Central Parking Corporation
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2006
Commission file number 001-13950
CENTRAL PARKING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
|
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Tennessee
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62-1052916 |
|
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(State or Other Jurisdiction of Incorporation
or Organization)
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(I.R.S. Employer Identification No.) |
|
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2401 21st Avenue South,
Suite 200, Nashville, Tennessee
|
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37212 |
|
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|
(Address of Principal Executive Offices)
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(Zip Code) |
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|
Registrants Telephone Number, Including Area Code:
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(615) 297-4255 |
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|
|
Former name, address and fiscal year, if changed since last report:
|
|
Not Applicable |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
|
|
|
|
|
Large accelerated filer o
|
|
Accelerated filer þ
|
|
Non-accelerated filer o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act). YES o NO þ
Indicate the number of shares outstanding of each of the registrants classes of common stock
as of the latest practicable date.
|
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Class
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Outstanding at May 2, 2006 |
|
|
|
Common Stock, $0.01 par value
|
|
32,083,069 |
INDEX
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
Part 1. Financial Information
Item 1. Financial Statements
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
Amounts in thousands, except share data
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
September 30, |
|
|
|
2006 |
|
|
2005 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
37,051 |
|
|
$ |
26,055 |
|
Management accounts receivable, net of allowance for doubtful accounts of $8,532 and $10,268
at March 31, 2006 and September 30, 2005, respectively |
|
|
46,069 |
|
|
|
51,931 |
|
Accounts receivable other |
|
|
16,272 |
|
|
|
15,537 |
|
Current portion of notes receivable (including amounts due from related parties of
$965 at March 31, 2006 and $937 at September 30, 2005) |
|
|
4,605 |
|
|
|
5,818 |
|
Prepaid expenses |
|
|
18,511 |
|
|
|
8,630 |
|
Assets held for sale |
|
|
36,402 |
|
|
|
49,048 |
|
Available for sale securities |
|
|
4,616 |
|
|
|
4,606 |
|
Deferred income taxes |
|
|
22,267 |
|
|
|
19,949 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
185,793 |
|
|
|
181,574 |
|
Notes receivable, less current portion |
|
|
11,582 |
|
|
|
10,480 |
|
Property, equipment, and leasehold improvements, net |
|
|
310,565 |
|
|
|
327,391 |
|
Contracts and lease rights, net |
|
|
76,125 |
|
|
|
80,064 |
|
Goodwill, net |
|
|
232,443 |
|
|
|
232,443 |
|
Investment in and advances to partnerships and joint ventures |
|
|
3,800 |
|
|
|
4,443 |
|
Other assets |
|
|
28,054 |
|
|
|
31,419 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
848,362 |
|
|
$ |
867,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt and capital lease obligations |
|
$ |
2,903 |
|
|
$ |
1,764 |
|
Trade accounts payable |
|
|
85,920 |
|
|
|
83,604 |
|
Accrued expenses |
|
|
51,597 |
|
|
|
52,809 |
|
Management accounts payable |
|
|
29,261 |
|
|
|
25,532 |
|
Income taxes payable |
|
|
1,421 |
|
|
|
12,389 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
171,102 |
|
|
|
176,098 |
|
Long-term debt and capital lease obligations, less current portion |
|
|
138,776 |
|
|
|
98,212 |
|
Subordinated convertible debentures |
|
|
78,085 |
|
|
|
78,085 |
|
Deferred rent |
|
|
21,430 |
|
|
|
22,113 |
|
Deferred income taxes |
|
|
20,265 |
|
|
|
19,565 |
|
Other liabilities |
|
|
20,975 |
|
|
|
21,152 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
450,633 |
|
|
|
415,225 |
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
385 |
|
|
|
528 |
|
|
Shareholders equity: |
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 50,000,000 shares authorized, 32,081,068
and 36,680,694 shares issued and outstanding at March 31, 2006 and
September 30, 2005, respectively |
|
|
321 |
|
|
|
368 |
|
Additional paid-in capital |
|
|
179,259 |
|
|
|
251,784 |
|
Accumulated other comprehensive income, net |
|
|
2,304 |
|
|
|
3,432 |
|
Retained earnings |
|
|
216,165 |
|
|
|
197,182 |
|
Other |
|
|
(705 |
) |
|
|
(705 |
) |
|
|
|
|
|
|
|
Total shareholders equity |
|
|
397,344 |
|
|
|
452,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
848,362 |
|
|
$ |
867,814 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Page 3 of 27
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
Amounts in thousands, except per share data
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
Six months ended March 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parking |
|
$ |
130,528 |
|
|
$ |
133,265 |
|
|
$ |
263,907 |
|
|
$ |
271,888 |
|
Management contracts |
|
|
29,311 |
|
|
|
28,930 |
|
|
|
57,596 |
|
|
|
59,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159,839 |
|
|
|
162,195 |
|
|
|
321,503 |
|
|
|
331,113 |
|
Reimbursement of management contract expenses |
|
|
115,249 |
|
|
|
107,814 |
|
|
|
229,287 |
|
|
|
219,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
275,088 |
|
|
|
270,009 |
|
|
|
550,790 |
|
|
|
550,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of parking |
|
|
119,681 |
|
|
|
124,900 |
|
|
|
241,574 |
|
|
|
248,836 |
|
Cost of management contracts |
|
|
13,206 |
|
|
|
15,202 |
|
|
|
24,040 |
|
|
|
30,436 |
|
General and administrative |
|
|
21,029 |
|
|
|
21,588 |
|
|
|
41,814 |
|
|
|
40,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153,916 |
|
|
|
161,690 |
|
|
|
307,428 |
|
|
|
319,595 |
|
Reimbursed management contract expenses |
|
|
115,249 |
|
|
|
107,814 |
|
|
|
229,287 |
|
|
|
219,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
269,165 |
|
|
|
269,504 |
|
|
|
536,715 |
|
|
|
538,976 |
|
Property-related gains, net |
|
|
3,559 |
|
|
|
14,756 |
|
|
|
26,304 |
|
|
|
16,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings |
|
|
9,482 |
|
|
|
15,261 |
|
|
|
40,379 |
|
|
|
28,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
285 |
|
|
|
978 |
|
|
|
587 |
|
|
|
2,183 |
|
Interest expense |
|
|
(4,143 |
) |
|
|
(4,957 |
) |
|
|
(8,099 |
) |
|
|
(9,914 |
) |
(Loss) gain on derivative instruments |
|
|
(28 |
) |
|
|
1,090 |
|
|
|
(99 |
) |
|
|
1,644 |
|
Equity in partnership and joint venture income (loss) |
|
|
43 |
|
|
|
(652 |
) |
|
|
463 |
|
|
|
(350 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before minority interest and income taxes |
|
|
5,639 |
|
|
|
11,720 |
|
|
|
33,231 |
|
|
|
21,718 |
|
Minority interest, net of tax |
|
|
(195 |
) |
|
|
(405 |
) |
|
|
(551 |
) |
|
|
(708 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before income taxes |
|
|
5,444 |
|
|
|
11,315 |
|
|
|
32,680 |
|
|
|
21,010 |
|
Income tax expense |
|
|
(1,918 |
) |
|
|
(3,809 |
) |
|
|
(12,574 |
) |
|
|
(7,038 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
|
3,526 |
|
|
|
7,506 |
|
|
|
20,106 |
|
|
|
13,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
|
(1,539 |
) |
|
|
44 |
|
|
|
(163 |
) |
|
|
(3,551 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
1,987 |
|
|
$ |
7,550 |
|
|
$ |
19,943 |
|
|
$ |
10,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
$ |
0.11 |
|
|
$ |
0.21 |
|
|
$ |
0.62 |
|
|
$ |
0.39 |
|
(Loss) earnings from discontinued operations, net of tax |
|
|
(0.05 |
) |
|
|
0.00 |
|
|
|
(0.01 |
) |
|
|
(0.10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
0.06 |
|
|
$ |
0.21 |
|
|
$ |
0.61 |
|
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
$ |
0.11 |
|
|
$ |
0.21 |
|
|
$ |
0.62 |
|
|
$ |
0.39 |
|
(Loss) earnings from discontinued operations, net of tax |
|
|
(0.05 |
) |
|
|
0.00 |
|
|
|
(0.01 |
) |
|
|
(0.10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
0.06 |
|
|
$ |
0.21 |
|
|
$ |
0.61 |
|
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used for basic per share data |
|
|
31,962 |
|
|
|
36,584 |
|
|
|
32,435 |
|
|
|
36,198 |
|
Effect of dilutive common stock options |
|
|
318 |
|
|
|
112 |
|
|
|
190 |
|
|
|
166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used for dilutive per share data |
|
|
32,280 |
|
|
|
36,696 |
|
|
|
32,625 |
|
|
|
36,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Page 4 of 27
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Amounts in thousands
|
|
|
|
|
|
|
|
|
|
|
Six months ended March 31, |
|
|
|
|
|
|
|
2005 |
|
|
|
|
|
|
|
(Revised See |
|
|
|
2006 |
|
|
Note 2) |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
19,943 |
|
|
$ |
10,421 |
|
Loss from discontinued operations |
|
|
163 |
|
|
|
3,551 |
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
|
20,106 |
|
|
|
13,972 |
|
Adjustments
to reconcile earnings from continuing operations to net cash (used)
provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
15,618 |
|
|
|
14,673 |
|
Equity in
partnership and joint venture (earnings) losses |
|
|
(463 |
) |
|
|
350 |
|
Distributions from partnerships and joint ventures |
|
|
1,346 |
|
|
|
1,083 |
|
Property-related gains, net |
|
|
(26,304 |
) |
|
|
(16,637 |
) |
Loss (gain) on derivative instruments |
|
|
99 |
|
|
|
(1,644 |
) |
Stock-based compensation |
|
|
209 |
|
|
|
|
|
Deferred income tax expense |
|
|
(1,635 |
) |
|
|
(4,497 |
) |
Minority interest, net of tax |
|
|
551 |
|
|
|
708 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Management accounts receivable |
|
|
5,630 |
|
|
|
(10,031 |
) |
Accounts receivable other |
|
|
(782 |
) |
|
|
(614 |
) |
Prepaid expenses |
|
|
(9,961 |
) |
|
|
(2,156 |
) |
Other assets |
|
|
(764 |
) |
|
|
(1,735 |
) |
Trade accounts payable, accrued expenses and other liabilities |
|
|
990 |
|
|
|
3,411 |
|
Management accounts payable |
|
|
3,824 |
|
|
|
8,006 |
|
Deferred rent |
|
|
(683 |
) |
|
|
(1,115 |
) |
Refundable income taxes |
|
|
|
|
|
|
1,432 |
|
Income taxes payable |
|
|
(10,989 |
) |
|
|
1,588 |
|
|
|
|
|
|
|
|
Net cash (used) provided by operating activities continuing operations |
|
|
(3,208 |
) |
|
|
6,794 |
|
Net cash used by operating activities discontinued operations |
|
|
(1,310 |
) |
|
|
(2,357 |
) |
|
|
|
|
|
|
|
Net cash (used) provided by operating activities |
|
|
(4,518 |
) |
|
|
4,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Proceeds from disposition of property and equipment |
|
|
51,422 |
|
|
|
31,975 |
|
Purchases of property, equipment and leasehold improvements |
|
|
(8,102 |
) |
|
|
(5,612 |
) |
Other investing activities |
|
|
(119 |
) |
|
|
2,614 |
|
|
|
|
|
|
|
|
Net cash provided by investing activities continuing operations |
|
|
43,201 |
|
|
|
28,977 |
|
Net cash provided by investing activities discontinued operations |
|
|
4,551 |
|
|
|
742 |
|
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
|
47,752 |
|
|
|
29,719 |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Dividends paid |
|
|
(960 |
) |
|
|
(1,099 |
) |
Net borrowings under revolving credit agreement |
|
|
42,938 |
|
|
|
51,000 |
|
Proceeds from issuance of notes payable, net of issuance costs |
|
|
70 |
|
|
|
5,748 |
|
Principal repayments on long-term debt and capital lease obligations |
|
|
(1,009 |
) |
|
|
(88,186 |
) |
Payment to minority interest partners |
|
|
(352 |
) |
|
|
(247 |
) |
Repurchase of common stock |
|
|
(75,325 |
) |
|
|
|
|
Tax benefit
on stock options |
|
|
138 |
|
|
|
|
|
Proceeds from issuance of common stock and exercise of stock options |
|
|
2,406 |
|
|
|
825 |
|
|
|
|
|
|
|
|
Net cash used by financing activities continuing operations |
|
|
(32,094 |
) |
|
|
(31,959 |
) |
Net cash used by financing activities discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by financing activities |
|
|
(32,094 |
) |
|
|
(31,959 |
) |
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
(144 |
) |
|
|
257 |
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
10,996 |
|
|
|
2,454 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
26,055 |
|
|
|
27,628 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
37,051 |
|
|
$ |
30,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
Unrealized gain on fair value of investment securities, net of tax |
|
$ |
10 |
|
|
$ |
(10 |
) |
Cash payments for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
6,426 |
|
|
$ |
9,129 |
|
Income taxes |
|
$ |
25,424 |
|
|
$ |
6,256 |
|
See accompanying notes to consolidated financial statements.
Page 5 of 27
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(1) Basis of Presentation
a. The accompanying unaudited consolidated financial statements
of Central Parking Corporation (Central Parking or the Company) have been prepared in
accordance with U. S. 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 U. S. generally accepted accounting principles for complete financial
statements. In the opinion of management, the unaudited consolidated financial statements reflect
all adjustments considered necessary for a fair presentation, consisting only of normal and
recurring adjustments. All significant inter-company transactions have been eliminated in
consolidation. Operating results for the three and six months ended March 31, 2006 are not
necessarily indicative of the results that may be expected for the fiscal year ending September 30,
2006. For further information, refer to the consolidated financial statements and footnotes
thereto for the year ended September 30, 2005 (included in the Companys Annual Report on Form
10-K). Certain prior period amounts have been reclassified to conform to the current period
presentation.
b. Prior to October 1, 2005, the Company applied the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations including Financial Accounting Standards Board (FASB)
Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation, an
interpretation of APB Opinion No. 25, to account for its fixed-plan stock options. Under this
method, compensation expense was recorded for fixed-plan stock options only if the current market
price of the underlying stock exceeded the exercise price on the date of grant. Statement of
Financial Accounting Standards (SFAS) No. 123 Accounting for Stock Based Compensation,
established accounting and disclosure requirements using a fair-value-based method of accounting
for stock-based employee compensation plans. As allowed by SFAS No. 123 and SFAS No. 148 Accounting
for Stock-Based Compensation-Transition and Disclosure, and amendment of FASB Statement No. 123,
the Company had elected to continue to apply the intrinsic-value-based method of accounting
described above, and had adopted only the disclosure requirements of these statements. The
following table illustrates the effect on net earnings if the fair-value-based method had been
applied to all outstanding and unvested awards for the second quarter ended March 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Six Months |
|
|
|
ended March |
|
|
ended March |
|
|
|
31, |
|
|
31, |
|
|
|
2005 |
|
|
2005 |
|
Net earnings, as reported |
|
$ |
7,550 |
|
|
$ |
10,421 |
|
Add stock-based employee
compensation expense included in
reported net income, net of tax |
|
|
|
|
|
|
|
|
Deduct total stock-based employee
compensation expense determined under
fair-value-based method for all awards,
net of tax |
|
|
(1,036 |
) |
|
|
(2,198 |
) |
|
|
|
|
|
|
|
Pro forma net earnings |
|
$ |
6,514 |
|
|
$ |
8,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic-as reported |
|
$ |
0.21 |
|
|
$ |
0.29 |
|
|
|
|
|
|
|
|
Basic-pro forma |
|
$ |
0.18 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted-as reported |
|
$ |
0.21 |
|
|
$ |
0.29 |
|
|
|
|
|
|
|
|
Diluted-pro forma |
|
$ |
0.18 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
Stock-based
employee compensation expense in the table above was calculated
using the Black-Scholes option pricing model. The Company utilizes both the single option and
multiple option valuation approaches. Allocation of compensation expense were made using
historical option terms for option grants made to the Companys employees and historical Central
Parking Corporation stock price volatility. The Company applies a 40% tax rate to arrive at the
after tax deduction.
Effective October 1, 2005, the Company adopted the fair value recognition provisions of SFAS
No.123R using the modified prospective method. Under this method,
compensation costs in the periods in 2006 are based
Page 6 of 27
on the estimated fair value of the respective options and the proportion vesting in the period.
Stock-based employee compensation expense for the three and six months ended March
31, 2006 was calculated using the Black-Scholes option-pricing model. The Company utilizes both
the single option and multiple option valuation approaches. Allocation of compensation expense was
made using historical option terms for option grants made to the Companys employees and historical
Central Parking Corporation stock price volatility.
There were no options granted during the six months ended March 31, 2006. The
estimated weighted average fair value of options granted during 2005 was $5.85 using the
Black-Scholes option pricing model with the following assumptions: weighted average dividend yield
based on historic dividend rates at the date of the grant, weighted average volatility of 33% for
fiscal year 2005, weighted average risk free interest based on the treasury bill rate of 10-year
instruments at the date of grant, and a weighted average expected term of 7.0 years for 2005.
The
adoption of SFAS No. 123(R) using the modified prospective method resulted in the Company
recognizing $98 thousand of stock based compensation expense in the quarter ended March 31, 2006
and $209 thousand for the first half of fiscal 2006. As of March 31,
2006, there were approximately $387 thousand of total unrecognized
compensation expense related to unvested options granted under the
option plans. The Company used a 7.0% forfeiture to arrive at
this expense. This cost if expected to be fully recognized by the
end of Fiscal Year 2007. During the six months ended March 31, 2006,
the aggregate intrinsic value of options exercised under our stock
plan was $488,474 determined as of the date of option exercise.
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 the plans,
incentive stock options, as well as nonqualified options and other stock-based awards, may be
granted to officers, employees and directors. A total of 7,317,500 common shares had been reserved
for issuance under these two plans combined. Options representing
4,050,456 shares are outstanding
under the stock option plan at September 30, 2005. Under this
plan options generally vest over a one-to four-year period and
generally expire ten years after the date of grant. This plan
expired in August 2005 and no new
shares will be granted under the plan.
In
February 2006, shareholders approved a new 2006 plan and reserved 1,500,000 shares to be issued. The Company
has not issued any options under the new plan as of March 31, 2006. Options are expected to be
granted with an exercise price equal to the fair market value at the date of grant, generally vest
over a one- to four-year period and generally expire ten years after the date of grant, similar to
the 1995 plans.
In August 1995, both the Board of Directors and shareholders approved a stock plan for
directors. A total of 475,000 shares have been reserved for issuance under the plan. This plan
expired in August 2005 and no new shares will be granted under this plan. Options to purchase
102,750 shares are outstanding under this plan at September 30, 2005.
A summary for the Companys stock option activity as of March 31, 2006, and changes during the
first six months of fiscal 2006 is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate |
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
Intrinsic |
|
|
|
Number |
|
|
Weighted Average |
|
|
|
Remaining Contractual |
|
|
Value as of |
|
|
|
of Shares |
|
|
Exercise Price |
|
|
|
Term |
|
3/31/06 |
|
Outstanding at September 30, 2005 |
|
|
4,153,206 |
(a) |
|
$ |
17.98 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(40,675 |
) |
|
$ |
11.56 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(3,000 |
) |
|
$ |
12.73 |
|
|
|
|
|
|
|
|
|
Canceled |
|
|
(36,926 |
) |
|
$ |
16.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2005 |
|
|
4,072,605 |
|
|
$ |
18.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(124,919 |
) |
|
$ |
13.23 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(3,000 |
) |
|
$ |
12.73 |
|
|
|
|
|
|
|
|
|
Canceled |
|
|
(22,500 |
) |
|
$ |
16.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2006 |
|
|
3,922,186 |
|
|
$ |
18.22 |
|
|
|
5.89 |
|
|
$ |
3,801,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and
expected to vest at March 31, 2006 |
|
|
3,903,346 |
|
|
$ |
18.25 |
|
|
|
0.06 |
|
|
$ |
3,739,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2006 |
|
|
3,667,686 |
|
|
$ |
18.61 |
|
|
|
5.78 |
|
|
$ |
2,971,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The Companys consolidated financial statements included in its 2005 Annual Report on
Form 10-K included disclosures as to the number of options granted during fiscal 2005 and
outstanding at September 30, 2005. Such amounts included as an award for 300,000 option shares
which, after further analysis by the Company, did not, in fact, occur due to the fact that options
were not available for grant under the Companys stock option plans. These options are not included
in this outstanding stock option table as of September 30, 2005.
The
Company recognized a tax benefit of $188,453 during the six months
ended March 31, 2006 related to the exercise of non-qualified stock
options.
Page 7 of 27
Restricted Stock
As of September 30, 2005, the Restricted Stock Plan had issued 330,463 shares. Expense
related to vesting of restricted stock is recognized by the Company
over the vesting period of one year. Under
the restricted stock plan, the Company granted 14,000 shares and 16,000 shares with weighted
average fair values on grant date of $14.08 per share and $20.20 per share during fiscal year 2005
and 2004, respectively.
The Company issued restricted stock valued at $197 thousand, $323 thousand and $216 thousand
of restricted stock units, during fiscal year 2005, 2004 and 2003 respectively. These restricted
stock grants are exercisable upon change of control of the Company.
The
Company measures compensation cost related to restricted shares using
the quoted market price on the grant date. During
the first half of 2006, the Company recognized compensation expense
of $100,286 related to restricted shares and expects to recognize
$108,920 during the remainder of Fiscal Year 2006 and $90,765 during
the first half of Fiscal Year 2007.
A summary for the Companys restricted stock activity as of March 31, 2006, and changes during
the first six months of fiscal 2006 is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
Number |
|
|
Grant Date |
|
|
|
of Shares |
|
|
Fair
Value |
|
Outstanding at September 30, 2005 |
|
|
28,660 |
|
|
$ |
16.76 |
|
Granted |
|
|
|
|
|
|
n/a |
|
Vested |
|
|
|
|
|
|
n/a |
|
Forfeited |
|
|
|
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2005 |
|
|
28,660 |
|
|
$ |
16.76 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
14,000 |
|
|
$ |
15.56 |
|
Vested |
|
|
(14,001 |
) |
|
$ |
17.24 |
|
Forfeited |
|
|
|
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2006 |
|
|
28,659 |
|
|
$ |
15.94 |
|
|
|
|
|
|
|
|
|
(2) Cash Flow Statement Revisions
The Company has separately disclosed in the accompanying consolidated statements of cash flows
the operating, investing and financing portions of the cash flows attributable to its discontinued
operations, which prior periods were reported on a combined basis in a single amount. As a result,
the 2005 consolidated cash flow statement has been labeled as revised.
The Company intends to revise the previously issued fiscal year consolidated statements of
cash flows in the Annual Report on Form 10-K for the fiscal year ended September 30, 2006 in order
for such annual periods to be presented consistently with the accompanying consolidated cash flow
statements. The condensed consolidated cash flow statements for each of the years in the
three-year period ended September 30, 2005 as revised to present cash flows related to discontinued
operations by operating, investing and financing activities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
Net cash provided by operating activities-continuing operations |
|
$ |
18,935 |
|
|
$ |
38,368 |
|
|
$ |
19,018 |
|
Net cash (used) provided by operating activities-discontinued
operations |
|
|
(15,701 |
) |
|
|
3,271 |
|
|
|
1,495 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
3,234 |
|
|
|
41,639 |
|
|
|
20,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by investing activities-continuing operations |
|
$ |
101,073 |
|
|
$ |
45,338 |
|
|
$ |
(46,804 |
) |
Net cash provided by investing activities-discontinued
operations |
|
|
673 |
|
|
|
7,018 |
|
|
|
15,667 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by investing activities |
|
|
101,746 |
|
|
|
52,356 |
|
|
|
(31,137 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used) provided by financing activities-continuing operations |
|
$ |
(106,620 |
) |
|
$ |
(97,663 |
) |
|
$ |
8,069 |
|
Net cash provided (used) by financing activities-discontinued
operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used) provided by financing activities |
|
|
(106,620 |
) |
|
|
(97,663 |
) |
|
|
8,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
$ |
67 |
|
|
$ |
(276 |
) |
|
$ |
629 |
|
|
Cash and cash equivalents-beginning of the year |
|
$ |
27,628 |
|
|
$ |
31,572 |
|
|
$ |
33,498 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents-end of the year |
|
$ |
26,055 |
|
|
$ |
27,628 |
|
|
$ |
31,572 |
|
|
|
|
|
|
|
|
|
|
|
(3) 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
Page 8 of 27
exercised or converted into common stock, or if restricted shares of common stock were to become
fully vested.
The subordinated convertible debentures have not been included in the diluted earnings per
share calculation since such securities are anti-dilutive. Such securities were convertible into
1,419,588 shares of common stock on both March 31, 2006 and 2005. For the six months ended March
31, 2006 and March 31, 2005, options to purchase 2,523,354 and 2,762,576 shares, respectively are excluded from the calculation of diluted
common shares since they are anti-dilutive.
(4) Property-Related Gains, Net
The Company routinely disposes of or recognizes impairment related to owned properties,
leasehold improvements, contract rights, lease rights and other long-term deferred expenses due to
various factors, including economic considerations, unsolicited offers from third parties, loss of
contracts and condemnation proceedings initiated by local government authorities. Leased and
managed properties are also periodically evaluated and determinations may be made to sell or exit a
lease obligation. A summary of property-related gains and losses for the three months and six
months ended March 31, 2006 and March 31, 2005 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Net gains on sales of property held for use |
|
$ |
3,655 |
|
|
$ |
15,547 |
|
|
$ |
27,195 |
|
|
$ |
17,490 |
|
Impairment charges for property, equipment and
leasehold improvements held for use |
|
|
(96 |
) |
|
|
(663 |
) |
|
|
(883 |
) |
|
|
(724 |
) |
Impairment charges for contract rights, lease
rights and
other intangible assets |
|
|
|
|
|
|
(128 |
) |
|
|
(8 |
) |
|
|
(129 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Property-related gains, net |
|
$ |
3,559 |
|
|
$ |
14,756 |
|
|
$ |
26,304 |
|
|
$ |
16,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property-related gains for the three months ended March 31, 2006 were $3.6 million. The
$3.6 million gain was comprised of gains on sale of property of
$3.7 million ($1.7 million in
Chicago and $2.6 million in Atlanta offset by a loss of $0.6 million in miscellaneous property
sales); partially offset by $0.1 million of impairments of leasehold improvements, contract rights
and other intangible assets. Net property-related gains for the six months ended March 31, 2006
were $26.3 million. The $26.3 million gain was comprised of gains on sale of property of $27.2
million ($12.9 million in Houston, $7.5 million in Chicago, $4.3 million in Atlanta, $1.4 million
in Denver, $1.4 million in West Palm Beach, offset by a loss $0.3 million in miscellaneous
properties sales); partially offset by $0.9 million of impairments of leasehold improvements,
contract rights and other intangible assets. In assessing impairment, management considered
current operating results, the Companys recent forecast for the
next fiscal year and required capital
improvements, management determined that the projected cash
flows for these locations would not be enough to recover the remaining value of the assets. The
Companys property-related gains for the three and six months ended March 31, 2005 was $14.8
million and $16.6 million, respectively.
In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, the results of operations (including the gain or loss on sale and any recognized asset
impairment) of long-lived assets which qualify as a component of an entity that either have been
disposed of or are classified as held for sale shall be reported in discontinued operations if (i)
the operations and cash flows of the component have been, or will be, eliminated from operations of
the Company as a result of the disposal transaction and (ii) the entity will not have any
significant continuing involvement in the operations of the component after the disposal
transaction. The net property-related gains noted above have been classified in continuing
operations as the individual disposal transactions did not meet the SFAS No. 144 criteria for
classification as discontinued operations primarily due to the expected retention of certain cash
flows from assets disposed. If managements assumptions regarding the timing and amount of such
retained cash flows change in the future, the net property gain (loss) recognized in continuing
operations, along with the results of operations related to such assets, may need to be
reclassified to discontinued operations. See footnote 7 for a discussion of discontinued
operations.
(5) Intangible Assets
As of March 31, 2006, the Company had the following amortizable intangible assets (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
Carrying |
|
|
Accumulated |
|
|
|
|
|
|
Amount |
|
|
Amortization |
|
|
Net |
|
|
Contract and lease rights |
|
$ |
130,143 |
|
|
$ |
54,018 |
|
|
$ |
76,125 |
|
|
|
|
|
|
|
|
|
|
|
Page 9 of 27
Amortization expense related to the contract and lease rights was $2.0 million and $1.8
million for the three months ended March 31, 2006, and
March 31, 2005 and $4.0 million and $3.6
million and for the six months ended March 31, 2006 and March 31, 2005.
(6) Long-Term Debt
The Companys credit facility (the Credit Facility) provides for an aggregate availability
of up to $300 million consisting of a $225 million revolving loan, including a sub-limit of $90
million for standby letters of credit, and a $75 million term loan. The facility is secured by the
stock of certain subsidiaries of the Company, certain real estate assets, and domestic personal
property assets of the Company and certain subsidiaries.
The Credit Facility bears interest at LIBOR plus a tier-based margin dependent upon certain
financial ratios. There are separate pricing tiers for the revolving loan and term loan. The weighted
average margin as of March 31, 2006 was 200 basis points. The amount outstanding under the
Companys Credit Facility was $124.1 million consisting of a $74.1 million term loan and a $50.0
million revolving loan, with an overall weighted average interest rate of 5.5% as of March 31,
2006. The term loan is required to be repaid in quarterly payments of $187,500 through March 2008
and quarterly payments of $9.1 million from June 2008 through March 2010. The revolving loan is
required to be repaid February 2008. The aggregate availability under the Credit Facility was
$127.6 million at March 31, 2006, which is net of $47.4 million of stand-by letters of credit.
During the first quarter, the Company repurchased a total of 4,859,674 shares for $75.3 million
using the availability under the Credit Facility.
The Company completed an amendment to the Credit Facility as of March 31, 2006. The main
purpose of the amendment was to modify the financial covenant target requirements. The
modifications affected the leverage ratio, senior leverage ratio and fixed charge coverage ratio.
The new leverage targets step down over the next several quarters and will remain at 3.50 for the
leverage ratio and 2.50 for the senior leverage ratio until loan maturity.
The Credit Facility contains covenants including those that require the Company to maintain
certain financial ratios, restrict further indebtedness and certain acquisition activity and limit
the amount of dividends paid. The primary ratios are a leverage ratio, senior leverage ratio and a
fixed charge coverage ratio. Quarterly compliance is calculated using a four quarter rolling
methodology and is measured against specified targets. The Company was in compliance with the
covenants at March 31, 2006.
(7) Derivative Financial Instruments
The Company periodically enters into various types of derivative instruments to manage
fluctuations in cash flows resulting from interest rate risk. These instruments include interest
rate swaps and caps. Under interest rate swaps, the Company receives variable interest rate
payments and makes fixed interest rate payments, thereby creating fixed-rate debt. Purchased
interest rate cap agreements also protect the Company from increases in interest rates that would
result in increased cash interest payments made under its Credit Facility. Under interest rate cap
agreements, the Company has the right to receive cash if interest rates increase above a specified
level.
At March 31, 2006, the Company had three derivative financial instruments including two
interest rate swaps with a combined notional amount of $87.5 million. These derivative financial
instruments are reported at their fair values and are included as other assets on the consolidated
balance sheets. The following table lists the fair value of the derivative financial instruments
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
September 30, |
|
|
|
2006 |
|
|
2005 |
|
Derivative instrument assets: |
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
2,944 |
|
|
$ |
3,006 |
|
|
|
|
|
|
|
|
Because not all of the terms are consistent with those of the Credit Facility, the derivatives
do not qualify as a cash flow hedge for accounting purposes. As such, any changes in the fair
market value of these derivative instruments are included in the consolidated statement of
operations.
The Company entered into an interest rate cap agreement on an underlying $12.7 million loan in
October 2005. This agreement limits the Companys exposure to the floating interest rate by paying
the Company for interest paid in excess of 5.50%.
(8) Stock Repurchase
In August of 2005, the Company made an offer to its shareholders to purchase up to 4,400,000
shares of common stock at a price no greater than $16.75 or lower than $14.50 per share. The
transaction was structured as a modified Dutch Auction tender offer.
The offer was amended to reduce the range from a price no higher than $16.00 and no lower than
$14.00 per
Page 10 of 27
share. The transaction was concluded on October 14, 2005 at which time the Company accepted
and purchased 4,400,000 shares at a price of $15.50 per share. The Company exercised its right to
purchase an additional 459,674 shares without extending or modifying the offer. The Company
repurchased a total of 4,859,674 shares for $75.3 million using the availability under the Credit
Facility.
(9) Comprehensive Income
Comprehensive income (loss) for the three and six months ended March 31, 2006 and 2005, was as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Net earnings |
|
$ |
1,987 |
|
|
$ |
7,550 |
|
|
$ |
19,943 |
|
|
$ |
10,421 |
|
Change in fair value of investment securities, net of tax |
|
|
(1 |
) |
|
|
(36 |
) |
|
|
10 |
|
|
|
(10 |
) |
Foreign currency cumulative translation adjustment |
|
|
(270 |
) |
|
|
(604 |
) |
|
|
(1,138 |
) |
|
|
3,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
1,716 |
|
|
$ |
6,910 |
|
|
$ |
18,815 |
|
|
$ |
13,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) Discontinued Operations
For
first half of fiscal 2006, the Company either disposed or designated
as held-for-sale,
certain locations, resulting in a loss from discontinued operations of $0.2 million.
Included in discontinued operations in first half of 2006 is income of $2.3 million from the
settlement agreement with Rotala, see footnote 12 for additional disclosures. Also included in
discontinued operations are losses of $4.0 million primarily related to the United Kingdom
transportation division; partially offset by a
gain of $1.1 million from the sale of properties and income of
$0.4 million in other discontinued operations. The Companys 2005 results were reclassified to
reflect the operations of these locations as discontinued operations, net of related income taxes.
Also see note 13.
(11) Business Segments
The Company is managed based on segments administered by senior vice presidents. These
segments are generally organized geographically, with exceptions depending on the needs of specific
regions. The following are summaries of revenues and operating earnings (loss) of each segment for
the three months ended March 31, 2006 and 2005, as well as identifiable assets for each segment as
of March 31, 2006 and September 30, 2005. The segment information has been updated for 2006 and
2005 to incorporate changes in the Companys segment structure.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
March 31, |
|
|
March 31, |
|
Revenues:(1) |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Segment One |
|
$ |
25,138 |
|
|
$ |
25,632 |
|
|
$ |
49,685 |
|
|
$ |
52,141 |
|
Segment Two |
|
|
13,509 |
|
|
|
14,951 |
|
|
|
27,878 |
|
|
|
30,056 |
|
Segment Three |
|
|
6,159 |
|
|
|
6,847 |
|
|
|
12,292 |
|
|
|
14,531 |
|
Segment Four |
|
|
17,347 |
|
|
|
16,751 |
|
|
|
34,293 |
|
|
|
34,734 |
|
Segment Five |
|
|
67,279 |
|
|
|
67,531 |
|
|
|
139,079 |
|
|
|
139,161 |
|
Segment Six |
|
|
18,057 |
|
|
|
18,584 |
|
|
|
34,601 |
|
|
|
37,201 |
|
Segment Seven |
|
|
5,188 |
|
|
|
4,993 |
|
|
|
9,339 |
|
|
|
9,639 |
|
Segment Eight |
|
|
4,516 |
|
|
|
4,392 |
|
|
|
9,275 |
|
|
|
8,516 |
|
Other |
|
|
2,646 |
|
|
|
2,514 |
|
|
|
5,061 |
|
|
|
5,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
159,839 |
|
|
$ |
162,195 |
|
|
$ |
321,503 |
|
|
$ |
331,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Revenues exclude reimbursement of management contract expenses. Such amounts were
$115.2 million and $107.8 million for the three months ended March 31, 2006 and 2005,
respectively, and $229.3 million and $219.4 million for the six months ended March 31, 2006
and 2005, respectively. |
Page 11 of 27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
March 31, |
|
|
March 31, |
|
Operating earnings (loss): |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Segment One |
|
$ |
2,037 |
|
|
$ |
1,620 |
|
|
$ |
4,479 |
|
|
$ |
3,536 |
|
Segment Two |
|
|
(550 |
) |
|
|
64 |
|
|
|
1,019 |
|
|
|
170 |
|
Segment Three |
|
|
771 |
|
|
|
212 |
|
|
|
(1,897 |
) |
|
|
1,763 |
|
Segment Four |
|
|
1,796 |
|
|
|
33 |
|
|
|
4,354 |
|
|
|
862 |
|
Segment Five |
|
|
2,783 |
|
|
|
(176 |
) |
|
|
7,315 |
|
|
|
5,859 |
|
Segment Six |
|
|
3,013 |
|
|
|
2,791 |
|
|
|
4,844 |
|
|
|
5,169 |
|
Segment Seven |
|
|
1,300 |
|
|
|
914 |
|
|
|
2,155 |
|
|
|
1,715 |
|
Segment Eight |
|
|
199 |
|
|
|
65 |
|
|
|
59 |
|
|
|
120 |
|
Other (including property
related
gains, net) |
|
|
(1,867 |
) |
|
|
9,738 |
|
|
|
18,051 |
|
|
|
8,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating earnings |
|
$ |
9,482 |
|
|
$ |
15,261 |
|
|
$ |
40,379 |
|
|
$ |
28,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
September 30, |
|
Identifiable assets: |
|
2006 |
|
|
2005 |
|
Segment One |
|
$ |
23,626 |
|
|
$ |
24,484 |
|
Segment Two |
|
|
35,685 |
|
|
|
36,571 |
|
Segment Three |
|
|
32,191 |
|
|
|
32,423 |
|
Segment Four |
|
|
10,515 |
|
|
|
10,630 |
|
Segment Five |
|
|
319,914 |
|
|
|
321,384 |
|
Segment Six |
|
|
29,156 |
|
|
|
35,822 |
|
Segment Seven |
|
|
13,665 |
|
|
|
11,457 |
|
Segment Eight |
|
|
14,468 |
|
|
|
10,984 |
|
Other |
|
|
369,142 |
|
|
|
384,059 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
848,362 |
|
|
$ |
867,814 |
|
|
|
|
|
|
|
|
Segment One encompasses Nebraska, Missouri, Colorado and the Midwestern region of the United States. It also includes Canada, excluding Vancouver.
Segment Two encompasses the southeastern region of the United States to include Washington DC and Baltimore. It also includes Pennsylvania and western New York.
Segment Three encompasses Europe.
Segment Four encompasses Nashville, TN, Memphis, TN and the western region of the United States and Vancouver, BC.
Segment Five encompasses the northeastern region of the United States to include New York City, New Jersey, Boston and Philadelphia.
Segment Six encompasses Florida, Alabama, parts of Tennessee and the southeastern region of the United States to include the Gulf Coast region and Texas.
Segment Seven encompasses the USA Parking acquisition.
Segment Eight encompasses Puerto Rico, Central and South America.
Other encompasses the home office, eliminations, certain owned real estate, certain partnerships and discontinued operations.
(12) Commitments and Contingencies
On December 23, 2005, the Company entered into a settlement agreement with Rotala PLC, the
Flights Group companies, Stuart Lawrenson, Paul Churchman and Michael Tackley resolving the
Companys claims arising from certain actions taken by former employees of the Company in the
United Kingdom. The key terms of the settlement include: (1) The payment to the Company of the
proceeds from the sale of 46,666,667 shares of Rotala stock, indirectly owned by Lawrenson, which
were sold through a private placement with net proceeds of pound sterling (GBP) 602,296 (USD
$1,073,741 based on January 26, 2006 exchange rate) was received by the Company on January 26,
2006; (2) Rotala issued promissory notes to the Company with a value of GBP 800,000 (USD $1,374,738
based on December 31, 2005 exchange rate), payable in annual installments between December 31,
2006, and December 31, 2010; (3) in addition to amounts already received from Rotala for goods
and services benefiting the Flights Group, Rotala agreed to pay an additional GBP 270,000 (USD
$472,377 based on April 5, 2006 exchange rate) to the Company
upon completion of a previously
announced fundraising which was completed and paid to the Company on April 5, 2006; (4) Rotala
granted to the Company a warrant to purchase 15,000,000 ordinary shares of Rotala stock at an
exercise price of 1.5 pence per share, exercisable for a five year period; (5) Stuart Lawrenson
agreed to pay to the Company GPB 70,000 (USD $120,290 based on December 31, 2005 exchange rate) in
April 2006 and to pay an additional GBP 60,000 (USD $103,105 based on December 31, 2005 exchange
rate) within a year; and (6) Paul Churchman and Michael
Tackley each agreed to pay GBP 10,000 (USD $17,184 based on December 31, 2005 exchange rate) to the
Company
Page 12 of 27
within
ninety days. The Company received the payment of GBP 95,000 (USD
$166,276 based on
April 6, 2006 exchange rate) from Lawrenson on April 6, 2006 and the payments from Churchman and
Tackley of GBP 20,053 (USD $35,097 based on April 6, 2006 exchange rate) on April 6, 2006. Once
the conditions of this settlement have been met, all claims between the parties will be released.
As part of the Companys strategic review of operations, it is anticipated that the Company
will exit certain transportation contracts in the United Kingdom. The contract termination costs
to be recognized in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities to exit these contracts is estimated to
approximate $12 million on a pre-tax basis.
In addition to the matter described above 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 have a material adverse
effect on the financial position, operations, or liquidity of the Company.
(13) Subsequent Events
On
May 5, 2006, the Company entered into an agreement with a governmental agency in the
United Kingdom to terminate the Companys obligations to the
governmental agency related to certain bus routes in London. As a result, the Company also expects
to incur additional charges related to bus and facility lease obligations (or termination payments
to be negotiated related to such obligations) and employee
termination costs. The Company
currently estimates that the total of such pre-tax charges will
approximate $12 million,
although the ultimate costs will be dependent on the results of current negotiations with the
respective third parties. The Company currently expects that such costs will be recognized in the
third quarter of fiscal 2006 in accordance with the relevant accounting literature related to
contract termination costs and employee termination costs. None of the aforementioned
liabilities qualified for recognition at March 31, 2006 in the Companys consolidated financial
statements. When recognized, the charges will be reflected as a component of discontinued
operations in our consolidated statement of income.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements May Prove Inaccurate
This report includes various forward-looking statements regarding the Company that are subject
to risks and uncertainties, including, without limitation, the factors set forth below and in Item
1A Risk Factors and Item 7 Managements Discussion and Analysis of Financial Condition and
Results of Operations section of the Companys annual report on Form 10-K for the year ended
September 30, 2005. Forward-looking statements include, but are not limited to, discussions
regarding the Companys operating strategy, growth strategy, acquisition strategy, cost savings
initiatives, industry, economic conditions, financial condition, liquidity and capital resources,
results of operations and impact of new accounting pronouncements. Such statements include, but are
not limited to, statements preceded by, followed by or that otherwise include the words believes,
expects, anticipates, intends, seeks, estimates, projects, objective, strategy,
outlook, assumptions, guidance, forecasts, goal, intends, pursue, will likely
result, will continue or similar expressions. For those statements, the Company 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 document,
and the Companys 10-K, 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
news releases and other public statements by the Company:
|
- |
|
the Companys ability to achieve the goals described in this report and other reports
filed with the Securities and Exchange Commission, including but not limited to, the
Companys ability to: |
|
- |
|
increase cash flow by reducing operating costs, accounts receivable and indebtedness; |
|
|
- |
|
cover the fixed cost of its leased and owned facilities and
maintain adequate liquidity through its cash resources and credit facility; |
|
|
- |
|
integrate future acquisitions, in light of challenges in
retaining key employees, synchronizing business processes and efficiently
integrating facilities, marketing, and operations; |
Page 13 of 27
|
- |
|
comply with the terms of its credit facility or obtain waivers of noncompliance; |
|
|
- |
|
reduce operating losses at unprofitable locations; |
|
|
- |
|
form and maintain strategic relationships with certain large real estate owners and
operators; and |
|
|
- |
|
renew existing insurance coverage and obtain performance and surety bonds on favorable
terms; |
|
- |
|
successful implementation of the Companys strategic plan; |
|
|
- |
|
interest rate fluctuations; |
|
|
- |
|
the loss, or renewal on less favorable terms, of existing management contracts and
leases and the failure to add new locations on favorable terms; |
|
|
- |
|
the timing of property-related gains and losses; |
|
|
- |
|
pre-opening, start-up and break-in costs of parking facilities; |
|
|
- |
|
player strikes or other events affecting major league sports; |
|
|
- |
|
changes in economic and business conditions at the local, regional, national or international levels; |
|
|
- |
|
changes in patterns of air travel or automobile usage, including but not limited to
effects of weather on travel and transportation patterns; |
|
|
- |
|
the impact of litigation and claims; |
|
|
- |
|
higher premium and claims costs relating to medical, liability, workers compensation
and other insurance programs; |
|
|
- |
|
compliance with, or changes in, local, state, national and international laws and
regulations, including, without limitation, local regulations, restrictions and taxation on
real property, parking and automobile usage, security measures, environmental, anti-trust
and consumer protection laws; |
|
|
- |
|
changes in current parking rates and pricing of services to clients; |
|
|
- |
|
extraordinary events affecting parking facilities that the Company manages, including
labor strikes, emergency safety measures, military or terrorist attacks and natural
disasters; |
|
|
- |
|
the loss of key employees; and |
|
|
- |
|
the other factors discussed under Item 1A Risk Factors and in Item 7 -
Managements Discussion and Analysis of Financial Condition and Results of Operations
included in the Companys Annual Report on Form 10-K for the fiscal year ended September
30, 2005. |
Overview
The Company is a leading provider of parking and related services. Central Parking operates
parking facilities in 37 states, the District of Columbia, Canada, Puerto Rico, Chile, Columbia,
Peru, the United Kingdom, the Republic of Ireland, Spain, Germany, Poland, Greece, Italy and
Switzerland. The Company also provides ancillary products and services, including parking
consulting, shuttle, valet, on-street and parking meter enforcement, and billing and collection
services. As of March 31, 2006, Central Parking operated 1,634 parking facilities through
management contracts, leased 1,387 parking facilities, and owned 164 parking facilities, either
independently or in joint ventures with third parties.
Central Parking operates parking facilities under three general types of arrangements:
management contracts, leases and fee ownership. 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. Management contract revenues consist of management fees (both fixed
and performance based) and fees for ancillary services such as insurance, accounting, equipment
leasing, and consulting. The cost of management contracts includes insurance premiums, claims and
other direct overhead.
The Company believes that most commercial real estate developers and property owners view
services such as parking as potential profit centers rather than cost centers. Many of these
parties outsource parking operations to
Page 14 of 27
parking management companies in an effort to maximize profits or leverage the original rental
value to a third-party lender. Parking management companies can increase profits by using
managerial skills and experience, operating systems, and operating controls unique to the parking
industry.
The Companys strategy is to increase the number of profitable parking facilities it operates
by focusing its marketing efforts on adding facilities at the local level and targeting real estate
managers and developers with a national presence.
The Company continues to view privatization of certain governmental operations and facilities
as an opportunity for the parking industry. For example, privatization of on-street parking fee
collection and enforcement in the United Kingdom has provided significant opportunities for private
parking companies. In the United States, several cities have awarded on-street parking fee
collection and enforcement and parking meter service contracts to for-profit parking companies such
as Central Parking.
Critical Accounting Policies
Managements Discussion and Analysis of Financial Condition and Results of Operations
discusses the Companys consolidated financial statements, which have been prepared in accordance
with U.S. generally accepted accounting principles. Accounting estimates are an integral part of
the preparation of the financial statements and the financial reporting process and are based upon
current judgments. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during
the reported period. Certain accounting estimates are particularly sensitive because of their
complexity and the possibility that future events affecting them may differ materially from the
Companys current judgments and estimates.
This listing of critical accounting policies is not intended to be a comprehensive list of all
of the Companys accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by U.S. generally accepted accounting principles, with no need
for managements judgment regarding accounting policy. The Company believes that of its significant
accounting policies, as discussed in Note 1 to the consolidated financial statements included in
the Companys Annual Report on Form 10-K for the year ended September 30, 2005, the following
involve a higher degree of judgment and complexity:
Impairment of Long-Lived Assets and Goodwill
As of March 31, 2006, the Companys long-lived assets were comprised primarily of $310.6
million of property, equipment and leasehold improvements, $76.1 million of contract and lease
rights, $232.4 million of goodwill and $10.1 million of deferred expenses. In accounting for the
Companys long-lived assets, other than goodwill and intangible assets with indefinite useful
lives, the Company applies the provisions of Statement of Financial Accounting Standards (SFAS)
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company accounts for
goodwill and intangible assets with indefinite useful lives under the provisions of SFAS No. 142,
Goodwill and Other Intangible Assets.
The determination and measurement of an impairment loss under these accounting standards
require the continuous use of significant judgment and estimates. The determination of fair value
of these assets includes cash flow projections that assume certain future revenue and cost levels,
assumed discount rates based upon current market conditions and other valuation factors, all of
which involve the use of significant judgment and estimation. The Company recorded impairment
losses of approximately $0.1 million in continuing operations (there were no impairments for assets
classified in discontinued operations) during the three months ended March 31, 2006 as a result of
underperforming locations, upon termination or disposal and premature closures and approximately
$0.9 million ($0.8 million in continuing operations and $0.1 million in discontinued operations)
during the six months ended March 31, 2006 as a result of underperforming locations, upon
termination or disposal and premature closures. Future events may indicate differences from
managements judgments and estimates, which could, in turn, result in increased impairment charges
in the future. Future events that may result in increased impairment charges include increases in
interest rates, which would impact discount rates, unfavorable economic conditions or other
factors, which could decrease revenues and profitability of existing locations, and changes in the
cost structure of existing facilities.
Contract and Lease Rights
As of March 31, 2006, the Company had $76.1 million of contract and lease rights. The Company
capitalizes payments made to third parties, which provide the Company the right to manage or lease
facilities. Lease
Page 15 of 27
rights and management contract rights, which are purchased individually, are amortized on a
straight-line basis over the terms of the related agreements, which range from 5 to 30 years.
Management contract rights acquired through acquisition of an entity are amortized as a group over
the estimated term of the contracts, including anticipated renewals and terminations based on the
Companys historical experience (typically 15 years). If the actual renewal rate of contracts
within an acquired group is less than initially estimated, accelerated amortization or impairment
may be necessary.
Allowance for Doubtful Accounts
As of March 31, 2006, the Company had $70.9 million of gross trade receivables, including
management accounts receivable and accounts receivable other. Additionally, the Company had a
recorded allowance for doubtful accounts of $8.5 million. The Company reports management accounts
receivable, net of an allowance for doubtful accounts, to represent its estimate of the amount that
ultimately will be realized in cash. The Company reviews the adequacy of its allowance for
doubtful accounts on an ongoing basis, using historical collection trends, analyses of receivable
portfolios by region and by source, aging of receivables, as well as review of specific accounts,
and makes adjustments in the allowance as necessary. Changes in economic conditions, especially in
the Northeast United States, could have an impact on the collection of existing receivable balances
or future allowance considerations.
Insurance
The Company purchases comprehensive liability insurance covering certain claims that occur at
parking facilities it owns, leases or manages. The primary amount of such coverage is $1 million
per occurrence and $2 million in the aggregate per facility. In addition, the Company purchases
umbrella/excess liability coverage. The Companys various liability insurance policies have
deductibles of up to $350,000 that must be met before the insurance companies are required to
reimburse the Company for costs incurred relating to covered claims. In addition, the Companys
workers compensation program has a deductible of $250,000. The Company also provides health
insurance for many of its employees and purchases a stop-loss policy with a deductible of $150,000
per claim. As a result, the Company is, in effect, self-insured for all claims up to the
deductible levels. This determination requires the use of judgment in both the estimation of
probability and the amount to be recognized as an expense. Management utilizes historical
experience with similar claims along with input from legal counsel in determining the likelihood
and extent of an unfavorable outcome for certain general litigation. Future events may indicate
differences from these judgments and estimates and result in increased expense recognition in the
future.
Income Taxes
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 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 Company has certain net operating loss carry forwards which expire between 2006 and
2018. The valuation allowance provides for net operating loss carry forwards for which
recoverability is deemed to be uncertain. The carrying value of the Companys deferred tax assets
assumes that the Company will be able to generate sufficient future taxable income in certain tax
jurisdictions, based on estimates and assumptions. If these estimates and related assumptions
change in the future, the Company will be required to adjust its deferred tax valuation allowances.
Recent Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment. SFAS No. 123R requires
the company to measure the cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award. SFAS 123R was effective for the
Company beginning October 1, 2005. See footnote (1) for additional information.
In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset
Retirement Obligations, an interpretation of FASB Statement No. 143 (FIN No. 47). FIN No. 47
clarifies that the term, conditional asset retirement obligation as used in SFAS No. 143,
Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset
retirement activity in which the timing and/or method of settlement are conditional upon a future
event that may or may not be within the control of the entity. Even though uncertainty about the
timing and/or method of settlement exists and may be conditional upon a future event, the
obligation to perform the asset retirement activity is unconditional. Accordingly, an entity is
required to recognize a liability for the fair value of a conditional asset retirement obligation
if the fair value of the liability can be reasonably estimated. Uncertainty about the timing
and/or method of settlement of a conditional asset retirement obligation should be factored into
the measurement of the liability when sufficient information exists. The fair value of a liability
for the
Page 16 of 27
conditional asset retirement obligation should be recognized when incurred generally upon
acquisition, construction, or development or through the normal operation of the asset. SFAS No.
143 acknowledges that in some cases, sufficient information may not be available to reasonably
estimate the fair value of an asset retirement obligation. FIN No. 47 also clarifies when an
entity would have sufficient information to reasonably estimate the fair value of an asset
retirement obligation. FIN No. 47 is effective no later than the end of fiscal years ending after
December 15, 2005, and early adoption of FIN No. 47 is encouraged. The Company has not determined
the impact, if any, that the adoption of this pronouncement will have to its consolidated financial
statements.
In June 2005, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 05-06,
Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or
Acquired in a Business Combination (EITF 05-06). EITF 05-06 concludes that the amortization
period for leasehold improvements acquired in a business combination and leasehold improvements
that are in service significantly after and not contemplated at the beginning of the lease term
should be amortized over the shorter of the useful life of the assets or a term that includes
required lease periods and renewals that are deemed to be reasonably assured at the date of
inception. The consensus was effective for periods beginning after June 29, 2005. The adoption of
this pronouncement did not have a material impact on the Companys consolidated financial
statements.
In June 2005, the EITF reached consensus in EITF 04-5, Determining Whether a General Partner, or
the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited
Partners Have Certain Rights, to provide guidance on how general partners in a limited partnership
should determine whether they control a limited partnership and therefore should consolidate it.
The EITF agreed that the presumption of general partner control would be overcome only when the
limited partners have either of two types of rights. The first type, referred to as kick-out
rights, is the right to dissolve or liquidate the partnership or otherwise remove the general
partner without cause. The second type, referred to as participating rights, is the right to
effectively participate in significant decisions made in the ordinary course of the partnerships
business. The kick-out rights and the participating rights must be substantive in order to overcome
the presumption of general partner control. The consensus is effective for general partners of all
new limited partnerships formed and for existing limited partnerships for which the partnership
agreements are modified subsequent to the date of FASB ratification (June 29, 2005). For existing
limited partnerships that have not been modified, the guidance in EITF 04-5 is effective no later
than the beginning of the first reporting period in fiscal years beginning after December 15, 2005.
The Company has not determined the impact, if any, that the adoption of this pronouncement will
have to its consolidated financial statements with respect to existing limited partnerships that
have not been modified.
Results of Operations
Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
Parking revenues for the second quarter of fiscal year 2006 decreased to $130.5 million from
$133.3 million for the second quarter of fiscal year 2005, a decrease of $2.7 million, or 2.1%.
The decrease of $2.7 million is due to a decrease of $10.5 million due to closed locations and a
decrease of $3.7 million related to contracts converted from leased to management deals; partially
offset by an increase of $4.0 million in new locations and an
increase of same store sales of $7.5
million.
Management contract revenues for the second quarter of fiscal 2006 increased to $29.3 million
from $28.9 million for the second quarter of fiscal year 2005, an increase of $0.4 million or 1.3%.
The increase was primarily due to an increase in management fees.
Cost of parking for the second quarter of fiscal 2006 decreased to $119.7 million from $124.9
million for the second quarter of fiscal 2005, a decrease of $5.2 million or 4.2%. The decrease
was due primarily to a reduction in the number of operating locations, including elimination of
several unprofitable locations, and was composed of a $2.2 million decline in rent expense, $0.8
million decline in snow removal, $0.6 million decline in property taxes and $1.6 million decline in
repairs and maintenance and other. Rent expense as a percentage of parking revenues decreased to
51.0% during the quarter ended March 31, 2006, from 51.6% in the quarter ended March 31, 2005.
Payroll and benefit expenses as a percent of parking revenues were 19.1% of parking revenues for
the second quarter of fiscal 2006 as compared to 18.6% in the comparable prior year period. Cost
of parking as a percentage of parking revenues decreased to 91.7% for the second quarter of fiscal
2006 from 93.7% for the second quarter of fiscal 2005.
Cost of management contracts for the second quarter of fiscal 2006 decreased to $13.2 million
from $15.2 million in the comparable period in 2005, a decrease of $2.0 million or 13.1%. The
decrease was primarily caused by
Page 17 of 27
a decrease of $0.6 million in group insurance claims, a decrease of $0.5 million in other
insurance related costs, $0.2 million in bad debt expense and $0.7 million decrease in other
expenses. Cost of management contracts as a percentage of management contract revenue decreased to
45.1% for the second fiscal quarter of 2006 from 52.5% for the same period in 2005.
General and administrative expenses decreased to $21.0 million for the second quarter of
fiscal 2006 from $21.6 million for the second quarter of fiscal 2005, a decrease of $0.6 million or
2.6%. This decrease is due to a decrease of $1.4 million in payroll related expenses and $1.2
million in other expenses; offset by $2.0 million in professional fees. General and administrative
expenses as a percentage of total revenues (excluding reimbursement of management contract
expenses) remained flat at 13.2% for the second quarter of fiscal 2006 and the second quarter of
fiscal 2005.
Net property-related gains for the three months ended March 31, 2006 were $3.6 million. The
$3.6 million gain was comprised of gains on sale of property of
$3.7 million ($1.7 million in
Chicago and $2.6 million in Atlanta offset by a loss of $0.6 million in miscellaneous property
sales); partially offset by $0.1 million of impairments of leasehold improvements, contract rights
and other intangible assets. Based on current operating results, the Companys recent forecast for
the next fiscal year and required capital improvements, management determined that the projected cash flows for these locations would not be enough to
recover the remaining value of the assets. The Companys property-related gains for the three
months ended March 31, 2005 was $14.7 million.
Interest expense decreased to $4.1 million for the second quarter of fiscal 2006 from $5.0
million for the second quarter of fiscal 2005, a decrease of $0.8 million or 16.4%. The decrease
was primarily attributed to a decrease in the weighted average debt outstanding under the Credit
Facility.
The weighted average balance outstanding for the Companys debt obligations and subordinated
convertible debentures was $233.8 million during the quarter ended March 31, 2006, at a weighted
average interest rate of 6.4% compared to a weighted average balance outstanding of $291.4 million
at a weighted average rate of 6.2% during the quarter ended March 31, 2005. Amortization of
deferred finance costs was included in the calculation of the weighted average interest rate.
The Company recorded income tax expense on earnings from continuing operations of $1.9 million
for the second quarter of fiscal 2006 as compared to income tax expense of $3.8 million for the
second quarter of fiscal 2005, a change of $1.9 million. The effective tax rate on earnings from
continuing operations before income taxes for the second quarter of fiscal 2006 was 35.2% compared
to 33.7% for the second quarter of fiscal 2005.
For the three months ended March 31, 2006, the Company had either disposed of or designated as
held-for-sale or disposal certain locations, resulting in a loss from discontinued operations of
$1.5 million, net of tax. The loss was primarily related to the United Kingdom transportation
division. The Companys prior period results were reclassified to reflect the operations of the
locations discontinued in the first and second quarter of fiscal 2006, net of related income taxes.
Six Months Ended March 31, 2006 Compared to Six Months Ended March 31, 2005
Parking revenues for the first half of fiscal year 2006 decreased to $263.9 million from
$271.9 million for the first half of fiscal year 2005, a decrease of $8.0 million, or 2.9%. The
decrease of $8.0 million is due to a decrease of $20.4 million due to closed locations and a decrease of
$5.9 million related to contracts converted from leased to management deals; partially offset by an
increase of $8.2 million in new locations and an increase of same store sales of $10.1 million.
Management contract revenues for the first half of fiscal 2006 decreased to $57.6 million from
$59.2 million for the first half of fiscal year 2005, a decline of $1.6 million or 2.8%. The
decrease was primarily due to the lower net management fees from our at risk United Kingdom
locations, which totaled $1.2 million, $0.3 million resulting from the loss of a contract and
approximately $0.3 million due to Hurricane Katrina; offset by an increase of $0.2 million in
management fees.
Cost of parking for the first half of fiscal 2006 decreased to $241.6 million from $248.8
million for the first half of fiscal 2005, a decrease of $7.3 million or 2.9%. The decrease was
due primarily to a reduction in the number of operating locations, including elimination of several
unprofitable locations, and was composed of a $5.3 million
decline in rent expense, $1.0 million decline in
repairs and maintenance, $0.8 million decline in snow removal, $0.8 million decline in property taxes;
offset by $0.6 million increase in other expenses. Rent expense as a percentage of parking
revenues decreased to 50.8% during the six months ended March 31, 2006, from 51.3% for the six
months ended
Page 18 of 27
March 31, 2005. Payroll and benefit expenses as a percent of parking revenues were 19.0% of
parking revenues for the six months ended of fiscal 2006 as compared to 18.3% in the comparable
prior year period. Cost of parking as a percentage of parking revenues remained flat at 91.5% for
both the first half of fiscal 2006 and the first half of fiscal 2005.
Cost of management contracts for the first half of fiscal 2006 decreased to $24.0 million from
$30.4 million in the comparable period in 2005, a decrease of $6.4 million or 21.0%. The decrease
was primarily caused by a decrease of $2.6 million in group insurance claims expense, a decrease of
$1.6 million in other insurance related costs and a decrease of $0.9 million in bad debt expense
and $1.3 million in other expenses. Cost of management contracts as a percentage of management
contract revenue decreased to 41.7% for the first half of fiscal 2006 from 51.4% for the same
period in 2005.
General and administrative expenses increased to $41.8 million for the first half of fiscal
2006 from $40.3 million for the first half of fiscal 2005, an increase of $1.5 million or 3.7%.
This increase is due to an increase of $3.9 million in professional expenses related to the United
Kingdom investigation and other; offset by a decrease of $1.5 million in payroll related expenses and a
decrease of $0.9 million in other expenses. General and administrative expenses as a percentage of
total revenues (excluding reimbursement of management contract expenses) increased to 13.0% for the
first half of fiscal 2006 compared to 12.2% for the first half of fiscal 2005.
Net property-related gains for the six months ended March 31, 2006 were $26.3 million. The
$26.3 million gain was comprised of gains on sale of property of $27.2 million ($12.9 million in
Houston, $7.5 million in Chicago, $4.3 million in Atlanta, $1.4 million in Denver, $1.4 million in
West Palm Beach; offset by a loss $0.3 million in miscellaneous properties sales); partially offset
by $0.9 million of impairments of leasehold improvements, contract rights and other intangible
assets. Based on current operating results, the
Companys recent forecast for the next fiscal year, and required capital improvements, management determined that the projected cash flows for these locations
would not be enough to recover the remaining value of the assets. The Companys property-related
gains for the six months ended March 31, 2005 was $16.6 million.
Interest expense decreased to $8.1 million for the first half of fiscal 2006 from $9.9 million
for the first half of fiscal 2005, a decrease of $1.8 million or 18.3%. The decrease was primarily
attributed to a decrease in the weighted average debt outstanding under the Credit Facility.
The weighted average balance outstanding for the Companys debt obligations and subordinated
convertible debentures was $233.9 million during the six months ended March 31, 2006, at a weighted
average interest rate of 6.3% compared to a weighted average balance outstanding of $292.4 million
at a weighted average rate of 6.1% during the six months ended March 31, 2005. Amortization of
deferred finance costs was included in the calculation of the weighted average interest rate.
The Company recorded income tax expense on earnings from continuing operations of $12.6
million for the first half of fiscal 2006 as compared to income tax expense of $7.0 million for the
first half of fiscal 2005, a change of $5.6 million. The effective tax rate on earnings from
continuing operations before income taxes for the first half of fiscal 2006 was 38.5% compared to
33.5% for the first half of fiscal 2005. The increase in the effective tax rate is primarily due
to valuation allowances against foreign losses; partially offset by the utilization of state tax
loss carry forward.
For the six months ended March 31, 2006, the Company had either disposed of or designated as
held-for-sale or disposal certain locations, resulting in a loss from discontinued operations of
$0.2 million, net of tax. The loss was primarily related to the United Kingdom transportation
division. The Companys prior period results were reclassified to reflect the operations of the
locations discontinued in the first and second quarter of fiscal 2006, net of related income taxes.
Liquidity and Capital Resources
Net
cash used by operating activities for the six months ended March 31, 2006 was $4.5 million
compared to $4.4 million provided for the six months ended March 31, 2005. The change was
primarily due to an increase in operating assets.
Net cash provided by investing activities was $47.8 million for the six months ended March 31,
2006 compared
Page 19 of 27
to $29.7 million of net cash provided in investing activities for the six months ended March
31, 2005. This change was primarily due to an increase in proceeds from dispositions of property
and equipment. The proceeds for the six months ended March 31, 2006, related primarily to property
sales in Houston, Chicago, Atlanta, Denver and West Palm Beach.
Net
cash used by financing activities was $32.1 million for the six months ended March 31,
2006 compare to $32.0 million net cash used for the six months ended March 31, 2005.
The Companys credit facility (the Credit Facility) provides for an aggregate availability
of up to $300 million consisting of a $225 million revolving loan, including a sub-limit of $90
million for standby letters of credit, and a $75 million term loan. The facility is secured by the
stock of certain subsidiaries of the Company, certain real estate assets, and domestic personal
property assets of the Company and certain subsidiaries.
The Credit Facility bears interest at LIBOR plus a tier-based margin dependent upon certain
financial ratios. There are separate pricing tiers for the revolving loan and term loan. The weighted
average margin as of March 31, 2006 was 200 basis points. The amount outstanding under the
Companys Credit Facility was $124.1 million consisting of a $74.1 million term loan and a $50.0
million revolving loan, with an overall weighted average interest rate of 5.5% as of March 31,
2006. The term loan is required to be repaid in quarterly payments of $187,500 through March 2008
and quarterly payments of $9.1 million from June 2008 through March 2010. The revolving loan is
required to be repaid by February 2008. The aggregate availability under the Credit Facility was
$127.6 million at March 31, 2006, which is net of $47.4 million of stand-by letters of credit.
The Company completed an amendment to the Credit Facility as of March 31, 2006. The main
purpose of the amendment was to modify the financial covenant target requirements. The
modifications affected the leverage ratio, senior leverage ratio and fixed charge coverage ratio.
The new leverage targets step down over the next several quarters and will remain at 3.50 for the
leverage ratio and 2.50 for the senior leverage ratio until loan maturity.
The Credit Facility contains covenants including those that require the Company to maintain
certain financial ratios, restrict further indebtedness and certain acquisition activity and limit
the amount of dividends paid. The primary ratios are a leverage ratio, senior leverage ratio and a
fixed charge coverage ratio. Quarterly compliance is calculated using a four quarter rolling
methodology and is measured against specified targets. The Company was in compliance with the
covenants at March 31, 2006.
Central Parking believes its cash flows and the Credit Facility are sufficient for its cash
needs over the next twelve months; however if Central Parking identifies investment opportunities
requiring cash in excess of Central Parkings cash flows and the Credit Facility, Central Parking
may seek additional sources of capital, including seeking to further amend the Credit Facility to
obtain additional indebtedness.
Future Cash Commitments
The Company routinely makes capital expenditures to maintain or enhance parking facilities
under its control. The Company expects capital expenditures for fiscal 2006 to be approximately
$19 to $22 million, of which the Company has spent $8.1 million during the first six months of
fiscal 2006.
The following tables summarize the Companys total contracted obligations and commercial
commitments as of March 31, 2006 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
|
|
|
|
|
|
|
Less than |
|
|
1-3 |
|
|
3-5 |
|
|
After 5 |
|
|
|
Total |
|
|
1 Year |
|
|
Years |
|
|
Years |
|
|
Years |
|
Long-term debt and capital lease
obligations |
|
$ |
141,679 |
|
|
$ |
2,903 |
|
|
$ |
92,803 |
|
|
$ |
45,730 |
|
|
$ |
243 |
|
Subordinated convertible debentures |
|
|
78,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,085 |
|
Operating leases |
|
|
951,615 |
|
|
|
193,291 |
|
|
|
267,612 |
|
|
|
163,026 |
|
|
|
327,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations |
|
$ |
1,171,379 |
|
|
$ |
196,194 |
|
|
$ |
360,415 |
|
|
$ |
208,756 |
|
|
$ |
406,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of commitment expiration per period |
|
|
|
|
|
|
Less than |
|
1-3 |
|
3-5 |
|
After 5 |
|
|
Total |
|
1 Year |
|
Years |
|
Years |
|
Years |
Unused lines of credit |
|
$ |
127,576 |
|
|
$ |
|
|
|
$ |
127,576 |
|
|
$ |
|
|
|
$ |
|
|
Unused lines of credit as of March 31, 2006 are reduced by $47.4 million of standby letters of
credit.
See
Note 13 to the consolidated financial statements for additional
disclosure of future obligations related to the United Kingdom Transportation division.
Page 20 of 27
Stock Repurchase
In August of 2005, the Company made an offer to its shareholders to purchase up to 4,400,000
shares of common stock at a price no greater than $16.75 or lower than $14.50 per share. The
transaction was structured as a modified Dutch Auction tender offer.
The offer was amended to reduce the range from a price no higher than $16.00 and no lower than
$14.00 per share. The transaction was concluded on October 14, 2005 at which time the Company
accepted and purchased 4,400,000 shares at a price of $15.50 per share. The Company exercised its
right to purchase an additional 459,674 shares without extending or modifying the offer. The
Company repurchased a total of 4,859,674 shares for $75.3 million using the availability under the
Credit Facility.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
Interest Rates
The Companys primary exposure to market risk consists of changes in interest rates on
variable rate borrowings. As of March 31, 2006, the Company had $124.1 million of variable rate
debt outstanding under the Credit Facility priced at LIBOR plus a weighted average margin of 200
basis points. Of this amount, $74.1 million of the Credit Facility is payable in quarterly
installments of $187,500 through March 2008 and quarterly payments of $9.1 million from June 2008
through March 2010 and $56.5 million in revolving credit loans are due in February 2008. The
Company anticipates paying the scheduled quarterly payments from operating cash flows.
The Company is required under the Credit Facility to enter into and maintain interest rate
protection agreements designed to limit the Companys exposure to increases in interest rates. On
May 30, 2003, the Company entered into two interest rate swap transactions for a total of $87.5
million. Both transactions swapped the Companys floating LIBOR interest rates for fixed interest
of 2.45% until June 30, 2007. Because not all of the terms are consistent with the credit
facility, the derivatives do not qualify as a cash flow hedge.
The weighted average interest rate on the Companys Credit Facility at March 31, 2006 was
5.5%. The 5.5% rate includes all outstanding LIBOR contracts and swap agreements at March 31,
2006. An increase (decrease) in LIBOR of 1% would result in an increase (decrease) of annual
interest expense of $0.8 million based on the Companys un-hedged outstanding Credit Facility
balance of $84.0 million at March 31, 2006.
In March 2000, a limited liability company, of which the Company is the sole shareholder,
purchased a parking structure for $19.6 million and financed $13.3 million of the purchase price
with a five-year note bearing interest at one-month floating LIBOR plus 162.5 basis points. In
April 2005, the limited liability company amended the note. The amendment extended the term to a
maturity date of February 28, 2008. The amended $12.7 million loan will continue to bear interest
at a floating basis based on LIBOR plus 162.5 basis points. The Company entered into an interest
rate cap agreement on the underlying $12.7 million loan in October 2005. This agreement limits the
Companys exposure to the floating interest rate by paying the Company for interest paid in excess
of 5.50%.
Foreign Currency Risk
The Companys exposure to foreign exchange risk is minimal. As of March 31, 2006, the Company
has approximately GBP 3.8 million (USD $6.6 million) of cash and cash equivalents denominated in
British pounds, EUR 1.6 million (USD $2.0 million) denominated in euros, CAD 1.8 million (USD $1.6
million) denominated in Canadian dollars, and USD $1.5 million denominated in various other foreign
currencies. The Company also has EUR 0.6 million (USD $0.7 million) of notes payable denominated
in euros and GBP 8.3 million (USD $14.5 million) of notes payable denominated in pounds at March
31, 2006. These notes bear interest at a floating rate of 4.6% as of March 31, 2006, and require
monthly principal and interest payments through 2012. The Company does not hold any hedging
instruments related to foreign currency transactions. The Company monitors foreign currency
positions and may enter into certain hedging instruments in the future should it determine that
exposure to foreign exchange risk has increased. Based on the Companys overall currency rate
exposure as of March 31, 2006, management does not believe a near-term change in currency rates,
based on historical currency movements, would materially affect the Companys financial statements.
Page 21 of 27
ITEM 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of management, including our Chief Executive
Officer and Chief Financial Officer, we evaluated the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act
of 1934, or the Exchange Act) for the quarter ended March 31, 2006.
Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures were not effective as of March 31, 2006
because of material weaknesses discussed below.
To address the material weaknesses described below, we performed additional analysis and other
post-closing procedures to ensure our consolidated financial statements were prepared in accordance
with generally accepted accounting principles. Accordingly, management, including the Chief
Executive Officer and Chief Financial Officer, believe the consolidated financial statements
included in this report present, in all material respects, the Companys financial condition,
results of operations and cash flows for the quarter ended March 31, 2006.
(b) Managements Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision
and with the participation of our management, including our principal executive officer and
principal financial officer, we conducted an assessment of the effectiveness of our internal
control over financial reporting based on the framework in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
As a result of this assessment, management identified material weaknesses in internal control
over financial reporting as follows:
1. Inadequate company-level controls. We did not maintain effective company-level controls as
defined in the Internal ControlIntegrated Framework published by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). These deficiencies related to three of the five
components of internal control as defined by COSO (control environment, monitoring, and information
and communication). Specifically,
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Our control environment did not sufficiently promote
integrity and ethical values over financial reporting
throughout our management structure, and this material
weakness was a contributing factor in the development of
other material weaknesses described below; |
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We had inadequate monitoring controls, including inadequate staffing
and procedures to ensure periodic evaluations of internal controls to
ensure that appropriate personnel regularly obtain evidence that
controls are functioning effectively and that identified control
deficiencies are remediated timely; and |
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There was inadequate communication from management to employees
regarding the importance of controls and employees duties and control
responsibilities. |
These deficiencies resulted in more than a remote likelihood that a material misstatement of
our interim or annual financial statements would not be prevented or detected.
2. Inadequate Expertise in U.S. Generally Accepted Accounting Principles. Our finance and
accounting personnel were inadequately trained and lacked appropriate expertise in U.S. generally
accepted accounting principles to prepare financial information for inclusion in the Companys
consolidated financial statements. This deficiency resulted in the improper capitalization of
certain property and equipment, the improper recognition of revenue on certain management
agreements, improper deferral of gains and losses on interest rate swap agreements, the failure to
recognize impairment on property and equipment and other long-term assets, which required
adjustments to the interim and annual financial statements.
Page 22 of 27
3. Inadequate segregation of duties. We had inadequate procedures and controls to ensure
proper segregation of duties within our purchasing, disbursements and accounting processes. As a
result, misappropriations of assets occurred and were not detected in a timely manner. This
deficiency resulted in the misappropriation of assets due to the unauthorized transfer of certain
management contracts to a former officer of the United Kingdom subsidiary and the Companys
continued payment and recognition of management costs after the contracts were transferred, which
required adjustments to the interim and annual financial statements to write-off certain current
assets, property and equipment and goodwill.
4. Inadequate financial statement preparation and review procedures. We had inadequate
policies, procedures and personnel to ensure that accurate, reliable interim and annual financial
statements were prepared and reviewed on a timely basis. Specifically, we had insufficient levels
of supporting documentation and review and supervision of the Companys accounting and finance
departments. These deficiencies resulted in errors in the recognition of revenue, improper
capitalization of certain property and equipment, improperly recorded assets, the failure to record
certain accrued liabilities in the United Kingdom subsidiary which required adjustments to the
interim and annual financial statements.
5. Inadequate reviews of account reconciliations, analyses and journal entries. We had
inadequate review procedures over account reconciliations, account and transaction analyses, and
journal entries. Specifically, deficiencies were noted in the following areas: a) management review
of supporting documentation, calculations and assumptions used to prepare the financial statements,
including spreadsheets and account analyses; and b) management review of journal entries recorded
during the financial statement preparation process. These deficiencies resulted in inappropriate
recognition of revenue, inappropriate classification of assets, improperly recorded assets, the
failure to record certain accrued liabilities, which required adjustments to the interim and annual
financial statements.
6. Inadequate controls over authorization of purchase and disbursement transactions. We had
inadequate controls over purchases and the disbursement of funds as well as the recording of
accruals for purchases and expenses. Specifically,
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Inadequate and ineffective policies over the authorization of purchases; |
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Ineffective invoice approval policies; |
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Ineffective supervisory oversight and/or review of the addition or removal of management contracts; and |
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Inadequate period-end cut-off procedures in the procurement cycle. |
These deficiencies increase the likelihood that unauthorized purchases and disbursements could
occur and not be detected in a timely manner. These deficiencies resulted in the misappropriation
of assets because of the unauthorized transfer of certain management contracts to a former officer
of the United Kingdom subsidiary, the Companys continued payment and recognition of management
costs after the contracts were transferred, and the failure to record certain accrued liabilities,
which required adjustments to the interim and annual financial statements.
7. Inadequate controls over revenue recognition. Our review procedures over accounting for
revenue recognition were not functioning effectively. Specifically, the review procedures over the
application of our revenue recognition policies for management agreements were inadequate. These
deficiencies resulted in the improper recognition of revenue on certain management contracts, which
required adjustments to the interim and annual financial statements.
As a result of these material weaknesses as of March 31, 2006 in the Companys internal
control over financial reporting, management has concluded that, as of March 31, 2006, the
Companys internal control over financial reporting was not effective based on the criteria set
forth by the COSO of the Treadway Commission in Internal ControlIntegrated Framework.
(c) Changes in Internal Control Over Financial Reporting
During the fourth quarter of 2005, the Company removed the persons directly responsible for
the unauthorized related party transactions and improper and inaccurate accounting entries in the
United Kingdom subsidiary. There were no other changes in our internal control over financial
reporting that occurred in the fourth quarter of 2005 that materially affected, or were reasonably
likely to materially affect, our internal control over financial reporting.
Page 23 of 27
Subsequent to September 30, 2005, we implemented the remedial measures outlined below to
address the identified material weaknesses in connection with the preparation of our September 30,
2005 consolidated financial statements. We have dedicated additional resources to the review of
our control processes and procedures surrounding the internal control environment. Furthermore, we
have been conducting a thorough review and evaluation of our internal controls as part of our
compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002.
In order to remediate the weaknesses in our internal control over financial reporting,
management has implemented the following measures as of the date of filing of this Form 10-Q:
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Hired senior management including financial reporting personnel. |
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Changed the lines of reporting so that the accounting, internal audit, information
technology and human resources functions in the United Kingdom subsidiary report directly
to the corresponding department heads in the United States. |
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Established new approval authorization control limits. |
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Established new reconciliation procedures. |
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Replaced accounting software used in the United Kingdom subsidiary with programs used in
the United States and U.S. management employees have direct access to this system. |
Management is considering additional remedial actions to be implemented in fiscal 2006.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On December 23, 2005, the Company entered into a settlement agreement with Rotala PLC, the
Flights Group companies, Stuart Lawrenson, Paul Churchman and Michael Tackley resolving the
Companys claims arising from certain actions taken by former employees of the Company in the
United Kingdom. The key terms of the settlement include: (1) The payment to the Company of the
proceeds form the sale of 46,666,667 shares of Rotala stock, indirectly owned by Lawrenson, which
were sold through a private placement with net proceeds of pound sterling (GBP) 602,296 (USD
$1,073,741 based on January 26, 2006 exchange rate) was received by the Company on January 26,
2006; (2) Rotala issued promissory notes to the Company with a value of GBP 800,000 (USD $1,374,738
based on December 31, 2005 exchange rate), payable in annual installments between December 31,
2006, and December 31, 2010; (3) in addition to amounts already received from Rotala for goods
and services benefiting the Flights Group, Rotala agreed to pay an additional GBP 270,000 (USD
$472,377 based on April 5, 2006 exchange rate) to the Company upon completion of a previously
announced fundraising which was completed and paid to the Company on April 5, 2006; (4) Rotala
granted to the Company a warrant to purchase 15,000,000 ordinary shares of Rotala stock at an
exercise price of 1.5 pence per share, exercisable for a five year period; (5) Stuart Lawrenson
agreed to pay to the Company GPB 70,000 (USD $120,290 based on December 31, 2005 exchange rate) in
April 2006 and to pay an additional GBP 60,000 (USD $103,105 based on December 31, 2005 exchange
rate) within a year; and (6) Paul Churchman and Michael Tackley each agreed to pay GBP 10,000 (USD
$17,184 based on December 31, 2005 exchange rate) to the Company within ninety days. The Company
received the payment of GBP 95,000 (USD $166,276 based on April 6, 2006 exchange rate) from
Lawrenson on April 6, 2006 and the payments from Churchman and Tackley of GBP 20,053 (USD $35,097
based on April 6, 2006 exchange rate) on April 6, 2006. Once the conditions of this settlement
have been met, all claims between the parties will be released.
In addition to the matter described above 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
Page 24 of 27
proceedings and claims will not have a material adverse effect on the financial position,
operations, or liquidity of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
An annual meeting of shareholders was held on February 21, 2006. At the meeting, the Companys
shareholders were asked to elect nine directors to the Companys board of directors. Each of the
nominated directors was elected. Shareholders were also asked to approve the 2006 Long-Term
Incentive Plan. No other matters were voted upon at the annual meeting.
The following table sets forth the voting tabulations for each of the directors nominated to serve
on the Companys board of directors:
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Broker |
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Votes |
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Votes |
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Non- |
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Votes For |
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Against |
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Withheld |
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Abstentions |
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Voters |
Monroe J. Carell, Jr. |
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30,320,170 |
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137,694 |
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N/A |
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Raymond T. Baker |
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30,384,109 |
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73,755 |
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N/A |
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Claude Blankenship |
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30,383,799 |
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74,065 |
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N/A |
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Kathryn Carell Brown |
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30,318,600 |
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139,264 |
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N/A |
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Emanuel Eads |
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30,369,235 |
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88,629 |
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N/A |
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Lewis Katz |
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28,660,274 |
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1,797,590 |
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N/A |
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Edward G. Nelson |
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28,705,711 |
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1,752,153 |
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N/A |
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Owen G. Shell Jr. |
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30,383,439 |
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74,425 |
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N/A |
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William B. Smith |
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30,369,945 |
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87,919 |
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N/A |
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Other Matters: |
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Approve 2006 Long-Term
Incentive Plan |
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29,720,261 |
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663,942 |
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73,661 |
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N/A |
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Item 6. Exhibits
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2.1
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Plan of Recapitalization, effective October 9, 1997 (Incorporated by reference to
Exhibit 2 to the Companys Registration Statement No. 33-95640 on Form S-1). |
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2.2
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Agreement and Plan of Merger dated September 21, 1998, by and among the Registrant,
Central Merger Sub, Inc., Allright Holdings, Inc., Apollo Real Estate Investment Fund
II, L.P. and AEW Partners, L.P. (Incorporated by reference to Exhibit 2.1 to the
Companys Registration Statement No. 333-66081 on Form S-4 filed on October 21, 1998). |
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2.3
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Amendment dated as of January 5, 1999, to the Agreement and Plan of Merger dated
September 21, 1998 by and among the Registrant, Central Merger Sub, Inc., Allright
Holdings, Inc., Apollo Real Estate Investment Fund II, L.P. and AEW Partners, L.P.
(Incorporated by reference to Exhibit 2.1 to the Companys Registration Statement No.
333-66081 on Form S-4 filed on October 21, 1998, as amended). |
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2.4
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Acquisition Agreement and Plan of Merger dated as of November 7, 1997, by and between
the Registrant and Kinney System Holding Corp and a subsidiary of the Registrant
(Incorporated by reference to the Companys Current Report on Form 8-K filed on
February 17, 1998). |
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3.1
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(a)
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Amended and Restated Charter of the Registrant (Incorporated by reference to
Exhibit 4.1 to the Companys Registration Statement No. 333-23869 on Form S-3). |
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(b)
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Articles of Amendment to the Charter of Central Parking
Corporation increasing the authorized number of shares of common stock,
par value $0.01 per share, to one hundred million (Incorporated by
reference to Exhibit 2 to the Companys 10-Q for the quarter ended
March 31, 1999). |
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3.2
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Amended and Restated Bylaws of the
Registrant (Incorporated by reference to Exhibit to the Companys Registration Statement No. 333-23869 on Form S-3). |
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4.1
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Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the
Companys Registration Statement No. 33-95640 on Form S-1). |
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4.2
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(a)
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Registration Rights Agreement (the Allright Registration Rights Agreement) dated as of September 21, 1998 by and
between the Registrant, Apollo Real Estate Investment Fund II, L.P., AEW Partners, L.P. and Monroe J. Carell, Jr.,
The Monroe Carell Jr. Foundation, Monroe Carell Jr. 1995 Grantor Retained Annuity Trust, Monroe Carell Jr. 1994
Grantor Retained Annuity Trust, The Carell Childrens Trust, The 1996 Carell Grandchildrens Trust, The Carell
Family Grandchildren 1990 Trust, The Kathryn Carell Brown Foundation, The Edith Carell Johnson Foundation, The
Julie Carell Stadler Foundation, 1997 Carell Elizabeth Brown Trust, 1997 Ann Scott Johnson Trust, 1997 Julia
Claire Stadler Trust, 1997 William Carell Johnson Trust, 1997 David Nicholas Brown Trust and 1997 George Monroe
Stadler Trust (Incorporated by reference to Exhibit 4.4 to the Companys Registration Statement No. 333-66081
filed on October 21, 1998). |
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4.2
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(b)
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Amendment dated January 5, 1999 to the Allright Registration Rights Agreement (Incorporated by reference to
Exhibit 4.4.1 to the Companys Registration Statement No. 333-66081 filed on October 21, 1998, as amended). |
Page 25 of 27
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4.2
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(c)
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Second Amendment dated February 1, 2001 to the Allright Registration Rights Agreement. (Incorporated by reference
to Exhibit 4.6 to the Companys Registration Statement No. 333-54914 on Form S-3 filed on February 2, 2001) |
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4.3
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Indenture dated March 18, 1998 between the registrant and Chase Bank of Texas, National Association, as
Trustee regarding up to $113,402,050 of 5-1/4 % Convertible
Subordinated Debentures due 2028. (Incorporated by reference to
Exhibit 4.5 to the Registrants Registration Statement No.
333-52497 on Form S-3). |
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4.4
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Amended and Restated Declaration of Trust of Central Parking Finance Trust dated as
of March 18, 1998. (Incorporated by reference to Exhibit 4.5 to the Registrants
Registration Statement No. 333-52497 on Form S-3). |
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4.5
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Preferred Securities Guarantee Agreement dated as of March 18, 1998 by and between
the Registrant and Chase Bank of Texas, national Association as Trustee (Incorporated
by reference to Exhibit 4.7 to the Registrants Registration Statement No. 333-52497
on Form S-3). |
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4.6
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Common Securities Guarantee Agreement dated March 18, 1998 by the Registrant.
(Incorporated by reference to Exhibit 4.9 to 333-52497 on Form S-3). |
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10.1
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Fifth Amendment to Credit Agreement dated April 7, 2006 by and among Central Parking
Corporation et al and Bank of America, N. A. et al (filed herewith). |
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31.1
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Certification of Emanuel Eads pursuant to Rule 13a-14(a). |
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31.2
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Certification of Jeff Heavrin pursuant to Rule 13a-14(a). |
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32.1
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Certification of Emanuel Eads pursuant to Section 1350. |
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32.2
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Certification of Jeff Heavrin pursuant to Section 1350 |
Page 26 of 27
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.
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CENTRAL PARKING CORPORATION |
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Date: May 10, 2006
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By:
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/s/ EMANUEL EADS |
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Emanuel Eads |
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Chief Executive Officer |
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CENTRAL PARKING CORPORATION |
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Date: May 10, 2006
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By:
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/s/ JEFF HEAVRIN |
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Jeff Heavrin |
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Senior Vice President and Chief
Financial Officer |
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Page 27 of 27