounts and current portion of notes
receivable - other (including amounts due
from related parties of $544 in 1997 and
$238 in 1998) (Note 3) 11,208 14,921
Prepaid rent and other expenses 14,409 22,695
Deferred income taxes (Note 12) 911 545
Prepaid and refundable income taxes 2,154 1,266
------------------------------------------------------------------------------------------------------
Total current assets 58,037 98,769
Investments, at amortized cost (fair value
$4,962 in 1997 and $5,355 in 1998) (Note 4) 4,754 5,087
Notes receivable, less current portion (Note 3) 32,607 46,524
Property, equipment, and leasehold improvements, net (Note 5) 306,160 382,506
Contracts and lease rights, net (Note 6) 51,887 62,472
Goodwill, net (Notes 2 and 6) 65,428 288,170
Investment in and advances to partnerships and joint ventures
(Note 7) 59,004 40,376
Other assets (Note 6) 20,816 30,118
------------------------------------------------------------------------------------------------------
$ 598,693 $ 954,022
======================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease
obligations (Note 8) $ 305 $ 2,881
Accounts payable 35,034 54,918
Accrued payroll and related costs 12,726 16,908
Accrued expenses 13,296 27,403
Management accounts payable 13,325 26,611
Income taxes payable 871 945
------------------------------------------------------------------------------------------------------
Total current liabilities 75,557 129,666
Long-term debt and capital lease obligations, less current
portion (Note 8) 273,725 283,319
Deferred rent 2,391 14,875
Deferred compensation (Note 13) 10,819 11,359
Deferred income taxes (Note 12) 36,949 32,894
Minority interest 21,163 23,103
Other liabilities 4,975 6,892
------------------------------------------------------------------------------------------------------
Total liabilities 425,579 502,108
------------------------------------------------------------------------------------------------------
Company-obligated mandatorily redeemable convertible securities of
Subsidiary holding solely parent debentures (Note 9) -- 110,000
Shareholders' equity (Notes 2, 10, and 13)
Common stock, $0.01 par value; 50,000,000
shares authorized, 32,781,786 and 36,521,500
shares issued and outstanding
in 1997 and 1998, respectively 328 366
Additional paid-in capital 111,728 256,405
Foreign currency translation adjustment 57 (150)
Retained earnings 61,571 85,795
Deferred compensation on restricted stock (570) (502)
------------------------------------------------------------------------------------------------------
Total shareholders' equity 173,114 341,914
Commitments and contingencies (Notes 7, 10, 11, 12, 13, and 15) $ 598,693 $ 954,022
------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 23
CENTRAL PARKING CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
Amounts in thousands, except per share data
<TABLE>
<CAPTION>
Year Ended September 30,
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Parking $ 109,272 $ 295,692 $ 534,573
Management contract 32,534 43,245 65,826
---------------------------------------------------------------------------------------------------
Total revenues 141,806 338,937 600,399
---------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of parking 97,686 248,052 441,704
Cost of management contracts 9,769 11,793 15,000
General and administrative 17,419 37,011 63,726
Goodwill and non-compete amortization -- 1,655 8,317
---------------------------------------------------------------------------------------------------
Total costs and expenses 124,874 298,511 528,747
---------------------------------------------------------------------------------------------------
Operating earnings 16,932 40,426 71,652
---------------------------------------------------------------------------------------------------
Other income (expenses):
Interest income 2,303 2,575 4,027
Interest expense -- (18,497) (30,232)
Dividends on company-obligated mandatorily redeemable
convertible securities of a subsidiary
trust (Note 9) -- -- (3,247)
Net gains (losses) on sales of property and equipment 1,192 3,118 (639)
Minority interest -- (163) (289)
Equity in partnership and joint venture earnings
(Note 7) 641 4,238 5,246
---------------------------------------------------------------------------------------------------
Earnings before income taxes and extraordinary item 21,068 31,697 46,518
Income tax expense (Note 12):
Current 6,647 12,676 17,596
Deferred 585 335 2,777
---------------------------------------------------------------------------------------------------
Total income taxes 7,232 13,011 20,373
Net earnings before extraordinary item $ 13,836 $ 18,686 $ 26,145
Extraordinary item, net of tax -- (1,032) --
Net earnings 13,836 17,654 26,145
===================================================================================================
Basic earnings per share (Note 10):
Net earnings before extraordinary item $ 0.54 $ 0.62 $ 0.76
Extraordinary item, net of tax $ -- $ (0.03) $ --
Net earnings $ 0.54 $ 0.59 $ 0.76
Diluted earnings per share (Note 10):
Net earnings before extraordinary item $ 0.53 $ 0.61 $ 0.74
Extraordinary item, net of tax $ -- $ (0.03) $ --
Net earnings $ 0.53 $ 0.58 $ 0.74
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 24
CENTRAL PARKING CORPORATION
Consolidated Statements of Shareholders' Equity
Amounts in thousands, except per share data
<TABLE>
<CAPTION>
Foreign Deferred
Additional Currency Compensation
Number of Common Paid-In Translation Retained on Restricted
Shares Stock Capital Adjustment Earnings Stock Total
------ ----- ------- ---------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
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 -- -- -- -- (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
-------------------------------------------------------------------------------------------------------------------------------
Initial formation of Allright 5,950 60 72,869 -- -- -- 72,929
Net earnings -- -- -- -- 17,654 -- 17,654
Issuance of common stock 528 5 6,016 -- -- -- 6,021
Issuance under restricted
stock plan -- -- 46 -- -- -- 46
Common stock dividends -- -- -- -- (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 -- -- -- (2) -- -- (2)
===============================================================================================================================
Balance at September 30, 1997 32,782 $ 328 $111,728 $ 57 $ 61,571 $ (570) $ 173,114
===============================================================================================================================
Net earnings -- -- -- -- 26,145 -- 26,145
Issuance of common stock for
acquisitions 1,006 10 42,528 -- -- -- 42,538
Issuance of common stock,
net of offering and
issuance costs 2,612 26 99,854 -- -- -- 99,880
Issuance under restricted
stock plan and employment
agreements 3 -- 129 -- -- -- 129
Issuance under Employee
Stock Ownership Plan 67 1 926 -- -- -- 927
Common stock dividends -- -- -- -- (1,921) -- (1,921)
Exercise of stock options
and related tax benefits 52 1 1,240 -- -- -- 1,241
Amortization of deferred
compensation -- -- -- -- -- 68 68
Foreign currency translation
adjustment -- -- -- (207) -- -- (207)
===============================================================================================================================
Balance at September 30, 1998 36,522 $ 366 $256,405 $ (150) $ 85,795 $ (502) $ 341,914
===============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 25
CENTRAL PARKING CORPORATION
Consolidated Statements of Cash Flows
Amounts in thousands
<TABLE>
<CAPTION>
Year Ended September 30,
1996 1997 1998
-------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings before extraordinary item $ 13,836 $ 18,686 $ 26,145
Extraordinary item, net of tax -- (1,032) --
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation 2,500 8,642 15,063
Amortization of goodwill and non-compete agreements -- 1,655 8,317
Amortization of contract and lease rights, straight-line rent,
Deferred financing fees and other 920 3,250 5,294
Equity in partnership and joint venture earnings (641) (4,238) (5,246)
Distributions from partnerships and joint ventures 1,023 2,990 4,369
Net gains on sales of property and equipment (1,192) (3,118) 639
Deferred income taxes 585 (196) 2,777
Minority interest -- 163 289
Changes in operating assets and liabilities, excluding effects of
acquisitions:
Management accounts receivable (2,211) (3,160) (1,955)
Notes and accounts receivable - other 5,179 (3,977) 1,475
Prepaid expenses (749) (4,204) (6,032)
Prepaid and refundable income taxes -- (533) 888
Other assets (3,277) 1,176 1,329
Accounts payable, accrued expenses,
and deferred compensation 730 10,032 13,114
Management accounts payable 2,156 2,876 12,269
Income taxes payable (872) 178 (2,970)
-------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 17,987 29,190 75,765
-------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of property and equipment 1,467 15,170 6,975
Purchase of property, equipment, and leasehold improvements (16,684) (14,634) (72,222)
Investments in notes receivable, net (2,283) (17,332) --
Purchase of assets held for resale -- (45,962) --
Proceeds from sale of assets held for resale -- 45,962 --
Purchase of contract rights (300) (3,850) (1,573)
Investments in and advances to partnerships, joint ventures
and unconsolidated subsidiaries (1,562) (47,720) (223)
Acquisitions of companies, net of cash acquired -- (270,837) (216,454)
Proceeds from maturities and calls of investments 151 330 374
Purchase of investments (388) (601) (707)
-------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (19,599) (339,474) (283,830)
-------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Dividends paid (1,046) (1,488) (1,871)
Net borrowings under revolving credit agreement, net of issuance costs -- 70,352 (24,360)
Proceeds from issuance of company-obligated mandatorily redeemable
securities, net of issuance costs -- -- 106,477
Proceeds from issuance of notes payable, net of issuance costs -- 168,211 125,137
Capital contributions upon formation of Allright -- 67,428 --
Principal repayments on notes payable -- (21,775) (107,759)
Distribution of debt proceeds from partnerships and joint ventures -- -- 30,285
Proceeds from issuance of common stock and exercise of stock options, net 21,037 7,205 102,177
-------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 19,991 289,933 230,086
-------------------------------------------------------------------------------------------------------------------------
Foreign currency translation 8 134 166
-------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 18,387 (20,217) 28,187
Cash and cash equivalents at beginning of period 10,218 28,605 17,308
Cash and cash equivalents derived from Allright merger -- 8,920 --
-------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 28,605 $ 17,308 $ 39,495
-------------------------------------------------------------------------------------------------------------------------
Non-cash transactions:
Exchange of properties, net of cash $ 2,644 $ -- $ --
Purchase of property and equipment in exchange for liabilities -- -- $ 1,314
Note receivable on property sale $ -- $ 10,225 $ --
Issuance of stock in acquisitions $ -- $ -- $ 42,538
Issuance of restricted stock $ 1,880 $ -- $ 130
-------------------------------------------------------------------------------------------------------------------------
Effects of acquisitions:
Estimated fair value of assets acquired $ 457,021 $ 94,718
Purchase price in excess of the net assets acquired (goodwill) 33,633 233,333
Estimated fair values of liabilities assumed (204,728) (62,587)
Common stock issued -- (42,538)
-------------------------------------------------------------------------------------------------------------------------
Cash paid $ 285,926 $ 222,926
Less cash acquired (15,089) (6,472)
-------------------------------------------------------------------------------------------------------------------------
Net cash paid for acquisitions $ 270,837 $ 216,454
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 26
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 ("CPC") is a United States company chartered in the
State of Tennessee. The consolidated financial statements include accounts of
Central Parking Corporation and its subsidiaries (the "Company" or "Central
Parking") including Central Parking System, Inc. ("CPS") and its wholly-owned
U.S. subsidiaries; Kinney System Holdings, Inc. and its wholly owned
subsidiaries ("Kinney"); Central Parking System of the United Kingdom, Ltd. and
its wholly-owned subsidiary ("CPS-UK"); Central Parking System Realty, Inc. and
its wholly-owned subsidiaries ("Realty"); Allright Holdings, Inc. and its
wholly-owned subsidiaries ("Allright"), including Edison Parking Management,
L.P. ("Edison"), a 50% owned partnership under Allright control. The results of
operations of the remaining 50% of Edison are eliminated as a minority
interest.. Central Parking Finance Trust was established during the year ended
September 30, 1998. All significant inter-company transactions have been
eliminated.
On June 1, 1997, Allright acquired a 50% controlling interest in Edison Parking
Management, L.P. ("Edison"). Edison's assets consist of management contracts
contributed by ParkFast Parking Management, L.P. ("ParkFast"), a third party.
These management contracts were recorded by Allright at their fair market value
and are being amortized on a straight-line basis over their expected useful
lives, which average 12 years. The value of ParkFast's interest is reflected as
minority interest in the accompanying consolidated balance sheets.
The accompanying consolidated financial statements have been restated to reflect
the impact of the merger between Central Parking and Allright, which was
consummated on March 19, 1999. The transaction constituted a tax-free
reorganization and has been accounted for as a pooling-of-interests under
Accounting Principles Board ("APB") Opinion No. 16. "Business Combinations."
Accordingly, Central Parking's financial statements have been restated to
reflect the combined results of operations, financial position and cash flows of
Central Parking and Allright as if Allright had been part of Central Parking
since Allright's inception date of October 31, 1996. Prior to the consummation
of the merger, Allright's fiscal year end was June 30. In recording the business
combination. Allright's consolidated financial statements as of June 30, 1997
and 1998 and for the eight month period and year then ended, respectively, have
been combined with Central Parking's consolidated financial statements for the
fiscal years ended September 30, 1997 and 1998, respectively. Generally accepted
accounting principles proscribe giving effect to a consummated business
combination accounted for by pooling-of-interest method in financial statements
that do not included the date of consummation.
The Company provides parking consulting services and manages parking facilities
throughout the world, principally in the United States and United Kingdom. The
Company manages and operates owned or leased parking facilities, manages and
operates parking facilities owned or leased by third parties, and provides
financial and other advisory services to clients.
(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.
Management accounts payable reflected on the accompanying consolidated balance
sheets is reflected net of cash. 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.
<PAGE> 27
(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 which include investments with original maturities of three
months or less.
(d) Investments
Investment securities consist of debt obligations of states and political
subdivisions and are 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 write-down 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, 1997 and 1998,
all of the Company's investment securities were classified as held-to-maturity.
(e) Property, Equipment, and Leasehold Improvements
Property, equipment, computer software, computer hardware, and leasehold
improvements are recorded at cost. Depreciation is provided principally on a
straight-line basis over a period of one to fifteen years for furniture,
fixtures, and equipment, over three years for computer software, over five years
for computer hardware, over the remaining lives of the corresponding leases for
leasehold improvements, and over thirty to forty years for buildings.
Accelerated depreciation is used for income tax purposes.
(f) Investment in Partnerships and Joint Ventures
Investment in general and limited partnerships and joint ventures are generally
accounted for using the equity method of accounting with the exception of
Edison, which is consolidated into the Company's financial statements. The
Company has a number of joint ventures 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 generally accounted for under the equity method and are included in
equity in partnership and joint venture earnings in the accompanying
consolidated statements of earnings with the exception of Edison, which is
consolidated into the Company's financial statements, with the remaining 50%
eliminated through minority interest.
(g) Contract and Lease Rights
Contract and lease rights consist of capitalized payments made to third-parties,
which provide the Company the opportunity to manage or lease facilities. Lease
rights represent the difference between fair market lease terms and the
contractual lease terms acquired. Contract and lease rights are allocated among
respective locations and are amortized principally on a straight-line basis over
the terms of related agreements which range from five to thirty 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, ranging from 5 - 30 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) Other assets
Other assets is comprised of a combination of the cash surrender value of key
man life insurance policies, security deposits, key money deposits with clients,
deferred issuance costs related to the sale of Preferred Securities discussed in
Note 9, deferred debt issuance costs related to the Company's credit facilities,
and non-compete
<PAGE> 28
agreements. Key money represents deposits and prepayments tendered to clients at
the inception of long-term relationships, and is amortized over the life of the
applicable lease. Non-compete agreements are amortized over the life of the
agreement, or economic useful life whichever is shorter. Deferred issuance costs
related to the Preferred Securities are amortized over the 30 year life of the
underlying subordinated debentures. Deferred debt issuance costs are amortized
over the life of the related debt.
(j) 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 rent and other expenses. The difference between actual lease payments
and straight-line lease expenses over the lease term is included in accrued
expense or deferred rent, as appropriate.
In connection with its acquisitions, the Company revalued certain leases to
estimated fair market value at the time of the respective acquisition. Favorable
operating leases of entities acquired represent the present value of the excess
of the current market rental over the contractual lease payments. Unfavorable
operating leases of entities acquired represent the present value of the excess
of the contractual lease payments over the current market rental. Such write-ups
and write-downs are amortized on a straight-line basis over the remaining life
of the underlying lease, or 30 years, whichever is shorter. Favorable and
unfavorable lease rights are reflected on the accompanying consolidated balance
sheets in contract and lease rights and other liabilities, respectively.
(k) Impairment of Long-Lived Assets
The Company accounts for long-lived assets in accordance with the provisions of
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." 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 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.
The Company periodically reviews the carrying value of long-lived assets,
including goodwill, contract and lease rights, and non-compete agreements, to
determine if the net book values of such assets continue to be recoverable over
the remainder of the original estimated useful life. In performing this review
for recoverability, the Company estimates the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized based on
the estimated diminution of value. Since the assets involved are held and used
in the operations of the Company, consideration is also given to actions or
remediations the Company might take in order to achieve the original estimates
of cash flows. Adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
During fiscal 1998, an impairment loss of approximately $1,075,000 was recorded
for properties of which management changed the intended use from hold and
operate to sell.
(l) 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. Work opportunity 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.
<PAGE> 29
(m) Extraordinary item
On October 31, 1996, the Company recorded an extraordinary loss of $1.5 million
for costs incurred with respect to the defeasance of debt obligations. The tax
benefit resulting from the extraordinary loss reduced the amount of the loss to
$1.0 million.
(n) Pre-opening Expenses
The direct and incremental costs of hiring and training personnel associated
with the opening of new parking facilities and the associated internal
development costs are expensed as incurred.
(o) Per Share and Share Data
Effective October 1, 1997, the Company adopted the provisions of the Financial
Accounting Standards Board Statement No. 128, ("SFAS No. 128"), "Earnings Per
Share." Statement 128 replaced the previously reported primary and fully diluted
earning per share. Basic earnings per share excludes dilution and is computed by
dividing income available to common shareholders by the weighted-average number
of common shares outstanding for the period. Diluted earnings per share reflect
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity.
Earnings per share for all periods presented have been calculated in accordance
with SFAS No. 128. 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 completed in December 1997.
(p) 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 generally included in the currency
translation adjustment in shareholders' equity.
(q) 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,
1998. Book value approximates fair value for substantially all of the Company's
assets and liabilities that fall under the fair value disclosure requirements.
(r) Stock Option Plan
The Company applies the intrinsic value based method of accounting prescribed by
Accounting Principles Board opinion No. 25 ("APB No. 25") Accounting for Stock
Issued to Employees, and related interpretations in accounting for its stock
options. As such, compensation expense would be recorded on the date of grant
only if the current market price of the underlying stock exceeded the exercise
price.
(s) Business Concentration
Approximately 29% of the Company's total parking spaces managed, owned or leased
at September 30, 1998 were attributable to parking and management contract
operations geographically located in the Northeastern and Mid-Atlantic areas of
the United States.
(t) Risk Management
The Company utilizes a combination of indemnity and self insurance coverages up
to certain maximum losses for liability, health and workers' compensation
claims. The accompanying consolidated balance sheets reflect the estimated
losses related to such risks.
(u) Use of Estimates
<PAGE> 30
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.
(v) Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." Statement 130 established standards for
reporting and display of comprehensive income and its components. Comprehensive
income is the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources.
Comprehensive income includes all changes in equity except those resulting from
investments by and distributions to owners. This pronouncement is effective for
fiscal years beginning after December 15, 1997 and requires the reporting of
comprehensive income within the financial statements. The Company adopted SFAS
130 in fiscal year 1999.
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. The Company has adopted SFAS No. 131 in
fiscal 1999. Management does not anticipate that the pronouncement will
significantly impact the presentation of the Company's consolidated financial
statements.
In February 1998, the Financial Accounting Standards Board issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits," which
amends SFAS Nos. 87, 88, and 106. This pronouncement is effective for fiscal
years beginning after December 15, 1997. The Company has adopted SFAS No. 132 in
fiscal 1999. Management does not anticipate that the pronouncement will
significantly impact the presentation of Central Parking's consolidated
financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which supercedes
SFAS Nos. 80, 105, and 119. This Statement is expected to be effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. Management is
evaluating the impact of SFAS No. 133 to Central Parking's consolidated
financial statements.
(w) Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation. Certain reclassifications have been made to Allright's historical
financial statements to conform to Central's presentation.
(2) BUSINESS COMBINATIONS
ALLRIGHT MERGER
- ---------------
Allright Holdings, Inc. On March 19, 1999, Central Parking completed a merger
with Allright, pursuant to which approximately 7.0 million shares of Central
Parking common stock and approximately 0.5 million options and warrants to
purchase common stock of Central Parking, were exchanged for all of the
outstanding shares of common stock and options and warrants to purchase common
stock of Allright. Each outstanding share of Allright common stock and each
outstanding option or warrant to purchase such common stock was exchanged for
87.6367273 shares of Central Parking common stock. The transaction has been
accounted for as a pooling-of-interests under APB Opinion No. 16. Accordingly,
prior period financial statements presented have been restated to include the
combined results of operations, financial position and cash flows of Allright as
if it had been part of Central Parking from the date of Allright's inception,
October 31, 1996. In addition, the consolidated income tax provision has been
restated on a combined basis. The impact of the restatement was to increase net
earnings by $849,000 and to decrease net earnings by $533,000 in 1997 and 1998,
respectively. There were no material transactions between Central Parking and
Allright prior to the Merger.
Following are the results of operations for the separate companies prior to the
Merger and the combined amounts presented in the consolidated financial
statements:
<TABLE>
<CAPTION>
Years Ended September 30,
1997 1998
---- ----
<S> <C> <C>
</TABLE>
<PAGE> 31
<TABLE>
<S> <C> <C>
In thousands
Total revenue:
Central Parking $ 220,454 $ 383,175
Allright 118,483 217,224
----------- -----------
$ 338,937 $ 600,399
Earnings (loss) before income taxes and extraordinary item:
Central Parking $ 32,412 $ 44,224
Allright (715) 2,294
----------- -----------
$ 31,697 $ 46,518
</TABLE>
The Company incurred $27.3 million of merger related expenses on a pre-tax basis
during the quarter ended March 31, 1999. Management estimates that approximately
$3.6 million of payment related to attaining employment periods will incurred in
future periods.
PURCHASE ACQUISITIONS
- ---------------------
Civic Parking LLC. On December 31, 1996, the Company purchased for cash,
Civic Parking LLC ("Civic"), 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 Central Parking under management agreements.
The purchase price was approximately $91.0 million, which was financed
through working capital and $67.2 million of borrowings under the Company's
credit facilities. Of the $91.0 million, $46.0 million was held for resale
to a joint venture partner and $45.0 million was recorded as an investment
in joint ventures. The transaction was accounted for using 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 consummated the sale of 50% of Civic to its
joint venture partner, an affiliate of Equity Capital Holdings, LLC, for
$46.0 million in cash. No gain or loss was recognized on the sale of the 50%
interest. The Company accounts for the remaining interest in Civic under the
equity method. Such results are included in the accompanying consolidated
financial statements from December 31, 1996. Central Parking continues to
operate these garages pursuant to a lease and operating agreement with
Civic.
Square Industries, Inc. On January 18, 1997, Central Parking 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, Central Parking assumed $23.2 million of
existing Square debt. As of September 30, 1997, the Company refinanced $18.9
million of the debt assumed from Square through a draw on the Company's
credit facilities.
Square operated facilities primarily in the Northeastern, part of the United
States. 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.
Car Park Corporation. On May 29, 1997, the Company acquired for cash certain
assets and leases of Car Park Corporation ("Car Park") for $3.5 million;
consisting of parking facilities in the San Francisco metropolitan area. 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 excess of purchase
price over the fair value of the net assets acquired of $3.3 million is
being amortized on a straight-line basis over 25 years.
Diplomat Parking Corporation. On October 1, 1997, Central Parking acquired
the stock and certain assets of Diplomat Parking Corporation ("Diplomat")
for approximately $22.2 million in cash and notes payable. Diplomat operated
parking facilities located primarily in Washington, D.C. and Baltimore,
Maryland. The acquisition was accounted for as a purchase, and accordingly,
the results of operations of Diplomat have been included in the Company's
consolidated financial statements from the date of acquisition. The excess
of purchase
<PAGE> 32
price over the fair value of the net assets acquired of $20.7 million is
being amortized on a straight-line basis over 25 years.
National Garages, Inc. On December 1, 1997, Allright purchased substantially
all of the assets of National Garages, Inc. ("National"), a privately owned
parking company based in Detroit, which operates 210 facilities located
primarily in the Midwestern United States. The purchase prices of
approximately $3.7 million was paid in cash and financed through working
capital and $2.2 million in debt under Allright's revolving line of credit.
Kinney System Holding Corp. On February 12, 1998, Central Parking acquired
Kinney System Holding Corp ("Kinney"), a privately held company
headquartered in New York City. In addition to facilities in New York City,
Kinney increased Central Parking's presence in a number of other major
metropolitan areas such as Boston, Philadelphia and Washington, D.C. and
broadened the Company's geographic coverage in the following nine states:
Connecticut, Florida, Kentucky, Maryland, Massachusetts, New Hampshire, New
York, Pennsylvania, and Virginia.
Consideration for the Kinney acquisition was approximately $208.8 million,
including $171.8 million in cash, including transaction fees and related
expenses, and $37.0 million (882,422 shares) in Central Parking common
stock. In connection with this transaction, Central Parking assumed $10.3
million in capital leases, refinanced $24.2 million in existing Kinney debt
and assumed $4.6 million of Kinney debt.
The Kinney acquisition was accounted for using the purchase method, and
accordingly, the results of operations of Kinney have been included in the
Company's consolidated financial statements from February 12, 1998. The
excess of purchase price over the fair value of the net assets acquired of
$197.6 million is being amortized on a straight-line basis over 30 years.
In connection with the Kinney acquisition, the remaining 50% interest in
Spectrum Parking Associates ("Spectrum") was acquired for $3.6 million. The
acquisition was accounted for as a purchase and the results of operations
are included from February 13, 1998. The excess of purchase price over the
fair value of net assets acquired of $2.2 million is being amortized on a
straight-line basis over 18 years.
Central Parking System of Louisiana, Inc. Central Parking has historically
owned 50% of Central Parking System of Louisiana, Inc ("CPS-Louisiana") and
on March 30, 1998 purchased the remaining 50% from Property Service
Corporation for $2.5 million in Central Parking common stock (52,631
shares). The acquisition was accounted for as a purchase and, accordingly,
the purchase price has been allocated to CPS-Louisiana's assets and
liabilities. The excess of purchase price over fair value of net assets
acquired of $2.5 million is being amortized on a straight-line basis over 5
years.
Turner Parking System, Inc. On April 1, 1998, Central Parking purchased
substantially all of the assets of Turner Parking System, Inc.("Turner"), a
privately-held parking company headquartered in Dallas, Texas, for $3.8
million, including $3.0 million in cash and $800,000 (16,842 shares) in
Central Parking common stock. Turner operated parking facilities in Texas,
Florida, California, Georgia and Washington, D.C. The results of operations
are included in the Company's consolidated financial statements from April
1, 1998. The acquisition was accounted for as a purchase and, accordingly,
the purchase price has been allocated to Turner's assets and liabilities.
The excess of purchase price over fair value of net assets acquired of $3.7
million is being amortized on a straight-line basis over 10 years.
Sterling Parking, Inc. On July 1, 1998, Central Parking purchased
substantially all of the assets of Sterling Parking, Inc. ("Sterling"), a
privately-held parking company headquartered in Atlanta, Georgia for $4.3
million, including $2.1 million in cash, including transaction fees and
other related expenses, and $2.2 million (54,358 shares) in Central Parking
common stock. Sterling operated parking facilities in Georgia, Florida,
Virginia, California, and Kentucky. The results of operations are included
in the Company's consolidated financial statements from July 1, 1998. The
acquisition was accounted for as a purchase and, accordingly, the purchase
price has been allocated to Sterling's assets and liabilities. The excess of
purchase price over fair value of net assets acquired of $4.5 million is
being amortized on a straight-line basis over 10 years.
<PAGE> 33
The following unaudited pro forma condensed results of operations give effect to
the acquisition of Square, Civic Parking, Car Park, Diplomat, Kinney,
CPS-Louisiana, Turner and Sterling 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,
1997 1998
--------- ---------
<S> <C> <C>
Total revenues $ 522,140 $ 653,122
Earnings before income taxes and extraordinary 16,330 42,232
item
Net earnings, before extraordinary item 6,120 22,461
Basic earnings per share $ 0.20 $ 0.64
Basic weighted average common shares 31,018 34,982
outstanding
Diluted earnings before extraordinary item per $ 0.19 $ 0.63
share
Diluted weighted average common shares 31,445 35,682
outstanding
</TABLE>
The foregoing unaudited proforma amounts are based upon certain assumptions and
estimates, including, but not limited to, the recognition of interest expense on
debt incurred to finance the acquisitions and amortization of goodwill over 5 to
30 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. The pro forma results of operations for the year ended September 30,
1997 and 1998 do not reflect certain operational and financial combination
benefits which, in management' opinion, are the direct result of the Square and
Kinney acquisitions.
(3) NOTES RECEIVABLE
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 statement of
earnings.
In connection with the Kinney acquisition, the Company acquired a note
receivable from the City of New York (the "City") related to two parking garages
which were built on behalf of the City. The Company also has a long-term
management agreement to operate the parking garages. Amounts advanced for the
construction of the garages were recorded as a note receivable and are being
repaid by the City in monthly installments of $156,000 including interest at
8.0% through December 2007. In connection with the purchase, the note receivable
was recorded at estimated fair value. At September 30, 1998, the carrying value
of the note was $12.3 million.
In connection with the Allright merger, the Company acquired a mortgage note of
$2.5 million, payable monthly with interest at 7.7%, from a partnership which is
secured by a parking garage and rental assignments. The loan matures in August
2010. Allright also loaned its partner, Edison, $16.5 million in connection with
the Allright's acquisition of its interest in Edison in June 1997. The note is
secured by a partnership interest in Edison, bears interest at a rate of 10%,
and is payable in full in July 2004. The remainder of the notes receivable
consist of notes ranging from $153 thousand to $1.1 million at the end of fiscal
1997, and notes ranging from $17 thousand to $1.1 million at the end of fiscal
1998. The notes bear interest at rates ranging from 8% to 12% at the end of
fiscal 1998.
(4) INVESTMENTS
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,
1997 1998
--------- ----------
<S> <C> <C>
Amortized cost $ 4,754 $ 5,087
Unrealized gains 213 276
</TABLE>
<PAGE> 34
<TABLE>
<S> <C> <C>
Unrealized losses 5 8
- -------------------------------------------------------------- ------------ ------------
Fair value $ 4,962 $ 5,355
- -------------------------------------------------------------- ------------ ------------
</TABLE>
The amortized cost and approximate fair value of debt securities at September
30, 1998 by average estimated maturity are shown below (in thousands):
<TABLE>
<CAPTION>
Amortized Cost Fair Value
-------------- ----------
<S> <C> <C>
Due in one year or less $ 614 $ 663
Due after one year through five years 1,372 1,419
Due after five years through ten years 1,803 1,909
Due after ten years 1,298 1,364
- ------------------------------------------------------------ ----------------------- ---------------
Total securities $ 5,087 $5,355
- ------------------------------------------------------------ ----------------------- ---------------
</TABLE>
(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,
1997 1998
------------ -----------
<S> <C> <C>
Leasehold improvements $ 10,537 $ 15,005
Buildings and garages 34,923 52,482
Operating equipment 24,577 47,021
Furniture and fixtures 3,519 3,657
Capital leases 1,400 5,127
Aircraft 3,955 4,250
- --------------------------------------------------------------------------- ------------ -----------
$ 78,911 $ 127,542
Less accumulated depreciation and amortization 19,311 28,836
- --------------------------------------------------------------------------- ------------ -----------
59,600 98,706
Land 246,560 283,800
- --------------------------------------------------------------------------- ------------ -----------
Property, equipment and
leasehold improvements, net $306,160 $ 382,506
- --------------------------------------------------------------------------- ------------ -----------
</TABLE>
(6) INTANGIBLE AND OTHER ASSETS
(a) Contract and Lease 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
11). 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 and lease rights and accumulated amortization are as follows (in
thousands):
<TABLE>
<CAPTION>
September 30,
1997 1998
---------- ---------
<S> <C> <C>
Contract and lease rights $56,900 $71,403
Less accumulated amortization 5,013 8,931
-------------------------------------------------------------- ---------- ---------
Contract and lease rights, net $51,887 $ 62,472
-------------------------------------------------------------- ---------- ---------
</TABLE>
(b) Goodwill
Goodwill at September 30, 1997 and 1998 consists of (in thousands):
<TABLE>
<CAPTION>
September 30,
1997 1998
-------- ---------
<S> <C> <C>
Excess of purchase price over net assets acquired $ 67,013 $ 298,082
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C>
Less accumulated amortization 1,585 9,912
-------------------------------------------------------------- -------------- -------------
Goodwill, net $ 65,428 $ 288,170
-------------------------------------------------------------- -------------- -------------
</TABLE>
(c) Other assets
Included in other assets are unamortized balances related to non-competition
agreements of $875,000 at September 30, 1997 and $1.8 million at September 30,
1998.
(7) INVESTMENTS IN AND ADVANCES TO 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, 1997 and 1998, and
for the three years ended September 30, 1998 (in thousands):
<TABLE>
<CAPTION>
Investment in and
Accumulated Losses Advances to
In Partnerships and Partnerships and
Joint Ventures Joint Ventures
1997 1998 1997 1998
-------------------------------------- ----------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Civic Parking, LLC $ 45,421 $ 14,907 $ -- $ --
Commerce Street Joint Venture (868) (872) 743 721
Larimer Square Parking Associates 1,015 1,007 2,394 2,212
12 West 48th Street, LLC -- 8,585 -- --
Lodo Parking Garage 1,270 1,230 -- --
Arizona Stadium Parking Garage LLC 1,500 1,505 -- --
CPS Mexico 472 976 2,103 2,313
157166 Canada, Inc. 1,154 1,091 1,201 1,138
Other 1,587 5,523 1,012 40
-------------------------------------- ----------------- ------------- ------------- -------------
$ 51,551 $ 33,952 $7,453 $6,424
-------------------------------------- ----------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
Equity in
Partnerships and Joint Venture
Joint Ventures Earnings Debt
1996 1997 1998 1997 1998
-------------------------------------- ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Civic Parking, LLC $ -- $2,877 $2,383 $ -- $ 59,709
Commerce Street Joint Venture 400 504 602 7,606 7,346
Larimer Square Parking Associates 22 59 103 3,554 3,334
12 West 48th Street, LLC -- -- 548 -- --
Lodo Parking Garage 77 126 145 -- --
Arizona Stadium Parking Garage LLC -- -- 230 1,800 1,976
CPS Mexico 153 514 505 -- --
157166 Canada, Inc. -- (3) (4) -- --
Other (11) 161 734 4,524 4,481
-------------------------------------- ------------ ------------ ----------- ------------ ------------
$ 641 $4,238 $5,246 $ 17,484 $ 76,846
-------------------------------------- ------------ ------------ ----------- ------------ ------------
</TABLE>
(a) Civic Parking, LLC
As explained in Note 2, the Company acquired its 50% joint venture
ownership in Civic Parking during the fiscal year ended September
30, 1997. The Company's results of operations include 50% of Civic
Parking's net earnings from January 1, 1997 to September 30, 1997,
and the net earnings from October 1, 1997 to September 30, 1998.
The four parking garages are located in St. Louis, Missouri and
contain retail spaces.
In March 1998, Civic obtained financing with a financial
institution for $60 million. Civic distributed the loan proceeds to
its shareholders, and as a result, Central Parking received net
proceeds of $30.3 million from this transaction, which reduced the
Company's carrying value of its investment in partnerships and
joint ventures. Unaudited summary information for Civic Parking is
as follows (in thousands):
<TABLE>
<CAPTION>
September 30,
1997 1998
-------------------------------------- ----------------- ------------------
<S> <C> <C>
Financial position:
</TABLE>
<PAGE> 36
<TABLE>
<S> <C> <C>
Land, property and equipment, net $ 90,925 $ 89,124
Cash 1,669 1,662
Other assets 175 108
Liabilities (768) (60,932)
-------------------------------------- ----------------- ------------------
Net assets $ 92,001 $ 29,962
-------------------------------------- ----------------- ------------------
</TABLE>
<TABLE>
<CAPTION>
January 1, Year ended
to September 30, September 30,
1997 1998
-------------------------------------- ----------------- ------------------
<S> <C> <C>
Results of operations:
Revenue $7,668 $ 9,241
Cost of operations 2,458 4,649
-------------------------------------- ----------------- ------------------
Net earnings $5,210 $ 4,592
Distributions to Central Parking $3,680 $ 32,910
-------------------------------------- ----------------- ------------------
</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 completion of the Original Facility.
The joint venture financed the Original Facility with industrial
development bonds in the original principal amount of $8,600,000
(the "Series A Bonds") issued by The Industrial Development Board
of the Metropolitan Government of Nashville and Davidson County
(the "Metro IDB"). The Metro IDB holds title to the Original
Facility, which it leases to the joint venture under a lease
expiring in 2016. The lease of the Original Facility obligates the
venture to make lease payments corresponding to principal and
interest payable on Series A Bonds and provides the venture with an
option to purchase the Original Facility at any time by paying the
amount due under the Series A Bonds and making a nominal purchase
payment to the Metro IDB. The joint venture refinanced the Series A
Bonds in 1994 to achieve more favorable interest rate terms. The
outstanding principal amount of Series A Bonds is reflected in the
above table at September 30, 1997 and 1998.
Also included in investments in and advances to partnerships and
joint ventures are the Series B Bonds purchased in April 1994
relating to the Commerce Street Joint Venture in the amounts of
$760,000 and $743,000 at September 30, 1997 and 1998, respectively.
The Bonds require monthly interest and principal payments at the
index rate (prime) plus 250 basis points (11% at September 30,
1998) through 2009. 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. The remainder of the Series B Bonds are owned by the other
joint venture partner.
(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) 12 West 48th Street, LLC
In connection with the Kinney acquisition, the Company acquired a
40% interest in a limited liability company which owns and operates
a garage and two adjacent buildings in New York City. Kinney's
carrying value of $4.4 million was adjusted by $3.8 million to
reflect the estimated fair value of the partnership's underlying
net assets.
(e) Lodo Parking Garage, LLC
<PAGE> 37
In March 1995, the Company acquired a 50% interest in a joint
venture which holds a parking complex in Denver, Colorado. The
Company invested $1.4 million in the joint venture and manages the
parking facility for the joint venture.
(f) Arizona Stadium Parking Garage, LLC
The Company owns a 50% interest in a joint venture which
constructed the Arizona Diamondback Stadium Parking Garage. The
Company operates this parking facility for the joint venture.
(g) CPS Mexico, Inc.
The Company holds 50% interest in a Mexican joint venture which
manages and leases various parking structures in Mexico. The
Company also has advanced $2.1 and $2.3 million at September 30,
1997 and 1998, respectively, to the affiliate. These loans bear
interest between 10% and 15% and require principal payments over
various terms through 2001.
(h) 157166 Canada, Inc.
In September 1988, the Company acquired a 50% interest in a
Canadian joint venture which holds a parking facility in Montreal,
Quebec. The Company operates this parking facility for the joint
venture.
(8) LONG TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt presented in the accompanying consolidated balance sheet includes
an unsecured credit facility ("Credit Facility") which would have expired
February 11, 2003. The Credit Facility originally provided for an aggregate
availability of up to $300 million, consisting of a five-year $200 million
revolving credit facility, including a sub-limit of $25 million for standby
letters of credit, and a $100 million term loan. The Credit Facility bore
interest until June 30, 1998 at a rate of LIBOR plus 1.25%. On June 30, 1998 the
interest rate on the Credit Facility and the commitment fee on the unused
portion reverted to a grid pricing based upon the achievement of various
financial ratios. The Credit Facility contained certain covenants including
those that required the Company to maintain certain financial ratios, restrict
further indebtedness, and limit the amount of dividends payable. On March 18,
1998, the Company completed offerings of equity and convertible trust issued
preferred securities, from which the Company obtained $195.6 million in net
proceeds. The Company repaid and terminated the $100 million term loan with
proceeds from these offerings. The amount outstanding under the Company's Credit
Facility as of September 30, 1998 was $48.2 million, with an interest rate of
6.5% (LIBOR plus 75 basis points). The weighted average interest rate was 6.88%
for the period the Credit Facility was outstanding. At September 30, 1998, the
Company had $147.1 million available on the Credit Facility. The amount
available is adjusted to reflect letters of credit outstanding of $4.8 million.
In addition, certain contractual obligations were collateralized by irrevocable
letters of credit in the amount of $3.5 million at September 30, 1998. The
Credit Facility was repaid with proceeds from the New Credit Facility described
below.
The Company's previous credit facility, which was unsecured, was scheduled to
expire January 31, 2000. Credit available under the prior facility amounted to
$120 million. As of September 30, 1997 the Company had $70.8 million
outstanding, and $48.0 million available for borrowing, under the 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
September 30, 1997 was 6.7%. Commitment fees for the unused portion of the
credit facility approximated 0.25% of the unused balance.
In October 1996, Allright entered into a credit agreement for the purpose of
financing the purchase of Allright Corporation. Additionally, in October 1996,
Allright defeased all of its Industrial Development Revenue Bonds (IRBs) in the
amount of $17,892,093 and recorded an extraordinary loss of $1,534,000. At June
30, 1997 and 1998, $15,800,000 and $15,515,000, respectively, of the IRBs remain
outstanding in a trust secured by U.S. Treasury bills which were used to defease
these instruments. The credit facility was obtained in two tranches with two
sub-portions to the first tranche. The first tranche, sub-part A of $30 million,
bore an annual interest rate of one month LIBOR plus 3.00% through October 30,
1998, and LIBOR plus 3.25% thereafter. The first tranche, sub-part B of $125
million bore an annual interest rate of LIBOR plus 3.00% through October 31,
1998, and LIBOR plus 3.25% thereafter. The second tranche, of $30 million, bore
an annual interest rate of 12.25% up to October 30, 1998, and 12.5% thereafter.
All tranches were set to mature October 30, 1999. These obligations were repaid
upon
<PAGE> 38
consummation of the Merger from proceeds of the New Credit Facility, described
below. In connection with the repayment of such amounts, the Company recognized
an extraordinary loss of $1.5 million, ($1.0 million net of tax).
Allright obtained a revolving line of credit (Permitted Acquisition Loan) with a
maximum borrowing capacity of $75,000,000, maturing October 30, 1999. At June
30, 1997 and 1998, borrowing capacity available under the Permitted Acquisition
Loan was approximately $62,497,000 and $43,740,000, respectively. The Permitted
Acquisition Loan provides for interest per annum equal to LIBOR plus 3.75
percent on outstanding borrowings.
On March 5, 1998, Allright obtained a revolving line of credit and letter of
credit agreement (Bank One Loan) with a maximum borrowing capacity of
$5,100,000, maturing October 1, 1999. At June 30, 1998, borrowing capacity
available under the Bank One Loan was $3,813,000. The Bank One Loan provides for
interest for interest per annum equal, at the Company option, to either the
Prime Rate of interest or Libor plus 2.75 percent on outstanding borrowings.
The CSFB term loans and Permitted Acquisition Loan are secured by substantially
all of Allright's assets. The Bank One Loan is collateralized by a piece of
Allright's property.
In addition to the Credit Facility, the Company also has several notes payable
outstanding totaling $4.9 million, which are secured by related real estate and
equipment and bear interest at rates ranging from 6.1% to 10.0%. These balances
mature from dates in 1998 to 2006. Future maturities under notes payable are as
follows (in thousands):
<TABLE>
<CAPTION>
Year ended
September 30,
---------------------------------- -----------
<S> <C>
1999 $ 1,032
2000 219,457
2001 1,089
2002 793
2003 48,857
Thereafter 3,457
---------------------------------- -----------
$274,685
---------------------------------- -----------
</TABLE>
In connection with the Kinney acquisition, the Company assumed an agreement
whereby a parking structure and the corresponding land upon which it sits are
leased under a long-term arrangement. The parking structure is accounted for as
a capital lease, and the underlying land is accounted for as an operating lease.
The original agreement called for lease payments over a twenty-year term at a
17.4% interest rate. In connection with purchase accounting, the carrying value
of the related obligation was recorded at fair value. The carrying amount of the
capital lease obligation at September 30, 1998 was $9.2 million, bearing
interest at a rate of 8.0% per annum and requiring monthly payments of
approximately $167,000 per month. The operating lease requires a payment of
approximately $183,000 per month. The lease agreements run through December
2003.
The future minimum lease payments under these capital lease obligations include
the following are as follows (in thousands):
<TABLE>
<CAPTION>
Year ended
September 30,
--------------------------------------------------------------
<S> <C>
1999 $ 5,423
2000 5,381
2001 5,554
2002 4,799
2003 4,748
Thereafter 2,334
---------------------------------------------------- ----------
28,239
Less interest portion at rates ranging from
6.1% to 10% (16,724)
Less current portion (1,849)
---------------------------------------------------- ----------
$ 9,666
---------------------------------------------------- ----------
</TABLE>
On March 19, 1999, Central Parking established a new credit facility providing
for an aggregate of up to $400 million (the "New Credit Facility") consisting of
a five-year $200 million revolving credit facility including a
<PAGE> 39
sublimit of $25 million for standby letters of credit, and a $200 million
five-year term loan. The principal amount of the term loan shall be repaid in
quarterly payments of $12.5 million commencing June 30, 2000 and continuing
until the loan is repaid. The New Credit Facility bears interest at either prime
rate plus 0.5% or LIBOR plus a margin of 1.12% through June 19, 1999 thereafter
reverts to a grid based pricing based upon the Company achieving certain
financial ratios. The New Credit Facility contains certain covenants including
those that require Central Parking to maintain certain financial ratios,
restrict further indebtedness and limit the amount of dividends paid. Central
Parking used the New Credit Facility to replace Central Parking's previous
credit facility and to refinance the existing debt of Allright Holdings, Inc.
(9) CONVERTIBLE TRUST ISSUED PREFERRED SECURITIES OFFERINGS
On March 18, 1998, the Company created Central Parking Finance Trust ("Trust")
which completed a private placement of 4,400,000 shares at $25.00 per share of
5.25% convertible trust issued preferred securities ("Preferred Securities")
pursuant to an exemption from registration under the Securities Act of 1933, as
amended. The Preferred Securities represent preferred undivided beneficial
interests in the assets of Central Parking Finance Trust, a statutory business
trust formed under the laws of the State of Delaware. The Company owns all of
the common securities of the Trust. The Trust exists for the sole purpose of
issuing the Preferred Securities and investing the proceeds thereof in an
equivalent amount of 5.25% Convertible Subordinated Debentures ("Convertible
Debentures") of the Company due 2028. The net proceeds to the Company from the
Preferred Securities private placement were $106.5 million. Each Preferred
Security is entitled to receive cumulative cash distributions at an annual rate
of 5.25% (or $1.312 per share) and will be convertible at the option of the
holder thereof into shares of Company common stock at a conversion rate of
0.4545 shares of Company common stock for each Preferred Security (equivalent to
$55.00 per share of Company common stock), subject to adjustment in certain
circumstances. The Preferred Securities do not have a stated maturity date but
are subject to mandatory redemption upon the repayment of the Convertible
Debentures at their stated maturity (April 1, 2028) or upon acceleration or
earlier repayment of the Convertible Debentures.
The Company's consolidated balance sheets reflect the Preferred Securities of
the Trust as company-obligated mandatorily redeemable convertible securities of
subsidiary holding solely parent debentures.
(10) SHAREHOLDERS' EQUITY
(a) Recapitalization
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. 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 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.
<PAGE> 40
(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) Secondary stock offering
On March 13, 1998, the Company completed a secondary public offering of common
stock in which 2,137,500 shares were sold which generated net proceeds to the
Company of $89.1 million.
(d) Stock Splits
On November 21, 1997 the Company's Board of Directors approved a three-for-two
stock split which was 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.
(e) Warrants
In connection with Allright's acquisition of Allright Corporation, warrants to
purchase 1,177 shares of Allright common stock at $0.01 exercise price were
issued. The fair value of the warrants on the date of grant, estimated at
$1,177,000, was recorded as additional purchase consideration in the formation
of Allright. As a result of the Merger, such warrants represent rights to
acquire 103,148 shares of Central Parking common stock.
(f) Earnings Per Share
Effective October 1, 1997, the Company adopted the provisions of SFAS No. 128.
Statement 128 replaced the previously reported primary and fully diluted
earnings per share with basic and diluted earnings per share. Basic earnings per
share excludes dilution and is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Earnings per share for all periods
presented have been calculated and presented in accordance with SFAS No. 128.
The following tables set forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
September 30, 1996 September 30, 1997 September 30, 1998
Income Common Income Common Income Common
Available Shares Per-share Available Shares Per-share Available Shares Per-share
($000's) (000's) Amount (000's) (000's) Amount (000's) (000's) Amount
- ------------------------- ---------- ----------- ---------- ---------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic earnings per
share before
extraordinary item $13,836 25,762 $ 0.54 $18,686 30,070 $ 0.62 $26,145 34,618 $ 0.76
Effects of dilutive stock
and options:
Stock option plan and -- 112 -- -- 210 (.01) -- 474 (0.02)
warrants
Restricted stock plan -- 127 (0.01) -- 185 -- -- 172
Deferred stock unit plan -- -- -- -- -- -- -- 9 --
Employee stock
Purchase plan -- 41 -- -- 47 -- -- 39 --
- ---------------------------------------------------------------------------------------------------------------------------
Diluted earnings per
share before
extraordinary item $13,836 26,042 $ 0.53 $18,686 30,512 $ 0.61 $26,145 35,312 $ 0.74
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 41
Weighted average common shares used for the computation of basic earnings per
share excludes certain common shares issued pursuant to the Company's restricted
stock plan and deferred compensation agreement, because under the related
agreements the holder of restricted stock will forfeit such shares if certain
employment or service requirements are not met. The effect of the conversion of
the company-obligated mandatorily redeemable securities of the subsidiary trust
has not been included in the diluted earnings per share calculation since such
securities were anti-dilutive. At September 30, 1998, such securities were
convertible into 2,000,000 shares of common stock.
(11) 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 2101. 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>
1999 $ 182,365
2000 150,767
2001 126,096
2002 101,425
2003 86,442
Thereafter 451,849
--------------------------------------------------- -----------
Total future operating lease commitments $1,098,944
--------------------------------------------------- -----------
</TABLE>
Included in the future minimum rental commitments under operating leases are
aggregate payments of $74.9 million resulting from commitments incurred under
the agreement described in Note 6(a).
Rental expense for all operating leases was as follows (in thousands):
<TABLE>
<CAPTION>
Year ended September 30,
1996 1997 1998
----------------------- ------------- ------------ ------------
<S> <C> <C> <C>
Rentals:
Minimum $ 38,882 $105,882 $202,709
Contingent 19,330 36,131 60,989
----------------------- ------------- ------------ ------------
Total rentexpense $ 58,212 $142,013 $263,698
------------------------ ------------- ------------ ------------
</TABLE>
(12) INCOME TAXES
Income tax expense consists of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
1996 1997 1998
---------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal $ 5,585 $ 9,940 $ 13,593
Jobs credit, net of federal tax benefit -- (98) (247)
- -----------------------------------------------------------------------------------------------------------------
Net federal current tax expense 5,585 9,842 13,346
State 639 1,940 3,251
Non-U.S 423 894 999
- -----------------------------------------------------------------------------------------------------------------
6,647 12,676 17,596
Deferred:
Federal and state 585 366 2,780
Non-U.S. -- (31) (3)
- -----------------------------------------------------------------------------------------------------------------
585 335 2,777
- -----------------------------------------------------------------------------------------------------------------
Total income tax expense from continuing operations $ 7,232 $ 13,011 $ 20,373
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Total income taxes are allocated as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
1996 1997 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense from continuing operations $ 7,232 $ 13,011 $ 20,373
Extraordinary Item -- (502) --
</TABLE>
<PAGE> 42
<TABLE>
<S> <C> <C> <C>
Acquisition related expenses for tax purposes in excess of amounts
recognized for financial reporting purposes -- (1,423) (1,467)
Shareholders' equity, for compensation expense for tax
purposes in excess of amounts recognized for financial
reporting purposes (310) (213) (568)
============================================================================== =========== =========== ==========
Total income taxes $ 6,922 $ 10,873 $ 18,338
============================================================================== =========== =========== ==========
</TABLE>
Provision has not been made for U.S. or additional foreign taxes on
approximately $2,863,000, $11,918,000 and $12,068,000 at September 30, 1996,
1997, and 1998, respectively, of undistributed earnings of foreign subsidiaries,
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 and extraordinary
item is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
1996 1997 1998
$ % $ % $ %
- ------------------------------------------------------------- -------- ----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Federal statutory rate on earnings before income taxes $ 7,164 34.0% $ 11,094 35.0% $ 16,281 35.0%
State and city income taxes, net of federal income tax 422 2.0 1,296 4.1 2,113 4.5
benefit
Jobs credits, net of federal tax benefit -- -- (98) (0.3) (247) (0.5)
Tax-exempt interest income (312) (1.5) (88) (0.3) (100) (0.2)
Nondeductible goodwill amortization -- -- 524 1.7 2,598 5.6
Other (42) (0.2) 283 0.8 (272) (0.6)
- ------------------------------------------------------------- -------- ----------- ---------- ---------- ---------- -----------
Income tax expense from continuing operations $ 7,232 34.3% $ 13,011 41.0% $ 20,373 43.8%
- ------------------------------------------------------------- -------- ----------- ---------- ---------- ---------- -----------
</TABLE>
Sources of deferred tax assets and deferred tax liabilities are as follows (in
thousands):
<TABLE>
<CAPTION>
September 30,
1997 1998
----------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Deferred compensation expense $ 5,885 $ 6,182
Accrued expenses and reserves 1,294 873
Prepaid expenses 197 333
Charitable contribution of property 3,080 1,922
Net operating loss carry forwards 18,417 19,990
Capitalized leases -- 2,554
Tax credit carry forwards -- 587
Deferred and capitalized expenses 380 3,866
Amortization of management contracts -- 702
Other 172 462
----------------------------------------------------------------------------------------
Total gross deferred tax assets 29,425 37,471
Deferred tax liabilities:
Deferred tax gain on sales of properties (1,230) (1,367)
Deferred installment gain on sale of property (2,062) (2,019)
Timing differences in recognition of partnership earnings (482) (702)
Property, plant and equipment, due to differences in
depreciation and purchase business combinations (44,129) (47,923)
Other (436) (446)
----------------------------------------------------------------------------------------
Total gross deferred tax liabilities (48,339) (52,457)
Valuation allowance on net operating loss carry forwards (17,124) (17,363)
----------------------------------------------------------------------------------------
Net deferred tax liabilities $(36,038) $(32,349)
========================================================================================
</TABLE>
As of September 30, 1998, the Company has U.S. net operating loss carry forwards
of approximately $45,934,000 which expire between 2002 and 2013. The ability of
the Company to fully utilize these net operating losses is limited due to
changes in ownership of the companies which generated these losses. These
limitations have been considered in determining the deferred tax asset valuation
allowance shown above. Management believes that it is more likely than not that
the results of operations will generate sufficient taxable income to realize
deferred tax assets after giving consideration to the valuation allowance. The
valuation allowance has been provided for loss carry forwards for which
recoverability is not deemed to be more likely than not.
<PAGE> 43
(13) EMPLOYEE BENEFIT PROGRAMS
(a) Stock Plans
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 678,403 shares are
outstanding under this plan at September 30, 1998. 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, 1998, 276,863 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.
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 135,500 shares
are outstanding under this plan at September 30, 1998.
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 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,
1998, 107,432 shares had been issued under this plan.
As part of the transactions effecting the formation of Allright in October 1996,
management of the Allright Corporation was granted an effective interest equal
to $5,500,000. $1,650,000 of this commitment was granted in October 1996, with
the remainder to be issued as directed by and subject to limitations established
by Allright's board of directors.
Effective January 1, 1998, the Allright 1998 Employee Stock Option Plan (the
"1998 Incentive Plan") authorized 3,850 shares of common stock to be available
for awards. The 1998 Incentive Plan is intended in part, as a vehicle by which
Allright's board of directors could fulfill the commitment made to management of
Allright Corporation, the predecessor company. Effective May 20, 1998, 1,605
incentive stock options (ISOs) were issued to management of Allright to purchase
1,605 shares of Allright's common stock at a price of $1,700 per share. Under
the terms of the award, at the time of exercise, a special cash bonus shall be
paid equal to the number of shares of common stock for which the ISO has been
exercised times $1,700 per share. In connection with the merger, these options
were converted into options to purchase 140,657 shares of Central Parking common
stock. One-third of the ISOs vested on May 20, 1998, one -third on January 1,
1999, and the remaining third will vest on January 1, 2000. The ISOs expire
January 1, 2008.
In February 1997, stock options to purchase 2,917 shares of Allright's common
stock were granted to an executive of Allright at an option price per share
above market on the date of grant. Vesting commenced on March 1, 1997, with such
options vesting at the rate of 61 shares per month. In connection with the
merger, these options were converted into options to purchase 255,636 shares of
Central Parking common stock.
In July 1997, stock options to purchase 740 shares of common stock were granted
to an executive of Allright at an option price per share above market on the
date of grant. The options vest 25 percent on July 25, 1998, 1999, 2000 and
2001. In connection with the Merger, these options were converted into options
to purchase 64,851 shares of Central Parking common stock.
Based on the terms in the respective agreements, all options to acquire
Allright's common stock outstanding at June 30, 1998 accelerated at various
rates due to the consummation of the Merger between Allright and Central
Parking.
<PAGE> 44
The following table summarizes the transactions pursuant to the Company's stock
option plans for the last three fiscal years:
<TABLE>
<CAPTION>
Number Option Price
of Shares Range Per Share
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at September 30, 1995 -- --
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 537,609 $12.55 to $30.50
Exercised 45,525 $8.00
Canceled 18,000 $21.25
- -------------------------------------------------------------------------------------------------
Outstanding at September 30, 1997 793,509 $8.00 to $30.50
- -------------------------------------------------------------------------------------------------
Granted 587,155 $19.40 to $51.06
Exercised 52,370 $8.00 to $22.50
Canceled 53,250 $21.25 to $43.44
- -------------------------------------------------------------------------------------------------
Outstanding at September 30, 1998 1,275,044 $8.00 to $51.06
- -------------------------------------------------------------------------------------------------
</TABLE>
At September 30, 1998, options to purchase 732,568 shares were exercisable.
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>
<CAPTION>
Year Ended September 30,
1996 1997 1998
-----------------------------------
<S> <C> <C> <C>
As reported:
Net income (in thousands) $ 13,836 $ 18,686 $ 26,145
Basic earnings before extraordinary item per share 0.54 0.62 0.76
Diluted earnings before extraordinary item per share 0.53 0.61 0.74
Pro Forma - SFAS 123
Net income (in thousands) $ 12,840 $ 10,672 $ 20,996
Basic earnings before extraordinary item per share 0.50 0.35 0.61
Diluted earnings before extraordinary item per share 0.49 0.35 0.59
</TABLE>
The estimated weighted average fair value of the options granted were $3.60 for
1996 option grants, $16.34 for 1997 option grants and $13.41 for 1998 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.
(b) Profit Sharing Plan
The Company has a profit-sharing plan for domestic employees to which employer
contributions are at the discretion of the Board of Directors. Voluntary
after-tax contributions not in excess of 10% of compensation may be made by
non-highly compensated employees.
Eligible employees, 20 years or older, may become a participant in the plan
after one year of continuous service, if the employee was employed prior to
reaching age 65. An employee's interest in the plan vests after two years at the
rate of 20% each year, so that the employee is fully vested at the end of seven
continuous years of service.
Employer expense associated with this plan was $971,000, $1,136,000 and
$1,400,000 in years 1996, 1997, and 1998, respectively.
A trusteed noncontributory profit-sharing plan covered substantially all
employees of Allright. Contributions under the plan were based on 5% of
consolidated pretax income from parking operations, as adjusted as specified in
the
<PAGE> 45
plan, and approximated $680,000 for the period from October 31, 1996 through
June 30, 1997 and $1,398,000 for the year ended June 30, 1998.
(c) Incentive Compensation Agreements
The Company has incentive compensation agreements with certain key employees.
Participating employees receive an annual bonus based on profitability of the
operations for which they are responsible. Incentive compensation expense is
accrued during the year based upon management's estimate of amounts earned under
the related agreements. Incentive compensation under all such agreements was
approximately $4,371,000, $5,160,000, and $5,775,000 in years 1996, 1997 and
1998, respectively.
(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 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
$412,000, $88,000, and $330,000 in fiscal years 1996, 1997 and 1998,
respectively.
Agreements with certain former key executives of Allright provide for aggregate
annual payments ranging from $20,000 to $144,000 per year for periods ranging
from 10 years to life, beginning when the executive retires or upon death or
disability. Under certain conditions, the amount of deferred benefits can be
reduced. Life insurance contracts with a face value of approximately $9,288,000
have been purchased to fund, as necessary, the benefits under these agreements.
The cash surrender value of the life insurance contracts is approximately
$900,000 and $1,135,000 at June 30, 1997 and June 30, 1998, respectively, and is
included in other noncurrent assets. The plan is a nonqualified plan and is not
subject to ERISA funding requirements. Net pension costs for 1997 and 1998 were
$316,000 and $494,000, respectively. At June 30, 1998, Allright had recorded a
potential liability of $7.6 million for accrued pension costs associated with
this plan. The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations was 7% for the period from October 31, 1996,
through June 30, 1997 and the year ended June 30, 1998.
(e) Deferred Unit Plan
On December 19, 1996, the Board of Directors approved the adoption of the
Company's Deferred Stock Unit Plan. Under the plan, certain key employees 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
<PAGE> 46
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, 1998 $490,207 of compensation has been deferred under this
plan.
(f) Severance Agreements
Allright 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. In addition, Allright has agreements with several employees which
call for severance payments in the event of termination.
(g) Employment Agreements
In connection with the merger, the Company entered into certain employment and
management continuity agreements with certain key employees, Included in merger
costs at March 31, 1999 is $8.0 million related to such employment agreements.
Under such agreements, certain payments will be made which are contingent upon
continued employment through certain dates. Payments that were required prior to
and concurrent with the consummation of the merger have been included in merger
costs for the quarter ended March 31, 1999. Payments to be made in future
periods, subject to attaining the employment periods, total approximately $3.6
million.
(14) RELATED PARTIES
The Company leases two properties from an entity 50% owned by the Company's
chairman for $290,000 per year for a 10-year term and pays percentage rent to
the entity. Total rent expense, including percentage rent, was $290,000,
$354,000, and $442,000 in 1996, 1997 and 1998, respectively. The Company will
receive 25% of the gain in the event of a sale of these properties during the
term of the lease pursuant to the lease agreements. 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.
(15) 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 coverages for individual claims in excess
of various dollar amounts, subject to annual aggregate limits.
In connection with the initial formation of Allright, Nedinco Delaware
Incorporated ("Nedinco") and Hang Lung Development Company Ltd. agreed to
indemnify Allright for certain costs and liabilities incurred in connection with
or arising out of Allright's predecessor's operations prior to October 31, 1996.
As a result of the indemnification, expenses related to items covered by the
indemnification are being paid directly by Nedinco.
(16) SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments made for interest and income taxes were as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
1996 1997 1998
------------- ------------ -------------
<S> <C> <C> <C>
Interest $ -- $ 14,837 $ 27,516
Income taxes $ 7,209 $ 12,231 $ 17,901
</TABLE>
(17) BUSINESS SEGMENTS
<PAGE> 47
The Company's business activities consist of domestic and foreign operations.
Foreign operations are conducted primarily in the United Kingdom, with segments
in Canada and Malaysia. The Company also conducts business through joint
ventures in Mexico, Germany, and Spain. Revenues attributable to foreign
operations were less than 10% of consolidated revenues for each of fiscal years
1996, 1997 and 1998. Further, with the exception of the United Kingdom, there
are no countries that account for 10% or greater of total foreign revenues.
Therefore, the Company includes all foreign operations in a single reporting
segment.
A summary of information about the Company's operations by segments is as
follows (in thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
1996 1997 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total revenues:
Domestic $ 128,631 $ 312,719 $ 566,472
Foreign 13,175 26,218 33,927
- ------------------------------------------------------------------------------------------------------
Consolidated $ 141,806 $ 338,937 $ 600,399
======================================================================================================
Operating earnings:
Domestic $ 15,873 $ 37,798 $ 68,140
Foreign 1,059 2,628 3,512
- ------------------------------------------------------------------------------------------------------
Consolidated $ 16,932 $ 40,426 $ 71,652
======================================================================================================
Earnings before income taxes and extraordinary item:
Domestic $ 19,748 $ 28,858 $ 42,801
Foreign 1,320 2,839 3,717
- ------------------------------------------------------------------------------------------------------
Consolidated $ 21,068 $ 31,697 $ 46,518
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
September 30,
1997 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Identifiable assets:
Domestic $ 587,594 $ 935,210
Foreign 11,099 18,812
- ------------------------------------------------------------------------------------------------------
Consolidated $ 598,693 $ 954,022
======================================================================================================
</TABLE>
(18) SUBSEQUENT EVENTS
Allied Parking. On October 1, 1998, Allright purchased from Allied Parking, Inc.
("Allied") four leases relating to parking facilities in New York City, with
remaining lease terms ranging from 2006 to 2029 for approximately $14.2 million.
Allied agreed to lease to Allright two more lots for 19 years, each in exchange
for a note receivable of $4.9 million, secured by an assignment of rents.
Allright also purchased the right to use the "Allied Parking" name for $835,000.
On November 8, 1998, Allright purchased six additional leases from Allied
Parking with maturities ranging from 1999 to 2008 for $5.1 million. Allright
also purchased the right to use the "Allied Parking" name associated with these
leases for $300,000.
<PAGE> 48
On May 10, 1999, the Company entered into a definitive agreement to purchase a
parking facility that is being developed in Chicago by a wholly owned subsidiary
of Prime Group Realty Trust (NYSE: PGE). The purchase price is approximately
$37.3 million. The garage will have a total of 1,018 parking spaces as well as
4,200 square feet suitable for retail. Under the terms of the agreement, the
purchase will occur upon completion of the parking facility, which is expected
in the latter part of 2000.
During April 1999 the Company purchased an additional lease from Allied Parking
with a lease term through 2020 for $3.0 million. Allright also purchased the
right to use the "Allied Parking" name associated with these as part of the
purchase price.
On May 28, 1999, the Company purchased the remaining 60% interest in a
partnership which operates a parking facility in New York City for $23.2 million
in cash. The Company previously owned 40% of the partnership. The previous
partner will continue to manage the garage for the next 7 years.
In connection with the Allright Merger, the Company incurred in the quarter
ended March 31, 1999, $27.3 million of merger related expenses on a pre-tax
basis. The Company anticipates approximately $10.2 million of additional
expenses related to the Allright merger, which will be recognized when incurred
in subsequent quarters. Included in this total is approximately $3.6 million of
amounts to be paid to certain Allright employees under retention and employment
agreements.
<PAGE> 49
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
For the three months ended December 31, 1998 and
December 31, 1997
OVERVIEW
The Company operates parking facilities under three types of arrangements:
leases, fee ownership, and management contracts.
On March 19, 1999, Central Parking completed a merger with Allright Holdings,
Inc. ("Allright"). The transaction constituted a tax-free reorganization and has
been accounted for as a pooling-of-interests under Accounting Principles Board
("APB") Opinion No. 16, "Business Combinations." Refer to the accompanying notes
to the consolidated condensed financial statements.
Parking revenues consist of Central Parking Corporation and subsidiaries
("Central Parking" or the "Company") revenues from leased and owned facilities.
Cost of parking relates to both leased and owned facilities and includes rent,
payroll and related benefits, depreciation (if applicable), maintenance,
insurance, and general operating expenses.
Parking revenues from owned properties amounted to $15.3 million and $9.4
million for the three months ended December 31, 1998 and December 31,1997,
respectively. Owned properties parking revenues, as a percentage of parking
revenues, accounted for 9.7% and 8.7% in the three months ended December 31,
1999 and 1998, respectively. Ownership of parking facilities, either
independently or through joint ventures, typically requires a larger capital
investment than managed or leased facilities but provides maximum control over
the operation of the parking facility and the greatest profit potential of the
three types of operating arrangements. As the owner, all changes in owned
facility revenue and expense flow directly to the Company. Additionally, the
Company has the potential to realize benefits of appreciation in the value of
the underlying real estate if the property is sold. Central Parking assumes
complete responsibility for all aspects of the property, including all
structural, mechanical, or electrical maintenance or repairs and property taxes.
Parking revenues from leased facilities amounted to $142.4 million and $98.3
million for the first three months of fiscal 1999 and 1998, respectively. Leased
properties parking revenues, as a percentage of parking revenues, accounted for
90.3% and 91.3% in the three months ending December 31, 1998 and 1997,
respectively. Leases generally provide for a contractually established payment
to the facility owner, which is either a fixed annual amount, a percentage of
gross revenues, or a combination thereof. As a result, Central Parking's
revenues and profits in its lease arrangements are dependent upon the
performance of the facility. Leased facilities require a longer commitment and a
larger capital investment by Central Parking than managed facilities but
generally provide a more stable source of revenue and a greater opportunity for
long-term revenue growth. Under its leases, the Company is typically responsible
for all facets of the parking operations, except for structural, mechanical, or
electrical maintenance or repairs, or property taxes. Lease arrangements are
typically for terms of three to ten years, with renewal options.
Management contract revenues amounted to $22.9 million and $13.6 million for the
three months ended December 31, 1998 and 1997, respectively. Management contract
revenues consist of management fees (both fixed and percentage of revenues) and
fees for ancillary services such as insurance, accounting, equipment leasing,
and consulting. The cost of management contracts includes insurance premiums and
claims and other indirect overhead. 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, Central Parking is not
responsible under its management contracts for structural, mechanical, or
electrical maintenance or repairs, or for providing security or guard services
or for paying property taxes. The typical management contract is for a term of
one to three years and generally is renewable for successive one-year terms, but
is cancelable by the property owner on short notice.
The Company's clients have the option of obtaining insurance on their own or
having Central Parking provide insurance as part of the services provided under
the management contract. Because of its size and claims experience,
<PAGE> 50
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, Central Parking generates profits on
the insurance provided under its management contracts.
As of December 31, 1998, Central Parking operated 1,960 parking facilities
through management contracts, leased 2,575 parking facilities, and owned 266
parking facilities, either independently or in joint venture with third parties.
Three Months Ended December 31, 1998 Compared to Three Months Ended December 31,
- --------------------------------------------------------------------------------
1997
- ----
Parking revenues for the first quarter of fiscal 1999 increased to $157.7
million from $107.7 million in the first quarter of fiscal 1998, an increase of
$50.1 million, or 46.5%. Of the $50.1 million increase, $34.0 million resulted
from the acquisitions of Kinney, Turner and Sterling's 251 leased and owned
locations. The remaining increase of $16.1 million, resulted from the net
addition of 196 leased and owned locations over the same period last year as
well as a combination of rate increases and higher utilization of parking spaces
at existing facilities. During the previous quarter, the Company converted four
previously leased locations to a management agreement. This conversion reduced
parking revenues by $3.3 million in the first quarter of fiscal 1999 as compared
to the same quarter of fiscal 1998. Revenues from foreign operations amounted to
$8.3 million and $8.4 million, for the quarters ended December 31, 1998 and
1997, respectively.
Management contract revenues for the first quarter of fiscal 1999 increased to
$22.9 million from $13.6 million in the first quarter of fiscal 1998, an
increase of $9.3 million or 68.8%. Of the $9.3 million increase, $2.9 million
resulted from the addition of 417 management locations through the acquisitions
of Kinney, Turner, Sterling, and National. The remaining increase of $6.4
million is attributed to the net addition of 388 management contracts and
increased management fees on existing locations.
Cost of parking in the first quarter of 1999 increased to $129.0 million from
$89.1 million in the first quarter of 1998, an increase of $39.9 million or
44.8%. Rent expense increased $23.4 million from the first quarter of 1998 to
the first quarter of 1999, principally as a result of new locations from
acquisitions.. Payroll increased $8.3 million from the quarter ended December
31, 1998 over the same period in 1999, principally as a result of new locations
from acquisitions and increases on existing locations. Cost of parking as a
percentage of parking revenues decreased to 81.8% in the first quarter of fiscal
1999 from 82.6% in fiscal first quarter 1998. This decrease was attributable to
lower operating costs associated with facilities acquired with Kinney, as well
as the Company's conversion of four previously leased locations to a management
agreement, which reduced costs of parking by $2.3 million in the first quarter
of fiscal 1999 as compared to the same quarter of fiscal 1998.
Cost of management contracts in fiscal first quarter 1999 increased to $5.6
million from $3.3 million in the comparable period in 1998, an increase of $2.3
million or 73.4%. The increase in cost reflects higher insurance claims, in
total, and as a percentage of management contract revenue, and higher employment
taxes associated with the increase in the number of managed facilities. Cost of
management contracts as a percentage of management contract revenue increased to
24.6% for the first fiscal quarter 1999 from 23.9% for the same period in 1998.
General and administrative expenses excluding amortization of goodwill increased
to $19.7 million for the first quarter of fiscal 1999 from $13.4 million in
fiscal first quarter 1998, an increase of $6.3 million or 46.8%. The increase is
primarily attributable to the purchase of Kinney and the increased
administrative activities associated with the Kinney operations. General and
administrative expenses, as a percentage of revenues, were 10.9% for the first
quarter of fiscal 1999 compared to 11.1% for the first quarter of fiscal 1998.
Goodwill and non-compete amortization for the first quarter of fiscal 1999
increased to $2.9 million from $889 thousand in fiscal first quarter 1998, an
increase of $2.0 million, as a result of the Sterling, CPS of Louisiana, Turner,
and Kinney acquisitions.
Interest income increased to $1.1 million for the first quarter of fiscal 1999
from $839 thousand in the first quarter of fiscal 1998, an increase of $281
thousand, or 31.0%. The increase in interest income is a result of larger
balances in notes receivable outstanding during the quarter.
Interest expense and dividends on Company-obligated mandatorily redeemable
convertible securities of a subsidiary trust increased to $9.0 million for the
first quarter of fiscal 1999 from $6.9 million in the first quarter of fiscal
1998.
<PAGE> 51
The increase in interest expense was primarily attributable to higher
outstanding balances on the Company's credit facilities. The weighted average
balance outstanding under such credit facilities and convertible securities was
$392.2 million during the quarter ended December 31, 1998, at a weighted average
interest rate of 7.9% compared to $275.1 million during the quarters ended
December 31, 1997 at an average interest rate of 8.9%.
Income taxes increased to $6.5 million for the first quarter of fiscal 1999 from
$4.2 million in the first fiscal quarter in 1998, an increase of $2.3 million or
55.0%. The effective tax rate for the first fiscal quarter 1999 was 39.2%
compared to 43.0% for the 1998 quarter. The increase in the effective tax rate
is attributable to a combination of decreasing interest income on tax-exempt
investments, an increase in non-tax deductible goodwill amortization, and an
increase in effective state tax rates.
Liquidity and Capital Resources
- -------------------------------
Operating activities for the three months ended December 31, 1998 provided net
cash of $4.0 million, compared to $13.5 million of cash provided by operating
activities for the three months ended December 31, 1997. Net earnings of $10.1
million and depreciation and amortization of $9.1 million, partially offset by
increases in management accounts receivables, prepaid expenses and other assets,
and decreases in accounts payable account for the majority of the cash provided
by operating activities during the first quarter of 1999. Net earnings of $5.5
million, depreciation and amortization of $4.9 million, increases in notes and
accounts receivable of $1.9 million, and increases in income tax payable account
for the majority of the cash provided by operating activities.
Investing activities for the three months ended December 31, 1998 used net cash
of $40.2 million, compared to $17.9 million for the same period in 1997.
Purchase of property, equipment, leasehold improvements, and contract rights of
$35.4 million and investment in notes receivable of $4.9 million account for the
majority of the cash used by investing activities during the first quarter 1999.
Purchase of property, equipment, and leasehold improvements of $6.7 million and
acquisitions of companies of $12.3 million, partially offset by proceeds from
sales of property of $2.1 million account for the majority of the cash used by
investing activities in the first quarter of 1998.
Financing activities for the three months ended December 31, 1998 provided net
cash of $15.7 million, compared to $7.0 million provided in the same quarter of
the previous year. Proceeds from issuance of notes payable of $15.3 million
during the three months ended December 31, 1998 accounts for the majority of the
cash provided by financing activities. Net borrowings under revolving credit
agreements of $6.6 million account for the majority of cash provided by
financing activities during the three months ended December 31, 1997.
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 from Central Parking's New
Credit Facility (described below) over the next twelve months. In the ordinary
course of business, Central Parking is required to maintain and, in some cases,
make capital improvements to the parking facilities it operates; however, as of
December 31, 1998, Central Parking had no material outstanding commitments for
capital expenditures related to current operations except as discussed below. If
Central Parking identifies investment opportunities requiring cash in excess of
Central Parking's cash flows and the New Credit Facility, Central Parking may
seek additional sources of capital, including the sale or issuance of Central
Parking common stock or convertible securities, or amending the New Credit
Facility to obtain additional indebtedness. Central Parking's ability to raise
additional capital by issuing additional shares of common stock is limited as a
result of the registration rights agreement entered into in connection with the
merger with Allright Holdings, Inc. ("Allright"). The registration rights
agreement provides certain limitations and restrictions upon Central Parking's
ability to issue new shares of Company common stock. While Central Parking does
not expect this limitation to affect its working capital needs, it could have an
impact on Central Parking's ability to complete significant acquisitions.
Future Cash Commitments
- -----------------------
On May 10, 1999, the Company entered into a definitive agreement to purchase a
parking facility that is being developed in Chicago by a wholly owned subsidiary
of Prime Group Realty Trust (NYSE: PGE). The purchase price is approximately
$37.3 million. The garage will have a total of 1,018 parking spaces as well as
4,200 square feet suitable for retail. Under the terms of the agreement, the
purchase will occur upon completion of the parking facility, which is expected
in the latter part of 2000.
<PAGE> 52
During April 1999 the Company purchased an additional lease from Allied Parking
with a lease term through 2020 for $3.0 million. Allright also purchased the
right to use the "Allied Parking" name associated with these as part of the
purchase price.
On May 28, 1999, the Company purchased the remaining 60% interest in a
partnership which operates a parking facility in New York City for $23.2 million
in cash. The Company previously owned 40% of the partnership. The previous
partner will continue to manage the garage for the next 7 years.
In connection with the Allright Merger, the Company incurred in the quarter
ended March 31, 1999, $27.3 million of merger related expenses on a pre-tax
basis. The Company anticipates approximately $10.2 million of additional
expenses related to the Allright merger, which will be recognized when incurred
in subsequent quarters. Included in this total is approximately $3.6 million of
amounts to be paid to certain Allright employees under retention and employment
agreements.
New Credit Facility
- -------------------
On March 19, 1999, Central Parking established a new credit facility providing
for an aggregate of up to $400 million (the "New Credit Facility") consisting of
a five-year $200 million revolving credit facility including a sublimit of $25
million for standby letters of credit, and a $200 million five-year term loan.
The principal amount of the term loan shall be repaid in quarterly payments of
$12,500,000 commencing June 30, 2000 and continuing until the loan is repaid.
The New Credit Facility bears interest at either prime rate plus 0.5% or LIBOR
plus a margin of 1.12% through June 19, 1999 thereafter reverts to a grid based
pricing based upon the Company achieving certain financial ratios. The New
Credit Facility contains certain covenants including those that require Central
Parking to maintain certain financial ratios, restrict further indebtedness and
limit the amount of dividends paid. Central Parking used the New Credit Facility
to replace Central Parking's previous credit facility and to refinance the
existing debt of Allright Holdings, Inc. The amount outstanding under the
Company's New Credit Facility as of March 31, 1999 is $319 million, with a
weighted average interest rate of 6.065% for the period from March 19, 1999
through March 31, 1999.
The Company had previously established a credit facility (the "Previous Credit
Facility") providing for an aggregate availability of up to $300 million,
consisting of a five-year $200 million revolving credit facility, including a
sub-limit of $25 million for standby letters of credit, and a $100 million term
loan. The $100 million term loan was repaid with proceeds from debt and equity
offerings completed in March 1998, and the remaining balance of the revolving
credit facility was repaid with proceeds from the New Credit Facility.
In October 1996, Allright entered into a credit agreement for the purpose of
financing the purchase of the predecessor company. The credit facility was
obtained in two tranches with two sub-portions to the first tranche. The first
tranche, sub-part A of $30 million, bore an annual interest rate of one month
LIBOR plus 3.00% through October 30, 19998, and LIBOR plus 3.25% thereafter. The
first tranche, sub-part B of $125 million bore an annual interest rate of LIBOR
plus 3.00% through October 31, 1998, and LIBOR plus 3.25% thereafter. The second
tranche, of $30 million, bore an annual interest rate of 12.25% up to October
30, 1998, and 12.5% thereafter. All tranches were set to mature October 30,
1999. These obligations were repaid upon consummation of the Merger from
proceeds of the New Credit Facility.
CONVERTIBLE TRUST ISSUED PREFERRED SECURITIES AND EQUITY OFFERINGS
On March 18, 1998, the Company completed an offering of 2,137,500 shares of
common stock. The Company received net proceeds from the offering of $89.1
million. Concurrent with the common stock offering, the Company created the
Trust which completed a private placement of 4,400,000 shares at $25.00 per
share of 5.25% convertible trust issued preferred securities pursuant to an
exemption from registration under the Securities Act of 1933, as amended. The
Preferred Securities represent preferred undivided beneficial interests in the
assets of Central Parking Finance Trust, a statutory business trust formed under
the laws of the State of Delaware. The Company owns all of the common securities
of the Trust. The Trust exists for the sole purpose of issuing the Preferred
Securities and investing the proceeds thereof in an equivalent amount of 5.25%
Convertible Subordinated Debentures ("Convertible Debentures") of the Company
due 2028. The net proceeds to the Company from the Preferred Securities private
placement were $106.5 million. Each Preferred Security is entitled to receive
cumulative cash distributions at an annual rate of 5.25% (or $1.312 per share)
and will be convertible at the option of the holder
<PAGE> 53
thereof into shares of Company common stock at a conversion rate of 0.4545
shares of Company common stock for each Preferred Security (equivalent to $55.00
per share of Company common stock), subject to adjustment in certain
circumstances. The Preferred Securities do not have a stated maturity date but
are subject to mandatory redemption upon the repayment of the Convertible
Debentures at their stated maturity (April 1, 2028) or upon acceleration or
earlier repayment of the Convertible Debentures. The proceeds of the equity and
preferred security offerings were used to repay indebtedness.
The Company's consolidated balance sheets reflect the Preferred Securities of
the Trust as company-obligated mandatorily redeemable convertible securities of
subsidiary whose sole assets are convertible subordinated debentures of the
Parent.
Year 2000
- ---------
The Company has considered the impact of Year 2000 issues on its computer
systems and applications and has developed remediation plans. These plans are
part of the Company's ongoing business strategies to incorporate advanced
technologies in its information systems, and were contemplated in advance of
Year 2000 issues. The expenditures for system upgrades will be accounted for as
regular capital expenditures and will be depreciated over their estimated useful
lives of 3 - 5 years. The ongoing expenses of training and testing are expensed
as they are incurred. The Company has spent in excess of approximately
$6.0 million upgrading its computer information systems in accordance with its
plans for technological enhancement. Such expenditures are not material to the
Company's operations or liquidity. Based on tests and other information, Central
Parking has concluded that the upgraded information systems that have been
installed are Year 2000 compliant. The Company believes that subsequent systems
being contemplated will also be Year 2000 compliant. System hardware and
software that in management's estimation are not Year 2000 compliant have been
fully depreciated. Central Parking is in the process of testing newly installed
systems to determine their compliance with Year 2000 issues, and, while testing
is not yet complete, the Company believes that all such systems are Year 2000
compliant. Management believes that it has enough time to fully test and foresee
all significant remaining Year 2000 issues on its information systems and,
therefore, does not have any other contingency plan in place for such systems.
Central Parking uses some fee calculation devices that compute parking fees and
statistical data, and also automate the ingress and egress control mechanisms at
certain parking facilities. Based on contracts with the vendors of such
equipment, Central Parking, expects them to make available reasonably priced
upgrades to address Year 2000 issues. Central Parking believes that less than
20% of its operations have fee calculation devices with any Year 2000 issues
with regard to carrying out its parking business. However, the vendors have
given no assurance that such fee computation devices will be Year 2000 compliant
on any given date before December 31, 1999. In the event remediation is not
complete at any of these sites prior to the Year 2000, and a failure of such
equipment were to occur due to processing incompatibilities in the Year 2000,
manual override systems are in place at all locations. Given the limited
technology required to operate such facilities, management believes all material
operations could adequately be performed manually. Such contingency plans are
currently deployed in the events of power failures or other business
interruptions at locations where these devices are located.
Certain property management systems are not currently Year 2000 compliant,
however, alternative systems are being implemented and tested that will
adequately address the Year 2000 issue. The Company believes all such systems
will be fully Year 2000 compliant by December 1999. In the event such systems
are not completely installed, or are not Year 2000 compliant, the Company has
manual back up systems that will adequately perform all material fuctions.
Central Parking is communicating, by means of Year 2000 questionnaires, with
each of its major vendors to determine third party compliance with Year 2000
issues. Although Central Parking cannot require its vendors to respond,
follow-up with each party is being conducted to try and determine and resolve
any Year 2000 issues. Central Parking is also requiring all vendors to warrant
that all software and hardware purchased by Central Parking is fully Year 2000
compliant. While Central Parking does not expect to be materially affected by
any third party's Year 2000 issues, no assurance can be given that a third
party's failure to adequately address their Year 2000 issues could not
materially effect Central Parking's business or financial results.
<PAGE> 54
Mergers and Acquisitions
- ------------------------
ALLRIGHT HOLDINGS, INC.
On March 19, 1999, Central Parking Corporation (the "Company" or "Central
Parking") completed a merger ("the Merger") in which Allright Holdings, Inc.
("Allright"), merged with a wholly owned subsidiary of the Company.
Approximately 7.0 million shares of Central Parking stock, and approximately 0.5
million options and warrants to purchase such common stock of Central Parking
were exchanged for all of the outstanding shares of common stock and options
warrants to purchase common stock of Allright. Allright was one of the largest
parking services companies in the United States with revenues of approximately
$217.2 million for the fiscal year ended June 30, 1998.
The transaction constituted a tax-free reorganization and has been accounted for
as a pooling-of-interests under Accounting Principles Board ("APB") Opinion No.
16, "Business Combinations." Accordingly, prior period financial statements
presented have been restated to include the combined results of operations,
financial position and cash flows of Allright as if it had been part of Central
Parking from the date of Allright's inception, October 31, 1996. Refer to the
accompanying notes to the consolidated condensed financial statements.
The Company incurred $27.3 million of merger related expenses on a pretax basis
in the quarter ended March 31, 1999 that were reported as operating expenses.
Included in these costs are approximately $18.2 million in professional fees;
comprised of investment banking, legal, accounting, and consulting fees; $8.0
million related to Allright employment agreements, and the balance of $1.1
million in travel, supplies, printing, and other out-of-pocket expenses. In
connection with the Merger, Allright entered into certain employment and
management continuity agreements. Under such agreements, certain payments will
be made which are contingent upon continued employment through certain dates.
Payments that were required upon consummation of the merger have been included
in merger costs in the quarter ended March 31, 1999. Additional, payments to be
made in future periods, subject to attaining the employment periods, total
approximately $3.6 million.
Prior to the Central Parking/Allright Merger, Allright's fiscal year ended June
30. In recording the business combination, Allright's fiscal year-end has been
restated to reflect a September year-end to conform to Central Parking's fiscal
year-end. There were no material transactions between Central Parking and
Allright prior to the Merger. Certain reclassifications have been made to
Allright's historical financial statements to conform to Central's presentation.
As a result of restating financial information of both companies to conform to
Central Parking's fiscal year-end, and to provide for comparability of
operations, the quarter ending September 30, 1998 for Allright has been recorded
directly to stockholders equity, and is not included in year-to-date information
presented in the accompanying consolidated financial statements.
The results of operations and cash flows from Allright for that quarter were as
follows: (in thousands)
<TABLE>
<CAPTION>
Results of Operations Cash Flows from:
--------------------- ----------------
<S> <C> <C> <C>
Total revenue $59,167 Operating activities $ 1,142
Earnings before tax 244 Investing activities (4,552)
Income tax 264 Financing activities 14,659
Net loss (20)
</TABLE>
ALLIED PARKING
On October 1, 1998, Allright purchased from Allied Parking, Inc. ("Allied
Parking") four leases relating to parking facilities in Manhattan, with
maturities ranging from 2006 to 2029 for approximately $14.2 million. Allied
agreed to lease to Allright two more lots for 19 years each in exchange for
a prepaid lease payment of $4.9 million. Allright also purchased the right
to use the "Allied Parking" name for $835,000.
On November 8, 1998, Allright purchased six additional leases from Allied
Parking with maturities ranging from 1999 to 2008 for $5.1 million. Allright
also purchased the right to use the "Allied Parking" name associated with
these leases for $300,000.
<PAGE> 55
CENTRAL PARKING SYSTEM OF LOUISIANA, INC.
Central Parking has historically owned 50% of CPS-Louisiana and on March 30,
1998, purchased the remaining 50% from Property Service Corporation for $2.5
million in Central Parking common stock (52,631 shares). CPS-Louisiana
manages and operates leased parking facilities, manages and operates parking
facilities owned or leased by other parties, and provides financial and
other advisory services.
KINNEY SYSTEM HOLDING CORP.
On February 12, 1998, Central Parking acquired Kinney, a privately held
company headquartered in New York City. Kinney has been in the parking
business for over 60 years. In addition to enhancing the Company's presence
in New York City, Kinney increased Central Parking's presence in a number of
other major metropolitan areas such as Boston, Philadelphia and Washington,
D.C. and broadened its geographic coverage in the following nine states:
Connecticut, Florida, Kentucky, Maryland, Massachusetts, New Hampshire, New
York, Pennsylvania, and Virginia. Kinney provides both self-parking and
valet parking services, and provides parking related services such as
facility design and development and consulting services.
Kinney operated 403 parking facilities containing approximately 168,800
spaces, including approximately 76,700 in the New York City metropolitan
area, 42,800 in Boston, 31,100 in Philadelphia and 10,300 in Washington,
D.C. At the time of the acquisition, Kinney's facility mix was comprised of
225 leased sites, 170 managed sites and 8 owned sites. The parking
facilities operated by Kinney include Yankee Stadium, the Waldorf-Astoria,
Port Authority Bus Terminal, World Financial Center, and the General Motors
Building in New York City, The Ritz-Carlton-Boston, Government Center in
Boston, Spectrum-Philadelphia, and the Four Seasons Hotel of Washington,
D.C.
Consideration for the Kinney acquisition was approximately $208.8 million,
including $171.8 million in cash, including transaction fees and other
related costs, and $37.0 million (882,422 shares) in Central Parking common
stock. In connection with this transaction, Central Parking assumed $10.3
million in capital leases, refinanced $24.2 million in existing Kinney debt
and assumed $4.6 million of Kinney debt. Central Parking financed the Kinney
acquisition through borrowings under the Company's credit facility, and
ultimately from the issuance of Central Parking common stock and Central
Parking obligations pursuant to the Trust Issued Preferred Securities.
NATIONAL GARAGES, INC.
On December 1, 1997, Allright purchased substantially all of the assets of
National Garages, Inc. ("National"), a privately owned parking company based
in Detroit, which operates 210 facilities located primarily in the
Midwestern United States. The purchase price of approximately $3.7 million
was paid in cash and financed through working capital and $2.2 million in
debt under on Allright's previous revolving line of credit.
EDISON RESTRUCTURING AGREEMENT
In connection with the Merger, Allright entered into a Restructuring
Agreement with Edison Parking Management L.P., which required Allright to
contribute an additional $11.7 million to the limited partnership and modify
certain other related agreements. The Partnership then loaned such amounts
back to Allright.
<PAGE> 56
Central Parking Corporation
Consolidated Condensed Balance sheets
Unaudited
<TABLE>
<CAPTION>
Dollar amounts in thousands
September 30, December 31,
1998 1998
----------- -----------
Assets
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 39,495 $ 30,391
Management accounts receivable 19,847 28,946
Accounts and current portion of notes receivable - other 14,921 24,609
Prepaid expenses 22,695 33,109
Deferred income taxes 545 545
Refundable income taxes 1,266 3,194
----------- -----------
Total current assets 98,769 120,794
Investments at amortized cost 5,087 5,152
Notes receivable, less current portion 46,524 49,257
Property, equipment, and leasehold improvements, net 382,506 394,059
Contract and lease rights, net 62,472 81,865
Goodwill, net 288,170 285,626
Investment in partnership and joint ventures 40,376 40,172
Other assets 30,118 39,153
----------- -----------
$ 954,022 $ 1,016,078
=========== ===========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term and capital lease obligations 2,881 252,804
Accounts payable 54,918 72,096
Accrued payroll and related costs 16,908 13,118
Accrued expenses 27,403 15,199
Management accounts payable 26,611 29,657
Income tax payable 945 5,611
----------- -----------
Total current liabilities 129,666 388,485
Long-term debt and capital lease obligations 283,319 77,604
Deferred rent 14,875 14,878
Deferred compensation 11,359 11,958
Deferred income taxes 32,894 32,636
Minority interest 23,103 21,991
Other Liabilities 6,892 6,679
----------- -----------
Total liabilities 502,108 554,231
Company-obligated mandatorily redeemable convertible securities
of subsidiary holding solely parent debentures 110,000 110,000
Shareholders' equity:
Common stock, $.01 par value, 50,000,000 shares authorized,
36,534,700 and 36,521,550 issued and outstanding, respectively 366 366
Additional paid-in capital 256,405 256,662
Foreign currency translation adjustment (150) (164)
Retained earnings 85,795 95,471
Deferred compensation on restricted stock (502) (488)
----------- -----------
Total shareholders' equity 341,914 351,847
----------- -----------
$ 954,022 $ 1,016,078
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE> 57
Central Parking Corporation
Consolidated Condensed Statements of Earnings
Unaudited
Dollar amounts in thousands, except per share data
<TABLE>
<CAPTION>
Three Months Ended December 31,
1997 1998
--------- ---------
<S> <C> <C>
Revenues:
Parking $ 107,661 $ 157,724
Management contract 13,594 22,941
--------- ---------
Total revenues 121,255 180,665
Costs and expenses:
Cost of parking 89,091 129,036
Cost of management contracts 3,252 5,638
General and administrative 13,424 19,701
Goodwill and non-compete amortization 889 2,900
--------- ---------
Total costs and expenses 106,656 157,275
--------- ---------
Operating earnings 14,599 23,390
Other income (expenses):
Interest income 839 1,121
Interest expense (6,904) (7,562)
Dividends on Company-obligated mandatorily redeemable
convertible securities of a subsidiary trust - (1,396)
Net losses on sales of property and equipment (38) (85)
Minority interest (72) (78)
Equity in partnership and joint venture earnings 1,243 1,186
--------- ---------
Other (expenses), net (4,932) (6,814)
--------- ---------
Earnings before income taxes 9,667 16,576
Income taxes 4,152 6,437
--------- ---------
Net earnings $ 5,515 $ 10,139
========= =========
Basic earnings per share $ 0.17 $ 0.28
Diluted earnings per share $ 0.17 $ 0.27
</TABLE>
See accompanying notes to consolidated condensed financial statements
Central Parking Corporation
<PAGE> 58
Consolidated Condensed Statement of Cash Flows
Dollar amounts in thousands
<TABLE>
<CAPTION>
Three Months Ended December 31,
1997 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings before extraordinary income $ 5,515 $ 10,139
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation 3,122 4,801
Amortization of goodwill and non-compete 889 2,900
Amortization of contract and lease rights, straight-line rent,
deferred financing and other 911 1,434
Equity in partnership and joint venture earnings (1,243) (1,186)
Distributions from partnerships and joint ventures 1,312 1,253
Net gain on sales of property and equipment 38 85
Deferred income tax 412 (258)
Minority interest 72 78
Changes in operating assets and liabilities, net of effects of acquisition of companies:
(Increase) decrease in management accounts receivable (157) (11,559)
(Increase) decrease in notes and accounts receivable - other 1,921 (2,833)
(Increase) decrease in prepaid expenses (2,337) (4,677)
(Increase) decrease in prepaid and refundable income taxes 2,154 (273)
(Increase) decrease in other assets (329) (3,045)
Increase (decrease) in accounts payable, accrued expenses
and deferred compensation 647 (9,737)
Increase (decrease) in management accounts payable (1,321) 12,242
Increase (decrease) in income taxes payable 1,971 4,666
-------- --------
Net cash provided by operating activites 13,577 4,030
-------- --------
Cash flows from investing activities:
Proceeds from sales of property and equipment 2,121 203
Investments in notes receivable -- (4,928)
Purchase of property, equipment, and leasehold improvements (6,666) (13,297)
Purchase of contract rights and lease rights (245) (22,140)
Investment in and advances to partnerships, joint ventures and
unconsolidated subsidiaries 90 11
Acquisitions of companies, net of cash acquired (12,258) --
Purchase of investments (71) (65)
Proceeds from maturities of investments (849) --
-------- --------
Net cash used by investing activites (17,878) (40,216)
-------- --------
Cash flows from financing activities:
Dividends paid (395) (444)
Net borrowings under revolving credit agreement, net of issuance costs 6,550 2,300
Capital contributions 1,500 32
Proceeds from issuance of notes payable, net of issuance costs 1,389 15,330
Principal repayments on notes payable and capital leases (2,216) (1,746)
Proceeds from issuance of common stock and exercise of stock options, net 207 193
Net cash provided by financing activities 7,035 15,665
-------- --------
Foreign currency translation 78 168
-------- --------
Net increase (decrease) in cash and cash equivalents 2,812 (20,353)
Cash and cash equivalents at beginning of period 17,308 50,744
-------- --------
Cash and cash equivalents at end of period $ 20,120 $ 30,391
Non-cash transactions:
Issuance of restricted stock $ -- $ 24
Effects of acquisitions:
Estimated fair value of assets acquired $ 4,246 $ --
Purchase price in excess of the net assets acquired 20,258 --
Estimated fair value of liabilities assumed in acquisition (11,064) --
-------- --------
Cash paid 13,440 --
Less cash acquired (1,182) --
-------- --------
Net cash paid for acquisition $ 12,258 $
======== ========
</TABLE>
<PAGE> 59
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation
- ---------------------
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles and with
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. All significant
inter-company transactions have been eliminated in consolidation. Operating
results for the three months ended December 31, 1998 are not necessarily
indicative of the results that may be expected for the fiscal year ending
September 30, 1999. For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended September 30, 1998 (included
in the Company's Annual Report on Form 10-K and as restated for the merger with
Allright Holdings, Inc. as filed on Form 8 K/A). Certain items have been
restated to conform to current year presentation and the merger with Allright.
Mergers and Acquisitions
- ------------------------
Allright Holdings, Inc. On March 19, 1999, Central Parking Corporation (the
"Company" or "Central Parking") completed a merger ("the Merger") in which
Allright Holdings, Inc. ("Allright"), merged with a wholly owned subsidiary of
the Company. Approximately 7.0 million shares of Central Parking stock, and
approximately 0.5 million options and warrants to purchase such common stock of
Central Parking were exchanged for all of the outstanding shares of common stock
and options and warrants to purchase common stock of Allright. Allright was one
of the largest parking services companies in the United States with revenues of
approximately $217.2 million for the fiscal year ended June 30, 1998.
The transaction constituted a tax-free reorgainization and has been accounted
for as a pooling-of-interests under Accounting Principles Board ("APB") Opinion
No. 16, "Business Combinations." Accordingly, Central Parking's financial
statements have been restated to reflect the combined results of operations
financial position and cash flows of Central Parking and Allright as if Allright
had been part of Central Parking since Allright's inception date of October 31,
1996. Prior to the consummation of the merger, Allright's fiscal yearend was
June 30. The accompanying consolidated condensed balance sheet at December 31,
1998, and the related consolidated condensed statements of earnings and cash
flows for the three month period then ended, reflects the combined balances of
Central Parking and Allright as of December 31, 1998 and for the three months
then ended. The accompanying consolidated condensed balance sheet at September
30, 1998 reflects the combined balances of Central Parking at such date and of
Allright as of June 30, 1998. The consolidated condensed statements of earnings
and cash flows for the three-month period ended December 31, 1997 reflects the
combined balances of Central Parking for such period and the balances of
Allright for the three months ended September 30, 1997.
There were no material transactions between Central Parking and Allright prior
to the Merger. Certain reclassifications have been made to Allright's historical
financial statements to conform to Central's presentation.
As a result of restating financial information of both companies to conform to
Central Parking's fiscal year-end, and to provide for comparability of
operations, the results of operations of Allright for quarter ending September
30, 1998 has been recorded directly to stockholders' equity.
The results of operations and cash flows from Allright for that quarter
were as follows: (in thousands)
<TABLE>
<CAPTION>
Results of Operations Cash Flows from:
--------------------- ----------------
<S> <C> <C> <C>
Total revenue $59,167 Operating activities $ 1,142
Earnings before tax 244 Investing activities (4,552)
Income tax expense 264 Financing activities 14,659
Net loss (20)
</TABLE>
The Company incurred $27.3 million of merger related expenses on a pretax basis
in the quarter ended March 31, 1999 that were reported as operating expenses.
Included in these costs are approximately $18.2 million in professional fees;
comprised of investment banking, legal, accounting, and consulting fees; $8.0
million related to Allright employment agreements, and the balance of $1.1
million in travel, supplies, printing, and other out-of-
<PAGE> 60
pocket expenses. In connection with the Merger, Allright entered into certain
employment and management continuity agreements. Under such agreements, certain
payments will be made which are contingent upon continued employment through
certain dates. Payments that were required upon consummation of the merger were
included in merger costs reorganized in the quarter ended March 31, 1999.
Additional payments to be made in future periods, subject to attaining the
employment periods, total approximately $3.6 million.
Allied Parking. On October 1, 1998, Allright purchased from Allied Parking, Inc.
("Allied") four leases relating to parking facilities in New York City, with
remaining lease terms ranging from 2006 to 2029 for approximately $14.2 million.
Allied agreed to lease to Allright two more lots for 19 years, each in exchange
for a note receivable of $4.9 million, secured by an assignment of rents.
Allright also purchased the right to use the "Allied Parking" name for $835,000.
On November 8, 1998, Allright purchased six additional leases from Allied
Parking with maturities ranging from 1999 to 2008 for $5.1 million. Allright
also purchased the right to use the "Allied Parking" name associated with these
leases for $300,000.
Central Parking System of Louisiana, Inc. Central Parking has historically owned
50% of CPS-Louisiana and on March 30, 1998, purchased the remaining 50% from
Property Service Corporation for $2.5 million in Central Parking common stock
(52,631 shares). CPS-Louisiana manages and operates leased parking facilities,
manages and operates parking facilities owned or leased by other parties, and
provides financial and other advisory services.
Kinney System Holding Corp. On February 12, 1998, Central Parking acquired
Kinney, a privately held company headquartered in New York City. Kinney has been
in the parking business for over 60 years. In addition to enhancing the
Company's presence in New York City, Kinney increased Central Parking's presence
in a number of other major metropolitan areas such as Boston, Philadelphia and
Washington, D.C. and broadened its geographic coverage in the following nine
states: Connecticut, Florida, Kentucky, Maryland, Massachusetts, New Hampshire,
New York, Pennsylvania, and Virginia. Kinney provides both self-parking and
valet parking services, and provides parking related services such as facility
design and development and consulting services.
Kinney operated 403 parking facilities containing approximately 168,800 spaces,
including approximately 76,700 in the New York City metropolitan area, 42,800 in
Boston, 31,100 in Philadelphia and 10,300 in Washington, D.C. At the time of the
acquisition, Kinney's facility mix was comprised of 225 leased sites, 170
managed sites and 8 owned sites. The parking facilities operated by Kinney
include Yankee Stadium, the Waldorf-Astoria, Port Authority Bus Terminal, World
Financial Center, and the General Motors Building in New York City, The
Ritz-Carlton-Boston, Government Center in Boston, Spectrum-Philadelphia, and the
Four Seasons Hotel of Washington, D.C.
Consideration for the Kinney acquisition was approximately $208.8 million,
including $171.8 million in cash, including transaction fees and other related
costs, and $37.0 million (882,422 shares) in Central Parking common stock. In
connection with this transaction, Central Parking assumed $10.3 million in
capital leases, refinanced $24.2 million in existing Kinney debt and assumed
$4.6 million of Kinney debt. Central Parking financed the Kinney acquisition
through borrowings under the Company's credit facility, and ultimately from the
issuance of Central Parking common stock and Central Parking obligations
pursuant to the Trust Issued Preferred Securities.
National Garages, Inc. On December 1, 1997, Allright purchased substantially all
of the assets of National Garages, Inc. ("Natonal"), a privately owned parking
company based in Detroit, which operates 210 facilities located primarily in the
Midwestern United States. The purchase price of approximately $3.7 million was
paid in cash and financed through working capital and $2.2 million in debt under
Allright's previous revolving line of credit. The partnership then loaned such
amounts back to Allright.
Edison Restructuring Agreement. In connection with the Merger, Allright entered
into a Restructuring Agreement with Edison Parking Management L.P., which
required Allright to contribute an additional $11.7 million to the limited
partnership and modify certain other related agreements. The Partnership then
loaned such amounts back to Allright.
<PAGE> 61
Earnings Per Share
- ------------------
Basic earnings per share excludes dilution and is computed by dividing income
available to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock, or if restricted shares of common stock were to become fully
vested, that then shared in the earnings of the entity. Earnings per share for
all periods presented have been calculated and presented in accordance with SFAS
No. 128.
The following tables set forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
December 31, 1998 December 31, 1997
Income Common Per-Share Income Common Per-Share
Available Shares Amount Available Shares Amount
($000's) (000's) ($000's) (000's)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share
Earnings (loss) before extraordinary item $10,139 36,260 $ 0.28 $ 5,515 32,525 $ 0.17
Effect of dilutive stock and options:
Stock option plan and warrants -- 524 (.01) -- 417 --
Restricted stock plan -- 172 -- 175 --
Deferred stock unit plan -- 16 -- -- --
Employee stock purchase plan -- 46 -- 48 --
Diluted earnings per share $10,139 36,818 $ 0.27 $ 5,515 33,165 $ 0.17
------- ------- -------- ------- ------ ------
Earnings (loss) before extraordinary item
</TABLE>
Weighted average common shares used for the computation of basic earnings per
share excludes certain common shares issued pursuant to the Company's restricted
stock plan and deferred compensation agreement, because under the related
agreements the holder of restricted stock may forfeit such shares if certain
employment or service requirements are not met. The effect of the conversion of
the company-obligated mandatorily redeemable securities of the subsidiary trust
has not been included in the diluted earnings per share calculation since such
securities are anti-dilutive. At December 31, 1998, such securities were
convertible into 2,000,000 shares of common stock.
Long Term Debt
- --------------
The Company had previously established a credit facility (the "Previous Credit
Facility") providing for an aggregate availability of up to $300 million,
consisting of a five-year $200 million revolving credit facility, including a
sub-limit of $25 million for standby letters of credit, and a $100 million term
loan. The $100 million term loan was repaid with proceeds from debt and equity
offerings completed in March 1998, and the remaining balance of the revolving
credit facility was repaid with proceeds from the New Credit Facility.
In October 1996, Allright entered into a credit agreement for the purpose of
financing the purchase of Allright Corporation. Additionally, in October 1996,
Allright defeased all of its Industrial Development Revenue Bonds (IRBs) in the
amount of $17,892,093 and recorded an extraordinary loss of $1,534,000. At June
30, 1997 and 1998, $15,800,000 and $15,515,000, respectively, of the IRBs remain
outstanding in a trust secured by U.S. Treasury bills which were used to defease
these instruments. The credit facility was obtained in two tranches with two
sub-portions to the first tranche. The first tranche, sub-part A of $30 million,
bore an annual interest rate of one month LIBOR plus 3.00% through October 30,
1998, and LIBOR plus 3.25% thereafter. The first tranche, sub-part B of $125
million bore an annual interest rate of LIBOR plus 3.00% through October 31,
1998, and LIBOR plus 3.25% thereafter. The second tranche, of $30 million, bore
an annual interest rate of 12.25% up to October 30, 1998, and 12.5% thereafter.
All tranches were set to mature October 30, 1999. These obligations were repaid
upon consummation of the Merger from proceeds of the New Credit Facility
described below. In connection with the repayment of such amounts, the Company
recognized in the quarter ended March 31, 1999, an extraordinary loss of $1.5
million, ($1.0 million net of tax).
<PAGE> 62
The Company obtained a revolving line of credit (Permitted Acquisition Loan)
with a maximum borrowing capacity of $75,000,000, maturing October 30, 1999. At
June 30, 1997 and 1998, borrowing capacity available under the Permitted
Acquisition Loan was approximately $62,497,000 and $43,740,000, respectively.
The Permitted Acquisition Loan provides for interest per annum equal to LIBOR
plus 3.75 percent on outstanding borrowings.
On March 5, 1998, the Company obtained a revolving line of credit and letter of
credit agreement (Bank One Loan) with a maximum borrowing capacity of
$5,100,000, maturing October 1, 1999. At June 30, 1998, borrowing capacity
available under the Bank One Loan was $3,813,000. The Bank One Loan provides for
interest for interest per annum equal, at the Company option, to either the
Prime Rate of interest or Libor plus 2.75 percent on outstanding borrowings.
The CSFB term loans and Permitted Acquisition Loan are secured by substantially
all of Allright's assets. The Bank One Loan is collateralized by a piece of the
Company's property.
Convertible Trust Issued Preferred Securities and Equity Offerings. On March 18,
1998, the Company created Central Parking Finance Trust ("Trust") which
completed a private placement of 4,400,000 shares at $25.00 per share of 5.25%
convertible trust issued preferred securities ("Preferred Securities") pursuant
to an exemption from registration under the Securities Act of 1933, as amended.
The Preferred Securities represent preferred undivided beneficial interests in
the assets of Central Parking Finance Trust, a statutory business trust formed
under the laws of the State of Delaware. The Company owns all of the common
securities of the Trust. The Trust exists for the sole purpose of issuing the
Preferred Securities and investing the proceeds thereof in an equivalent amount
of 5.25% Convertible Subordinated Debentures ("Convertible Debentures") of the
Company due 2028. The net proceeds to the Company from the Preferred Securities
private placement were $106.5 million. Each Preferred Security is entitled to
receive cumulative cash distributions at an annual rate of 5.25% (or $1.312 per
share) and will be convertible at the option of the holder thereof into shares
of Company common stock at a conversion rate of 0.4545 shares of Company common
stock for each Preferred Security (equivalent to $55.00 per share of Company
common stock), subject to adjustment in certain circumstances. The Preferred
Securities do not have a stated maturity date but are subject to mandatory
redemption upon the repayment of the Convertible Debentures at their stated
maturity (April 1, 2028) or upon acceleration or earlier repayment of the
Convertible Debentures.
The Company's consolidated balance sheets reflect the Preferred Securities of
the Trust as company-obligated mandatorily redeemable convertible securities of
subsidiary whose sole assets are convertible subordinated debentures of the
Parent. The consolidated results of operations reflect dividends on the
Preferred Securities.
On March 19, 1999, Central Parking established a new credit facility (the "New
Credit Facility") providing for an aggregate of up to $400 million consisting of
a five-year $200 million revolving credit facility including a sublimit of $25
million for standby letters of credit, and a $200 million five-year term loan.
The principal amount of the term loan shall be repaid in quarterly payments of
$12,500,000 commencing June 30, 2000 and continuing until the loan is repaid.
The New Credit Facility bears interest at either prime rate plus 0.5% or LIBOR
plus a margin of 1.12% through June 19, 1999, and thereafter reverts to a
grid-based pricing based upon the Company achieving certain financial ratios.
The New Credit Facility contains certain covenants including those that require
Central Parking to maintain certain financial ratios, restrict further
indebtedness and limit the amount of dividends paid. Central Parking used the
New Credit Facility to replace Central Parking's previous credit facility and to
refinance the existing debt of Allright Holdings, Inc. The amount outstanding
under the Company's New Credit Facility as of March 31, 1999 is $319 million
with a weighted average interest rate of 6.08% for the period from March 19,
1999 through March 31, 1999.
Recent Accounting Pronouncements
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COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" ("Statement 130"). Statement 130 established
standards for reporting and display of comprehensive income and its components.
Comprehensive income is the change in equity of a business enterprise during a
period from transactions and other events and circumstances from non-owner
sources. Comprehensive income includes all
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changes in equity except those resulting from investments by and distributions
to owners. The Company's other comprehensive income consists of foreign currency
translation, which is recorded to shareholders' equity, net of tax. Other
comprehensive loss for the three month periods ended December 31, 1998 and 1997
was $168 thousand and $78 thousand, respectively.
ACCOUNTING FOR THE COST OF COMPUTER SOFTWARE
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," effective for fiscal years
beginning after December 16, 1998. SOP 98-1 defines which costs incurred to
develop or purchase internal-use software should be capitalized and which should
be expensed. The company is in the process of determining what impact, if any,
this pronouncement will have on its financial statements.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("Statement
133"). Statement 133 established reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts. Under SFAS
No. 133, the Company would recognize all derivatives as either assets or
liabilties, measured at their fair value, in the statement of financial
position. The Company is in the process of evaluating the impact, if any, this
pronouncement will have on its financial statements.
Subsequent Events
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During January 1999, a third party exercised its option to purchase certain land
from the Company. As a result, the Company received proceeds of $17.7 million
and recognized a gain on such sale of $2.5 million. The Company incurred $27.3
million of merger related expenses on a pre-tax basis during the quarter ended
March 31, 1999. Included in these costs are approximately $18.2 million in
professional fees, which are comprised of investment banking, legal, accounting
and consulting fees; $8.0 million related to Allright employment agreements, and
the balance of $1.1 million in travel, supplies, printing, and other
out-of-pocket expenses. In connection with the Merger, Allright entered into
certain employment and management continuity agreements. Under such agreements,
certain payments will be made which are contingent upon continued employment
through certain dates, Payments that were required prior to and concurrent with
the consummation of the merger have been included in merger costs during the
quarter ended March 31, 1999. Payments to be made in future periods, subject to
attaining the employment periods, total approximately $3.6 million.
On May 28, 1999 the Company purchased the remaining 60% interest in a
partnership which operates a parking facility in New York City for $23.2 million
in cash. The Company previously owned 40% of the partnership. The previous
partner will continue to manage the garage for the next 7 years. In connection
with this transaction, the Company also sold its remaining 24.3% interest in
another partnership with the same partner, which also operates parking
facilities in New York City, for $3.2 million in cash.
During April 1999 the Company purchased an additional lease from Allied Parking
with a remaining lease term 2020 for $3.0 million. also purchased the right to
use the "Allied Parking" name associated with as part of the purchase price.
On May 10, 1999, the Company entered into a definitive agreement to purchase a
parking facility that is being developed in Chicago by a wholly owned subsidiary
of Prime Group Realty Trust (NYSE: PGE). The purchase price is approximately
$37.3 million. The garage will have a total of 1,018 parking spaces as well as
4,200 square feet suitable for retail. Under the terms of the agreement, the
purchase will occur upon completion of the parking facility, which is expected
in the latter part of 2000.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned party duly authorized.
Central Parking Corporation
By: Stephen A. Tisdell
Chief Financial Officer
