Central Parking Corporation
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material pursuant to
14a-11(c) or
Rule 14a-12
Central Parking Corporation
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
common stock, par value $.01 per share of Central Parking
Corporation (CPC common stock)
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(2)
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Aggregate number of securities to which transaction applies:
32,300,416 shares of CPC common stock, 162,476 deferred
stock units and 3,225,110 options to purchase CPC common stock
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(3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined): The filing fee was determined
based upon the sum of (A) 32,300,416 shares of CPC
common stock multiplied by the merger consideration of
$22.53 per share, plus (B) options to purchase
3,225,110 shares of CPC common stock multiplied by $4.65
(which is the difference between $22.53 and the weighted average
exercise price of $17.88 per share), plus (C) 162,476
deferred stock units multiplied by the merger consideration of
$22.53 per share. In accordance with Section 14(g) of
the Securities Exchange Act of 1934, as amended, the filing fee
was determined by multiplying 0.0000307 by the sum of the
amounts calculated pursuant to clauses (A), (B) and
(C) of the preceding sentence.
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(4)
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Proposed maximum aggregate value of transaction: $746,385,718
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(5)
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Total fee paid: $22,914
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þ |
Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1) |
Amount Previously Paid:
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(2) |
Form, Schedule or Registration Statement No.:
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2401 21st Avenue South, Suite 200
Nashville, Tennessee 37212
Dear Shareholders:
You are cordially invited to attend a special meeting of
shareholders of Central Parking Corporation, a Tennessee
corporation, which will be held at our corporate headquarters,
2401 21st Avenue South, Third Floor, Nashville, Tennessee,
on Monday, May 21, 2007 at 9:00 a.m., local time.
At the meeting, you will be asked to consider and vote on a
proposal to approve an Agreement and Plan of Merger, dated as of
February 20, 2007 (we refer to this agreement as it may be
amended from time to time as the merger agreement), among
Central Parking, KCPC Holdings, Inc., a Delaware corporation,
and KCPC Acquisition, Inc., a Tennessee corporation and
wholly-owned subsidiary of KCPC Holdings, which provides for the
acquisition of Central Parking by KCPC Holdings by merger of
KCPC Acquisition with and into Central Parking. If our
shareholders approve the merger agreement and the merger is
subsequently completed, Central Parking will become a
wholly-owned subsidiary of KCPC Holdings, directly or indirectly
through one or more wholly-owned subsidiaries, and you will be
entitled to receive $22.53 in cash, without interest and less
any applicable tax withholding, for each share of Central
Parking common stock that you own. A copy of the merger
agreement is attached as Annex A to the accompanying proxy
statement, and you are encouraged to read it in its entirety.
After careful consideration, our board of directors, acting
on the unanimous recommendation of a special committee composed
of directors who are not officers or employees of Central
Parking and who the board of directors believes meet the New
York Stock Exchange criteria as independent
directors, has unanimously approved the merger agreement
and determined that the merger and the merger agreement are
advisable and in the best interests of Central Parking and its
shareholders. Our board of directors recommends that you vote
FOR the approval of the merger agreement and the
transactions contemplated thereby. In reaching its
determination, our board of directors considered a number of
factors which are discussed in the attached proxy statement. In
considering the recommendation of our board of directors with
respect to the merger agreement, you should be aware that some
of our directors and executive officers have interests in the
merger that are different from, or in addition to, the interests
of our shareholders generally. See The Merger
Interests of Certain Persons in the Merger beginning on
page 40.
The accompanying document provides a detailed description of the
proposed merger, the merger agreement and related matters. I
urge you to read these materials carefully. You may also obtain
more information about Central Parking from documents we have
filed with the Securities and Exchange Commission.
Your vote is very important regardless of the number of
shares you own. Because approval of the merger agreement
requires the affirmative vote of the holders of a majority of
the outstanding shares of Central Parking common stock entitled
to vote, a failure to vote will have the same effect as a vote
against the approval of the merger agreement.
Whether or not you are able to attend the special meeting in
person, please complete, sign and date the enclosed proxy card
and return it in the envelope provided as soon as possible or
submit a proxy through the Internet or by telephone as described
in the enclosed proxy card. If you hold shares through a broker
or other nominee, you should follow the procedures provided by
your broker or nominee. If you attend the special meeting and
vote in person, your vote by ballot will revoke any proxy
previously submitted.
Thank you for your cooperation and your continued support of
Central Parking.
Sincerely,
Monroe J. Carell, Jr.
Executive Chairman of the Board
Neither the Securities and Exchange Commission nor any state
securities regulatory agency has approved or disapproved of the
merger, passed upon the merits or fairness of the merger or
passed upon the adequacy or accuracy of the disclosure in the
enclosed documents. Any representation to the contrary is a
criminal offense.
This proxy statement is dated April 30, 2007, and is first
being mailed to shareholders on or about April 30, 2007.
2401 21st Avenue South
Nashville, Tennessee 37212
(615) 297-4255
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS OF
CENTRAL PARKING
To Be Held on May 21,
2007
To the Shareholders of
CENTRAL PARKING CORPORATION:
Notice is hereby given that a special meeting of shareholders of
Central Parking Corporation (Central Parking) will
be held at our corporate headquarters, 2401 21st Avenue
South, Third Floor, Nashville, Tennessee, on Monday,
May 21, 2007, at 9:00 a.m., local time, for the
following purposes:
1. To consider and vote on a proposal to approve the
Agreement and Plan of Merger, dated as of February 20,
2007, by and among Central Parking Corporation, KCPC Holdings,
Inc., a Delaware corporation, and KCPC Acquisition, Inc., a
Tennessee corporation and a wholly-owned subsidiary of KCPC
Holdings. The merger agreement, a copy of which is attached as
Annex A to the accompanying proxy statement, provides for
the acquisition of Central Parking by KCPC Holdings by merger of
KCPC Acquisition with and into Central Parking. If our
shareholders approve the merger agreement and the merger is
subsequently completed, Central Parking will become a
wholly-owned subsidiary of KCPC Holdings, directly or indirectly
through one or more wholly-owned subsidiaries, and you will be
entitled to receive $22.53 in cash, without interest and less
any applicable tax withholding, for each share of Central
Parking common stock that you own; and
2. To transact such other business as may properly come
before the meeting or any adjournment or postponement thereof,
including to consider any procedural matters incident to the
conduct of the special meeting, such as adjournment or
postponement of the special meeting to solicit additional
proxies in favor of the proposal to approve the merger agreement.
Only shareholders of record of our common stock as of the close
of business on April 19, 2007 are entitled to notice of,
and to vote at, the special meeting and any adjournment or
postponement of the special meeting. The affirmative vote of the
holders of a majority of the outstanding shares of our common
stock entitled to vote is required to approve the merger
agreement.
If you fail to vote by proxy or in person, it will have the same
effect as a vote against the approval of the merger agreement.
If you return a properly signed proxy card but do not indicate
how you want to vote, your proxy will be counted as a vote
FOR approval of the merger agreement. Holders of our
common stock are not entitled to appraisal rights under the
Tennessee Business Corporation Act in connection with the
merger. See The Merger Dissenters
Rights on page 48.
By Order of the Board of Directors
Henry J. Abbott
Secretary
Nashville, Tennessee
April 30, 2007
YOUR VOTE IS IMPORTANT.
Whether or not you plan to attend the special meeting, please
sign and date the enclosed proxy card and return it promptly in
the envelope provided or submit a proxy through the Internet or
by telephone as described in the enclosed proxy card. Giving
your proxy now will not affect your right to vote in person if
you attend the meeting.
TABLE OF
CONTENTS
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1
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1
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4
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5
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8
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8
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9
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10
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12
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12
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12
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12
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12
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13
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13
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14
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14
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15
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23
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26
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35
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36
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40
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40
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48
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48
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48
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49
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49
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50
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52
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52
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52
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52
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52
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53
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53
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53
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53
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54
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55
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57
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58
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i
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59
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59
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60
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61
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61
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63
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64
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66
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66
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66
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66
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67
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67
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Enclosures:
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Central Parking 2006 Annual Report
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Central Parking quarterly report
on Form 10-Q for quarter ended December 31, 2006
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ii
SUMMARY
TERM SHEET
This summary term sheet, together with the Questions and
Answers About the Special Meeting and the Merger,
highlights selected information from this proxy statement. It
does not contain all of the information that is important to
you. Accordingly, we urge you to read this entire proxy
statement and the annexes to this proxy statement. In addition,
this proxy statement incorporates by reference important
business and financial information about Central Parking. You
may obtain the information incorporated by reference into this
proxy statement without charge by following the instructions in
Where You Can Find More Information beginning on
page 67. Except as otherwise specifically noted in this
proxy statement, Central Parking, we,
our, us, and other similar words refer
to Central Parking Corporation and its affiliates. In addition,
KCPC Holdings, Inc. may be referred to as
KCPC Holdings or Parent and KCPC
Acquisition, Inc. may be referred to as KCPC
Acquisition or Merger Sub.
The
Merger
Parties
to the Merger (page 66)
Central Parking Corporation is a leading provider of parking and
related services. As of December 31, 2006, Central Parking
operated approximately 3,100 parking facilities containing
approximately 1.5 million spaces at locations in
37 states, the District of Columbia, Canada, Puerto Rico,
Chile, Colombia, Peru, the United Kingdom, the Republic of
Ireland, Spain, Greece, Italy and Switzerland. Central Parking
operates or manages multi-level parking facilities and surface
lots. It also provides ancillary services, including parking
consulting, shuttle bus, valet, parking meter collection and
enforcement, and billing services. Central Parking operates
parking facilities under three general types of arrangements:
management contracts, leases and fee ownership. Our common stock
is quoted on the New York Stock Exchange under the symbol
CPC.
KCPC Holdings is a newly formed corporation organized under the
laws of the State of Delaware. KCPC Acquisition is a newly
formed corporation organized under the laws of the State of
Tennessee and is a wholly-owned subsidiary of KCPC Holdings.
KCPC Holdings and KCPC Acquisition were formed by funds managed
by affiliates of Kohlberg & Company, L.L.C.,
Lubert-Adler Partners, L.P. and Chrysalis Capital Partners, L.P.
(collectively referred to in this proxy statement as the
Equity Sponsors).
Structure
of the Merger (page 52)
Upon the terms and subject to the conditions of the merger
agreement, KCPC Acquisition will be merged with and into Central
Parking. As a result of the merger, we will cease to be a
publicly traded company and will become a wholly-owned
subsidiary, directly or indirectly through one or more
wholly-owned subsidiaries, of KCPC Holdings. The merger
agreement is attached as Annex A to this proxy statement.
Please read it carefully.
What
You Will Receive in the Merger (page 52)
Each holder of shares of our common stock will be entitled to
receive $22.53 in cash, without interest and less any applicable
tax withholding, for each share of our common stock held
immediately prior to the merger, other than shares owned by
Central Parking, KCPC Holdings, KCPC Acquisition, and by certain
of our employees who agree with KCPC Holdings to exchange equity
securities of Central Parking held by them for equity securities
of KCPC Holdings.
Central
Parking Stock Options, Deferred Units and Restricted Stock
(page 53)
Except as separately agreed to by KCPC Holdings and any holder
of Central Parking stock options, each outstanding Central
Parking stock option that remains outstanding and unexercised as
of the effective time of the merger, whether or not then vested
or exercisable, will automatically be converted into the right
to receive a cash payment equal to the product of (a) the
excess, if any, of the merger consideration of $22.53 per
share over the exercise price per share of the stock option,
multiplied by (b) the number of shares of common stock
issuable upon exercise of the stock option, without interest and
less any applicable tax withholding. After the
merger, such stock options will no longer be outstanding and the
holders of the options will no longer have any rights to
purchase Central Parking stock.
Except as separately agreed to by KCPC Holdings and any holder
of Central Parking deferred stock units, each deferred stock
unit granted under Central Parkings 1996 Deferred Stock
Unit Plan that remains outstanding, whether or not vested, as of
the effective time of the merger will automatically vest and be
converted into the right to receive a cash payment equal to the
product of (a) the merger consideration of $22.53 per
share, multiplied by (b) the number of shares of common
stock issuable with respect to such deferred unit at the time of
vesting, without interest and less any applicable tax
withholding. After the merger, such deferred stock units will no
longer be outstanding, and the holders of the deferred stock
units will no longer have any rights thereunder.
Except as separately agreed to by KCPC Holdings and any holder
of Central Parking restricted stock, all Central Parking
restricted stock will automatically become unrestricted common
stock and be converted into the right to receive $22.53 in cash
for each share of previously restricted common stock held
immediately prior to the merger, without interest and less any
applicable tax withholding.
Trust Issued
Preferred Securities (page 53)
The Trust Issued Preferred Securities (TIPS) issued by
Central Parking Finance Trust will remain outstanding after the
merger. However, in accordance with the terms thereof, the TIPS
will cease to be convertible at or after the consummation of the
merger into shares of Central Parking common stock, but will
instead be convertible into an amount equal to the product of
(a) $22.53 times (b) the number of shares of Central
Parking common stock into which the TIPS could have been
converted as of the consummation of the merger. After the
merger, each share of TIPS will remain outstanding until the
maturity date of April 1, 2028 unless converted by the
holder into $19.18 in cash per TIPS share or redeemed by Central
Parking at $25 per TIPS share.
Conditions
to the Merger (page 59)
We and KCPC Holdings will not complete the merger unless a
number of conditions are satisfied or waived. These conditions
include:
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our shareholders must have approved the merger agreement and the
merger;
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the applicable waiting period under the HSR Act must have
expired or been terminated; and
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there must not be any court or governmental restraints or
prohibitions on the consummation of the merger.
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In addition, our obligation to complete the merger is subject to
the satisfaction or waiver of the following conditions:
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the performance by each of KCPC Holdings and Merger Sub in all
material respects of their obligations under the merger
agreement;
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the representations and warranties of KCPC Holdings and Merger
Sub being true and correct, subject to certain material adverse
effect qualifications (except for certain representations and
warranties that are not subject to any qualifications or are
required to be true and correct in all material
respects); and
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the receipt of the merger consideration on your behalf by the
paying agent.
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In addition, the obligation of KCPC Holdings to complete the
merger is subject to the satisfaction or waiver of the following
conditions:
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the performance by us in all material respects of our
obligations under the merger agreement;
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our representations and warranties being true and correct,
subject to certain material adverse effect qualifications
(except for certain representations and warranties that are not
subject to any qualifications or are required to be true and
correct in all material respects); and
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the delivery by us of any payoff letters, consents, and
government approvals required to be obtained.
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2
Termination
of the Merger Agreement (page 60)
We and KCPC Holdings may mutually agree in writing to terminate
the merger agreement at any time prior to completing the merger,
even after our shareholders have approved the merger agreement.
The merger agreement may also be terminated at any time prior to
completion of the merger under certain circumstances, including:
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by either party, if the merger is not completed by July 31,
2007, or if any injunction, order, decree or ruling permanently
prohibiting the merger becomes final and nonappealable, or if
our shareholders fail to approve the merger agreement at the
special meeting, or at any time prior to shareholder approval,
if our board of directors, with respect to a superior proposal,
executes an acquisition agreement (as defined in the
merger agreement) in accordance with the terms of the merger
agreement as described below under The Merger
Agreement Non-Solicitation of Transactions, or
resolves to do so;
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by KCPC Holdings, if our board makes an adverse recommendation
change (as defined below under The Merger
Agreement Non-Solicitation of Transactions),
or resolves to do so; or
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by us, if at any time after May 21, 2007, KCPC Holdings
shall not have received financing to close the merger within
five business days after we notify them that all other
conditions to completing the merger have been satisfied.
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Termination
Fee (page 61)
We will be required to pay certain affiliates of KCPC Holdings
an aggregate termination fee of $22.4 million, if any of
the following occur:
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the merger agreement is terminated by either party because our
shareholders did not approve the merger agreement at the special
meeting, and at or prior to the special meeting of shareholders
an acquisition proposal (as defined below under The Merger
Agreement Non-Solicitation of Transactions)
was publicly disclosed, and within 12 months after the
termination of the merger agreement we enter into an acquisition
agreement;
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the merger agreement is terminated by us because our board has
executed an acquisition agreement with respect to a superior
proposal (as defined below under The Merger
Agreement Non-Solicitation of Transactions) in
accordance with the terms of the merger agreement or resolved to
do so; or
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the merger agreement is terminated by KCPC Holdings because our
board made an adverse recommendation change or resolved to do so.
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KCPC Holdings will be required to pay us a termination fee of
$30.0 million if Central Parking, at any time after
May 21, 2007, terminates the merger agreement because KCPC
Holdings is unable to close the merger as a result of
insufficient proceeds from the financing to consummate the
merger within five (5) business days after notice by
Central Parking to KCPC Holdings that all other conditions to
KCPC Holdings obligations to complete the merger have
been satisfied.
Equity
Sponsor Limited Guarantee (page 40)
In connection with the merger agreement, the Equity Sponsors
have each agreed to a limited guarantee of the due, punctual and
complete payment of the payment obligation of KCPC Holdings for
the termination fee or arising from an intentional and material
breach of the merger agreement by KCPC Holdings, provided the
total amount recoverable under the limited guarantees is
$30.0 million.
No
Solicitation (page 58)
We have agreed that we will not, until the effective time of the
merger or the earlier termination of the merger agreement,
initiate, solicit, entertain, encourage or facilitate any
acquisition proposal, or otherwise participate in any
discussions regarding, or furnish confidential information, for
the purpose of encouraging any acquisition proposal. We also
have agreed that during such time we will not approve or
recommend an acquisition proposal or similar agreement or
propose to do so.
3
However, prior to the adoption of the merger agreement by our
shareholders and after notifying KCPC Holdings of our
intent to do so, we may provide information in response to a
request by a third party who has made an unsolicited bona fide
written acquisition proposal that is made after
February 20, 2007, so long as such proposal:
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did not result from any breach by us of our obligations to not
solicit other proposals and such information has been previously
provided to KCPC Holdings or KCPC Acquisition or is provided to
them prior to or substantially concurrent with the time it is
provided to such other person;
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the third party enters into a customary confidentiality
agreement with us, and our board determines in good faith after
consultation with independent legal counsel that such action is
necessary to comply with the boards fiduciary obligations
under applicable law; and
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the proposal constitutes, or is reasonably likely to lead to, a
superior proposal (as defined below under The Merger
Agreement Non-Solicitation of Transactions).
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The merger agreement provides that prior to the effective time
of the merger or the earlier termination of the merger
agreement, our board will not withdraw or amend, qualify or
modify (or publicly propose to take any such action), in a
manner adverse to KCPC Holdings, its approval of the merger
agreement or its recommendation that shareholders vote to
approve the merger agreement or endorse, approve, adopt or
submit to you any alternative acquisition proposal (or propose,
publicly or otherwise, to take any such action). However, prior
to the adoption of the merger agreement by our shareholders, our
board may withhold, withdraw, qualify or modify its
recommendation with respect to the merger agreement or approve
or recommend any superior proposal made after the date of the
merger agreement and not solicited in breach of the merger
agreement if our board reasonably determines in good faith,
after consultation with its outside legal counsel and financial
advisor, that such action is required to comply with its
fiduciary obligations. We must provide KCPC Holdings with five
business days prior notice if our board intends to take any of
these actions, and our board must take into account any changes
to the financial and other terms of the merger agreement
proposed by KCPC Holdings in determining whether the acquisition
proposal continues to constitute a superior proposal.
The
Special Meeting
Date,
Time and Place (page 12)
The special meeting will be held on Monday, May 21, 2007,
at 9:00 a.m., local time at our corporate headquarters,
2401 21st Avenue South, Third Floor, Nashville, Tennessee.
Matters
to be Considered (page 12)
You will be asked to consider and vote upon a proposal to
approve the merger agreement that we have entered into with KCPC
Holdings and KCPC Acquisition and to consider any other matters
that may properly come before the meeting, including any
procedural matters in connection with the special meeting.
Record
Date (page 12)
If you owned shares of our common stock at the close of business
on April 19, 2007, the record date for the special meeting,
you are entitled to notice of and to vote at the special
meeting. You have one vote for each share of our common stock
that you own on the record date. As of the close of business on
April 19, 2007, there were approximately
32,346,967 shares of our common stock outstanding and
entitled to be voted at the special meeting.
Required
Vote (page 12)
Approval of the merger agreement requires the affirmative vote
of the holders of a majority of our outstanding shares of common
stock entitled to vote at the special meeting. Failure to vote
by proxy, either by mail, through the Internet, by telephone or
in person, will have the same effect as a vote
AGAINST approval of the merger agreement.
4
Market
Price of Our Common Stock (page 63)
Our common stock is quoted on the New York Stock Exchange under
the symbol CPC. The closing sale price of our common
stock on May 31, 2006, which was the last trading day
before we engaged The Blackstone Group L.P. to assist in
exploring strategic alternatives, was $14.31. The closing sale
price of our common stock on November 27, 2006, which was
the last trading day before we announced that we had engaged
Blackstone, was $17.23. The closing sale price of our common
stock on February 20, 2007, which was the last trading day
before we announced the execution of the merger agreement, was
$21.22. On April 25, 2007, the most recent practicable date
before this proxy statement was printed, the closing sale price
of our common stock was $22.40. See Market Price and
Dividend Data beginning on page 63 for further
information, including important limitations you should
understand in evaluating the historical trading prices of our
common stock.
Voting
by Proxy (page 12)
You may vote by proxy through the Internet, by telephone or by
returning the enclosed proxy. If you hold your shares through a
broker or other nominee, you should follow the procedures
provided by your broker or nominee, which may include submitting
a proxy through the Internet or by telephone.
Revocability
of Proxy (page 13)
You may revoke your proxy at any time before it is voted. If you
have not submitted a proxy through your broker or nominee, you
may revoke your proxy by:
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submitting another properly completed proxy bearing a later date;
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giving written notice of revocation to any of the persons named
as proxies or to the Secretary of Central Parking;
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if you submitted a proxy through the Internet or by telephone,
submitting a proxy again through the Internet or by telephone
prior to the close of the Internet voting facility or the
telephone voting facility; or
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voting in person at the special meeting.
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Simply attending the special meeting will not constitute
revocation of your proxy. If your shares are held in
street name, you should follow the instructions of
your broker or nominee regarding revocation of proxies. If your
broker or nominee allows you to submit a proxy by telephone or
through the Internet, you may be able to change your vote by
submitting a proxy again by telephone or through the Internet.
Other
Important Considerations
Recommendation
of Our Board of Directors (page 25)
Our board of directors, acting on the unanimous recommendation
of our special committee composed of directors who are not
officers or employees of Central Parking and who the board of
directors believes meet the New York Stock Exchange criteria as
independent directors, has determined that the
merger agreement and the merger are advisable and in the best
interests of Central Parking and its shareholders. After
receiving the recommendation of the special committee and
hearing from the committees advisors, our board of
directors has unanimously approved the merger agreement and the
merger and recommends that you vote FOR the approval
of the merger agreement.
Opinion
of Blackstone to the Special Committee of the Board of Directors
of Central Parking (page 26)
Blackstone delivered an opinion to the special committee, to the
effect that, as of February 20, 2007, and based upon the
qualifications, assumptions, limitations and other matters set
forth in its written opinion, the merger consideration of
$22.53 per share in cash, without interest and less any
applicable tax withholding, to be received by the holders of
shares of our common stock pursuant to the merger was fair, from
a financial point of view, to the shareholders of Central
Parking.
5
The full text of the written opinion of Blackstone, dated
February 20, 2007, which sets forth the assumptions made,
the matters considered, and the qualifications and limitations
on the review undertaken by Blackstone in connection with its
opinion, is attached as Annex B to this proxy statement.
The opinion was provided to the special committee of our board
for its benefit and use in connection with its consideration as
to whether the merger consideration of $22.53 in cash, without
interest and less any applicable tax withholding, for each share
of Central Parking common stock was fair, from a financial point
of view, to our shareholders. The opinion did not constitute a
recommendation to the Central Parking special committee, board
of directors, or any holder of shares of our common stock as to
how to vote in connection with the merger. Under the terms of
the engagement letter between Central Parking and Blackstone,
Blackstone provided the special committee financial advisory
services and Central Parking agreed to pay Blackstone certain
fees for such services. As of the date of the proxy statement,
$250,000 has been paid to Blackstone pursuant to the engagement
letter and an additional $12,321,379 will be paid if the merger
is completed at the current price. See The
Merger Opinion of The Blackstone Group L.P.
beginning on page 26.
Voting
Agreements (page 62)
In connection with the merger agreement, the Equity Sponsors
required that Monroe Carell, members of his family and certain
related trusts and foundations, representing approximately 47%
of the outstanding common stock, enter into voting agreements.
Pursuant to the voting agreements, such shareholders agreed to
vote, and granted KCPC Holdings a proxy to vote, all the shares
of Central Parking common stock over which such shareholders
exercise voting control in favor of adoption of the merger
agreement and approval of the merger. The voting agreements
terminate upon the earliest to occur of the effective time of
the merger, the termination of the merger agreement in
accordance with its terms, and any reduction in the amount, or
any change in the form, of the consideration to be paid to the
shareholders pursuant to the merger agreement without the
written consent of the shareholder that is a party to the voting
agreement.
Interests
of Certain Persons in the Merger (page 40)
In considering the recommendation of our board of directors with
respect to the merger agreement, you should be aware that some
of our directors and executive officers have interests in the
merger that may be in addition to, or different from, the
interests of our shareholders generally. The members of our
board of directors were aware of these additional interests, and
considered them, when they approved the merger agreement. These
interests include:
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Transaction bonuses for certain of our executive officers and
certain key employees of up to $1,800,000.
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Accelerated vesting and cash-out of
in-the-money
stock options and restricted stock held by our directors and
employees (including our executive officers). The total
aggregate amount of cash payments expected to be made to our
directors and executive officers in connection with the cash-out
of their options and restricted stock is approximately
$19,457,163, including approximately $491,536 to the members of
the special committee.
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Vesting and cash-out of all deferred stock units held by
executive officers in the total aggregate amount of
approximately $3,617,100.
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Employment agreements of our executive officers that provide for
certain severance payments and benefits, including gross up for
taxes, in the event of termination of employment following a
change in control under certain circumstances. The total
aggregate cash value of potential cash severance payments and
benefits, including gross up for taxes, for these executive
officers (excluding Mr. Carell, whose amount is included
below) would be up to approximately $25,753,384.
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Potential employment and equity investment by certain of our
executive officers in the surviving corporation or KCPC Holdings
after the merger.
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The merger agreement provides for indemnification arrangements
for each of our current and former directors and officers.
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6
In addition, we entered into an agreement with Mr. Carell
as a material inducement to Mr. Carell and his family
entering into voting agreements with KCPC Holdings, which
interprets and modifies Mr. Carells pre-existing
employment and compensation agreements with Central Parking as
described in more detail in The Merger
Interests of Certain Persons in the Merger Monroe
Carells Agreements. Upon the merger,
Mr. Carells employment relationship with Central
Parking will end. We anticipate that up to $10,169,016 may be
paid to Mr. Carell under all of his compensation
arrangements with Central Parking, as interpreted and modified
in this agreement.
Financing
of the Merger (page 36)
KCPC Holdings intends to finance the merger and related
transactions through equity investment, senior secured bank
financing and real estate financing. The merger agreement does
not contain a financing condition as a closing condition. The
Equity Sponsors have each entered into an equity commitment
letter for $210.0 million in the aggregate. KCPC Holdings
has received a debt financing commitment letter from Goldman
Sachs Credit Partners L.P. (GSCP) pursuant to which
GSCP has committed to provide up to $405.0 million of
senior secured bank financing. In addition, KCPC Holdings has
received a commitment letter from Greenwich Capital Financial
Products, Inc. (GCFP) and Goldman Sachs Mortgage
Company (GSMP) pursuant to which, subject to the
conditions set forth therein, GCFP and GSMC have committed to
lend up to $417.8 million in first mortgage and mezzanine
financing.
United
States Federal Income Tax Consequences to Our Shareholders
(page 50)
For U.S. federal income tax purposes, the merger will be
treated as a taxable transaction for our common stockholders. In
general, U.S. holders (as defined under the caption
The Merger Material U.S. Federal Income
Tax Consequences of the Merger to our Shareholders) will
recognize gain or loss for U.S. federal income tax purposes
in the merger. Such gain or loss generally will be measured by
the difference between the amount of cash received on the
closing date of the merger by a U.S. holder and such
U.S. holders tax basis in its shares of our common
stock.
Regulatory
Matters (page 49)
Under the provisions of the HSR Act, Central Parking and KCPC
Holdings may not complete the merger until we have made certain
filings with the Federal Trade Commission and the United States
Department of Justice and the applicable waiting period has
expired or been terminated. Central Parking and KCPC Holdings
filed pre-merger notifications with the Antitrust Division of
the U.S. Department of Justice pursuant to the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976 on March 6, 2007.
The waiting period was terminated on March 29, 2007. We
cannot assure you that a challenge to the merger on antitrust
grounds will not be made or, if a challenge is made, of the
result.
Dissenters
Rights (page 48)
Central Parking has concluded that Central Parking shareholders
are not entitled under Tennessee law to dissenters rights
in connection with the merger.
Legal
Proceedings Related to the Merger (page 49)
Central Parking is aware of two putative class action lawsuits
related to the merger filed against Central Parking and each of
our directors in the Chancery Court for the State of Tennessee,
20th Judicial District, Davidson County, case numbers
07-387-III
and 07-397-I.
The complaints in these actions allege that the directors
breached their fiduciary duties of due care, loyalty, good
faith, candor and independence and put their personal interests
ahead of the interests of Central Parkings shareholders.
Plaintiffs seek to prohibit permanently the merger, to rescind
the merger to the extent it is consummated, an award of damages,
attorneys fees and other relief. Central Parking and the
directors dispute the allegations in the complaints and plan to
defend vigorously these actions. Additional lawsuits pertaining
to the merger could be filed in the future.
7
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are provided for your
convenience, and briefly address some commonly asked questions
about the proposed merger and the Central Parking special
meeting of shareholders. You should still carefully read this
entire proxy statement, including each of the annexes.
The
Special Meeting
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Q.
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Who is
soliciting my proxy?
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A. |
Our board of directors is soliciting this proxy.
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Will a
proxy solicitor be used?
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Yes. We have engaged D.F. King & Co., Inc. to assist in
the solicitation of proxies for the special meeting.
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Q.
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What
matters will be voted on at the special meeting?
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You will be asked to vote on the approval of the merger
agreement that we have entered into with KCPC Holdings and
KCPC Acquisition (which are also sometimes referred to in this
proxy statement as Parent and Merger Sub, respectively).
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Q.
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What vote
is required for Central Parkings shareholders to approve
the merger agreement?
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A. |
In order to approve the merger agreement, holders of a majority
of the outstanding shares of our common stock entitled to vote
must vote FOR approval of the merger agreement.
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Q.
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Who is
entitled to vote at the special meeting?
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A. |
Holders of record of our common stock as of the close of
business on April 19, 2007, are entitled to vote at the
special meeting.
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After carefully reading and considering the information
contained in this proxy statement, please vote your shares by
returning the enclosed proxy or submitting a proxy through the
Internet or by telephone. You can also attend the special
meeting and vote in person. Do NOT enclose or return your stock
certificate(s) with your proxy.
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Q.
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If my
shares are held in street name by my broker, will my
broker vote my shares for me?
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A. |
Your broker will only be permitted to vote your shares if you
instruct your broker how to vote. You should follow the
procedures provided by your broker regarding the voting of your
shares.
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Q.
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What if I
do not vote?
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A. |
If you fail to vote by proxy, either by mail, through the
Internet or by telephone or in person, it will have the same
effect as a vote against approval of the merger agreement. If
you return a properly signed proxy card but do not indicate how
you want to vote, your proxy will be counted as a vote
FOR approval of the merger agreement.
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Q.
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When
should I send in my proxy card?
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A. |
You should send in your proxy card as soon as possible so that
your shares will be voted at the special meeting.
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Q.
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May I
change my vote after I have mailed my signed proxy
card?
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A. |
Yes. You may change your vote at any time before your proxy card
is voted at the special meeting. You can do this in one of three
ways. First, you can send a written, dated notice to the
Secretary of Central Parking stating that you would like to
revoke your proxy. Second, you can complete, date and submit a
new proxy card either by mail, through the Internet or by
telephone. Third, you can attend the meeting and vote in person.
Your attendance alone will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow the
directions received from your broker to change those
instructions.
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Yes. You may attend the special meeting of shareholders and vote
your shares of common stock in person. If you hold shares in
street name you must provide a legal proxy executed
by your bank or broker in order to vote your shares at the
meeting.
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The
Merger
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Q.
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What is
the proposed transaction?
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The proposed transaction is the merger of Central Parking with
an entity affiliated with funds managed by affiliates of
Kohlberg & Company, L.L.C., Lubert-Adler Partners, L.P.
and Chrysalis Capital Partners, L.P. pursuant to the merger
agreement. Once the merger agreement has been adopted by our
shareholders and the other closing conditions under the merger
agreement have been satisfied or waived, Merger Sub will merge
with and into Central Parking. Central Parking will be the
surviving corporation, will cease to be a publicly traded
company and will instead become a wholly-owned subsidiary of
KCPC Holdings, directly or indirectly through one or more
wholly-owned subsidiaries.
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Q.
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If the
merger is completed, what will I be entitled to receive for my
shares of Central Parking common stock, and when will I receive
it?
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You will be entitled to receive $22.53 in cash, without interest
and less any applicable tax withholding, for each share of our
common stock that you own. Any shares owned by KCPC Holdings or
KCPC Acquisition will be cancelled and shares held by
certain of our employees who agree with KCPC Holdings to
exchange equity securities of Central Parking held by them for
equity securities of KCPC Holdings will be exchanged as agreed.
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After the merger closes, KCPC Holdings will arrange or cause to
be arranged for a letter of transmittal to be sent to each
shareholder. The merger consideration will be paid to each
shareholder once that shareholder submits the letter of
transmittal, properly endorsed stock certificates and any other
required documentation.
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Q.
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Am I
entitled to dissenters rights?
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No. Central Parking has concluded that you are not entitled
under Tennessee law to dissenters rights in connection
with the merger.
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Q.
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Why is
the Central Parking special committee and board recommending the
merger?
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Our board of directors, after reviewing the unanimous
recommendation of the special committee, believes that the
merger and the merger agreement are advisable and in the best
interests of Central Parking and its shareholders and
unanimously recommends that you approve the merger agreement. To
review the special committees and our boards reasons
for recommending the merger, see the section entitled The
Merger Reasons for the Merger beginning on
page 23 of this proxy statement.
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Q.
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Will the
merger be a taxable transaction to me?
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Yes. The receipt of cash for shares of Central Parking common
stock pursuant to the merger will be a taxable transaction for
U.S. federal income tax purposes. In general, you will
recognize gain or loss equal to the difference between the
amount of cash you receive and the adjusted tax basis of your
shares of our common stock. See the section entitled The
Merger Material U.S. Federal Income Tax
Consequences of the Merger to Our Shareholders beginning
on page 50 of this proxy statement for a more detailed
explanation of the tax consequences of the merger. You should
consult your tax advisor on how specific tax consequences of the
merger apply to you.
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Q.
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When is
the merger expected to be completed?
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We are working towards completing the merger as quickly as
possible. The merger agreement provides that the earliest date
on which we can close is May 21, 2007, unless the parties
mutually agree to close earlier. We currently expect to complete
the merger as quickly as possible after the special meeting and
after all the conditions to the merger are satisfied or waived,
including shareholder approval of the merger agreement at the
special meeting and expiration or termination of the waiting
period under U.S. antitrust law, or other applicable
antitrust law. Each of Central Parking and KCPC Holdings filed a
pre-merger notification with the U.S. antitrust authorities
pursuant to the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976 on March 6, 2007.
The waiting period was terminated on March 29, 2007.
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Q.
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Should I
send in my Central Parking stock certificates now?
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A. |
No. After the merger is completed, you will receive written
instructions informing you how to send in your stock
certificates to the paying agent in order to receive the merger
consideration. You must return your Central Parking stock
certificates as described in the instructions. PLEASE DO NOT
SEND YOUR CENTRAL PARKING STOCK CERTIFICATES NOW.
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Q.
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What
should I do if I have questions?
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A. |
If you have more questions about the special meeting, the merger
or this proxy statement, need assistance in submitting your
proxy or voting your shares of common stock, or need additional
copies of the proxy statement or the enclosed proxy card, please
call D.F. King, our proxy solicitor, toll-free at
(800) 431-9643.
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CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This proxy statement contains forward-looking statements about
our plans, objectives, expectations and intentions. You can
identify these statements by words such as expect,
anticipate, intend, plan,
believe, seek, estimate,
may, will and continue or
similar words. You should read statements that contain these
words carefully. They discuss our future expectations or state
other forward-looking information, and may involve known and
unknown risks over which we have no control, including, without
limitation:
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the financial performance of Central Parking through the date of
the completion of the merger;
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the requirement that our shareholders approve the merger
agreement with KCPC Holdings;
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KCPC Holdings ability to obtain sufficient financing to
complete the merger;
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receipt of necessary approvals under applicable antitrust laws
and other relevant regulatory authorities;
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failure by us or by KCPC Holdings to satisfy other conditions to
the merger, including the approval of our shareholders;
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the occurrence of any event, change or other circumstance that
could give rise to the termination of the merger agreement,
including a termination under circumstances that could require
us to pay a $22.4 million termination fee;
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the outcome of any legal proceedings instituted against us and
others in connection with the merger;
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the failure of the merger to close for any reason;
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the effect of the announcement of the merger on our customer
relationships, operating results, and business generally,
including our ability to retain key employees;
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business uncertainty and contractual restrictions that may exist
during the pendency of the merger;
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any significant delay in the expected completion of the merger;
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the amount of the costs, fees, expenses and charges related to
the merger and the final terms of the financings that will be
obtained for the merger; and
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diversion of managements attention from ongoing business
concerns;
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and other risks detailed in our current filings with the
Securities and Exchange Commission (which we refer to as the
SEC), including our most recent filings on
Forms 10-Q
and 10-K.
See Where You Can Find More Information on
page 67. You should not place undue reliance on
forward-looking statements. We cannot guarantee any future
results, levels of activity, performance or achievements. The
statements made in this proxy statement represent our views as
of the date of this proxy statement, and it should not be
assumed that the statements made herein remain accurate as of
any future date. Moreover, we assume no obligation to update
forward-looking statements or update the reasons actual results
could differ materially from those anticipated in
forward-looking statements, except as required by law.
11
THE
SPECIAL MEETING OF CENTRAL PARKING SHAREHOLDERS
We are furnishing this proxy statement to you, as a shareholder
of Central Parking, as part of the solicitation of proxies by
our board for use at the special meeting of shareholders.
Date,
Time, Place and Purpose of the Special Meeting
The special meeting will be held at the offices of Central
Parking, located at 2401 21st Avenue South, Third Floor,
Nashville, Tennessee, on Monday, May 21, 2007, at
9:00 a.m., local time. The purpose of the special meeting
is:
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to consider and vote on the proposal to approve the merger
agreement, dated as of February 20, 2007, by and among KCPC
Holdings, Central Parking and Merger Sub; and
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to transact such other business as may properly come before the
meeting or any adjournment or postponement thereof, including to
consider any procedural matters incident to the conduct of the
special meeting, such as adjournment or postponement of the
special meeting to solicit additional proxies in favor of the
proposal to approve the merger agreement.
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Our board has unanimously determined, based on the unanimous
recommendation of the special committee, that the merger
agreement and the merger are advisable and in the best interests
of Central Parking and its shareholders, and it has approved the
merger agreement and the merger. Our board unanimously
recommends that our shareholders vote FOR approval
of the merger agreement.
Record
Date; Stock Entitled to Vote; Quorum
The holders of record of shares of our common stock as of the
close of business on April 19, 2007, which is the record
date for the special meeting, are entitled to receive notice of
and to vote at the special meeting.
On the record date, there were approximately
32,346,967 shares of our common stock outstanding held by
approximately 4,050 shareholders. Holders of a majority of the
shares of our common stock issued and outstanding as of the
record date and entitled to vote at the special meeting must be
present in person or represented by proxy at the special meeting
to constitute a quorum to transact business at the special
meeting. Both abstentions and broker non-votes will
be counted as present for purposes of determining the existence
of a quorum. In the event that a quorum is not present at the
special meeting, we currently expect that we will adjourn or
postpone the meeting to solicit additional proxies.
Vote
Required
Approval of the merger agreement requires the affirmative vote
of the holders of a majority of the shares of our common stock
outstanding on the record date and entitled to vote.
Each holder of a share of our common stock is entitled to one
vote per share. Failure to vote your proxy (either through the
Internet, by telephone or by returning a properly executed proxy
card) or to vote in person will have the same effect as a vote
AGAINST approval of the merger agreement.
Brokers or other nominees who hold shares of our common stock in
street name for customers who are the beneficial
owners of such shares may not give a proxy to vote those
customers shares in the absence of specific instructions
from those customers. These non-voted shares of our common stock
will not be counted as votes cast or shares voting and will have
the same effect as votes AGAINST approval of the
merger agreement.
Voting
Shareholders may vote their shares by attending the special
meeting and voting their shares of our common stock in person,
or by completing the enclosed proxy card, signing and dating it
and mailing it in the enclosed postage-prepaid envelope. All
shares of our common stock represented by properly executed
proxies received in time for the special meeting will be voted
at the special meeting in the manner specified by the
12
holder. If a proxy card is signed by a shareholder and returned
without instructions, the shares of our common stock represented
by the proxy will be voted FOR approval of the
merger agreement.
In addition, shareholders may submit a proxy through the
Internet or by telephone by following the instructions included
with the enclosed proxy card. If you submit a proxy through the
Internet or by telephone, please do not return the proxy card.
You should be aware that in submitting a proxy through the
Internet, you may incur costs such as telephone and Internet
access charges for which you will be responsible. The Internet
voting facility and the telephone voting facility for
shareholders of record will close at 11:59 p.m., Eastern
Daylight Time, on May 20, 2007.
Shareholders who hold their shares of Central Parking common
stock in street name, meaning in the name of a bank,
broker or other person who is the record holder, must either
direct the record holder of their shares of our common stock how
to vote their shares or obtain a proxy from the record holder to
vote their shares at the special meeting.
Revocability
of Proxies
If you are a registered holder of our common stock, you can
revoke your proxy at any time before it is voted at the special
meeting by:
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submitting another properly completed proxy bearing a later date;
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giving written notice of revocation to any of the persons named
as proxies or to the Secretary of Central Parking;
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if you submitted a proxy through the Internet or by telephone,
submitting a proxy again through the Internet or by telephone
prior to the close of the Internet voting facility or the
telephone voting facility; or
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voting in person at the special meeting.
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If your shares of our common stock are held in the name of a
bank, broker, trustee or other holder of record, you must follow
the instructions of your broker or other holder of record to
revoke a previously given proxy. If your broker or nominee
allows you to submit a proxy by telephone or though the
Internet, you may be able to change your vote by submitting a
proxy again by telephone or through the Internet.
Solicitation
of Proxies
This proxy solicitation is being made and paid for by Central
Parking on behalf of its board of directors. In addition, we
have retained D.F. King to assist in the solicitation. We will
pay D.F. King a customary fee of approximately $7,000, plus a
per minute charge for handling inbound or outbound calls with
shareholders, plus reasonable
out-of-pocket
expenses for its assistance. Our directors, officers and
employees may also solicit proxies by personal interview, mail,
e-mail,
telephone, facsimile or other means of communication. These
persons will not be paid additional remuneration for their
efforts. We will also request brokers, banks and other nominees
to forward proxy solicitation material to the beneficial owners
of shares of common stock that the brokers, banks and nominees
hold of record. Upon request, we will reimburse them for their
reasonable
out-of-pocket
expenses related thereto. In addition, we will indemnify D.F.
King against any losses arising out of that firms proxy
soliciting services on our behalf.
13
Other
Business
We are not currently aware of any business to be acted upon at
the special meeting other than the matters discussed in this
proxy statement. Under our bylaws, business transacted at the
special meeting is limited to matters relating to the purposes
stated in the notice of special meeting, which is provided at
the beginning of this proxy statement, unless otherwise properly
brought by our board or a shareholder. If other matters do
properly come before the special meeting, or at any adjournment
or postponement of the special meeting, we intend that shares of
our common stock represented by properly submitted proxies will
be voted by and at the discretion of the persons named as
proxies on the proxy card. In addition, the grant of a proxy
will confer discretionary authority on the persons named as
proxies on the proxy card to vote in accordance with their best
judgment on procedural matters incident to the conduct of the
special meeting, such as a motion to adjourn in the absence of a
quorum or a motion to adjourn for other reasons, including to
solicit additional votes in favor of approval of the merger
agreement.
Questions
and Additional Information
If you have more questions about the merger or how to submit
your proxy, or if you need additional copies of this proxy
statement or the enclosed proxy card or voting instructions,
please call D.F. King at (800) 431-9643.
14
THE
MERGER
This discussion of the merger is qualified by reference to the
merger agreement, which is attached to this proxy statement as
Annex A. You should read the entire merger agreement
carefully as it is the legal document that governs the merger.
Background
of the Merger
For the entire period of time during which our stock has been
publicly traded, Monroe Carell, Jr., together with his
family and related entities, have collectively owned more of our
stock than any other shareholder. Mr. Carell has
continuously served as Chairman of Central Parkings board
of directors during this period. In the summer of 2004,
Mr. Carell contacted the investment banking firm of Morgan
Stanley & Co., Inc. regarding possible ways to sell his
substantial ownership interest in Central Parking. Morgan
Stanley began analyzing a potential sale of the whole company
and a potential sale of the Carell familys ownership
position. At Central Parkings September 16, 2004
board meeting, all of the directors were made aware of Morgan
Stanleys preliminary work, and the directors, excluding
Mr. Carell and Mrs. Kathryn Carell Brown, discussed
whether Central Parking should engage Morgan Stanley. The
directors ultimately asked Morgan Stanley to continue its work
and report back to them without yet being formally engaged.
At the October 21, 2004 meeting of our board of directors,
Morgan Stanley provided an update regarding its progress and
agreed to make a more detailed presentation at the boards
December meeting. At a December 9, 2004 board of directors
meeting, Morgan Stanley presented a range of possible strategic
alternatives to enhance shareholder value, including a sale of
the entire company, buy-outs of unprofitable leases and
contracts, increased dividends, share repurchases, and a public
offering of Mr. Carells stock. Our board of directors
established a special committee consisting of directors Nelson,
Shell and Smith, none of who are officers or employees of
Central Parking, to evaluate and recommend alternatives to
enhance shareholder value; each of these directors were believed
to be independent directors as defined by New York
Stock Exchange rules governing its listed companies.
On December 21, 2004, Central Parking executed an
engagement letter with Morgan Stanley to assist the special
committee in evaluating strategic alternatives, including
identifying possible buyers of Central Parking. The special
committee met in January 2005 to receive an update regarding
Morgan Stanleys work. At the February 17, 2005
meeting of our board of directors, Morgan Stanley provided an
update regarding its work to our full board of directors. On
March 14, 2005, Central Parking publicly announced that
Morgan Stanley had been selected as its financial advisor to
assist the company in evaluating various strategic alternatives.
Starting in March 2005, Morgan Stanley contacted more than 70
parties regarding their interest in a transaction. This process
did not generate any final offers, and the indications of value
were all less than $15 per share. Based on periodic updates
from Morgan Stanley and after conferring with management and the
other directors, the special committee determined that pursuing
a sale transaction at that price level was not in the best
interests of the shareholders. On June 20, 2005, Central
Parking announced that it was terminating discussions to sell
the company.
In the summer of 2005, our board of directors considered other
ways to enhance shareholder value. Morgan Stanleys
engagement was terminated and other advisors were contacted.
Among other firms, Banc of America Securities made a
presentation to Central Parking that included a review of
strategic alternatives. Banc of America Securities recommended
that Central Parking pursue a dutch auction tender offer after
considering other alternatives such as a one-time large
dividend, increased quarterly dividends, and a going-private
transaction. In August 2005, after consultation with Banc of
America Securities and legal advisors, our board of directors
approved, and Central Parking announced a strategic plan to
streamline operations, pursue the selective sale of owned
properties, and engage in a dutch auction tender offer. Central
Parking retained Banc of America Securities to assist in this
process, and the dutch auction tender offer was completed in
October 2005, resulting in Central Parking purchasing
4,859,674 shares of its common stock at prices at or below
$15.50 per share.
15
In the six months after the announcement of its strategic plan
and completion of the dutch auction tender offer, Central
Parkings stock price did not rise materially and was
trading for less than $15.50 per share in April and May
2006. In May 2006, Mr. Carell again expressed his interest
in a sale of his interest in Central Parking and notified
Central Parking that he had held preliminary discussions
regarding this topic with Blackstone, which had previously been
involved in a number of transactions in the parking industry,
including advising Central Parking in connection with the
acquisition of Allright Corporation, a transaction that was
completed in 1999.
On May 18, 2006, our board of directors discussed the
advisability of appointing a special committee to review and
evaluate strategic alternatives, including a potential sale of
the company. Given the possibility that Mr. Carell,
director Lewis Katz,
and/or
members of senior management might have special interests in
connection with any potential transaction, our board, with
advice of legal counsel, appointed a special committee of
independent and disinterested directors to review potential
strategic alternatives and determine whether any such
alternatives would be in the best interest of all Central
Parking shareholders. Our board of directors appointed a special
committee consisting of current directors Edward G. Nelson,
Raymond T. Baker, Claude Blankenship, Owen G. Shell, Jr.
and William B. Smith. Our board of directors believe each of
these directors to be independent directors as
defined by the New York Stock Exchange rules governing its
listed companies. Mr. Nelson was elected to serve as
chairman of this special committee. Our board authorized the
special committee to take any and all actions necessary or
advisable to consider and evaluate strategic alternatives
available to Central Parking, and, if appropriate, to negotiate
and make recommendations to our full board of directors
regarding strategic transactions involving the company, and
retain additional advisors, including financial and legal
advisors.
The special committee determined to continue the discussions
with Blackstone. On May 24, 2006, Blackstone made a
presentation regarding its experience with complex transactions
generally and specifically in the parking industry and reviewed
strategic alternatives for Central Parking, including the sale
of the company as a whole, a leveraged recapitalization, an
exchange of Carell family stock for real estate owned by Central
Parking, and other options such as block sales of stock,
continued asset sales, and increased dividends.
Near the time of the formation of the special committee,
Mr. Carell received an oral expression of interest from a
third party concerning the acquisition of the outstanding shares
held by him and members of his family and related entities.
Mr. Carell informed the company of his interest in further
exploring a sale of his stock. On May 24, 2006,
Mr. Carell received a written expression of interest from
that party to acquire the approximately 47% of Central Parking
owned by the Carell family and related entities for a price in
the range of $18.53 to $19.81 per share. Mr. Carell
informed Blackstone and the special committee of this proposal.
On May 31, 2006, the special committee met to consider
further the strategic alternatives available to Central Parking
and the recent offer received by Mr. Carell. The special
committee discussed the effects on other shareholders that could
arise from an independent sale of the Carell ownership
interests, including the possible receipt of a control premium
price that would not be available to other shareholders. The
special committee did not believe that the independent sale of
the stock of the Carell family and related entities would be in
the best interest of all of the Central Parking shareholders.
The special committee also discussed the merits of engaging
Blackstone to assist in its evaluation of strategic alternatives
and authorized legal counsel to negotiate with Blackstone. On
June 1, 2006, the special committee retained Blackstone as
its financial advisor.
On June 12, 2006, Blackstone reviewed with the special
committee four specific potential transactions:
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the sale of the entire company to a single buyer;
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the sale of Central Parkings real estate assets (CPC
Properties) and Central Parkings operating assets
(CPC Operations) to separate third parties;
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the sale of CPC Properties to Mr. Carell and the sale of
the remaining CPC Operations to a third party; and
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the sale of CPC Properties to Mr. Carell in exchange for
stock and continuation of CPC Operations as a public company.
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After discussion, the special committee decided that it would be
in the best interests of shareholders to determine the value
that could be obtained in the market place from the various
transactions reviewed by Blackstone.
On July 12, 2006, the special committee met again to
discuss updated financial projections for Central Parking,
the third party expression of interest for
Mr. Carells stock, and procedural issues relating to
Mr. Carells interest in acquiring all or a portion of
the CPC Properties.
On July 31, 2006, the special committee met to discuss
Blackstones analysis of the potential transactions
previously outlined and to receive an update on the status of
discussions with the third party that had expressed an interest
in the Carell family stock. The special committee noted that the
third party had requested access to confidential information of
Central Parking, and the special committee decided to provide
that access only in exchange for that partys standstill
agreement to forego an independent acquisition of the Carell
family ownership interest for six months from the date of the
agreement.
By letter dated August 15, 2006, the third party notified
Central Parking of its interest in acquiring all of the common
stock of Central Parking at a price at or above $19.81 per
share, which represented a premium of 26% over the then most
recent closing price. The special committee agreed to negotiate
exclusively with such party through September 5, 2006. The
special committee then met on August 28, 2006, to discuss
the proposal and other strategic planning matters.
The third party continued to express interest in Central
Parking, including by letter dated September 11, 2006,
reaffirming its interest in purchasing all of the outstanding
stock at the previously stated price of $19.81 per share.
However, the exclusivity period expired without the third party
making a definitive offer.
On September 12, 2006, the special committee met, and
Blackstone provided an update on its discussions with the third
party and on the preparation of materials required for the
transaction process. After receiving this update, the special
committee instructed Blackstone to finish promptly the work
necessary to present to potentially interested third parties the
strategic transactions discussed at its June meeting. During
September and October 2006, Blackstone, at the request of the
special committee, met with interested parties and provided
confidential information to more than 30 parties. After receipt
of the confidential materials, interested parties performed
preliminary due diligence investigations of Central Parking.
At a meeting of the special committee on September 20,
2006, Blackstone updated the special committee on the process.
The special committee also discussed a request from
Mr. Carell to participate as a potential bidder for the CPC
Properties. The special committee concluded that it was in the
best interests of Central Parking shareholders to allow
Mr. Carell to participate in the process as a potential
buyer of the CPC Properties. After further discussion, the
special committee authorized Blackstone, on behalf of the
special committee, to treat Mr. Carell in a manner
consistent with other potential buyers.
On October 3, 2006, Blackstone again updated the special
committee.
In late October and early November, more than 20 parties
submitted preliminary indications of interest to purchase all or
a portion of Central Parking. Mr. Carell submitted a
preliminary indication of interest for the CPC Properties. The
initial indications of interest for the entire company ranged
from $17.50 per share to $22.00 per share.
On November 7, 2006, Blackstone made a detailed
presentation to the special committee on the process, including
a review of preliminary indications of interest. As a result of
its evaluation of the preliminary indications of interest,
including proposed pricing, timing, and certainty, the special
committee determined that it was in the best interests of the
shareholders to continue to explore strategic alternatives.
Following this meeting, Blackstone, at the request of the
special committee, introduced parties interested in purchasing
CPC Operations with parties interested in purchasing CPC
Properties, in an effort to maximize value for the shareholders
by making those parties competitive with parties interested in
acquiring the entire company. Mr. Carell indicated to
Blackstone that he would be willing to make his proposal to
acquire CPC Properties
17
available on the same terms to any party interested in
purchasing CPC Operations. As part of this process, Blackstone
introduced Mr. Carell to one of the parties, referred to
below as Bidder A, interested in buying CPC Operations.
On November 28, 2006, Central Parking issued a press
release announcing that it had engaged Blackstone to assist
Central Parking in evaluating strategic alternatives.
The special committee met again on December 5, 2006, and
Blackstone updated the special committee on the status of the
preliminary indications of interest.
Throughout November and December 2006, each of the remaining
interested parties continued its due diligence investigation of
Central Parking. Management also made presentations to several
interested parties.
In December 2006, Central Parking delivered a draft merger
agreement to the interested parties and advised those parties
that best and final bids, along with markups of the
merger agreement, were due no later than January 9, 2007.
In early January, Central Parking received 14 bids, which
included bids to purchase the entire company, the CPC
Operations, the CPC Properties, and select CPC Properties
primarily located in New York City. All of these bids were
subject to conditions, including confirmatory diligence items
and the negotiation of a definitive transaction agreement. There
were four bids for the entire company, and they ranged from a
low of $19.00 per share to a high of $22.00 per share.
There were four bids for CPC Operations ranging from a low of
$19.25 per share to a high of $21.00 per share, each
of which assumed that CPC Properties would be sold for
$450.0 million and that CPC Operations would be responsible
for the taxes arising from the transfer of CPC Properties.
There were three bids for CPC Properties, including a bid from
Mr. Carell, ranging from a low of $430.0 million to a
high of $465.0 million, each of which assumed that CPC
Operations would be responsible for the taxes arising from the
transfer of CPC Properties. Central Parking also received three
bids for various components of the CPC Properties at prices that
ranged from $170.0 million to $290.0 million depending
on the properties included and related assumptions specified by
each bid. In addition, seven of the eight bidders who submitted
bids for either the entire company or CPC Operations included as
a part of their revisions to the draft merger agreement a
condition that Mr. Carell and members of his family and
related entities execute voting agreements in favor of its
proposed transaction.
On January 10 and 11, 2007, the special committees
advisors held discussions with each of the bidders and their
advisors to clarify the assumptions made in their respective
bids.
On January 11, 2007, the special committee met to consider
the bids and address issues relating to the transaction process.
The special committees financial and legal advisors
described for the committee the details of the bids received,
including pricing, confirmatory diligence expectations, timing,
key contract terms, and timing to closing. Blackstone noted that
it anticipated receiving additional CPC Properties bids in the
near future. After review and consideration of the bids, the
special committee determined that bids for the entire company
had certain advantages, including certainty of completion, but
that Blackstone should continue to pursue bidders for the CPC
Operations and CPC Properties as well in order to maximize value
and the potential for a successful transaction. Blackstone noted
that the special committee could consider offering expense
reimbursement to one or more of the bidders, if requested, to
keep parties in the process and assist in generating the best
price. Also discussed at the meeting were the key terms of the
proposed definitive agreement, the special committees
expectations concerning the significant terms of any agreement,
and the anticipated timing of the negotiation of a final
definitive agreement. The special committee directed Blackstone
to communicate to bidders that the special committee placed a
high priority on the fewest possible closing conditions to
achieve maximum certainty of consummation of a transaction.
At the conclusion of the January 11, 2007 meeting, the
special committee directed Blackstone to continue negotiations
with three bidders, referred to as Bidder A, Bidder B,
and Kohlberg, because those bidders had submitted the most
competitive proposals. At that time, Bidder A had proposed
to purchase the entire company but indicated a preference to
coordinate with Mr. Carell with respect to a simultaneous
sale to Mr. Carell of the CPC Properties. Bidder B had
indicated an interest in purchasing the entire company. Kohlberg
had indicated an interest in purchasing the CPC Operations but
had requested to be partnered with a CPC Properties
18
bidder. The special committee also instructed Blackstone to
inform the other bidders for the entire company and for the CPC
Operations that their bids were not competitive. In addition,
the special committee instructed Blackstone to continue
discussions with CPC Properties bidders.
During the week of January 15, 2007, Blackstone informed
the bidders identified by the special committee at the January
11 meeting that their bids were not competitive. In response,
several bidders attempted to make adjustments to the terms of
their bids. One bidder for the entire company, referred to as
Bidder C, responded by increasing its bid for the entire
company to $21.50 per share.
Between January 11 and January 22, 2007, Blackstone
introduced Kohlberg to CPC Properties bidders. Blackstone also
introduced Bidder B to a CPC Properties bidder when
Bidder B indicated that it had an interest in such
discussions because of the potential need for additional equity
to complete a transaction. Due diligence work by Kohlberg,
Bidder A, Bidder B, and Bidder C continued during
this period.
The special committee met on January 22, 2007, to discuss
the status of various bids, including the revised bid from
Bidder C. As a result of Bidder Cs revised bid,
the special committee decided to allow Bidder C to continue
negotiations and due diligence.
Lubert-Adler and Chrysalis were among the parties that were
informed during the week of January 15 that their bid was not
competitive. Two weeks later, as discussed in more detail below,
Lubert-Adler and Chrysalis partnered with Kohlberg as equity
sponsors. Kohlberg indicated to Central Parking that this
arrangement would allow it to make a more competitive bid for
the entire company than under arrangements with any of the CPC
Properties bidders previously introduced to them.
During the week of January 22, 2007, the four primary
remaining interested groups of bidders, Bidder A,
Bidder B, Bidder C and Kohlberg, did due diligence and
had discussions and negotiations of specific contract terms.
During this time, Bidder A was engaged in discussions with
Mr. Carell regarding Bidder As offer and the
potential sale of CPC Properties to Mr. Carell.
Bidder A advised Blackstone it had reached a preliminary
agreement in principle with Mr. Carell regarding the major
terms of a transaction involving CPC Properties, but it was
willing to proceed with its efforts to purchase the entire
company whether or not a definitive agreement was ultimately
reached with Mr. Carell. Bidder A continued to move
forward with its due diligence and the negotiation of a
definitive agreement. Bidder B indicated a willingness to
increase its price to $22.00, in part in exchange for the
companys agreement to reimburse it for up to
$2 million of its expenses incurred after January 16,
2007. Bidder C raised its bid to $22.50 per share but
noted that it would require substantially more time to complete
its due diligence prior to entering into a definitive agreement.
Kohlberg indicated a willingness to increase its price to
$22.00, in part in exchange for the companys agreement to
reimburse it for up to $1 million of expenses incurred
after January 25, 2007.
On January 29, 2007, the special committee met to discuss
the status of the bids. Blackstone noted for the special
committee that although the remaining bidders were very close on
price, Bidder A had performed substantial due diligence and
had indicated it would be in a position to make a final offer in
advance of the other parties. The special committee also gave
final approval to expense reimbursement on the terms described
above, and the company entered into cost reimbursement
agreements with Bidder B and Kohlberg the following week.
Because of its request for additional time to perform diligence,
no expense reimbursement agreement was entered into with
Bidder C despite its prior request to do so.
On February 1, 2007, Kohlberg advised Blackstone that it
intended to partner with Lubert-Adler and Chrysalis
(collectively, the Equity Sponsors) as a bidder for
the entire company at a price of $22.00 per share. During
the first week of February, Bidder A informed Blackstone
that it did not believe it would ultimately reach an agreement
with Mr. Carell pursuant to which he would acquire the CPC
Properties, but Bidder A reaffirmed that it was still
pursuing a bid for the entire company.
On February 6, 2007, the special committee was updated on
the developments since its last meeting.
During the week of February 5, 2007, Bidder A
informally indicated to Blackstone that it intended to offer to
purchase the entire company at a price of no less than
$22.25 per share, with an opportunity to increase this
amount to $22.75 per share provided that Central Parking
sold certain real estate in New York
19
City at a specified price prior to closing, with an opportunity
for the proposed merger consideration to increase if the those
New York City properties were sold above that specified price.
However, on February 9, 2007, Bidder A indicated that
it had revived its discussions with Mr. Carell, that it was
withdrawing this offer, and that Bidder A intended to offer
$22.50 for public shareholders and $21.50 for shares held by the
Carell family and related entities contemporaneous with a sale
to Mr. Carell of the CPC Properties for $448 million
plus the assumption of CPC Properties related debt.
Between February 9 and February 13, 2007, negotiations over
contract terms occurred between our advisors and advisors for
both Bidder A and the Equity Sponsors. Terms discussed
included the amount of the reverse termination fee, elimination
of any third party consents for closing, and elimination of
certain real estate closing conditions (particularly relating to
title and environmental issues), and other events that could
prevent or delay closing.
On February 13, 2007, Central Parking received a revised
merger agreement from Bidder B with numerous material open
issues, and subsequently Bidder B indicated that it needed
an additional two to three weeks to finalize contract terms and
due diligence and to obtain internal approval of the
transaction. On that same date, Bidder C advised Blackstone
that it needed an additional three to four weeks to perform its
remaining due diligence and to negotiate a merger agreement.
On February 13, 2007, the special committee met and was
updated on the recent developments. The special committee was
also advised, on that same date, that Bidder A had again
informed Blackstone that it did not intend to enter into a
transaction with Mr. Carell. Mr. Carell also informed
the special committee that Mr. Carell and his family would
consider entering into a voting agreement with any successful
bidder selected by the special committee. On February 14,
2007, Mr. Carell also delivered to the special
committees legal advisor proposed amendments to his
employment agreement and deferred compensation agreement that he
believed were appropriate in light of the proposed sale of the
company and that he would expect to enter into contemporaneous
with entering into a voting agreement.
On February 15, 2007, the special committees advisors
held a conference call with the Equity Sponsors and their
advisors to outline the key terms outstanding in the merger
agreement negotiations. Also, on February 15, 2007,
Bidder A asked to be put in contact with other CPC
Properties bidders and indicated a strong preference not to
acquire all of the CPC Properties at closing.
On February 16, 2007, the special committees advisors
circulated a revised draft of the merger agreement to the Equity
Sponsors and their advisors. At this point, the Equity
Sponsors offer remained at $22.00 per share. On that
same day, Bidder A delivered a revised merger agreement and
proposed to acquire the entire company for $22.25 per
share, with a reverse termination fee of $20 million and a
target date of February 19 for signing a definitive merger
agreement. A number of diligence items remained open with
respect to Bidder A, as did significant terms of the merger
agreement. Bidder A also requested the right to sell real
property between signing of a definitive agreement and closing,
which necessitated its proposed outside closing date of
September 30, 2007. As of this date, Bidder B was
significantly behind Bidder A with respect to the diligence
process and had also made significantly less progress with
respect to contract terms.
The special committee met on February 16, 2007 to discuss
the status of the bids. The Equity Sponsors also delivered on
that same date their debt and equity financing commitments.
After a lengthy discussion of the merits of the existing offers,
the likelihood of obtaining a higher price later from another
interested party, the demands of the diligence process, and the
transaction process generally, the special committee instructed
Blackstone to continue negotiations with Bidder A and the
Equity Sponsors. On a subsequent
follow-up
call on February 17, 2007 to discuss the February 16 draft
merger agreement, the Equity Sponsors indicated that they had
substantially completed their diligence and were prepared to
reach agreement on the terms proposed by the special
committees advisors on all of the major issues that
remained open other than the amount of the reverse termination
fee, and were prepared to execute a definitive agreement
immediately.
On the morning of February 18, 2007, the special
committees advisors and Bidder As advisors
discussed key unresolved contract terms. Bidder As
advisor indicated strongly that their client would not agree to
certain terms being proposed by the special committee in the
merger agreement related to the closing conditions for
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real estate title, environmental issues, and third party
consents. No progress was made on this issue and the call
terminated without a discussion of other substantive unresolved
issues. The Equity Sponsors had reached agreement on those same
proposed terms on the prior day. Later on February 18,
2007, Blackstone discussed these closing conditions further with
Bidder A and reiterated the special committees
position with respect to these closing conditions.
Later on February 18, 2007, the Equity Sponsors advised
Blackstone that they intended to make a higher offer, provided
that such bid would close the process. The Equity Sponsors had
reached agreement on the contract terms as proposed by the
special committee, including the elimination of closing
conditions for real estate title, environmental issues, or third
party consents other than the bring-down of the representations
and warranties contained in the merger agreement at closing, the
provision of a $30 million reverse termination fee and
establishing the right to terminate the merger agreement if the
closing did not occur on or before July 31, 2007. Based on
agreement to these terms, the Equity Sponsors increased their
bid to $22.50 per share on February 18, 2007. The
Equity Sponsors described this offer as their best and
final offer.
On the evening of February 18, 2007, the special committee
legal advisors notified counsel for Mr. Carell that the
special committee was close to having an agreement with the
Equity Sponsors and that the Equity Sponsors willingness
to enter into a merger agreement would be conditioned on
Mr. Carell, Mrs. Brown, and members of their families
and related entities entering into voting agreements in support
of the transaction. Counsel for Mr. Carell indicated that
Mr. Carell anticipated entering into amendments to his
employment agreement and deferred compensation agreement, on the
terms proposed to the special committee on February 14,
contemporaneous with Mr. Carell, Mrs. Brown, and
members of their families and related entities entering into
voting agreements. On February 19, 2007, a draft agreement
that had been prepared by the special committees legal
advisors substantially effecting those changes to
Mr. Carells existing agreements was forwarded to
Mr. Carells counsel. Later on that date,
Mr. Carells counsel asked the legal advisors to the
special committee to forward this draft agreement to counsel for
the Equity Sponsors. The Equity Sponsors then engaged in direct
negotiations with Mr. Carell and his counsel regarding this
draft agreement on February 19 and 20. The terms of the
final executed agreement were substantially the same as those
initially requested by Mr. Carell.
On February 19, 2007, Bidder A indicated to Blackstone
that it was further reducing its price to $22.00 per share
and that it would agree to the material terms requested by
Central Parking, other than with respect to the reverse
termination fee and the outside date for completing the
transaction. Bidder A also indicated that it still intended
to have Central Parking dispose of certain real estate prior to
closing.
On the morning of February 19, 2007, the special committee
held a meeting to discuss the recent developments. The special
committees advisors described the events over the last
several days, including the numerous discussions with the Equity
Sponsors and Bidder A. Blackstone also noted that the
Equity Sponsors had provided evidence of debt and equity
financing commitments in amounts sufficient to complete the
transaction and noted that Bidder A had not yet provided
financing commitments. The special committee then instructed its
advisors to attempt to finalize the terms of a merger agreement
and related agreements with the advisors for the Equity Sponsors.
Later that same day, Bidder A, Bidder B, and
Bidder C were contacted by Blackstone, and each was
informed that its current position on price, contract terms,
and/or
timing was not competitive and that Central Parking intended to
move forward with a different party. Bidder A subsequently
contacted Blackstone and indicated that it was prepared to
increase its price to $22.50 with a reverse termination fee of
$20 million, an outside closing date of August 30,
2007, and a continued intent to have Central Parking dispose of
certain estate prior to the closing.
On the evening of February 19, 2007, the special committee
held another meeting to discuss the developments that occurred
since their meeting that morning.
On February 20, 2007, Blackstone received a letter from
Bidder B increasing its price to $22.50, indicating that it
was willing to engage in further merger agreement negotiations
and indicating that it anticipated receipt of financing
commitments by February 28.
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On the evening of February 20, 2007, meetings of Central
Parkings special committee and full board of directors
were held. During the meeting of the special committee, the full
board was invited to hear Blackstones presentation
regarding the fairness from a financial point of view of the
$22.50 per share merger consideration to the common
shareholders of Central Parking and the presentation by the
special committees legal counsel of the proposed
transaction terms. Upon learning during the Blackstone
presentation that the Equity Sponsors and Bidder B had
received reimbursement of certain of their expenses,
Mr. Carell reiterated his prior request of the special
committee to be reimbursed for costs associated with his bid for
CPC Properties, which prior request had not been agreed to by
the special committee. The special committee discussed this
request without Mr. Carell or Mrs. Brown present.
After discussion with its advisors, the special committee
directed Blackstone to propose to the Equity Sponsors that they
increase their proposed price per share to all shareholders by
an amount such that Mr. Carells proceeds would be
substantially equivalent to the expense reimbursement he had
requested. After deliberation, the Equity Sponsors called
Blackstone and agreed to increase their price to $22.53 per
share for an immediate execution of definitive documentation,
and Blackstone then described this response to the special
committee and to Mr. Carell. Blackstone then continued to
discuss in detail its analyses of the transaction and the price
to be received by our shareholders in the transaction. Following
its presentation, Blackstone provided orally to the special
committee its opinion (which opinion was subsequently confirmed
in writing), to the effect that, as of February 20, 2007,
and based upon the qualifications, assumptions, limitations and
other matters set forth in its written opinion, the merger
consideration of $22.53 per share in cash to be received by
the holders of shares of our common stock pursuant to the merger
was fair, from a financial point of view, to such holders.
With the benefit of these presentations and advice, the special
committee, along with the other members of our board of
directors, discussed the terms and merits of the proposed
transaction in more detail. At the conclusion of this
discussion, directors Eads, Carell, Brown and Katz were excused
from the meeting, and the special committee had final
discussions regarding the merits of the proposed transaction and
whether it was in the best interests of shareholders. The
special committee then unanimously resolved that the merger
agreement is fair to and in the best interests of Central
Parking and its shareholders and recommended that the board of
directors of Central Parking approve the transaction, the merger
agreement, and the transactions contemplated by the merger
agreement, and that the board of directors recommend to the
shareholders of Central Parking that they vote to approve the
merger agreement and the transactions contemplated thereby.
The special committee then discussed the proposed modifications
to Mr. Carells compensation arrangement with Central
Parking to be offered as a material inducement to
Mr. Carell to vote all of his shares in favor of the merger
agreement. The specific terms of the modifications are described
in detail below in the section titled Interests of Certain
Persons in the Merger - Monroe Carells Agreements on
page 40. After discussion of these modifications, including
any potential economic impact to Central Parking, the special
committee unanimously approved the modifications and authorized
Central Parking to enter into an agreement with Mr. Carell
on the terms proposed.
The meeting of the special committee was then adjourned and a
meeting of our board of directors was convened. Our board of
directors expressly acknowledged that Mr. Carells and
Mrs. Browns agreements to enter into voting
agreements with the Equity Sponsors and the amendment of
Mr. Carells agreement with Central Parking provided
each of them with an interest in the proposed transaction not
available to all shareholders. Mr. Eads also informed the
directors that while no members of management had any express
agreement with the Equity Sponsors regarding their continued
employment with Central Parking after the transaction,
Mr. Eads anticipated that discussions regarding this topic
would occur after execution of the merger agreement. After
receiving the special committees recommendation, the board
discussed and deliberated the proposed transaction with the
Equity Sponsors. Our board also acknowledged that Mr. Katz
had disclosed to the board that he had prior business dealings
with Lubert-Adler and that he had been contacted much earlier in
the process and had declined to work with Lubert-Adler with
respect to this transaction. Thereafter, our board of directors
unanimously determined that the merger agreement is fair to and
in the best interests of Central Parking and its shareholders,
approved the merger agreement and the transactions contemplated
by the merger agreement, and recommended that the shareholders
of Central Parking vote to adopt the merger agreement.
22
Following the meeting of the board of directors, the merger
agreement was executed by Central Parking and the Equity
Sponsors.
Reasons
for the Merger
The
Special Committee
In the course of reaching its decision to recommend that our
board of directors approve the merger agreement and the merger,
the special committee consulted with senior management and the
special committees financial and legal advisors, and
reviewed a significant amount of information and considered a
number of factors weighing positively in favor of the merger,
including the following material factors:
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the actions previously taken by Central Parking and the other
strategic alternatives considered since the fall of 2004;
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the risks of continuing to operate on a stand-alone basis;
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the risks associated with our ability to meet our projections
for future results of our operations, compared with the
opportunity for our shareholders to currently realize the merger
consideration;
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the value of the consideration to be received by our
shareholders pursuant to the merger agreement, as well as the
fact that shareholders will receive the consideration in cash,
which provides certainty of value to our shareholders compared
to a transaction in which they would receive stock or other
non-cash consideration;
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the $22.53 per share to be paid as the consideration in the
merger represents a 41.4% premium over the one year trading
average of our common stock prior to November 27, 2006 (the
trading day prior to Central Parking publicly announcing its
hiring of Blackstone as its financial advisor to assist the
special committee to explore strategic alternatives to enhance
shareholder value), a 30.8% premium over the closing price of
our common stock on November 27, 2006, and a 6.2% premium
over the closing price of our common stock on February 20,
2007 (the trading day prior to announcement of executing the
merger agreement);
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the presentation of Blackstone (including an independent
consideration by the special committee of many of the factors
identified in the presentation and a review of the assumptions
and methodologies underlying the analyses in connection
therewith) and the opinion of Blackstone to the special
committee dated February 20, 2007, a copy of which is
attached to this proxy statement as Annex B and which you
should read carefully in its entirety, to the effect that, as of
such date and based upon the qualifications, assumptions,
limitations and other matters set forth in its opinion, the
merger consideration of $22.53 in cash per share, without
interest and less any applicable tax withholding, to be received
by our shareholders pursuant to the merger was fair to our
shareholders from a financial point of view;
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the existing conditions and activity in the financial market;
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the current level of acquisition activity and transaction
pricing by private equity funds;
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current real estate valuations, especially real estate located
in the New York City area;
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that Central Parking conducted a broad sales process in 2005,
contacting more than 70 parties, which had generated no formal
bids, at which point the board of directors determined to pursue
other strategic alternatives;
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the desire expressed by Mr. Carell and members of his
family to dispose of their Central Parking stock and the
potential effect of that disposition upon the other
shareholders, recognizing that Mr. Carell and his family
could liquidate their ownership interest in a manner that could
reduce the market price for Central Parkings shares;
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the historical, current and projected information concerning our
business and our industry;
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23
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certain risks beyond Central Parkings control associated
with operating business locations concentrated in major
metropolitan areas, particularly New York City, such as
terrorist attacks and government regulatory initiatives;
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our actual financial results for the quarter ended
December 31, 2006 and our estimated financial results for
the quarter ending March 31, 2007, as well as longer term
projections of our estimated financial results as prepared by
Central Parkings management;
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as part of the sales process, Blackstone contacted approximately
45 potential strategic and financial buyers, including buyers
for discrete pieces of the business;
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as part of the sales process, four bidding groups (consisting of
at least ten discrete parties) conducted full due diligence and
engaged in substantive negotiations on a definitive agreement;
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the terms and conditions of the merger agreement, including:
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the ability of the board, under certain circumstances, to
furnish information to and conduct negotiations with a third
party and, upon the payment to certain affiliates of KCPC
Holdings of a termination fee of $22.4 million, to
terminate the merger agreement to accept a superior proposal;
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the special committees belief that the $22.4 million
termination fee payable to certain affiliates of KCPC Holdings
was reasonable in the context of termination fees that were
payable in other comparable transactions and would not be likely
to preclude another party from making a competing proposal;
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the limited conditions to KCPC Holdings obligation to
complete the merger (including the limits contained in the
definition of material adverse effect);
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the existence of the $30.0 million reverse termination fee
payable to us if KCPC Holdings terminates or fails to complete
the merger for certain reasons;
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the limited guarantee of the Equity Sponsors to pay the
$30.0 million termination fee;
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as part of the process, the special committee was able to obtain
one final price increase from the Equity Sponsors on the day of
execution from $22.50 to $22.53;
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that Bidder A, the bidder next closest to completing a
transaction on the time frame of the Equity Sponsors, had not
delivered financing commitment letters, still indicated that it
desired to have Central Parking sell real estate prior to
closing, proposed a reverse termination fee of only
$20.0 million, and wanted a longer period to close the
transaction. Bidder A also had reduced its offer from
$22.50 to $22.25 and then to $22.00 in mid-February before
finally again raising its bid to $22.50 upon being told that
Central Parking intended to enter into an agreement with another
bidder;
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that Bidder B and Bidder C each had substantial
remaining due diligence, financing, internal approval and
definitive agreement negotiations to complete and validate their
bid before being in a position to execute a definitive agreement;
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the likelihood that delaying the process further would generate
a higher offer weighed against the possibility that the Equity
Sponsors could withdraw their offer; and
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that although Mr. Carell was a bidder for the CPC
Properties and participated in negotiations with Bidder A,
he did not participate in any way in the bid of the Equity
Sponsors, which suggests that the process implemented by the
special committee was successfully designed to enhance
shareholder value rather than favor a related party bid.
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24
The special committee also considered a number of factors
relating to the procedural safeguards involved in the
negotiations, each of which contributes to the belief that the
transaction is fair to our shareholders and supports the
determinations made by the special committee:
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the special committee is comprised solely of independent and
disinterested directors who are not Central Parkings
employees;
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the special committee had ultimate authority to decide whether
or not to recommend a transaction or any alternative thereto;
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the financial and other terms and conditions of the merger
agreement were the product of arms-length negotiations
between the special committee and its advisors, on the one hand,
and the Equity Sponsors and their respective advisors, on the
other hand; and
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the special committee retained and received advice from its own
advisors, including Blackstone, in evaluating, negotiating and
recommending the terms of the merger agreement.
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In the course of its deliberations, the special committee also
considered a variety of risks and other countervailing factors
weighing negatively against the merger, including:
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the risks and costs to us if the merger does not close,
including the diversion of management and employee attention,
employee attrition, and the effect on business relationships;
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the restrictions that the merger agreement imposes on actively
soliciting competing bids, and the fact that we would be
obligated to pay the $22.4 million termination fee to
certain affiliates of KCPC Holdings under certain circumstances;
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the fact that Central Parking will no longer exist as an
independent, stand-alone company and our shareholders will no
longer participate in the projected future growth in
profitability of Central Parking;
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the possibility that Central Parking might be more valuable in
the future if it meets or exceeds managements current
projections for increased profits;
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the fact that gains from an all-cash transaction would be
taxable to our shareholders for U.S. federal income tax
purposes; and
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the interests of Mr. Carell and our officers, directors,
and key employees in the merger described under Interests
of Certain Persons in the Merger.
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The foregoing discussion of the factors considered by the
special committee is not intended to be exhaustive, but it does
set forth the principal factors considered by the special
committee. The special committee reached the unanimous
conclusion to recommend that our board of directors approve the
merger agreement and the merger in light of the various factors
described above and other factors that each member of the
special committee felt were appropriate. In view of the wide
variety of factors considered by the special committee in
connection with its evaluation of the merger and the complexity
of these matters, the special committee did not consider it
practical, and did not attempt, to quantify, rank or otherwise
assign relative weights to the specific factors it considered in
reaching its decision and did not undertake to make any specific
determination as to whether any particular factor, or any aspect
of any particular factor, was favorable or unfavorable to the
ultimate determination of the special committee. Rather, the
special committee made its recommendation based on the totality
of information presented to, and the investigation conducted by,
it. In considering the factors discussed above, individual
directors may have given different weights to different factors.
Recommendation
of Our Board of Directors
Our board of directors, acting largely on the recommendation of
the special committee and being fully aware of the Carell
familys and managements interests in the
transaction, and after deliberation at a meeting on
February 20, 2007 as described above, determined by
unanimous vote that the merger agreement was advisable and in
the best interests of our shareholders. Accordingly, our board
unanimously approved the
25
merger agreement and the merger. Our board recommends that
you vote FOR the approval of the merger
agreement.
Opinion
of The Blackstone Group L.P.
The special committee retained Blackstone, by agreement dated
June 1, 2006, to provide it with financial advisory
services in connection with a possible sale, merger or other
strategic business combination involving Central Parking. The
special committee selected Blackstone to act as its financial
advisor based on Blackstones qualifications, expertise,
and reputation as a financial advisor to special committees. At
the meeting of the special committee on February 20, 2007,
and at the meeting of the Central Parking board of directors
later on that same day, Blackstone rendered its oral opinion,
subsequently confirmed in writing, that as of February 20,
2007, and based upon and subject to the assumptions,
qualifications, and limitations set forth in the opinion, the
$22.53 per share cash consideration to be received by the
Central Parking shareholders pursuant to the merger agreement
was fair, from a financial point of view, to such shareholders.
The full text of the written opinion of Blackstone, dated as of
February 20, 2007, is attached to this proxy statement as
Annex B. The opinion sets forth, among other things, the
assumptions made, procedures followed, matters considered and
limitations on the scope of the review undertaken by Blackstone
in rendering its opinion. You are encouraged to read the entire
opinion carefully. Blackstones opinion is directed to the
special committee of Central Parkings board of directors
and addresses only the fairness as of the date of the opinion,
from a financial point of view, of the $22.53 per share
cash consideration to be received by the holders of shares of
Central Parkings common stock pursuant to the merger
agreement. Blackstones opinion does not address any other
aspects of the merger or the merger agreement. The opinion, and
the other views and analysis of Blackstone referenced throughout
this proxy statement, do not constitute a recommendation to any
holder of Central Parking common stock as to how to vote at the
shareholders meeting to be held in connection with this
transaction. The summary of the opinion of Blackstone set forth
in this proxy statement is qualified in its entirety by
reference to the full text of the opinion.
In connection with rendering its opinion, Blackstone, among
other things:
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reviewed certain publicly available information concerning the
business, financial condition, and operations of Central Parking
that Blackstone believed to be relevant to its inquiry;
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reviewed certain internal information concerning the business,
financial condition, and operations of Central Parking that
Blackstone believed to be relevant to its inquiry;
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reviewed certain internal financial analyses, budgets, estimates
and forecasts relating to Central Parking prepared by, and
furnished to Blackstone by, the management of Central Parking;
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reviewed analyses relating to Central Parkings owned
property prepared by, and furnished to Blackstone by, the
management of Central Parking;
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visited selected owned and leased properties of Central Parking;
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reviewed the publicly reported historical prices and trading
activity for Central Parkings common stock;
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reviewed the February 20, 2007 draft of the merger
agreement, the February 14, 2007 draft of the voting
agreement, and the February 14, 2007 draft of the limited
guarantee;
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reviewed the February 16, 2007 drafts of the debt financing
commitments to be entered into between Merger Sub and certain
lending institutions (the debt financing
commitments);
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reviewed the February 16, 2007 draft of the equity
financing commitment to be provided by the Equity Sponsors to
KCPC Holdings (the equity financing commitment and
together with the debt financing commitments, the
financing commitments);
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held discussions with members of management of Central Parking
concerning Central Parkings business, operating
environment, financial condition, prospects, and strategic
objectives;
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26
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reviewed publicly available financial and stock market data with
respect to certain other companies in lines of businesses
Blackstone believed to be generally comparable to those of
Central Parking;
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reviewed the publicly available financial terms of certain
recent transactions in the parking industry;
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reviewed the premiums paid on certain recent acquisitions of
U.S. companies, the securities of which were publicly
traded;
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performed discounted cash flow analyses utilizing pro forma
financial information prepared by, and furnished to Blackstone
by, management of Central Parking;
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reviewed the results of Blackstones efforts to solicit
indications of interest and definitive proposals from third
parties with respect to an acquisition of Central
Parking; and
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participated in certain discussions and negotiations among
representatives of Central Parking and Parent and their
financial and legal advisors.
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In arriving at its opinion, Blackstone relied on, without
independent verification, the accuracy and completeness of all
financial and other information that was available from public
sources and all projections and other information provided to
Blackstone by Central Parking or otherwise reviewed by or for
Blackstone. With respect to financial and other projections and
pro forma financial information prepared by Central Parking and
the assumptions underlying those projections and such pro forma
information, Blackstone assumed that they were reasonably
prepared and represented managements best estimates and
judgments as of the date of their preparation. Blackstone relied
upon the assurances of the management of Central Parking that
they are not aware of any facts that would make the information
and projections provided by them inaccurate, incomplete, or
misleading. Blackstone did not make any independent evaluation
or appraisal of the assets and liabilities (contingent,
derivative, off-balance sheet or otherwise) of Central Parking,
nor did Blackstone obtain any such appraisals. Blackstone also
assumed that the definitive merger agreement, the definitive
voting agreement, the definitive limited guarantee and the
definitive financing commitments did not differ in any respects
material to Blackstones analyses from the drafts of such
documents furnished to Blackstone.
In arriving at its opinion, Blackstone assumed that the merger
will be effected in accordance with the terms and conditions set
forth in the merger agreement, including that KCPC Holdings and
Merger Sub will obtain financing for the merger in accordance
with the terms set forth in the financing commitments, without
waiver, modification or amendment of any term, condition or
agreement material to Blackstones analyses and that, in
the course of obtaining the necessary regulatory or third party
approvals, agreements or consents for merger, no delay,
limitation, restriction or condition will be imposed that would
have an adverse effect on Central Parking or the contemplated
benefits of the merger. Blackstone is not a legal, tax or
regulatory advisor and relied upon, without independent
verification, the assessment of Central Parking and its legal,
tax, and regulatory advisors with respect to such matters.
Blackstones opinion only addressed the fairness, from a
financial point of view, to the holders of Central
Parkings common stock of the $22.53 per share cash
consideration to be received by such shareholders in the merger
and did not address any other aspect or implication of the
merger, the merger agreement or any other agreement, arrangement
or understanding entered into in connection with the merger or
otherwise. In arriving at its opinion, Blackstone did not
express any opinion as to the impact of the merger on the
solvency or viability of Central Parking following the merger or
the ability of Central Parking to pay its obligations when they
become due.
Blackstones opinion did not address the relative merits of
the merger as compared to other business strategies or
transactions that might be available to Central Parking or
Central Parkings underlying business decision to effect
the merger. Blackstones opinion did not constitute a
recommendation to any shareholder of Central Parking as to how
such shareholder should vote or act with respect to the merger
or any other matter. In addition, Blackstones opinion did
not address the fairness to, or any consideration of, the
holders of any class of securities, creditors or other
constituencies of Central Parking other than the holders of
Central Parking common stock.
27
Blackstones opinion was necessarily based on financial,
economic, market and other conditions as in effect on, and the
information made available to it as of, February 20, 2007.
Events occurring after such date may affect Blackstones
opinion and the assumptions used in preparing it, and Blackstone
did not assume any obligation to update, revise or reaffirm its
opinion.
Blackstone is an internationally recognized financial advisory
firm. Blackstone, as part of its investment banking and
financial advisory business, is continuously engaged in the
valuation of businesses and securities in connection with
mergers and acquisitions and restructurings, and valuations for
corporate and other purposes. In the past Blackstone provided
financial advisory services to Central Parking in connection
with its acquisition of Allright Parking and to certain funds
managed by affiliates of Kohlberg & Company, L.L.C. in
connection with a sale of a portfolio company. Certain
affiliates of Blackstone have also been lenders to, and have
purchased assets from, certain portfolio companies of Kohlberg.
In addition, Blackstone and its affiliates may in the ordinary
course of business actively trade or hold the securities of
Central Parking for their own account or for others and may at
any time hold a long or short position in such securities.
Under the terms of Blackstones engagement letter, Central
Parking has agreed to pay Blackstone certain fees, substantially
all of which are payable upon consummation of any substantial
transaction or series of transactions involving Central Parking,
including the merger. These fees include: an initial fee of
$250,000 which was paid at the time of the engagement letter; a
retainer fee of $50,000 per month beginning on
November 1, 2006, which monthly fees have not yet been
paid; and an additional fee of $12,321,379 which will be paid if
the merger is completed at the current price, which is equal to
1.1% of the aggregate consideration to be received in the merger
plus an incremental incentive fee for consummating the merger at
a price greater than $20 per share, less any fees already
paid. Central Parking has also agreed to reimburse Blackstone
for certain of its expenses, including attorneys fees,
incurred in connection with its engagement, provided such
expenses shall not exceed, in the aggregate, $100,000 without
Central Parkings prior written consent. In addition,
Central Parking has agreed to indemnify Blackstone, its
affiliates, their respective partners, members, directors,
officers, employees and agents and each person, if any,
controlling Blackstone or any of its affiliates against certain
liabilities and expenses, including certain liabilities under
the U.S. federal securities laws, relating to or arising
out of its engagement and any related transactions.
Financial
Analyses of Blackstone
The following is a summary of the material analyses performed by
Blackstone in connection with its oral opinion and the
preparation of its written opinion letter dated
February 20, 2007. In connection with arriving at its
opinion, Blackstone did not attribute any particular weight to
any analysis described below. Some of these summaries of
financial analyses include information presented in tabular
format. In order to fully understand the financial analyses used
by Blackstone, the tables must be read together with the text of
each summary. The tables alone do not constitute a complete
description of the financial analyses. Blackstone computed the
implied equity values summarized below assuming
32.6 million fully diluted shares of Central Parking common
stock as of February 16, 2007.
Historical Share Price
Analysis. Blackstone performed a historical
share price analysis to obtain background information and
perspective with respect to the historical share prices of
Central Parking common stock.
Blackstone also reviewed the historical price performance and
average closing prices of Central Parking common stock for
various periods ending on November 27, 2006 (the last
closing price before Central Parking
28
announced that it had engaged Blackstone to explore strategic
alternatives) and February 16, 2007 and compared them to
the per share merger price of $22.53. Blackstone observed the
following:
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Central
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Offer Price
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Parking Price
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Premium
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$22.53 Per Share Merger Consideration Compared to:
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Per Share
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Per Share
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Undisturbed Share Price on
11/27/06
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$
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17.23
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30.8
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%
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Closing Share Price on
2/16/07
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$
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20.36
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10.7
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%
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One Month Average through
2/16/07
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$
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19.32
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16.6
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%
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Six Month Average through
2/16/07
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$
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17.75
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27.0
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%
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52-Week High through
2/16/07
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$
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20.89
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7.9
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%
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52-Week Low through
2/16/07
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$
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13.30
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69.4
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%
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30-Day
Undisturbed Trading Average through
11/27/06
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$
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17.43
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29.3
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%
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60-Day
Undisturbed Trading Average through
11/27/06
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$
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17.58
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28.2
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%
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Six Month Undisturbed Trading
Average through
11/27/06
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$
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16.26
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38.7
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%
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One Year Undisturbed Trading
Average through
11/27/06
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$
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15.91
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41.6
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%
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Blackstone also observed that the
52-week
(i) trading range of Central Parkings common stock
through February 16, 2007 was $13.30 to $20.89, which
implied a total enterprise value of Central Parking ranging from
$561 million to $809 million, and
(ii) undisturbed trading range of Central Parkings
common stock through November 27, 2006 (the last closing
price before Central Parking announced that it had engaged
Blackstone to explore strategic alternatives) was $12.85 to
$18.52, which implied a total enterprise value of Central
Parking of $547 million to $732 million. Blackstone
observed that the per share merger consideration to be received
by holders of Central Parking common stock was $22.53.
Sum-of-the-Parts
Analysis. Blackstone performed a
sum-of-the-parts
analysis for Central Parking based upon its estimated valuations
of each of Central Parkings business units as separate and
independent business concerns. The business units analyzed were
Central Parkings leased and management business
(Opco) and its owned real estate business
(Propco). The Opco business operates parking
facilities under leased or managed arrangements. The Propco
business owns and operates parking facilities, including
traditional garages, surface lots, airport
park-and-fly
lots, and condominium lots.
From the results of its
sum-of-the-parts
analysis, Blackstone estimated the (i) implied pre-tax
enterprise value range of Central Parkings Opco business
of (a) $475 million to $545 million based on the
sensitivity case (as discussed below), which implied an equity
value range of Central Parkings Opco business of $10.75 to
$12.75 per each share of Central Parking common stock, and
(b) $500 million to $600 million based on
managements upside case (as discussed below), which
implied an equity value range of Central Parkings Opco
business of $11.50 to $14.50 per each share of Central
Parking common stock, and (ii) implied after-tax enterprise
value range of Central Parkings Propco business of
$330 million to $361 million, which implied an equity
value range of Central Parkings Propco business of $10.00
to $11.00 per each share of Central Parking common stock.
Blackstone then added its implied valuation of the Opco business
with its implied valuation of the Propco business. This resulted
in an implied total enterprise value for Central Parking ranging
from (x) $805 million to $906 million using the
sensitivity case for its Opco analysis, which implied a per
share equity value range of Central Parkings common stock
of $20.75 to $23.75, and (y) $830 million to
$961 million using managements upside case for its
Opco analysis, which implied a per share equity value range of
Central Parkings common stock of $21.50 to $25.50.
Blackstone observed that the per share merger consideration to
be received by holders of Central Parking common stock was
$22.53. Blackstone noted that it believed the implied valuation
of $20.75 to $23.50 per share, determined using the
sensitivity case for its Opco analysis, is the more reasonable
assessment of the Opco business, due to, among other things,
historical volatility in Central Parkings financial
performance. Blackstone also noted that Central Parkings
ability to sell any or all of its Opco assets or Propco assets
separately would be subject to uncertainty and could result in
lost synergies and tax inefficiencies. In addition, third party
consents may be required to effect such sales and may not be
forthcoming.
29
Set forth below is a summary of the material analyses performed
by Blackstone in connection with its valuation of Central
Parkings Opco business and Propco business. In order to
fully understand the financial analyses used by Blackstone, the
tables below must be read together with the text of each summary
set forth below.
Opco Business Valuation Analysis. The
following is a summary of the material analyses performed by
Blackstone in connection with its valuation of Central
Parkings Opco business.
Summary Valuation Opco
Business. In connection with its valuation of
the Opco business, Blackstone performed a comparable companies
analysis, a discounted cash flow analysis, and a leveraged
buy-out analysis. Blackstone performed these valuations using
certain unadjusted management projections and estimates, which
are referred to herein as the upside case.
Blackstone also performed a valuation of the Opco business using
the projections and estimates supplied by management, as
adjusted to reflect, among other things, lower same-store-sales
growth for the managed business in 2007 and subsequent years,
lower EBITDA (defined as earnings before interest expense,
income taxes and depreciation and amortization) generation from
new management contracts in 2007 and subsequent years, higher
selling, general and administrative (SG&A)
expense in 2007, and a higher SG&A expense growth rate after
2007, which are referred to herein as the sensitivity
case. Blackstone noted that it believed the implied
valuation of the Opco business using the sensitivity case is a
more reasonable assessment of the Opco business.
Summary Valuation Opco Business (Sensitivity
Case). From the results of the Opco
valuation sensitivity case, Blackstone estimated the
implied pre-tax (i) enterprise value of Central
Parkings Opco business ranging from $475 million to
$545 million and (ii) per share equity value range of
Central Parkings Opco business of $10.75 to
$12.75 per each share of Central Parking common stock.
The following table below is a summary of the valuations implied
from such sensitivity case analyses. In order to fully
understand the financial analyses used by Blackstone, the table
must be read together with the text of each summary set forth
below. The following table alone does not constitute a complete
summary of the financial analyses performed by Blackstone in
connection with its sensitivity case valuation of the Opco
business.
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Implied Equity
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Total Implied Enterprise
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Value Per Share for
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Value for Opco Business
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Opco Business
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Opco Valuation Analysis
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(Sensitivity Case)
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(Sensitivity Case)
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(Sensitivity Case)
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Low
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High
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Low
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High
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($ in millions, except per share amounts)
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Comparable Companies Analysis
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$
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475
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$
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550
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$
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10.75
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$
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13.00
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Discounted Cash Flow Analysis
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$
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508
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$
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558
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$
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11.75
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$
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13.25
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Leveraged Buyout Analysis
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$
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480
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$
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531
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$
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10.75
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$
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12.25
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Blackstone Reference Range,
Pre-Tax(1)
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$
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475
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$
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545
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$
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10.75
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$
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12.75
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(1) |
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Assumes no tax liability to Central Parking due to the sale of
the Opco business in corporate form. |
Comparable Companies Analysis Opco Business
(Sensitivity Case). Blackstone performed a
comparable companies analysis that attempted to provide an
implied value for Central Parkings Opco business by
comparing its Opco business to similar public companies. For
purposes of this analysis, Blackstone reviewed certain public
trading multiples for six companies which, based on their
experience with companies in the parking industry, Blackstone
considered similar to Central Parkings Opco business in
size and business mix. The six companies consisted of
(i) ABM Industries, Inc. and Standard Parking Corp., which
companies provide parking management services (collectively, the
Parking Services Companies) and (ii) Compass
Group plc, Sodexho Alliance SA, FirstService Corp. and Comfort
Systems USA Inc., which companies provide facility management
services (collectively, the Facility Services
Companies and together with the Parking Services
Companies, the Selected Opco Companies). The
multiples used by Blackstone included, among others, ratios of
(1) total enterprise value to (a) projected calendar
year 2007 (2007E) EBITDA, (b) projected 2007E
EBITDA minus projected 2007E capital expenditures and
(c) 2007E earnings before
30
interest expense and income taxes (EBIT) and
(2) equity value to 2007E free cash flow (which is defined
as EBITDA less interest expense, cash taxes and capital
expenditures). In performing this analysis, Blackstone used
publicly available filings and estimates and press releases for
the comparable companies and, with respect to Central Parking,
estimates provided to Blackstone by Central Parkings
management. Blackstone observed the following:
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Equity Value
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Total Enterprise Value as a Multiple of:
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as a Multiple
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Total
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2007E
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of:
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Equity
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Enterprise
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2007E
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EBITDA -
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2007E Free
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Value
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Value
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EBITDA
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CAPEX
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EBIT
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CashFlow
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($ in millions)
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Parking Services
Companies
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ABM Industries Inc.
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$
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1,395.5
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$
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1,261.7
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10.7
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x
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12.9
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x
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14.4
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x
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22.7x
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Standard Parking Corp.
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$
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353.3
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$
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421.9
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11.0
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x
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12.8
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x
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13.6
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x
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15.2x
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Parking Services Companies Mean:
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10.9
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x
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12.9
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x
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14.0
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x
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18.9x
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Facility Services
Companies
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Compass Group plc
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$
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12,864.1
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$
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15,033.2
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9.9
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x
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14.0
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x
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14.4
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x
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21.1x
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Sodexho Alliance SA
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$
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11,910.5
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$
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13,041.0
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12.0
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x
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16.4
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x
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15.7
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x
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27.9x
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FirstService Corp.
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$
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787.6
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$
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929.9
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7.7
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x
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9.3
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x
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9.3
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x
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12.9x
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Comfort Systems USA Inc.
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$
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571.2
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$
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502.3
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7.6
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x
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8.3
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x
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8.3
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x
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17.9x
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Facility Services Companies Mean:
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9.3
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x
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12.0
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x
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14.1
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x
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16.7x
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Selected Opco Companies Mean:
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9.8
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x
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12.3
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x
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15.5
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x
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18.7x
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|
Based on the analysis of the relevant metrics for each of the
Selected Opco Companies, Blackstone selected representative
ranges of financial multiples of the Selected Opco Companies and
applied these ranges of multiples to the relevant Central
Parking financial statistic using the management projections.
Blackstone estimated the implied enterprise value range of
Central Parkings Opco business of $475 million to
$550 million. This resulted in an implied per share equity
value range of $10.75 to $13.00 per share of Central
Parking common stock.
No company used in the comparable company analysis is identical
to Central Parkings Opco business. In evaluating the
Selected Opco Companies, Blackstone made judgments and
assumptions with regard to industry performance, general
business, economic, market and financial conditions and other
matters, many of which are beyond the control of Central
Parking, such as the impact of competition on the Opco business
and the industry generally, industry growth, and the absence of
any adverse material change in the financial condition and
prospects of the Opco business or the industry or in the
financial markets in general.
Discounted Cash Flow Analysis Opco Business
(Sensitivity Case). Using projections
(sensitivity case) for 2007 to 2010, Blackstone performed an
analysis to determine the present value of the free cash flows
that Central Parkings Opco business could generate from
2007 and beyond. Blackstone used a weighted average cost of
capital range of 11.0% to 12.0%, based on a weighted average
cost of capital calculation which factored in the unlevered
betas for similar companies identified above under the heading
Comparable Companies Analysis Opco Business
(Sensitivity Case), and terminal multiple range of 11.5x
to 12.5x Opco 2007E EBITDA minus capital expenditures.
Blackstone selected terminal EBITDA minus capital expenditures
multiples ranging from 11.5x to 12.5x based on current trading
multiples reviewed in connection with comparable companies
identified above under the heading Comparable Companies
Analysis Opco Business (Sensitivity Case). The
discounted cash flow analysis determined the discounted present
value of the unlevered free cash flow generated over the period
covered by the financial forecasts and then added a terminal
value based on the terminal multiple range. This resulted in an
implied enterprise valuation range of Central Parkings
Opco business of $508 million to $558 million and a
range of implied per share equity values of $11.75 to $13.25 for
each share of Central Parking common stock.
31
Leveraged Buyout Analysis Opco Business
(Sensitivity Case). Blackstone also analyzed
the Opco business from the perspective of a potential financial
buyer that would effect a leveraged buyout using a debt capital
structure consistent with the debt structure that the Opco
business is expected to have following the merger. Blackstone
used management projections (sensitivity case) for 2007 to 2010,
and assumed that a financial sponsor could sell the Opco
business in 2010 at an aggregate total enterprise value range
representative of a multiple of 11.5x to 12.5x projected
calendar year 2010 (2010E) Opco EBITDA minus capital
expenditures based on a review of current and historical trading
multiples reviewed in connection with comparable companies
identified under the heading Comparable Companies
Analysis Opco Business (Sensitivity Case).
Blackstone added 2010E cash and subtracted forecasted 2010E debt
outstanding to calculate the 2010E equity value for the Opco
business. Based on Opcos assumed 2010E equity value range,
Blackstone derived an implied enterprise valuation range of
Central Parkings Opco business ranging from
$480 million to $531 million and a range of implied
per share equity values of $10.75 to $12.25 for each share of
Central Parking common stock, representing implied values per
share that a financial sponsor might be willing to pay to
acquire the Opco business.
Summary Valuation Opco Business (Upside
Case). From the results of the Opco
valuation upside case, Blackstone estimated the
implied pre-tax (i) enterprise value of Central
Parkings Opco business of $500 million to
$600 million and (ii) per share equity value range of
Central Parkings Opco business of $11.50 to
$14.50 per each share of Central Parking common stock.
The following table below is a summary of the valuations implied
from such upside case analyses. The analyses summarized in the
following table used the same methodologies as described above
in connection with the sensitivity case and does not constitute
a complete summary of the financial analysis performed by
Blackstone in connection with its upside case valuation of the
Opco business.
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Implied Equity
|
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Total Implied Enterprise
|
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Value Per Share
|
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Value for Opco Business
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for Opco Business
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(Upside Case)
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(Upside Case)
|
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Opco Valuation Analysis (Upside Case)
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Low
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High
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Low
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High
|
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($ in millions, except per share amounts)
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Comparable Companies Analysis
|
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$
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475
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$
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575
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|
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$
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10.75
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$
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13.75
|
|
Discounted Cash Flow Analysis
|
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$
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606
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$
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667
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$
|
14.75
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$
|
16.50
|
|
Leveraged Buyout Analysis
|
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$
|
554
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$
|
619
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|
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$
|
13.00
|
|
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$
|
15.00
|
|
Blackstone Reference Range,
Pre-Tax(1)
|
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$
|
500
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|
|
$
|
600
|
|
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$
|
11.50
|
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$
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14.50
|
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|
(1) |
|
Assumes no tax liability to Central Parking due to the sale of
the Opco business in corporate form. |
Propco Business Valuation Analysis. The
following is a summary of the material analyses performed by
Blackstone in connection with its valuation of Central
Parkings Propco business.
Summary Valuation Propco
Business. In connection with its valuation of
the Propco business, Blackstone performed a comparable companies
analysis and a leveraged buy-out analysis. From the results of
such analyses, Blackstone estimated the implied after-tax
(i) enterprise value of Central Parkings Propco
business to be $330 million to $361 million and
(ii) equity value range of Central Parkings Propco
business to be $10.00 to $11.00 per each share of Central
Parking common stock (assumes a sale of Propco would generate a
Central Parking tax liability of $95 million to
$114 million or $3.00 to $3.50 per share). Blackstone
noted that Central Parking managements internal after-tax
valuation of the Propco business was $355 million, assuming
a $175 million tax basis and a 38% tax rate.
32
The following table below is a summary of the valuations implied
from such analyses. In order to fully understand the financial
analyses used by Blackstone, the table must be read together
with the text of each summary set forth below. The following
table alone does not constitute a complete summary of the
financial analyses performed by Blackstone in connection with
its valuation of the Propco business.
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Implied Equity
|
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Total Implied Enterprise
|
|
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Value Per Share for
|
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Value for Propco Business(1)
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Propco Business(1)
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Low
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|
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High
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Low
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High
|
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($ in millions, except per share amounts)
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Propco Valuation
Analysis
|
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Comparable Companies Analysis
|
|
$
|
415
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|
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$
|
460
|
|
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$
|
12.75
|
|
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$
|
14.00
|
|
Leveraged Buyout Analysis
|
|
$
|
460
|
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$
|
479
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$
|
14.00
|
|
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$
|
14.75
|
|
Blackstone Reference Range, Pre-Tax
|
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$
|
425
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|
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$
|
475
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$
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13.00
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|
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$
|
14.50
|
|
Propco Taxes to Central Parking
from Sale of Propco(2)
|
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$
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95
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$
|
114
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$
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3.00
|
|
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$
|
3.50
|
|
Blackstone Reference Range,
After-Tax
|
|
$
|
330
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$
|
361
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$
|
10.00
|
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$
|
11.00
|
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|
(1) |
|
Assumes that no debt obligations of Central Parking are
attributed to the Propco business. |
|
(2) |
|
Assumes a $175 million tax basis and a 38% tax rate |
Comparable Companies Analysis Propco
Business. Blackstone performed a comparable
companies analysis that attempted to provide an implied value
for Central Parkings Propco business by comparing its
Propco business to similar public companies. For purposes of
this analysis, Blackstone reviewed certain public trading
multiples for five companies that, based on their experience
with companies in the parking industry, Blackstone considered
similar to Central Parkings Propco business in size and
business mix. The five companies consisted of American Financial
Realty Trust, National Retail Properties, Inc., Entertainment
Properties Trust, Getty Realty Corp. and Realty Income Corp.
(the Selected Propco Companies). The multiples used
by Blackstone included, among others, ratios of total enterprise
value to 2007E EBITDA and last twelve months (LTM)
EBITDA. In performing this analysis, Blackstone used publicly
available filings and estimates and press releases as well as,
with respect to Central Parking, estimates provided to
Blackstone by Central Parkings management. Blackstone
observed the following:
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Total
|
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|
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Enterprise
|
|
|
Total Enterprise Value as a Multiple of:
|
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|
Equity Value
|
|
|
Value
|
|
|
LTM EBITDA
|
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|
2007E EBITDA
|
|
|
|
($ in millions)
|
|
|
Selected Propco
Companies
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American Financial Realty Trust
|
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$
|
1,491
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|
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$
|
4,013
|
|
|
|
15.3
|
x
|
|
|
16.6x
|
|
National Retail Properties,
Inc.
|
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$
|
1,515
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$
|
2,291
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18.1
|
x
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|
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14.7x
|
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Entertainment Properties Trust
|
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$
|
1,825
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$
|
2,588
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16.1
|
x
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|
|
14.5x
|
|
Getty Realty Corp.
|
|
$
|
778
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|
$
|
822
|
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|
15.5
|
x
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|
|
15.2x
|
|
Realty Income Corp.
|
|
$
|
2,914
|
|
|
$
|
3,845
|
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|
18.7
|
x
|
|
|
14.4x
|
|
Selected Propco Companies Mean:
|
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|
|
|
|
|
|
|
|
|
16.7
|
x
|
|
|
15.1x
|
|
Based on the analysis of the relevant metrics for each of the
Selected Propco Companies, Blackstone selected representative
ranges of financial multiples of the Selected Propco Companies
and applied these ranges of multiples to the relevant Central
Parking financial statistic using the management projections.
Using this analysis, Blackstone estimated the implied enterprise
value of Central Parkings Propco business to be
$415 million to $460 million. This resulted in an
implied per share equity value range of $12.75 to
$14.00 per share of Central Parking common stock.
No company utilized in the comparable company analysis is
identical to Central Parkings Propco business. In
evaluating the Selected Propco Companies, Blackstone made
judgments and assumptions with
33
regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which
are beyond the control of Central Parking, such as the impact of
competition on the Propco business and the industry generally,
industry growth, and the absence of any adverse material change
in the financial condition and prospects of the Propco business
or the industry or in the financial markets in general.
Leveraged Buyout Analysis Propco
Business. Blackstone also analyzed the Propco
business from the perspective of a potential financial buyer
that would effect a leveraged buyout using a debt capital
structure consistent with the debt structure that the Propco
business is expected to have following the merger. Blackstone
used management projections for 2007 to 2010, and assumed that a
financial sponsor could sell the Propco business in 2010 at an
aggregate total enterprise value range representative of a
multiple of 14.5x to 15.5x Propco 2010E EBITDA based on a review
of current and historical trading multiples reviewed in
connection with comparable companies identified under the
heading Comparable Companies Analysis Propco
Business. Blackstone added 2010E cash and subtracted 2010E
debt outstanding to calculate Propcos 2010E equity value.
Based on Propcos assumed 2010E equity value range,
Blackstone derived a current pre-tax implied enterprise
valuation range of Central Parkings Propco business of
$425 million to $475 million and a range of pre-tax
implied per share equity values of $13.00 to $14.50 for each
share of Central Parking common stock, representing pre-tax
implied values per share that a financial sponsor might be
willing to pay to acquire the Propco business.
Premiums Paid Analysis. Blackstone
performed a premiums paid analysis based upon the premiums paid
in twelve precedent cash merger and acquisition transactions.
These precedent transactions were announced since January 2005
and had transaction enterprise values between $700 million
and $900 million. Blackstone analyzed the transactions to
determine the premium paid for the target as determined using
the stock price on the date that was one day, one week and one
month prior to the deal announcement. Based on this premiums
paid analysis, Blackstone utilized a premium reference valuation
range of 22% to 27%, which Blackstone applied to Central
Parkings
30-day
undisturbed average closing price of $17.43. Blackstone
estimated the implied enterprise value of Central Parking to be
$821 million to $850 million. This resulted in an
implied per share equity value range of $21.26 to $22.14 per
share of Central Parking common stock. Blackstone observed that
the per share merger consideration to be received by holders of
Central Parking common stock was $22.53.
Analyst Valuation Range. Blackstone
reviewed certain of the publicly available equity research
analyst reports for Central Parking that it viewed as most
relevant. Blackstone observed that only one of the more recent
equity research reports that Blackstone reviewed provided a
range of price targets for Central Parkings common stock.
The range of price targets in this research report (the report
was published in December 2006) was $16.00 to
$18.00 per share, which implied an estimated enterprise
value of $649 million to $715 million. Blackstone
observed that the per share merger consideration to be received
by holders of Central Parking common stock was $22.53.
In connection with the review of the merger by the special
committee of our board of directors, Blackstone performed a
variety of financial and comparative analyses for purposes of
rendering its opinion. The preparation of a fairness opinion is
a complex process and is not necessarily susceptible to a
partial analysis or summary description. In arriving at its
opinion, Blackstone considered the results of all of its
analyses as a whole and did not attribute any particular weight
to any analysis or factor it considered. Blackstone believed
that selecting any portion of its analyses, without considering
all analyses as a whole, would create an incomplete view of the
process underlying the analyses and opinions. In addition,
Blackstone may have given various analyses and factors more or
less weight than other analyses and factors, and may have deemed
various assumptions more or less probable than other
assumptions. As a result, the ranges of valuations resulting
from any particular analysis described above should not be taken
to be Blackstones view of the actual value of Central
Parking or its Opco business or Propco business. In performing
its analyses, Blackstone made numerous assumptions with respect
to industry performance, general business and economic
conditions and other matters. Many of these assumptions are
beyond the control of Central Parking. Any estimates contained
in Blackstones analyses are not necessarily indicative of
future results or actual values, which may be significantly more
or less favorable than those suggested by such estimates.
34
Blackstone conducted the analyses described above solely as part
of its analysis of the fairness, as of February 20, 2007,
of the consideration pursuant to the merger agreement from a
financial point of view to holders of shares of Central Parking
common stock and in connection with the delivery of its opinion
dated February 20, 2007 to the special committee of the
board of directors of Central Parking. These analyses do not
purport to be appraisals or to reflect the prices at which
shares of common stock of Central Parking might actually trade.
The merger consideration was determined through negotiations
between the special committee of the board of directors of
Central Parking and representatives of KCPC Holdings and was
recommended by the special committee for approval by the board
of directors and approved by the board of directors. Blackstone
provided advice to the special committee during these
negotiations. Blackstone did not, however, recommend any
specific merger consideration to Central Parking, the special
committee or the board of directors or that any specific merger
consideration constituted the only appropriate consideration for
the merger.
In addition, Blackstones opinion and its presentation to
the special committee were one of many factors taken into
consideration by the special committee in deciding to approve
the merger. Consequently, the analyses as described above and
the other views and analyses of Blackstone referenced throughout
this proxy statement should not be viewed as determinative of
the opinion of the special committee or of our board of
directors with respect to the consideration or of whether the
special committee or our board of directors would have been
willing to agree to different consideration. The foregoing
summary describes the material analyses performed by Blackstone
but does not purport to be a complete description of the
analyses performed by Blackstone.
Projected
Financial Information
Central Parkings management does not as a matter of course
make public projections as to future performance or earnings and
is especially wary of making projections for extended earnings
periods due to the unpredictability of the underlying
assumptions and estimates. However, management did provide
financial forecasts to the Equity Sponsors, the special
committee, and Blackstone in connection with their consideration
of the merger. Set forth below is a subset of these projections
to give our shareholders access to certain nonpublic information
deemed material by the special committee for purposes of
considering and evaluating the merger. The inclusion of this
information should not be regarded as an indication that the
Equity Sponsors, the special committee or board of directors,
Blackstone or any other recipient of this information
considered, or now considers, it to be a reliable prediction of
future results.
Central Parking advised the recipients of the projections that
its internal financial forecasts, upon which the projections
were based, are subjective in many respects. The projections
reflect numerous assumptions with respect to industry
performance, general business, economic, market and financial
conditions and other matters, all of which are difficult to
predict and beyond Central Parkings control. The
projections also reflect numerous estimates and assumptions
related to the business of Central Parking that are inherently
subject to significant economic, political, and competitive
uncertainties, all of which are difficult to predict and many of
which are beyond Central Parkings control. As a result,
there can be no assurance that the projected results will be
realized or that actual results will not be significantly higher
or lower than projected.
The financial projections were prepared for internal use and to
assist the financial advisor to the special committee with their
respective due diligence investigations of Central Parking and
not with a view toward public disclosure or toward complying
with U.S. generally accepted accounting principles, the
published guidelines of the SEC regarding projections or the
guidelines established by the American Institute of Certified
Public Accountants for preparation and presentation of
prospective financial information. Central Parkings
independent registered public accounting firm has not examined
or compiled any of the financial projections, expressed any
conclusion or provided any form of assurance with respect to the
financial projections and, accordingly, assumes no
responsibility for them. The financial projections do not take
into account any circumstances or events occurring after the
date they were prepared. Projections of this type are based on
estimates and assumptions that are inherently subject to factors
such as industry performance, general business, economic,
regulatory, market and financial conditions, as well as changes
to the business, financial condition
35
or results of operations of Central Parking, including the
factors described under Cautionary Statement Concerning
Forward-Looking Statements beginning on page 10,
which factors may cause the financial projections or the
underlying assumptions to be inaccurate. Since the projections
cover multiple years, such information by its nature becomes
less reliable with each successive year.
Since the date of the projections described below, Central
Parking has made publicly available its actual results of
operations for the quarter ended December 31, 2006. You
should review Central Parkings Quarterly Report on
Form 10-Q
for the quarter ended December 31, 2006 to obtain this
information. Readers of this proxy statement are cautioned not
to place undue reliance on the specific portions of the
financial projections set forth below. No one has made or makes
any representation to any shareholder regarding the information
included in these projections. Central Parking does not intend
to update or otherwise revise the projections to reflect
circumstances existing after the date when made or to reflect
the occurrence of future events, even in the event that any or
all of the assumptions underlying the projections are shown to
be in error.
For the foregoing reasons, as well as the bases and assumptions
on which the financial projections were compiled, the inclusion
of specific portions of the financial projections in this proxy
statement should not be regarded as an indication that such
projections will be an accurate prediction of future events, and
they should not be relied on as such. Except as required by
applicable securities laws, Central Parking does not intend to
update, or otherwise revise the financial projections or the
specific portions presented to reflect circumstances existing
after the date when made or to reflect the occurrence of future
events, even in the event that any or all of the assumptions are
shown to be in error.
Blackstone considered two sets of projections in its analysis.
One, referred to as the sensitivity case, was prepared by
management in May 2006 and updated for recent actual performance
and minor adjustments to the assumptions in February 2007. The
other set of projections, referred to as the upside case, was
prepared by management in September 2006 and was updated for
recent performance and minor adjustments in February 2007. The
upside case is based on 2007 cash flow estimates generally
consistent with managements 2007 budget and generally
contains more optimistic assumptions for higher revenue growth
and lower increases in expenses than assumed in the sensitivity
case. Central Parkings results for the first quarter of
fiscal year 2007 generally met managements budget for the
first quarter of 2007.
Sensitivity
Case Projections
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Fiscal Year Ended September 30,
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2007E
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2008E
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2009E
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2010E
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($ in millions)
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Total Revenue
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$
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660.1
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$
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676.7
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$
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700.2
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$
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726.4
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Total EBITDA
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81.2
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84.0
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87.5
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89.2
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Capital Expenditures
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11.9
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10.9
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11.3
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11.6
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Upside
Management Case Projections
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Fiscal Year Ended September 30,
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2007E
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2008E
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2009E
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2010E
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($ in millions)
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Total Revenue
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$
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662.3
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$
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681.3
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$
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707.4
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$
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735.8
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Total EBITDA
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85.8
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90.6
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96.4
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100.0
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Capital Expenditures
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11.9
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10.9
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11.3
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11.6
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Financing
of the Merger
Financing is not a condition to closing. If the merger agreement
is terminated by Central Parking after May 21, 2007 because
Parent shall not have received financing to close the merger
within five business days
36
after receiving notice that all other conditions to the merger
have been satisfied, Parent will be required to pay Central
Parking a termination fee of $30.0 million. The Equity
Sponsors have each entered into a limited guarantee in which
they guarantee their proportionate share of the
$30.0 million termination fee.
Parent estimates that the total amount of funds necessary to
complete the merger is approximately $990.3 million,
consisting of: approximately $749.7 million to be paid to
Central Parkings shareholders and holders of other
equity-based interests in Central Parking, approximately
$151.6 million to refinance our existing indebtedness
(assuming the exercise by all holders of outstanding TIPS of the
right to convert such TIPS into cash at closing), and
approximately $89.0 million to pay fees and expenses and
establish reserves in connection with the merger, the financing
for the merger and the other transactions contemplated by the
merger agreement. These funds are anticipated to come from the
following source:
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cash equity contributions by the Equity Sponsors and certain
other investors that are affiliates of the Equity Investors of
$210.0 million in the aggregate pursuant to equity
commitment letters;
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borrowings by Central Parking, as the surviving corporation, of
$275.0 million of first-lien and second-lien term loans;
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borrowings by one or more special purpose entities formed by
Central Parking (the Real Estate SPEs), the sole
assets of which will be certain owned real properties and
improvements thereon contributed by Central Parking and its
subsidiaries, of approximately $417.8 million in aggregate
principal amount under new real estate financings (collectively,
the Real Estate Financing); and
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anticipated cash on the balance sheet of Central Parking and
borrowings under its new revolving credit facility of
approximately $87.5 million in the aggregate.
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Pursuant to the merger agreement, Parent and Merger Sub are
obligated to use their reasonable best efforts to arrange the
debt financing and Central Parking is obligated to use its
commercially reasonable efforts to provide all necessary
cooperation in connection with the debt financing.
The following commitments have been received by Parent to
provide the necessary financing for the merger:
Equity
Financing
Parent has received an equity commitment letter dated
February 20, 2007 from the Equity Sponsors pursuant to
which each of the Equity Sponsors has committed to purchase on
or prior to the effective time of the merger equity securities
of Parent for a cash purchase price in the aggregate of
$210.0 million. The obligation of each Equity Sponsor to
fund its portion of the commitment is subject to the
satisfaction, in the reasonable independent judgment of such
Equity Sponsor (without giving effect to any modification or
waiver effected without the prior written consent of such Equity
Sponsor), of all conditions to Parents obligations set
forth in the merger agreement, and subject to the substantially
contemporaneous funding in full of the remaining portion of the
debt financing contemplated by the debt commitment letter
described below. Each Equity Sponsors obligation to fund
its portion of the commitment may be satisfied in whole or in
part by any affiliate of such Equity Sponsor or by a third party.
Debt
Financing
Merger Sub has received a commitment letter dated
February 20, 2007 from Goldman Sachs Credit Partners L.P.
(GSCP) pursuant to which, subject to the conditions
set forth therein, GSCP has committed to provide up to
$405.0 million of senior secured bank financing (the
Senior Secured Credit Facilities). Merger Sub has
also received a commitment letter dated February 20, 2007,
from Greenwich Capital Financial Products, Inc.
(GCFP) and Goldman Sachs Mortgage Company
(GSMP) pursuant to which, subject to the conditions
set forth therein, GCFP and GSMC have committed to lend up to
$417.8 million in first mortgage and mezzanine financing
(the Real Estate Financing). The definitive
documentation governing the debt financing has not been
finalized and, accordingly, the actual terms and amounts may
differ from those described below and, in certain cases, such
differences may be significant. We do not intend to update or
37
otherwise revise any statements concerning the terms of the
financing included in this proxy statement to reflect
circumstances existing after the date when such statements were
made or to reflect the occurrence of future events even in the
event that any of the statements regarding the financing
arrangements are shown to be in error or otherwise no longer
appropriate. As of the date of this proxy statement, no
alternative financing arrangements or alternative financing
plans have been made in the event the debt financing described
herein is not available as anticipated.
Senior
Secured Credit Facilities
The Senior Secured Credit Facilities will consist of:
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a $225.0 million first lien term loan facility with a
7-year term;
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a $75.0 million first lien revolving credit facility with a
6-year term;
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a $55.0 million first lien synthetic letter of credit
facility with a
7-year term
(collectively the First Lien Facilities); and
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a $50.0 million second lien term loan facility with a
71/2-year
term (the Second Lien Facility).
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The First Lien Facilities are expected to bear interest at the
option of Central Parking, as the surviving corporation, if
Central Parking has obtained a corporate family rating of B1 or
better by Moodys and B+ or better by S&P, in each
case, on the closing date at the base rate plus 1.25% per
annum, or at the reserve adjusted Eurodollar rate plus
2.25% per annum. If the ratings threshold described above
is not satisfied on the closing date, the First Lien Facilities
are expected to bear interest, at Central Parkings option,
at the base rate plus 1.50% per annum, or at the reserve
adjusted Eurodollar rate plus 2.50% per annum. After the
first full fiscal quarter after effective time of the merger,
the applicable margins will be adjusted as determined by a
leverage based grid.
The Second Lien Facility is expected to bear interest at Central
Parkings option, if Central Parking has obtained a
corporate family rating of B3 or better by Moodys and B-
or better by S&P, in each case, on the closing date at the
base rate plus 4.75% per annum, or the reserve adjusted
Eurodollar rate plus 5.75% per annum. If the ratings
threshold described above is not satisfied on the closing date,
the Second Lien Facilities are expected to bear interest, at
Central Parkings option, at the base rate plus
5.00% per annum, or the reserve adjusted Eurodollar rate
plus 6.00% per annum.
The surviving corporation will pay commitment fees that will
decrease upon achievement of specified leverage ratios and
letter of credit fees under the First Lien Facilities. The
surviving corporation will also pay an administrative agency fee
to GSCP for services related to the facilities.
The First Lien Facilities may be prepaid in whole or in part
without premium or penalty. The Second Lien Facility, subject to
the provisions of the First Lien Facilities, may be voluntarily
prepaid in whole or in part, subject to a premium of 2.00% of
the amount repaid if such repayment occurs on or prior to the
first anniversary and 1.00% of the amount repaid if such
repayment occurs after the first anniversary of the closing, but
prior to the second anniversary of the closing. The borrower
will be required to make mandatory prepayments of the First Lien
Facilities (with any balance to the Second Lien Facilities) for
certain asset sales outside the ordinary course of business
(subject to reinvestment rights and other exceptions), for
incurrence of indebtedness (other than permitted indebtedness),
and for a specified percentage of excess cash flow (to be
defined in the definitive documentation).
The first lien term loan facility will be payable in equal
quarterly amounts of 1.00% per annum through the date that
is six years and nine months after the closing with the
remaining balance due at maturity. No amortization will be
required with respect to the revolving facility, the synthetic
letter of credit facility or the Second Lien Facility.
The Senior Secured Credit Facilities will be guaranteed by
Parent and each of Central Parkings existing and
subsequently acquired or organized wholly-owned domestic
subsidiaries (other than the Real Estate SPEs formed in
connection with the Real Estate Financing described below). The
obligations of Central Parking and
38
the guarantors under the Senior Secured Credit Facilities will
be secured by substantially all of the assets of Central Parking
and the guarantors.
The Senior Secured Credit Facilities will contain customary
representations and warranties and customary affirmative and
negative covenants, including, among other things, restrictions
on indebtedness, liens, investments, asset sales, mergers and
consolidations, dividends and other distributions, redemptions,
prepayments of certain indebtedness, and a maximum leverage
ratio (applicable only to the Revolving Facility). The senior
secured facilities will also include customary events of
default, including upon a change of control.
Real
Estate Financing
The Real Estate Financing will consist of first mortgage and
mezzanine financing to one or more special purpose entities
formed by Central Parking (the Real Estate SPEs),
the sole assets of which will be direct or indirect interests in
certain owned real properties and improvements thereon
contributed by Central Parking and its subsidiaries. The
aggregate principal amount of the Real Estate Financing will be
based on a specified percentage of total collateral value or
cost, and is anticipated to be approximately $417.8 million.
The Real Estate Financing is expected to bear interest at a
one-month LIBOR rate plus 1.90% (payable monthly in arrears),
subject to a one-time flexible pricing feature of up to 0.20% if
the merger does not close by an agreed upon date. In addition,
an origination fee of 0.75% of the principal amount funded is
payable at closing.
The initial loan term shall be 24 months with the borrower
having the option to extend for up to three
12-month
periods, subject to certain conditions and extension fees. The
Real Estate Financing may be prepaid in whole or in part without
premium or penalty.
The Real Estate Financing will be non-recourse to Central
Parking, except for indemnification with respect to certain
environmental matters and other customary carve-outs. The loan
is expected to be structured as two separate loans consisting of
a first mortgage loan to the Real Estate SPEs that own the real
property and a mezzanine loan to the owner of the equity of the
Real Estate SPEs. The first mortgage loan will be
cross-collateralized by first mortgages on the properties
contributed to the Real Estate SPEs, and the mezzanine loan will
be secured by a pledge of 100% of the equity interests in the
mortgage borrowers and certain other collateral customary for
similar real estate financings.
Conditions
to Debt Financing
The debt financing commitments will expire if not drawn on or
prior to July 31, 2007. The debt financing commitments are
subject to customary closing conditions, including:
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there not having occurred, since September 30, 2006, any
material adverse effect as defined in the merger
agreement;
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the execution and delivery of definitive documents with respect
to the facilities;
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the merger and all related transactions being consummated in
accordance with the terms of the merger agreement;
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delivery of certain specified financial statements of Central
Parking and the Real Estate SPEs;
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receipt of equity contributions in an amount equal to at least
20% of the total capitalization of Parent after giving effect to
the merger and the other transactions from the Equity Sponsors
and certain other investors;
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the repayment of Central Parkings existing credit
agreement and certain other existing indebtedness;
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with respect to the Real Estate Financing, the borrower having
used commercially reasonable best efforts to satisfy such
closing conditions which are customarily required by the lenders
in connection with commercial mortgage loans, including
customary real estate diligence and closing deliveries; and
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receipt of other customary closing documents.
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39
Guarantees;
Remedies
In connection with the merger agreement, the Equity Sponsors
have each agreed to a limited guarantee of the due, punctual and
complete payment of the payment obligation of Parent for the
termination fee or arising from an intentional and material
breach of the merger agreement by Parent, provided the total
amount recoverable under the limited guarantees is
$30.0 million.
We cannot seek specific performance to require Parent and Merger
Sub to complete the merger, and our exclusive remedy for the
failure of Parent and Merger Sub to complete the merger is the
termination fee described above payable to us as provided in the
merger agreement and our ability to seek damages from Parent for
an intentional and material breach of the merger agreement. In
each case the total amount guaranteed by the Equity Sponsors is
$30.0 million. See The Merger Agreement
Termination Fee and Expenses.
Interests
of Certain Persons in the Merger
In considering the recommendation of our board of directors with
respect to the merger agreement, holders of shares of our common
stock should be aware that our executive officers, key
employees, and directors have interests in the merger that may
be different from, or in addition to, those of our shareholders
generally. These interests may create potential conflicts of
interest. Our board was aware of these potential conflicts of
interest and considered them, among other matters, in reaching
its decision to approve the merger agreement and to recommend
that our shareholders vote in favor of approving the merger
agreement.
Monroe
Carells Agreements
On December 14, 2004, Central Parking entered into a
revised employment agreement and modifications to an existing
deferred compensation agreement with Monroe Carell. The revised
agreements were negotiated in connection with
Mr. Carells return to Central Parking as chief
executive officer. The employment agreement is described below.
The revised deferred compensation agreement replaced the prior
deferred compensation agreement between Mr. Carell and
Central Parking dated October 1, 1988, as amended. The
revised deferred compensation agreement provided that
Mr. Carell would continue his service as chairman and chief
executive officer and would be subject to non-competition and
non-solicitation covenants during the period of employment and
for the greater of any period following employment that payments
would be made under the agreement, including periods following
termination of employment, or for twelve months following the
acceleration of amounts payable to Mr. Carell under the
agreement upon a change in control (as described below).
Following the termination of his employment, for any reason
other than death, the revised deferred compensation agreement
entitled Mr. Carell to annual payments of $500,000 until
his death and, in the event his wife survives him, she would be
entitled to annual payments of $500,000 until her death. The
agreement further provided that in the event of a change in
control the annual payments would cease, and within 90 days
after the change in control date, Central Parking would make a
lump sum payment to Mr. Carell equal to the then actuarial
value of the foregoing annual payments payable under the
agreement. Mr. Carell also agreed to provide consulting
services to Central Parking following the termination of his
employment. In addition, the agreement provided that if
Mr. Carell ceases to serve as the chief executive officer,
he would be entitled to annual payments of $300,000 until the
later of (i) the date he ceased to serve as non-employee
chairman of Central Parkings board of directors or
(ii) the date five years following the first payment;
provided (i) such payments would cease if Mr. Carell
breaches the non-competition or non-solicitation provisions, and
(ii) if Mr. Carell did not commence serving or ceased
serving as a non-employee chairman prior to the five years
following the first payment there would be a six month
suspension of payments, which would extend
Mr. Carells payments six months after the date they
would otherwise expire. The arrangements also included an excise
tax gross-up
provision.
The revised deferred compensation agreement was amended on
October 27, 2005, to clarify Central Parkings
obligations under the agreement to provide health insurance
coverage following termination of employment for Mr. Carell
and his wife. Under the amended agreement, Central Parking
agreed to reimburse Mr. Carell for the costs of health
insurance coverage for Mr. Carell and his wife having
substantially the same
40
level of benefits as Central Parkings plan. In the event
of a change in control, Central Parking would pay
Mr. Carell or his widow a lump sum payment equal to the
actuarial value of the amounts payable by Central Parking for
such coverage. The revised deferred compensation agreement was
amended again on May 30, 2006, to provide that (i) the
actuarial value of the $500,000 annual payments to be paid to
Mr. Carell and his wife for life as described above should
instead be paid in a lump sum, (ii) Mr. Carells
right to the $300,000 of additional compensation described above
commenced on October 1, 2005, and (iii) the actuarial
value of the insurance coverage for Mr. Carell and his wife
would be paid as a lump sum to Mr. Carell in lieu of
providing such coverage.
On February 20, 2007, with the Equity Sponsors
consent and approval, the special committee approved an
agreement with Mr. Carell, as a material inducement to and
as consideration for Mr. Carell, his family and related
entities entering into voting agreements in support of the
merger (the 2007 Agreement). The material
obligations of Central Parking and Mr. Carell under his
employment agreement, as amended, the revised deferred
compensation agreement, as amended, and the 2007 Agreement
(collectively, the Carell Agreements) are as follows:
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Prior to the closing of the merger, Mr. Carell will
continue to receive the compensation and benefits under his
employment agreement and revised deferred compensation agreement
as described above.
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Effective as of the closing of the merger, Mr. Carell will
resign as executive chairman of our board of directors and will
resign as a member of our board of directors. This resignation
will be deemed to be a termination for good reason
for purposes of Mr. Carells employment agreement
which will entitle Mr. Carell to the payments referred to
in the employment agreement, except as provided below. For
purposes of calculating these payments, Mr. Carells
base salary is deemed to be $845,000, instead of the
applicable base salary for purposes of such calculation under
his employment agreement in effect prior to the modification
pursuant to the 2007 Agreement of $800,000. The total amount of
severance and other compensation to be paid to Mr. Carell
under the Carell Agreements is expected to be approximately
$10,169,016.
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|
|
|
|
|
Mr. Carell will waive, effective upon the closing of the
merger, the right in his employment agreement that provides that
upon the termination of Mr. Carells employment with
Central Parking for good reason he will be entitled
to be paid up to $25,000 for outplacement assistance.
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|
|
|
|
|
Under the revised deferred compensation agreement
Mr. Carell is subject to certain post-termination
non-compete and non-solicitation covenants. Effective upon the
closing of the merger, the non-compete and non-solicitation
provisions in the revised deferred compensation agreement are
amended and restated primarily to: set the term of the
non-compete at twelve months from the closing of the merger;
clarify the consulting services that Mr. Carell can engage
in or provide without violating the non-compete; and allow
Mr. Carell to acquire parking assets without offering
Central Parking a right of first refusal to operate those assets.
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For a period of two weeks following the closing of the merger,
Mr. Carell will be entitled to the continued use of the
company office he is using at the time of his resignation.
Thereafter, Central Parking will relocate Mr. Carell to
reasonably equivalent office space selected by Mr. Carell.
Through September 30, 2012, Central Parking will pay the
rental fees for that new office space and the base salary for
Mr. Carells secretary. This amount is estimated to be
approximately $100,000 per year.
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|
|
|
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Central Parking will reimburse Mr. Carell for all actual
and reasonable legal, tax analysis, and accounting fees and
expenses incurred after February 14, 2007, by
Mr. Carell, his immediate family members, and the trusts
created by Mr. Carell that are associated with the sale of
their interests in Central Parking in connection with the merger.
|
41
|
|
|
|
|
Following the closing of the merger, Central Parking will permit
Mr. Carell, his spouse, his lineal descendants and their
spouses to continue to park their personal vehicles in any
Central Parking parking facility free of charge during
Mr. Carells lifetime.
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Central Parking will take such actions as necessary to effect
certain changes to the existing split-dollar life insurance
policies on the life of Mr. Carell that will limit Central
Parkings recovery under such policies to the current cash
value of the policies plus certain future premium payments to be
made by Central Parking. The present total of the death benefits
under these policies is approximately $1,059,505, of which
approximately $675,179 was payable to Central Parking prior to
the amendment of Mr. Carells agreement. One of the
policies will be cancelled which will result in Central Parking
receiving approximately $95,000 on the date of cancellation. The
value to Mr. Carell and the cost to Central Parking of the
other changes will depend on the date of Mr. Carells
death. In the event Mr. Carell were to die at the age of
85, these changes to the split-dollar life insurance policies
would result in Mr. Carells beneficiaries receiving
an estimated $475,000 more than they would have received and
Central Parking receiving an estimated $310,000 less than it
would have received without the changes.
|
Retention
Bonuses
Following announcement that Central Parking was pursuing
strategic alternatives in November 2006, on December 14,
2006, our compensation committee approved retention arrangements
for certain non-executive employees. These retention
arrangements generally provide for a bonus equal to 15% of the
employees base salary if the employee remains employed by
Central Parking through the closing of a
change-of-control
transaction, plus a bonus equal to 15% of the employees
base salary if the employee remains employed by Central Parking
ninety days following the closing of a
change-of-control
transaction. We anticipate that up to approximately $750,000 may
be paid under these retention arrangements.
Transaction
Bonuses
On February 20, 2007, our compensation committee approved
transaction bonuses to certain executive officers of Central
Parking. The transaction bonuses provide that the officers will
be paid a bonus of up to 100% of their twelve months base
salary, payable one half at the time of the execution of the
merger agreement and one half at the closing of the merger,
provided the officer remains with Central Parking at the time of
the merger. These transaction bonuses were granted to certain of
our executive officers and key employees as described below:
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Total
|
|
|
Emanuel J. Eads
|
|
President & CEO
|
|
$
|
550,000
|
|
Benjamin F. Parrish, Jr.
|
|
SVP/General Counsel
|
|
$
|
375,000
|
|
Jeff Heavrin
|
|
SVP/CFO
|
|
$
|
275,000
|
|
Gregory J. Stormberg
|
|
EVP
|
|
$
|
90,000
|
|
James A. Bond
|
|
EVP
|
|
$
|
90,000
|
|
Donald N. Holmes
|
|
SVP Human Resources
|
|
$
|
36,000
|
|
William R. Porter
|
|
SVP/Acquisitions
|
|
$
|
31,500
|
|
Other Non-executive bonuses
|
|
|
|
$
|
352,500
|
|
|
|
|
|
|
|
|
Total Bonuses
|
|
|
|
$
|
1,800,000
|
|
|
|
|
|
|
|
|
Treatment
of Stock Options
As of March 31, 2007, there were approximately
2,317,919 shares of our common stock subject to outstanding
stock options granted under our equity incentive plans to our
current executive officers and directors. Each outstanding stock
option that remains unexercised as of the completion of the
merger, whether or not the option is vested or exercisable, will
be cancelled, and the holder of such stock option that has an
42
exercise price of less than $22.53 will be entitled to receive a
cash payment, without interest and less any applicable tax
withholding, equal to the product of:
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|
|
|
|
the number of shares of our common stock subject to the option
as of the effective time of the merger, multiplied by
|
|
|
|
the excess of $22.53 over the exercise price per share of common
stock subject to such option.
|
The following table summarizes the outstanding vested and
unvested options held by our executive officers and directors as
of March 31, 2007, and the consideration that each of them
will receive pursuant to the merger agreement in connection with
the cancellation of their options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of Shares
|
|
|
Weighted Average
|
|
|
|
|
|
|
Underlying Vested
|
|
|
Per Share Exercise
|
|
|
|
|
|
|
and Unvested
|
|
|
Price of Vested and
|
|
|
Resulting
|
|
Name
|
|
Options
|
|
|
Unvested Options
|
|
|
Consideration
|
|
|
Monroe J. Carell, Jr.
|
|
|
221,294
|
|
|
|
17.8644
|
|
|
$
|
1,426,217
|
|
Emanuel J. Eads
|
|
|
555,500
|
|
|
|
16.4915
|
|
|
$
|
3,629,351
|
|
James H. Bond
|
|
|
268,000
|
|
|
|
19.3874
|
|
|
$
|
1,208,835
|
|
William H. Bodenhamer
|
|
|
128,000
|
|
|
|
16.3651
|
|
|
$
|
789,110
|
|
Robert Cizek
|
|
|
152,000
|
|
|
|
18.3328
|
|
|
$
|
786,709
|
|
Jeff Heavrin
|
|
|
15,500
|
|
|
|
15.1332
|
|
|
$
|
114,650
|
|
Donald N. Holmes
|
|
|
108,000
|
|
|
|
16.6239
|
|
|
$
|
637,860
|
|
Alan Kahn
|
|
|
185,500
|
|
|
|
19.3476
|
|
|
$
|
865,301
|
|
Gregory D. Maxey
|
|
|
131,500
|
|
|
|
16.6095
|
|
|
$
|
778,546
|
|
Benjamin F. Parrish, Jr.
|
|
|
232,000
|
|
|
|
19.8704
|
|
|
$
|
1,064,733
|
|
Gregory J. Stormberg
|
|
|
99,375
|
|
|
|
16.2698
|
|
|
$
|
622,109
|
|
William R. Porter
|
|
|
173,000
|
|
|
|
19.6480
|
|
|
$
|
773,551
|
|
Lewis Katz
|
|
|
25,250
|
|
|
|
31.4745
|
|
|
$
|
56,054
|
|
Edward G. Nelson
|
|
|
23,000
|
|
|
|
28.2560
|
|
|
$
|
56,054
|
|
Termination
of the Deferred Stock Unit Plan and Distribution of Account
Balances
Upon completion of the merger, we will terminate our
nonqualified deferred stock unit plan and will cause all
accounts thereunder to be fully vested and distributed in cash
to participants, without interest and less any required tax
withholding. The following table shows the account balances of
our executive officers as of March 31, 2007, in the
nonqualified deferred stock unit plan. All account balances will
be distributed as soon as practicable following completion of
the merger. Members of our board of directors do not participate
in the nonqualified deferred stock unit plan.
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|
|
|
|
|
|
|
|
|
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Current
|
|
|
Resulting
|
|
Name
|
|
Units
|
|
|
Consideration
|
|
|
Monroe J. Carell, Jr.
|
|
|
25,083.15
|
|
|
$
|
565,123
|
|
Emanuel J. Eads
|
|
|
18,616.18
|
|
|
$
|
419,423
|
|
James H. Bond
|
|
|
5,378.36
|
|
|
$
|
121,174
|
|
William H. Bodenhamer
|
|
|
76,609.62
|
|
|
$
|
1,726,015
|
|
Robert Cizek
|
|
|
1,302.77
|
|
|
$
|
29,351
|
|
Donald N. Holmes
|
|
|
1,632.64
|
|
|
$
|
36,783
|
|
Alan Kahn
|
|
|
14,769.63
|
|
|
$
|
332,760
|
|
Benjamin F. Parrish, Jr.
|
|
|
11,553.35
|
|
|
$
|
260,297
|
|
William R. Porter
|
|
|
5,600.26
|
|
|
$
|
126,174
|
|
43
Treatment
of Restricted Stock
As of March 31, 2007, there were approximately
27,327 shares of our common stock subject to restricted
stock granted under our equity incentive plans to our current
directors and 267,750 shares of restricted stock granted to
one executive officer. But for the merger transaction, these
shares issued to directors would have vested 13,334 in 2008,
9,331 in 2009 and 4,662 in 2010. Each share of restricted stock
that is unvested as of the completion of the merger will become
vested and be entitled to receive a cash payment equal to the
merger consideration of $22.53 per share, without interest
and less any applicable tax withholding.
The following table summarizes the outstanding unvested shares
of restricted stock held by our directors and executive officers
as of March 31, 2007, and the consideration that each of
them will receive pursuant to the merger agreement in connection
with the full vesting of their restricted stock:
|
|
|
|
|
|
|
|
|
|
|
No. of Shares of
|
|
|
Resulting
|
|
|
|
Unvested Restricted
|
|
|
Consideration Upon
|
|
Name
|
|
Stock
|
|
|
Full Vesting
|
|
|
James H. Bond
|
|
|
267,750
|
|
|
$
|
6,032,408
|
|
Raymond T. Baker
|
|
|
3,999
|
|
|
$
|
90,097
|
|
Claude Blankenship
|
|
|
3,333
|
|
|
$
|
75,092
|
|
Kathryn Carell Brown
|
|
|
3,999
|
|
|
$
|
90,097
|
|
Lewis Katz
|
|
|
3,999
|
|
|
$
|
90,097
|
|
Edward G. Nelson
|
|
|
3,999
|
|
|
$
|
90,097
|
|
Owen G. Shell
|
|
|
3,999
|
|
|
$
|
90,097
|
|
William B. Smith
|
|
|
3,999
|
|
|
$
|
90,097
|
|
Arrangements
with the Equity Sponsors
As of the date of this proxy statement, no member of our
management has entered into any agreement, arrangement or
understanding with the Equity Sponsors or their affiliates
regarding employment with, or the right to purchase or
participate in the equity of, KCPC Holdings. However, the Equity
Sponsors have informed us that it is their intention to retain
members of our existing management team with the surviving
corporation after the merger is completed. Members of management
currently are engaged in discussions with representatives of the
Equity Sponsors regarding revised terms of employment. The
Equity Sponsors have indicated that KCPC Holdings contemplates
establishing an option pool of up to 8.5% of the post merger
equity of KCPC Holdings for the benefit of Central Parking
employees, including management. In addition to revised terms of
employment, the Equity Sponsors have informed us that they
anticipate offering certain members of management the
opportunity to convert a portion of their current equity
interests in Central Parking into equity in KCPC Holdings. Our
chief executive officer currently holds a seat on our board of
directors. We are advised that KCPC Holdings contemplates having
a nine member board of directors, including our chief executive
officer as a member thereof. Although we believe members of our
management team are likely to enter into new arrangements with
the surviving corporation or affiliates of the Equity Sponsors
regarding employment with, and the right to purchase or
participate in the equity of, the surviving corporation or KCPC
Holdings, such matters are subject to further negotiations and
discussion and no terms or conditions have been finalized. Any
such new arrangements are expected to be entered into prior to
the completion of the merger.
On March 4, 2007, after the execution of the merger
agreement, Mr. Monroe Carell requested that Blackstone
inform the Equity Sponsors that Mr. Carell would be
interested in purchasing real estate that the Parent might
consider selling. There have been no discussions regarding the
potential sale of any specific real estate or any direct
discussions between the Equity Sponsors and Mr. Carell.
Employment
Agreements
Central Parking has entered into employment agreements with
Messrs. Carell, Eads, Stormberg, Bond, Bodenhamer, Kahn,
and other senior executives that provide for base salary and
annual performance-based
44
bonus payments. These employment agreements generally are for a
term of one year but automatically renew for additional one-year
periods unless notice is provided at least 30 days prior to
the end of the term. The agreements may be terminated by the
executive upon 30 days written notice or may be
terminated by Central Parking by complying with the severance
provisions provided in the agreements except in the case of a
termination for cause, in which case the executive is not
entitled to severance. These agreements provide that in the
event an executive is terminated without cause (and such
termination does not occur within two years following a change
in control) or the executive terminates his employment as a
result of a constructive discharge, the executive would receive
one year of base salary, bonus and welfare benefits, except in
the case of Messrs. Carell and Eads, who would receive two
years of base salary, bonus and welfare benefits. Terminated
executives would also receive outplacement assistance with a
value of up to $25,000, provided, however, that Mr. Carell
waived his entitlement to this benefit pursuant to the agreement
described on page 41.
These agreements, other than Mr. Carells agreement,
provide that the executive is subject to a non-competition
covenant for twelve months following termination of employment
and non-solicitation covenants for 24 months following
termination except in the case of a termination following a
change in control, in which case the non-competition and
non-solicitation covenants are waived.
These employment agreements further provide generally that in
the event of a termination without cause or a termination by the
executive for good reason within two years following a change in
control, most senior executives would receive severance equal to
two times base and bonus plus two years of benefits.
Messrs. Carell, Eads and Bond, and certain corporate staff
executives, would receive three times base and bonus plus three
years of benefits in the event of a termination without cause or
for good reason within two years following a change in control,
provided that Mr. Carell waived his entitlement to this
benefit pursuant to the agreement described on page 41.
Unvested stock options and deferred stock units would vest
immediately upon a change in control. The arrangements also
include an excise tax
gross-up
provision. A change in control is defined to include: the
acquisition of 30% or more of the outstanding stock of Central
Parking other than through acquisitions by Central Parking, a
subsidiary, an employee benefit plan of Central Parking, or
Monroe Carell or family members or related entities; a change in
the majority of the board; consummation of a merger,
consolidation, or reorganization, unless following such
transaction the shareholders prior to the transaction continue
to own more than 70% of the outstanding shares, board members
prior to the transaction continue to constitute a majority of
the board and no person or control group owns more than 30% (and
in the case of Mr. Carells employment agreement, 50%)
of the stock (other than Mr. Carell, family members or
related entities); consummation of the sale of all or
substantially all of Central Parkings assets or the
adoption of a plan of liquidation; or consummation of a plan of
liquidation with respect to the company.
The employment agreements generally define termination for
cause as: executives embezzlement, intentional
mishandling of Central Parking funds or theft or fraud with
respect to the business or affairs of Central Parking;
executives conviction of a felony or other crime involving
moral turpitude which adversely affects executives
job-related responsibilities; a violation by executive of the
non-competition and non-solicitation covenants in the agreement;
or executives deliberate and willful continuing refusal to
substantially perform the duties and obligations of his
position. Constructive discharge is defined as
termination of executives employment due to a failure of
Central Parking to fulfill its obligations under the agreement
in any respect, including any reduction in executives base
salary or annual incentive award or any other Central Parking
incentive plan target other than reductions not to exceed 25%
applicable to all executive officers of Central Parking, a
substantial reduction of benefits other than a reduction in
benefits applicable to all employees, or the reduction in the
title, authority
and/or
duties of the executive other than isolated, insubstantial or
inadvertent action.
Good reason means the occurrence after a change in
control of any of the following:
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|
|
|
|
Any change in the executives status, title, position or
responsibilities which, in the executives reasonable
judgment, represents an adverse change from such status, title,
position or responsibilities as in effect at any time within
180 days preceding the date of the change in control or at
any time thereafter;
|
45
|
|
|
|
|
Assignment to the executive of duties or responsibilities which,
in the executives reasonable judgment, are inconsistent
with the executives status, title, position or
responsibilities as in effect at any time within 180 days
preceding the date of the change in control or at any time
thereafter;
|
|
|
|
The removal of executive from or failure to reappoint or reelect
the executive to any such offices or positions, in each case
except in connection with the termination of the
executives employment for death, disability or termination
for cause;
|
|
|
|
A reduction in executives base salary or bonus
opportunity; the actual payment of less than 75% of the greater
of target annual incentive award; or the average of the three
prior annual incentive awards earned by executive; or a
reduction in target awards under any other incentive plans; or
any failure to pay executive any compensation or benefits to
which the executive is entitled within ten days after the date
when due;
|
|
|
|
The imposition of a requirement that the executive be based at
any place outside a
50-mile
radius of Central Parkings current principal office,
except for reasonably required travel on company business which
is not materially greater in frequency or duration than prior to
the change in control;
|
|
|
|
The failure by Central Parking to continue in effect any
material compensation or employee benefit plan in which the
executive was participating at any time within 180 days
preceding the date of the change in control or at any time
thereafter, unless such plan is replaced with a plan that
provides substantially equivalent compensation or benefits to
the executive or provide the executive with compensation and
benefits, in the aggregate, at least equal to those provided for
under each other employee benefit plan, program and practice in
which the executive was participating at any time within
180 days preceding the date of the change in control or at
any time thereafter;
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|
|
|
The insolvency or the filing (by any party, including Central
Parking) of a petition for bankruptcy with respect to Central
Parking, which petition is not dismissed within 60 days;
|
|
|
|
Any material breach by Central Parking of any provision of the
employment agreement; or
|
|
|
|
Any purported termination for cause of the executives
employment that does not comply with the terms of the employment
agreement.
|
The employment agreements also provide that in the event Central
Parking is involved in a change in control transaction, the
executive agrees to use his good faith efforts consistent with
his duties as a director, officer or employee to cooperate with
Central Parking, and as directed by the board of directors, and
the potential acquirer, in the due diligence process related
thereto. In the event that there is a change in control and the
executive thereafter terminates his employment for good reason
or voluntarily resigns, the executive agrees to remain with
Central Parking for a period of time after the date of such
termination or resignation as requested by Central Parking or
its acquirer, not to exceed three months from the date of such
termination or resignation, provided that Central Parking has
paid to executive all amounts due to him in connection with such
termination or resignation, together with an additional amount
equal to three months base salary and pro rated annual
incentive award together with all employment benefits and
perquisites (transition payment). In the event that
Central Parking or the acquirer does not request executive to
remain after his termination for good reason or resignation,
then Central Parking shall pay executive the transition payment
in a lump sum upon his departure.
The following table shows the amount of potential cash severance
payable to each of our current executive officers who is a party
to an employment agreement with a change in control severance
provisions and including the amount the officer would be
entitled to be reimbursed for outplacement expenses, based on
compensation and benefit levels in effect on March 27,
2007, and assuming the merger is completed on July 1, 2007,
and the executives employment terminates under
circumstances that entitle him to severance immediately
thereafter. The
46
table also shows the estimated value of continuing welfare and
fringe benefits and the estimated tax
gross-up
payment to each such executive in respect of the excise tax
imposed on excess parachute payments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Potential
|
|
|
Estimated Value of
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
Continuation
|
|
|
Transition
|
|
|
Estimated 280G
|
|
Name
|
|
Payment*
|
|
|
Benefits**
|
|
|
Payment
|
|
|
Gross-up Payment***
|
|
|
Emanuel J. Eads
|
|
$
|
3,362,500
|
|
|
$
|
96,992
|
|
|
$
|
258,083
|
|
|
$
|
2,155,130
|
|
James H. Bond
|
|
$
|
2,312,500
|
|
|
$
|
96,992
|
|
|
$
|
183,083
|
|
|
$
|
938,411
|
|
William H. Bodenhamer
|
|
$
|
1,137,500
|
|
|
$
|
64,662
|
|
|
$
|
133,083
|
|
|
$
|
467,695
|
|
Robert Cizek
|
|
$
|
1,175,000
|
|
|
$
|
64,662
|
|
|
$
|
133,083
|
|
|
$
|
493,014
|
|
Jeff Heavrin
|
|
$
|
1,337,500
|
|
|
$
|
96,992
|
|
|
$
|
109,333
|
|
|
$
|
712,381
|
|
Donald N. Holmes
|
|
$
|
711,250
|
|
|
$
|
64,662
|
|
|
$
|
86,833
|
|
|
$
|
297,177
|
|
Alan Kahn
|
|
$
|
968,750
|
|
|
$
|
64,662
|
|
|
$
|
114,333
|
|
|
$
|
0
|
|
Gregory D. Maxey
|
|
$
|
1,075,000
|
|
|
$
|
64,662
|
|
|
$
|
120,583
|
|
|
$
|
462,117
|
|
Benjamin F. Parrish, Jr.
|
|
$
|
1,862,500
|
|
|
$
|
96,992
|
|
|
$
|
149,333
|
|
|
$
|
943,840
|
|
Gregory J. Stormberg
|
|
$
|
1,473,750
|
|
|
$
|
64,662
|
|
|
$
|
164,333
|
|
|
$
|
577,855
|
|
William R. Porter
|
|
$
|
888,750
|
|
|
$
|
64,662
|
|
|
$
|
108,083
|
|
|
$
|
0
|
|
|
|
|
* |
|
Includes two or three times (as applicable) the sum of 2007 base
salary and target bonus, a prorated target annual bonus for
2007, and $25,000 for outplacement services. |
|
** |
|
Includes two or three times (as applicable) 401(k) match and
medical, dental, vision, life, and disability insurance benefits. |
|
*** |
|
Estimates are subject to change based on the date of completion
of the merger, date of termination of the executive officer,
interest rates then in effect and certain other assumptions used
in the calculation. Estimates include the estimated tax
gross-up as
a result of any acceleration of vesting of stock options as well
as the potential cash severance payment and estimated value of
benefits set forth in the preceding two columns. In addition,
estimates include the estimated tax
gross-ups
required to be paid in connection with Transaction Bonuses
described above. The estimates do not take into account the
value of certain on-going non-competition obligations. |
Indemnification
of Officers and Directors
KCPC Holdings and Merger Sub have agreed that the surviving
corporation shall maintain for not less than six years from the
effective time of the merger the current policies of
directors and officers fiduciary and liability
insurance maintained by Central Parking by purchasing a policy
providing tail coverage. This tail coverage is
required to be for a period of not less than six years from the
effective time in a form and with a carrier, or carriers,
reasonably agreed upon by Central Parking. Under the merger
agreement, KCPC Holdings shall make available to Central Parking
evidence of this tail coverage immediately prior to the
effective time. Alternatively, in the event that the tail
coverage cannot be purchased for a premium in an amount equal to
or less than 250% of the last annual premium paid by Central
Parking prior to the date of the merger agreement (the
insurance cap), then KCPC Holdings shall instead
cause the surviving corporation to purchase a policy or maintain
policies that, in KCPC Holdings good faith judgment,
provide as much comparable insurance as is available for the
amount of the insurance cap.
After the closing of the merger, KCPC Holdings and the surviving
corporation will also indemnify, to the fullest extent permitted
under applicable law, Central Parkings current and former
directors and officers, and the current and former directors and
officers of any of our subsidiaries, against all losses and
expenses (including all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties,
damages (including compensatory, punitive and consequential
damages), demands, claims, actions, causes of action,
assessments, deficiencies and other charges and attorneys
fees) arising out of or pertaining to acts or omissions (or
alleged acts or omissions) by them in their capacities as such,
for acts or omissions that occurred at or prior to closing. Each
indemnified party will be entitled to the prompt advancement of
expenses incurred in connection with such indemnification,
provided however that to the extent required by law, any person
to
47
whom expenses are advanced must provide an undertaking to repay
the advances if it is ultimately determined that such person is
not entitled to indemnification.
In addition, KCPC Holdings and Merger Sub have agreed that the
provisions of the certificate of incorporation and bylaws of the
surviving corporation relating to the elimination of liability
or the indemnification of officers or directors will not be
amended in any manner that would adversely affect the rights of
Central Parkings current officers or directors. Moreover,
KCPC Holdings and Merger Sub have agreed that the surviving
corporation and any of its respective successors or assigns will
make necessary provisions with any third party that merges with,
or acquires the properties or assets of, the surviving
corporation to assure that this third party assumes the
indemnification and coverage obligations described above.
Relationships
Among Certain Directors
Central Parking believes that none of the directors serving on
the special committee had any conflict of interest or
relationship that prevented him from making an independent
decision about the merits of the transaction. None of the
members of the special committee has any present business
relationship with Central Parking nor with the Carells, apart
from their common service on our board of directors.
Mr. Nelson and Mr. Carell are both members of the
Boards of Trust for Vanderbilt University and for the Vanderbilt
Medical Center. Mr. Nelson also formerly served on the
board of Vanderbilt Childrens Hospital along with
Mr. Carell. In the 1980s, Mr. Blankenship worked
for the Touche Ross accounting firm and provided accounting
services to Central Parking and Mr. Carell; this
relationship ceased in the late 1980s. Each member of the
special committee was paid $2,500 for each committee meeting
attended in person and $1,500 for each committee meeting
attended by telephone prior to January 22, 2007. For the
special committee meetings held on or after January 22,
2007, each member was paid $2,500 for each committee meeting
attended whether in person or by telephone. In addition,
Mr. Nelson received a $5,000 retainer for serving as the
chairman of the special committee. Members of the special
committee also hold shares of common stock, restricted stock,
and options that will be exchanged for cash as provided in the
merger agreement.
Delisting
and Deregistration of Central Parking Common Stock
If the merger is completed, Central Parking common stock will be
delisted from the New York Stock Exchange and deregistered under
the Securities Exchange Act of 1934, as amended, which we refer
to as the Exchange Act, and Central Parking will no longer file
periodic reports with the SEC.
Dissenters
Rights
No dissenters rights are available under
Section 48-23-102
of the Tennessee Business Corporation Act in connection with the
merger, unless the shares of our common stock are no longer
listed on the New York Stock Exchange or another registered
exchange on the date of the consummation of the merger.
Effect on
Central Parking if the Merger is Not Completed
If the merger agreement is not adopted by Central Parkings
shareholders or if the merger is not completed for any other
reason, shareholders will not receive any payment for their
shares in connection with the merger. Central Parking will
remain an independent public company and Central Parkings
stock will continue to be listed and traded on the New York
Stock Exchange. We would anticipate that we would continue to
operate our business in substantially the same manner as we are
currently operating it. The shareholders would be subject to the
same risks and opportunities as they are currently, including
the risks described in our annual report on
Form 10-K.
No assurance can be given as to the market price of our common
stock if the merger is not completed. Central Parkings
board of directors may from time to time consider, evaluate and
review our business operations, properties and dividend policies
and may make such changes as it deems appropriate. Our board may
continue to seek to identify strategic alternatives to enhance
shareholder value. If our shareholders do not adopt the merger
agreement or if the merger is not consummated for any other
reason, there can be no assurance that any other transaction
acceptable to Central Parking will be offered, or that the
business, prospects or results of operations of Central Parking
will not be adversely
48
affected. If the merger agreement is terminated because our
shareholders do not adopt the merger agreement, under certain
circumstances Central Parking will be required to pay certain
affiliates of KCPC Holdings an aggregate termination fee of
$22.4 million. See The Merger Agreement
Termination Fee and Expenses.
Legal
Proceedings Related to the Merger
Central Parking is aware of two putative class action lawsuits
related to the merger filed against Central Parking and each of
Central Parkings directors in the Chancery Court for the
State of Tennessee, 20th Judicial District, Davidson
County, case numbers
07-387-III
and 07-397-I.
The complaints in these actions allege that the directors
breached their fiduciary duties of due care, loyalty, good
faith, candor and independence and put their personal interests
ahead of the interests of Central Parkings shareholders.
Plaintiffs seek to prohibit permanently the merger, to rescind
the merger to the extent it is consummated, an award of damages,
attorneys fees and other relief. Central Parking and the
directors dispute the allegations in the complaints and plan to
defend vigorously these actions. Additional lawsuits pertaining
to the merger could be filed in the future.
Federal
or State Regulatory Filings Required in Connection with the
Merger
United
States Antitrust
Mergers and acquisitions that may have an impact in the United
States are subject to review by the Department of Justice and
the Federal Trade Commission to determine whether they comply
with applicable antitrust laws. Under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder, which we refer to
as the HSR Act, mergers and acquisitions that meet
certain jurisdictional thresholds, such as the present
transaction, may not be completed until the expiration of a
waiting period that follows the filing of notification forms by
both parties to the transaction with the Department of Justice
and the Federal Trade Commission. The initial waiting period is
30 days, but this period may be shortened if the reviewing
agency grants early termination of the waiting
period, or it may be lengthened if the reviewing agency
determines that an in-depth investigation is required and issues
a formal request for additional information and documentary
material. We and Parent filed pre-merger notifications with the
U.S. antitrust authorities pursuant to the HSR Act on
March 6, 2007 and, in accordance with the merger agreement,
requested early termination of the waiting period.
The waiting period was terminated on March 29, 2007.
It is possible that any of the government entities with which
filings are made may seek various regulatory concessions as
conditions for granting approval of the merger. There can be no
assurance that we will obtain the regulatory approvals necessary
to complete the merger or that the granting of these approvals
will not involve the imposition of conditions on completion of
the merger or require changes to the terms of the merger. These
conditions or changes could result in conditions to the merger
not being satisfied. For more information, please refer to
The Merger Agreement Conditions to the
Merger.
General
Any other filings required in order to complete the merger will
be made as soon as reasonably possible. It is possible that any
of the governmental authorities with which filings are made may
seek, as conditions for granting approval of the merger, various
regulatory concessions. There can be no assurance that Parent or
Central Parking will be able to satisfy or comply with these
conditions or be able to cause our respective subsidiaries to
satisfy or comply with these conditions, or that compliance or
noncompliance will not have adverse consequences for Parent
after completion of the merger, or that the required regulatory
approvals will be obtained within the time frame contemplated by
Parent and Central Parking or on terms that will be satisfactory
to Parent and Central Parking.
49
Material
U.S. Federal Income Tax Consequences of the Merger to Our
Shareholders
The following is a summary of the material U.S. federal
income tax consequences of the merger to our shareholders of the
receipt of cash in exchange for shares of our common stock
pursuant to the merger. This summary does not purport to
consider all aspects of U.S. federal income taxation that
might be relevant to our shareholders. For purposes of this
discussion, we use the term U.S. holder to mean
a beneficial owner of shares of our common stock that is, for
U.S. federal income tax purposes: a citizen or resident of
the United States; a corporation (or other entity taxable as a
corporation for U.S. federal income tax purposes) created
or organized under the laws of the United States or any of its
political subdivisions; a trust that is subject to the
supervision of a court within the United States and the control
of one or more U.S. persons or has a valid election in
effect under applicable United States Treasury Regulations to be
treated as a U.S. person; or an estate that is subject to
U.S. federal income tax on its income regardless of its
source. A
non-U.S. holder
is a person (other than a partnership) that is not a
U.S. holder. If a partnership holds our common stock, the
tax treatment of a partner will generally depend on the status
of the partner and the activities of the partnership. A partner
of a partnership holding our common stock should consult its tax
advisor.
This discussion is based on current law, which is subject to
change, possibly with retroactive effect. It applies only to
beneficial owners who hold shares of our common stock as capital
assets, and may not apply to shares of our common stock received
in connection with the exercise of employee stock options,
through our employee stock purchase plan, through our deferred
stock unit plan, through a grant of restricted stock, or
otherwise as compensation or certain types of beneficial owners
who may be subject to special rules (such as insurance
companies, banks, tax-exempt organizations, financial
institutions, broker-dealers, partnerships, S corporations
or other pass-through entities, mutual funds, traders in
securities who elect the
mark-to-market
method of accounting, shareholders subject to the alternative
minimum tax, shareholders that have a functional currency other
than the U.S. dollar, or shareholders who hold our common
stock as part of a hedge, straddle or a constructive sale or
conversion transaction). This discussion does not address the
receipt of cash in connection with the cancellation of shares of
restricted stock, deferred stock units or options to purchase
shares of our common stock, or any other matters relating to
equity compensation or benefit plans. This discussion also does
not address any aspect of state, local or foreign tax laws or
estate and gift tax laws.
U.S. Holders
The exchange of shares of our common stock for cash in the
merger will be a taxable transaction to U.S. holders for
U.S. federal income tax purposes. In general, a
U.S. holder whose shares of our common stock are converted
into the right to receive cash in the merger will recognize
capital gain or loss for U.S. federal income tax purposes
equal to the difference, if any, between the amount of cash
received with respect to such shares (determined before the
deduction of any applicable tax withholding) and the
shareholders adjusted tax basis in such shares. Gain or
loss will be determined separately for each block of shares
(i.e., shares acquired at the same cost in a single
transaction). Such gain or loss will be long-term capital gain
or loss provided that a shareholders holding period for
such shares is more than twelve months at the time of the
consummation of the merger. Long-term capital gains of
individuals are eligible for reduced rates of taxation. There
are limitations on the deductibility of capital losses.
Backup withholding, presently at a rate of 28%, and information
reporting may apply to the cash received pursuant to the merger.
Backup withholding will not apply, however, to a holder who: in
the case of a U.S. holder, furnishes a correct taxpayer
identification number and certifies that it is not subject to
backup withholding on IRS
Form W-9
or successor form; in the case of a
non-U.S. holder,
furnishes an applicable IRS
Form W-8
or successor form; or is otherwise exempt from backup
withholding and complies with other applicable rules and
certification requirements. Backup withholding is not an
additional tax and any amount withheld under these rules may be
credited against the holders United States federal income
tax liability and may entitle the holder to a refund if required
information is timely furnished to the IRS. Cash received in the
merger will also be subject to information reporting unless an
exemption applies.
50
Non-U.S. Holders
Any gain realized on the receipt of cash in the merger by a
non-U.S. holder
generally will not be subject to United States federal income
tax unless (i) the gain is effectively connected with a
trade or business of the
non-U.S. holder
in the United States (and, if required by an applicable income
tax treaty, is attributable to a United States permanent
establishment of the
non-U.S. holder);
(ii) the
non-U.S. holder
is an individual who is present in the United States for
183 days or more in the taxable year of that disposition,
and certain other conditions are met; or (iii) the shares
of our common stock held by the
non-U.S. holder
constitute a United States real property interest,
within the meaning of the Foreign Investment in Real Property
Tax Act of 1980 (FIRPTA) with respect to such
non-U.S. holder,
as described below.
An individual
non-U.S. holder
described in (i) of the immediately preceding paragraph
will be subject to tax on the net gain derived from the merger
under regular graduated U.S. federal income tax rates. If a
non-U.S. holder
is a foreign corporation that is described in (i) of the
immediately preceding paragraph, it will be subject to tax on
its net gain in the same manner as if it were a U.S. holder
and, in addition, may be subject to the branch profits tax equal
to 30% of its effectively connected earnings and profits or at
such lower rate as may be specified by an applicable income tax
treaty. An individual
non-U.S. holder
described in (ii) of the immediately preceding paragraph
will be subject to a flat 30% tax on the gain derived from the
merger, which may be offset by U.S. source capital losses,
even though the individual is not considered a resident of the
United States. A
non-U.S. holder
described in (iii) of the immediately preceding paragraph
will be subject to tax on the net gain derived from the merger
under regular graduated U.S. federal income tax rates.
Shares are not treated as a United States real property interest
with respect to a
non-U.S. holder
if such class of shares is regularly traded on an established
securities market within the meaning of applicable United States
Treasury Regulations and the
non-U.S. holder
did not actually, or constructively under specified Code
attribution rules, own more than 5% of that class at any time
during the shorter of the five-year period preceding the
disposition or the holders holding period. Because our
shares are regularly traded on the New York Stock Exchange, our
shares will not be treated as a United States real property
interest, except with respect to a
non-U.S. holder
meeting the more than 5% ownership requirement.
Non-U.S. holders
are urged to consult their tax advisors with respect to the
treatment of their shares as a United States real property
interest pursuant to these rules.
We intend to take the position that no amount of the merger
consideration payable to a
non-U.S. holder
is subject to withholding under FIRPTA. If a
non-U.S. holder
holds its shares through a nominee, that nominee may take a
contrary position and conclude that withholding applies under
FIRPTA to the share merger consideration payable to such
non-U.S. holder.
A
non-U.S. holder
may be entitled to a refund or credit against the holders
United States tax liability, if any, with respect to the amount
withheld, provided that required information is furnished to the
IRS on a timely basis.
Non-U.S. holders
should consult their own tax advisor regarding tax withholding
considerations.
The U.S. federal income tax consequences set forth above
are not intended to constitute a complete description of all tax
consequences relating to the merger. Because individual
circumstances may differ, each shareholder should consult the
shareholders tax advisor regarding the applicability of
the rules discussed above to the shareholder and the particular
tax effects to the shareholder of the merger in light of such
shareholders particular circumstances, the application of
state, local and foreign tax laws, and, if applicable, the tax
consequences of the receipt of cash in connection with the
cancellation of restricted shares, deferred stock units or
options to purchase shares of our common stock, including the
transactions described in this proxy statement relating to our
equity compensation and benefit plans.
51
THE
MERGER AGREEMENT
The following is a summary of the material terms of the
merger agreement. However, because the merger agreement is the
primary legal document that governs the merger, you should
carefully read the complete text of the merger agreement for its
precise legal terms and other information that may be important
to you. The merger agreement is included as Annex A to this
proxy statement and contains representations and warranties from
us to Parent and from Parent and Merger Sub to us. These
representations and warranties were made only for the purposes
of the merger agreement and solely for the benefit of Parent,
Merger Sub, and us, were made as of specific dates, and may be
subject to important limitations and qualifications.
Furthermore, these representations and warranties may have been
made for the purposes of allocating contractual risk between the
parties to the merger agreement instead of establishing these
matters as facts, and may or may not have been accurate as of
any specific date and do not purport to be accurate as of the
date of this proxy statement. Accordingly, you should NOT rely
upon the descriptions of the representations and warranties in
this proxy statement or the actual representations and
warranties contained in the merger agreement as
characterizations of the actual state of facts. Information
about Parent, Merger Sub and Central Parking can be found
elsewhere in this proxy statement and in such other public
filings Central Parking makes with the Securities and Exchange
Commission, which are available without charge at
www.sec.gov.
Form and
Timing of the Merger
If all of the conditions to the merger are satisfied or waived
in accordance with the merger agreement, Merger Sub, a
wholly-owned subsidiary of Parent created solely for the purpose
of engaging in the transactions contemplated by the merger
agreement, will merge with and into Central Parking. Upon such a
merger, the separate corporate existence of Merger Sub will
cease, and Central Parking will survive the merger and will
become a wholly-owned subsidiary of Parent, directly or
indirectly through one or more wholly-owned subsidiaries. We
sometimes refer to Central Parking after the merger as the
surviving corporation. We expect to complete the merger as
promptly as practicable after our shareholders approve the
merger agreement and the transactions contemplated thereby,
though the merger agreement provides that the earliest date we
can close is May 21, 2007, unless the parties mutually
agree to close earlier.
Charter
and Bylaws of the Surviving Corporation
The charter and bylaws of Central Parking as in effect
immediately prior to the consummation of the merger shall be the
charter and bylaws of the surviving corporation until thereafter
changed or amended.
Board of
Directors and Officers of the Surviving Corporation
Upon consummation of the merger, the directors of Merger Sub,
none of whom are currently affiliated with Central Parking, will
be the initial directors of the surviving corporation and the
officers of Central Parking will be the initial officers of the
surviving corporation. All surviving corporation officers will
hold their positions until their successors are duly elected and
qualified or until the earlier of their resignation or removal.
Consideration
to Be Received in the Merger
Each share of Central Parking common stock issued and
outstanding immediately before the merger will automatically be
cancelled and will cease to exist and will be converted into the
right to receive $22.53 in cash, without interest and less any
applicable tax withholding, other than shares held by the
company or owned by Parent or Merger Sub, and shares that are
contributed to Parent in exchange for shares of Parents
capital stock pursuant to agreements with employee shareholders
of Central Parking, which will be cancelled.
After the merger is effective, each holder of a certificate
representing any shares of Central Parking common stock will no
longer have any rights with respect to the shares except for the
right to receive the merger consideration.
52
Treatment
of Options and Other Awards
Upon the consummation of the merger, except as otherwise agreed
by the holder and Parent, all outstanding options to acquire
Central Parking common stock under our equity incentive plans
will become fully vested and immediately exercisable, and all
options not exercised prior to the merger will be cancelled and
converted into the right to receive a cash payment equal to the
number of shares of Central Parking common stock underlying the
option multiplied by the amount by which $22.53 exceeds the
exercise price for each share of Central Parking common stock
underlying the options. Additionally, except as otherwise agreed
by the holder and Parent, all deferred stock units will, upon
the consummation of the merger, vest and be cancelled and
converted into the right to receive a cash payment equal to the
number of shares represented by the deferred stock units
multiplied by $22.53. With respect to restricted stock, except
as otherwise agreed by holder and Parent, all restricted shares
of Central Parking common stock that remain restricted
immediately prior to the effective time of the merger will
automatically become unrestricted shares of Central Parking
common stock and be converted into the right to receive $22.53
in cash for each share of previously restricted common stock
held immediately prior to the merger. All payments described in
this paragraph will be without interest and subject to any
applicable tax withholding.
Treatment
of TIPS
The Trust Issued Preferred Securities (TIPS)
issued by Central Parking Finance Trust will remain outstanding
after the merger. However, the TIPS will cease to be convertible
at or after the consummation of the merger into shares of
Central Parking common stock, but will instead be convertible
into cash in an amount equal to the product of $22.53 times the
number of shares of Central Parking common stock into which the
TIPS could have been converted as of the consummation of the
merger. After the merger, each share of TIPS will remain
outstanding until the maturity date of April 1, 2028 unless
converted by the holder into $19.18 in cash per TIPS share or
redeemed by Central Parking at $25 per TIPS share.
Treatment
of Employee Stock Purchase Plan
Central Parkings board of directors will take all actions
necessary to continue the suspension of the 1996 Employee Stock
Purchase Plan through the effective time of the merger. The
Central Parking board of directors will take all actions
necessary to terminate the 1996 Employee Stock Purchase Plan as
of the effective time of the merger. Central Parking common
stock previously purchased through the Employee Stock Purchase
Plan will be treated identically to all other shares of Central
Parking common stock.
Payment
Procedures
Before the merger, Parent will designate a paying agent
reasonably satisfactory to us to make payment of the merger
consideration as described above. Prior to the effective time of
the merger, Parent or Merger Sub will deposit in trust with the
paying agent the funds appropriate to pay the merger
consideration to the shareholders.
As promptly as practicable after the effective date of the
merger, Parent will cause the paying agent to send you a letter
of transmittal and instructions advising you how to surrender
your certificates in exchange for the merger consideration.
Following the closing of the merger, the paying agent will pay
you your merger consideration after you have surrendered your
certificates to the paying agent and provided to the paying
agent your signed letter of transmittal and any other items
specified by the letter of transmittal. Interest will not be
paid or accrue in respect of the merger consideration. The
surviving corporation will reduce the amount of any merger
consideration paid to you by any applicable tax withholding. YOU
SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE PAYING AGENT
WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR
STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
53
Representations
and Warranties
The merger agreement contains customary representations and
warranties that we made to Parent regarding, among other things:
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corporate matters, including due organization, power and
qualification;
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authorization, execution, delivery and performance and the
enforceability of the merger agreement and related matters;
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absence of conflicts with, or violations of, organizational
documents or other obligations as a result of the merger;
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identification of required governmental filings and consents;
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our receipt of a fairness opinion from our financial advisor;
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our capital structure;
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our subsidiaries;
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sufficiency of our assets to conduct our business;
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accuracy of information contained in reports and other documents
that we file with the SEC and the compliance of our filings with
the SEC with applicable federal securities law requirements and,
with respect to financial statements therein, generally accepted
accounting principles;
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compliance in all material respects with the applicable
provisions of the Sarbanes-Oxley Act of 2002;
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absence of certain changes or events affecting our business
since September 30, 2006;
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maintenance and effectiveness of disclosure controls and
procedures required under applicable federal securities law;
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litigation and other liabilities;
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compliance with laws;
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permits;
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our material contracts;
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filing of tax returns, absence of unpaid taxes and other tax
matters;
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employee benefits plans;
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environmental matters;
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intellectual property;
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absence of undisclosed brokers fees;
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transactions with our affiliates;
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labor matters;
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insurance; and
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owned and leased property.
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In addition, each of Parent and Merger Sub made representations
and warranties regarding, among other things:
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corporate matters, including due organization, power and
qualification;
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authorization, execution, delivery and performance and the
enforceability of the merger agreement and related matters;
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absence of conflicts with, or violations of, organizational
documents or other obligations as a result of the merger;
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identification of required governmental filings and consents;
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litigation;
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guarantees by the Equity Sponsors;
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availability of funds necessary for the merger, including the
merger consideration;
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operations of Merger Sub;
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accuracy of information supplied for inclusion in this proxy
statement;
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absence of undisclosed brokers fees; and
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solvency of Central Parking and its subsidiaries immediately
after the merger.
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Many of our representations and warranties are qualified by a
material adverse effect standard. A material adverse
effect means, with respect to Central Parking, any event,
circumstance or change, as applicable, that individually or in
the aggregate, is, or is reasonably likely to be, materially
adverse to the condition (financial or otherwise), assets, or
results of operations of Central Parking and its subsidiaries
taken as a whole, except that the following, in and of
themselves, will not be considered to constitute a material
adverse effect:
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the economy, the financial or securities markets in general or
the industries in which we operate (to the extent Central
Parking and the entity is not disproportionately affected);
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any acts of terrorism, military actions or war;
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rules or restrictions imposed by any governmental or
quasi-governmental agency or similar authority that affect our
business or industry; or
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the announcement or pendency of the merger agreement or the
transactions contemplated thereby.
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Conduct
of Business Pending the Merger
We have agreed in the merger agreement that, except as otherwise
permitted or required in the merger agreement, we will, and will
cause each of our subsidiaries to:
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operate and carry on our business only in the ordinary course
consistent with our past practice;
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use commercially reasonable efforts consistent with good
business practice to keep and maintain all of our assets and
properties in normal operating condition and repair, with the
exception of reasonable wear and tear and casualty
damage; and
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use commercially reasonable efforts to maintain our present
business organization and preserve, in all material respects,
the goodwill of our suppliers, contractors, licensors,
employees, customers, distributors and others with whom we have
significant business relations.
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We have also agreed that, except as expressly contemplated by
the merger agreement or otherwise required to maintain our
business and assets consistent with our past practice, we will
not, and will not allow any of our subsidiaries to, without the
consent of Parent:
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amend any organizational documents or the terms of any
outstanding equity securities;
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except for internal transactions involving our subsidiaries,
issue or sell any stock; provided, however, we may issue stock
upon exercise of certain of our stock options outstanding on the
date of the merger agreement, and we may issue shares of our
stock upon the conversion of any of the TIPS in accordance with
the terms thereof;
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adjust, split, combine, or reclassify any shares of our
securities, or set aside or pay any dividends or make any other
distributions (whether in cash, stock or other property) in
respect of our securities, except for the payment of dividends
in accordance with the terms of the TIPS, the payment of
quarterly dividends consistent with historical amounts, or the
payment of dividends or distributions by one of our wholly-owned
subsidiaries to us or to another wholly-owned subsidiary or by
one of our non-wholly-owned subsidiaries pro rata to the equity
holders thereof;
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redeem, purchase or otherwise acquire (other than pursuant to
the conversion provision as required by the terms of the TIPS)
any outstanding securities of us or our subsidiaries, or any
right to purchase these securities;
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incur or assume any debt or other liability other than under our
existing credit facilities or pursuant to lease financing
arrangements for equipment not in excess of $1,000,000 in the
aggregate, modify in any material way any of the terms of any of
our existing credit agreements or any other debt or liability
except in the ordinary course of business consistent with our
past practice, or assume, guarantee, or endorse the obligations
of any other entity, association or individual;
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make any acquisition or disposition of leased real property or
any owned real property, or stock or assets of or to any third
party in excess of $1,000,000 in the aggregate other than
inventory, supplies or other assets acquired or disposed in the
ordinary course of business consistent with our past practice;
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merge or consolidate with any other entity, or adopt a plan of
liquidation, dissolution, bankruptcy, restructuring,
recapitalization or other reorganization, including transactions
between or among us
and/or among
our wholly-owned subsidiaries;
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enter into or amend (except as necessary to comply with
Section 409A of the Internal Revenue Code) any employment
or similar contract with, or increase the compensation
and/or
benefits: of any employee whose base salary or independent
contractor whose pay is in excess of $200,000 per year as
of the date of the merger agreement other than as provided in
the merger agreement, of any of our directors or officers, of
any shareholder beneficially owning in excess of ten percent
(10%) of our stock or any of our affiliates, or of any employee
(including highly compensated employees) resulting in an
increase in the payment of our obligations with respect to
compensation
and/or
benefits of employees in excess of $500,000 per year in the
aggregate;
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except for increases in compensation and benefits that are
required by applicable law or by contract in effect on the date
of the merger agreement or increases not exceeding 3% to
employees (other than highly compensated employees, officers or
non-employee directors) made in the ordinary course of business
consistent with our past practice, increase the compensation
and/or
benefits of employees, officers or directors, as of the date of
the merger agreement;
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enter into, adopt or amend in any material respect, or increase
the benefits payable under any employment agreement or employee
benefit plan, or terminate any employee in a manner that would
result in any severance or other payment becoming due;
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adopt, amend or terminate any employee benefit plan or
collective bargaining agreement, except as required by law or by
the terms of any such plan, or grant or make any loan, bonus or
other like benefit, to or for the benefit of any officer or
highly compensated employee except as specifically described in
the merger agreement;
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mortgage, pledge, or otherwise voluntarily encumber any part of
our assets, tangible or intangible, other than pledges or
encumbrances pursuant to our existing credit facilities;
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except as required by changes in generally accepted accounting
principles, make any material change in our accounting
principles or practices;
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settle any litigation except in the ordinary course of business
consistent with our past practice;
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except as permitted under the merger agreement, cancel, modify
or waive in any material way the terms of any material leases or
any contract that is material to us, other than in the ordinary
course of business consistent with our past practice;
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make an investment in or loan to or partner with any third
party, in each case, in excess of $1,000,000 individually and
$5,000,000 in the aggregate (provided that such third party is
not an affiliate); provided, however, that such transactions
solely between us and any of our wholly-owned subsidiaries shall
not be prohibited;
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make, change or revoke any material tax election, or elect or
change any method of accounting for tax purposes other than in
the ordinary course of business consistent with our past
practice, or settle any material action in respect of taxes or
enter into any material agreement or contract in respect of
taxes with any taxing authority;
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engage in any transaction with, or enter into any contract with,
directly or indirectly, any current or former director, officer,
holder of capital stock or other equity interest, partner,
member or affiliate of ours or any of our subsidiaries, or make
any payment or distribution to any of the foregoing other than
with respect to matters related to our employment of such person
in the ordinary course of business consistent with our past
practice;
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cancel or materially alter or amend any insurance policy, or
enter into or amend any insurance broker or similar agreement,
except in the ordinary course of business and consistent with
our past practice;
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lay off or otherwise terminate the employment of any employees
within 91 days of the closing date of the merger for a
reason that would constitute an employment loss
under the Worker Adjustment and Retraining Notification Act or
any similar law;
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grant any license or sublicense or amend the terms of any
material rights with respect to any intellectual property, other
than in the ordinary course of business consistent with our past
practice;
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make or authorize any capital expenditure that individually or
in the aggregate exceeds $1,000,000, except for capital
expenditures made in the ordinary course of business and
consistent with our past practice (which such expenditures shall
not exceed $5,000,000 in the aggregate); or
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agree, commit or resolve to do or authorize any of the foregoing
items.
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Cooperation
of Central Parking
We have agreed to, and have agreed to cause our subsidiaries and
our respective officers, directors, employees, and other
representatives to use commercially reasonable efforts to
provide all necessary cooperation in connection with the debt
financing as may be reasonably requested by Parent, including:
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participating in meetings, due diligence and presentations;
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furnishing all available financial statements and other
pertinent financial data and information;
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cooperating with the marketing efforts and assisting in the
timely preparation of offering documents and other similar
documents and materials for lender and rating agency
presentations;
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satisfying the conditions precedent set forth in the debt
financing letters;
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assisting in obtaining documents, opinions, reports and other
items prepared by third parties;
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delivering any documents to facilitate the pledge of collateral,
the payoff of existing indebtedness and the release of related
encumbrances;
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allowing Parent and lenders representatives such access as
may be reasonably necessary for their property level due
diligence and evaluation of our current assets, cash management
and accounting systems, policies and procedures, and
establishing bank and other accounts and blocked account
agreements and lock box arrangements in connection with the debt
financing;
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assisting Parent in obtaining estoppel certificates;
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preparing documents and instruments to reasonably remove
exceptions on title policies, preparing any necessary conveyance
instruments and effecting such conveyances; and
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providing interim monthly financial statements.
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Non-Solicitation
of Transactions
We have agreed that Central Parking and our representatives will:
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cease immediately and cause to be terminated all activities,
discussions or negotiations with any parties with respect to any
offer or proposal relating to any transaction or proposed
transaction, other than the transaction contemplated by the
merger agreement, involving any (i) direct or indirect
acquisition of assets of Central Parking and its subsidiaries
equal to 20% or more of its consolidated assets or to which 20%
or more of Central Parkings revenues or earnings on a
consolidated basis are attributable (or any long-term lease
agreement having similar economic effect), (ii) direct or
indirect acquisition of beneficial ownership of 20% or more of
any class of equity securities of Central Parking,
(iii) tender offer or exchange offer that if consummated
would result in any person or group beneficially owning 20% or
more of any class of equity securities of Central Parking, or
(iv) merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or
similar transaction involving Central Parking (any transaction
or series of transactions referred to in clauses (i)
through (iv) is referred to as an acquisition
proposal in this proxy statement);
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not initiate, solicit, entertain, encourage or facilitate an
acquisition proposal or participate in, pursue or in any way
cooperate with any discussions or negotiations regarding an
acquisition proposal;
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not approve or recommend, pursue through a letter of intent or
agreement in principle, or propose publicly to approve or
recommend, any acquisition proposal; and
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notify Parent if any person makes any acquisition proposal or
similar inquiry.
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However, prior to obtaining shareholder approval of the
transaction, Central Parking may provide confidential
information to any person concerning an acquisition proposal,
but only if:
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it is in response to a bona fide written acquisition proposal
that is made after February 20, 2007, and not in breach of
our obligations not to solicit acquisition proposals;
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such information has been previously been provided to Parent or
Merger Sub or is provided to Parent or Merger Sub prior to, or
substantially concurrent with, the time it is provided to such
person;
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we provide, to the extent practicable, notice to Parent that we
are responding to such a proposal; and
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our board of directors determines in good faith, after
consultation with legal counsel, that the acquisition proposal
involves the acquisition of 50% or more of Central Parking and
is or is likely to lead to an acquisition proposal that is
reasonably likely to be consummated, taking into account all
legal, tax and regulatory aspects of the proposal, has committed
financing, to the extent required, on terms as likely to be
satisfied as the terms of the financing contemplated by the
merger agreement, and after consultation with our financial
advisor, we conclude is more favorable to our shareholders from
a financial point of view than the merger (each, a
superior proposal).
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We have agreed to notify Parent within 48 hours of receipt
of any acquisition proposal or similar inquiry. We must also
provide Parent copies of all materials provided to such person
not previously provided to Parent. We have also agreed to keep
Parent informed in all material respects of the status and
details of any acquisition proposal, if any.
We have agreed that our board of directors will not
(i) (A) withdraw, or publicly propose to withdraw or
amend, qualify or modify in a manner adverse to Parent, the
approval, adoption or recommendation by such board of directors
of the merger or fail to recommend to the shareholders in the
proxy statement that they approve the merger and give Central
Parking shareholder approval or (B) endorse, approve,
adopt, submit to
58
Central Parking shareholders or recommend, or propose publicly
to endorse any acquisition proposal; or (ii) enter into,
adopt or recommend, or publicly propose to enter into, adopt or
recommend, or allow Central Parking to execute or enter into,
any letter of intent, agreement in principle, or other similar
contract constituting or related to, or that is intended to or
would reasonably be expected to lead to, any acquisition
proposal (any actions described in clause (i) or
(ii) referred to as an adverse recommendation
change in this proxy statement). However, at any time
prior to the time of the shareholder approval, our board of
directors may, in response to an acquisition proposal that it
reasonably in its good faith judgment determines, after
consultation with its outside counsel and its financial
advisors, constitutes a superior proposal that was unsolicited
and made after the date of the merger agreement and that did not
result in a breach of the terms of the merger agreement:
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make an adverse recommendation change if such action is required
for our board of directors to comply with their fiduciary duties
under applicable laws; or
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if such action is required for our board of directors to comply
with their fiduciary duties under applicable laws, cause Central
Parking to terminate the merger agreement and concurrently enter
into an alternative acquisition agreement; provided that Central
Parking has given five business days written notice that
the board of directors intends to take such action and in
determining whether to make this recommendation change or to
terminate the merger agreement, the board of directors takes
into account any changes to the financial or other terms of the
merger agreement proposed by KCPC Holdings in response to the
notice of a superior proposal.
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We have agreed that Central Parking may not enter into an
agreement with respect to another proposal unless the merger
agreement is terminated pursuant to its terms and Central
Parking has paid KCPC Holdings the amounts due under the merger
agreement as a result of such termination. Notwithstanding the
foregoing, our board of directors may disclose to our
shareholders a position with respect to a tender offer or
exchange offer by a third party, provided that our board of
directors may not recommend that the shareholders tender their
shares in connection with such an offer, or withdraw or modify
its approval or recommendation of the merger agreement, unless
the provisions above related to fiduciary duty apply.
Shareholders
Meeting
We have agreed to use our reasonable best efforts to obtain from
shareholders their approval and adoption of the merger agreement
and the transactions contemplated thereby.
Conditions
to the Merger
Conditions to Each Partys
Obligations. Each partys obligation to
complete the merger is subject to the satisfaction or waiver of
the following conditions:
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the merger agreement must have been adopted by the affirmative
vote of the holders of a majority of all outstanding shares of
voting Central Parking common stock and not been revoked;
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any applicable waiting period (and any extension thereof) under
the HSR Act shall have expired or been terminated; and
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no temporary restraining order, preliminary or permanent
injunction or other judgment or order issued by any court or
agency of competent jurisdiction or other statute, law, rule,
legal restraint or prohibition shall be in effect preventing the
merger.
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Conditions to Parents Obligations. The
obligation of Parent to complete the merger is subject to the
satisfaction or waiver of the following additional conditions:
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we must have performed in all material respects all obligations,
and complied in all material respects with the agreements and
covenants we are required to perform under the merger agreement
at or prior to the closing date;
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our representations and warranties with respect to (i) our
capitalization, (ii) our authority and power to complete
the merger, and (iii) our obligations to pay fees or
commissions to brokers or finders in connection with the merger
must be true and correct in all material respects, or, if
qualified by materiality or material adverse effect, true and
correct in all respects, as of the effective time of the merger
as if made at and as of the effective time;
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all other representations and warranties made by us in the
merger agreement, with the exception of those listed above, must
be true and correct as of the effective time of the merger as if
made at and as of such time (without giving effect to any
qualification as to materiality or material adverse effect set
forth in such representations and warranties), except where the
failure to be so true and correct, individually and in the
aggregate, has not had, and would not reasonably be expected to
have, a material adverse effect on us;
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we must deliver to Parent and Merger Sub at closing a
certificate with respect to the satisfaction of the foregoing
conditions relating to representations, warranties, obligations,
covenants and agreements;
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we must obtain certain consents specified in the merger
agreement; and
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we must obtain certain payoff letters specified in the merger
agreement.
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Conditions to Central Parkings
Obligations. Our obligation to complete the
merger is subject to the satisfaction or waiver of the following
further conditions:
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Parent and Merger Sub must have performed in all material
respects all obligations required to be performed by them under
the merger agreement at or prior to the closing date;
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the representations and warranties of Parent and Merger Sub with
respect to their authority and power to complete the merger, and
their obligations to pay fees or commissions to brokers or
finders in connection with the merger shall be true and correct
in all material respects or if qualified by materiality or
material adverse effect, shall be true and correct in all
respects, as of the effective time of the merger as if made at
and as of the effective time;
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all other representations and warranties of Parent and Merger
Sub contained in the merger shall be true and correct at and as
of the effective time of the merger (without regard to any
qualifications therein as to materiality or material adverse
effect), except where such failure to be true and correct has
not and would not reasonably be expected to materially impair,
delay or prevent consummation of the merger;
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Parents and Merger Subs delivery to us at closing of
a certificate with respect to the satisfaction of the foregoing
conditions relating to representations, warranties, obligations,
covenants and agreements; and
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Parents and Merger Subs delivery to the paying agent
of the merger consideration and to Central Parking of funds
necessary to repay certain obligations and indebtedness.
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Termination
The merger agreement may be terminated at any time prior to the
effective time of the merger under the following circumstances:
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by mutual consent of Parent and us at any time prior to
completing the merger, even after our shareholders have approved
the merger agreement;
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by either Parent or us:
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if the merger is not completed by July 31, 2007 (other than
because of the failure to fulfill an obligation under the merger
agreement or failure to use its required efforts to complete the
transaction by the party seeking termination);
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if any injunction, order, decree or ruling permanently
restraining, enjoining or otherwise prohibiting the merger shall
become final and nonappealable (provided that the party seeking
to terminate shall have used its reasonable best efforts to
remove such order);
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if our shareholders fail to approve the merger agreement at the
special meeting (other than because of the failure to fulfill an
obligation under the merger agreement by the party seeking
termination); or
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at any time prior to shareholder approval, if our board of
directors, with respect to a superior proposal, executes an
acquisition agreement (as defined in the merger
agreement) in accordance with the terms of the merger agreement
as described above under The Merger Agreement
Non-Solicitation
of Transactions or resolves to do so;
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if our board makes an adverse recommendation change, or resolves
to do so; or
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if at any time after May 21, 2007, Parent shall not have
received financing to close the merger within five business days
after we notify them that all other conditions to the merger
have been satisfied.
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Termination
Fee and Expenses
We will be required to pay certain affiliates of Parent a
termination fee of $22.4 million, if any of the following
occur:
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the merger agreement is terminated by either party because our
shareholders did not approve the merger agreement at the special
meeting, and at or prior to the special meeting of shareholders
an acquisition proposal was publicly disclosed and within
12 months after the termination of the merger agreement we
enter into an acquisition agreement;
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the merger agreement is terminated by us because our board has
executed an acquisition agreement with respect to a superior
proposal in accordance with the terms of the merger agreement or
resolved to do so; or
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the merger agreement is terminated by Parent because our board
made an adverse recommendation change or resolved to do so.
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Parent will be required to pay us a termination fee of
$30.0 million, if:
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the merger agreement is terminated by us because at any time
after May 21, 2007, Parent shall not have received
financing to close the merger within five business days after we
notify them that all other conditions to the merger have been
satisfied.
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Amendments
and Waivers
The parties may modify, amend or waive the terms and provisions
of the merger agreement by written instrument signed by the
party against whom enforcement of any such modification or
amendment is sought (or, in the case of a waiver, by the
intended beneficiary of the waived term or provision).
61
VOTING
AGREEMENTS
In connection with the merger agreement, the Equity Sponsors
requested that Monroe Carell, members of his family and certain
related entities (the related shareholders),
representing approximately 47% of the outstanding common stock,
enter into voting agreements. The voting agreements provide that
the related shareholders will:
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at any meeting of our shareholders, vote all of such related
shareholders common stock:
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in favor of the approval of the merger agreement (whether or not
recommended by our board of directors or any committee thereof)
and the approval of the transactions contemplated thereby,
including the merger;
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in favor of the approval of any other matter that is required by
applicable law or a governmental entity to be approved by our
shareholders to facilitate the transactions contemplated by the
merger agreement, including the merger;
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against any proposal made in opposition to, or in competition or
inconsistent with, the merger or the merger agreement;
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against any action or agreement that would reasonably be
expected to result in any condition to the consummation of the
merger set forth in the merger agreement not being
fulfilled; and
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against any other action that would reasonably be expected to
impede, interfere with, delay, postpone or attempt to discourage
the consummation of the transactions contemplated by the merger
agreement, including the merger, or result in a breach of any of
the covenants, representations, warranties or other obligations
or agreements of Central Parking under the merger agreement,
which would materially and adversely affect Central Parking or
Parent or their respective abilities to consummate the
transactions contemplated by the merger agreement prior to the
Termination Date;
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appear at any shareholder meeting or otherwise cause their
common stock to be present for purposes of calculating a quorum,
and respond to each request by Central Parking for written
consent, if any, and vote all of their common stock, against any
acquisition proposal and against any extraordinary dividend by
Central Parking or change in the capital structure of Central
Parking, in each case except for the merger agreement; and
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irrevocably appoint the president of Parent, as its proxy and
attorney-in-fact,
to vote (or cause to be voted) all of the related
shareholders common stock, provided such proxy shall
automatically terminate upon the termination of the voting
agreements.
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The voting agreements shall terminate upon the earliest to occur
of: the effective time of the merger, the termination of the
merger agreement in accordance with its terms, and any reduction
in the amount, or any change in the form, of the consideration
to be paid to the shareholders pursuant to the merger agreement
without the written consent of the related shareholders.
The voting agreements further provide that the related
shareholders, from the date of such agreements until their
termination, shall not: directly or indirectly sell, grant,
assign, transfer, pledge, encumber, hypothecate or otherwise
dispose of any of their beneficially owned common stock, other
than transfers to members of the related shareholders
immediate family or a family trust of the related shareholders,
but only if, in each case, prior to the effectiveness of the
transfer, the transferee agrees in writing to be bound by the
terms of the voting agreement and notice of such transfer is
delivered to Parent; tender any beneficially owned common stock
into any tender or exchange offer; or grant any proxy with
respect to the beneficially owned common stock, deposit the
beneficially owned common stock into a voting trust, enter into
a voting agreement with respect to any of the beneficially owned
common stock or otherwise restrict the ability of the related
shareholders freely to exercise all voting rights with respect
thereto.
The voting agreements apply to the related shareholders solely
in such related shareholders capacity as the beneficial
owner of common stock of Central Parking and nothing in the
voting agreement restricts or limits any action taken by such
related shareholder in its capacity as a director or officer of
Central Parking or any of its affiliates. The taking of any
actions (or failure to act) by a related shareholder in its
capacity as an officer or director of Central Parking, or any of
its affiliates, will not be deemed to constitute a breach of the
voting agreement, regardless of the circumstances.
62
MARKET
PRICE AND DIVIDEND DATA
Our common stock is listed on the New York Stock Exchange under
the symbol CPC. The following table sets forth, for
the periods indicated, the high and low sales prices for Central
Parkings common stock as reported by the New York Stock
Exchange.
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High
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Low
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Fiscal Year 2007
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|
|
|
|
|
First Quarter
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|
$
|
20.01
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|
|
$
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16.37
|
|
Second Quarter
|
|
$
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23.82
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|
|
$
|
17.90
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|
Fiscal Year 2006
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
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15.54
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|
|
$
|
12.85
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|
Second Quarter
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|
$
|
16.84
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|
|
$
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12.96
|
|
Third Quarter
|
|
$
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16.11
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|
|
$
|
13.30
|
|
Fourth Quarter
|
|
$
|
17.97
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|
|
$
|
15.00
|
|
Twelve months
|
|
$
|
17.97
|
|
|
$
|
12.85
|
|
Fiscal Year 2005
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
15.72
|
|
|
$
|
12.55
|
|
Second Quarter
|
|
$
|
18.37
|
|
|
$
|
13.72
|
|
Third Quarter
|
|
$
|
17.76
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|
|
$
|
13.21
|
|
Fourth Quarter
|
|
$
|
16.33
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|
|
$
|
13.79
|
|
Twelve months
|
|
$
|
18.37
|
|
|
$
|
12.55
|
|
There were, as of April 19, 2007, approximately 4,050
holders of Central Parkings common stock, based on the
number of record holders of our common stock and an estimate of
the number of individual participants represented by security
position listings.
The closing sales prices per share of Central Parking common
stock, as reported on New York Stock Exchange on
November 27, 2006, the last full trading day before the
announcement that it had engaged Blackstone to assist in
evaluating strategic alternatives, was $17.23, and on
April 25, 2007, the latest practicable date before the
printing of this proxy statement, was $22.40.
If the merger is consummated, our common stock will be delisted
from the New York Stock Exchange, there will be no further
public market for shares of our common stock and each share of
our common stock, other than shares held by the company or owned
by the Parent or Merger Sub and shares that are contributed to
Parent in exchange for shares of Parents capital stock
pursuant to agreements with employee shareholders of Central
Parking, will be cancelled and converted into the right to
receive $22.53 in cash, without interest and less any applicable
tax withholding.
Since April 1997, Central Parking has distributed a quarterly
cash dividend of $0.015 per share of Central Parking common
stock.
63
SECURITY
OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The table below sets forth certain information regarding the
beneficial ownership of the Common Stock as of March 20,
2007, of (i) each person known to Central Parking to
beneficially own 5% or more of the Common Stock, (ii) each
director, nominee and Named Executive Officer, and
(iii) all directors, nominees and executive officers of
Central Parking as a group. On that date, 32,300,416 shares
were outstanding. Unless otherwise indicated, the persons listed
below have sole voting and investment power over the shares of
the Common Stock indicated.
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|
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|
|
|
|
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Amount and
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|
|
|
|
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Nature of
|
|
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|
|
|
|
Beneficial
|
|
|
|
|
Beneficial Owner
|
|
Ownership(1)
|
|
|
Percent(1)
|
|
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Monroe J. Carell, Jr.
|
|
|
6,265,491
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(2)
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|
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19.3
|
%
|
2401 21st Avenue South,
Suite 200 Nashville, Tennessee 37212
|
|
|
|
|
|
|
|
|
The Carell Childrens Trust(3)
|
|
|
6,257,127
|
|
|
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19.4
|
%
|
One Belle Meade Place,
Suite 310, 4400 Harding Road Nashville, Tennessee 37205
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors
L.P.
|
|
|
2,999,683
|
(4)
|
|
|
9.3
|
%
|
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
|
|
|
|
|
|
|
|
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Columbia Wanger Asset Management,
L.P.
|
|
|
2,424,000
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(5)
|
|
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7.5
|
%
|
227 West Monroe Street,
Suite 3000 Chicago, Illinois 60606
|
|
|
|
|
|
|
|
|
Raymond T. Baker
|
|
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8,333
|
(6)
|
|
|
*
|
|
William H. Bodenhamer
|
|
|
189,222
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(7)
|
|
|
*
|
|
James H. Bond
|
|
|
548,934
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(8)
|
|
|
1.7
|
%
|
Kathryn Carell Brown
|
|
|
2,463,887
|
(9)
|
|
|
7.6
|
%
|
Claude Blankenship
|
|
|
4,000
|
(10)
|
|
|
*
|
|
Edward G. Nelson
|
|
|
45,644
|
(11)
|
|
|
*
|
|
Emanuel J. Eads
|
|
|
284,242
|
(12)
|
|
|
*
|
|
Jeff Heavrin
|
|
|
15,371
|
(13)
|
|
|
*
|
|
Alan Kahn
|
|
|
204,631
|
(14)
|
|
|
*
|
|
Lewis Katz
|
|
|
703,686
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(15)
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|
|
2.2
|
%
|
Owen G. Shell
|
|
|
12,000
|
(16)
|
|
|
*
|
|
William B. Smith
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|
|
8,000
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(17)
|
|
|
*
|
|
Gregory J. Stormberg
|
|
|
93,125
|
(18)
|
|
|
*
|
|
Directors and executive officers
as a group (19 persons)
|
|
|
11,607,902
|
(19)
|
|
|
33.8
|
%
|
|
|
|
* |
|
Indicates less than 1%. |
|
(1) |
|
For purposes of this table, a person or group of persons is
deemed to have beneficial ownership of any shares
that such person or group has the right to acquire within
60 days after the date set forth above, or with respect to
which such person otherwise has or shares voting or investment
power. For purposes of computing beneficial ownership and the
percentages of outstanding shares held by each person or group
of persons on a given date, shares which such person or group
has the right to acquire within 60 days after such date are
shares for which such person has beneficial ownership and are
deemed to be outstanding for purposes of computing the
percentage for such person, but are not deemed to be outstanding
for the purpose of computing the percentage of any other person. |
|
(2) |
|
Includes options to purchase 215,044 shares of common stock
granted pursuant to the Key Personnel Plan, 23,396 deferred
stock units, and 840,999 shares held by the Ann and Monroe
Carell, Jr. Foundation and 16,326 held by a trust for which
Mr. Carell is a co-trustee. Excludes 6,257,127 shares
held by The Carell Childrens Trust. See footnote 3. |
64
|
|
|
(3) |
|
The Carell Childrens Trust is a trust created by
Mr. Carell in 1987 for the benefit of his children. The
trustee is Equitable Trust Company. |
|
(4) |
|
Based on Schedule 13G/A filed by Dimensional
Fund Advisors with the Securities and Exchange Commission
on February 9, 2007. |
|
(5) |
|
Based on Schedule 13G filed by Columbia Wanger Asset
Management with the Securities and Exchange Commission on
January 9, 2007. |
|
(6) |
|
Includes 4,334 directly owned shares and 3,999 shares of
restricted stock. |
|
(7) |
|
Includes 67,472 deferred stock units and options to purchase
121,750 shares of common stock. |
|
(8) |
|
Includes 267,750 shares of stock held in an irrevocable
trust that were granted under our 1995 Restricted Stock Plan in
connection with Mr. Bonds Performance Unit Agreement,
2,250 shares held by his spouse, 11,806 shares
directly owned, 5,378 deferred stock units, and options to
purchase 261,750 shares of common stock granted pursuant to
our Key Personnel Plan. This amount excludes 700 shares
held by the Andrew Bond Trust with respect to which
Mr. Bond disclaims beneficial ownership. |
|
(9) |
|
Includes 81,630 shares held by the 1996 Carell
Grandchildrens Trusts with respect to which
Mrs. Brown is a co-trustee, 166,342 shares held by the
Kathryn Carell Brown Foundation with respect to which
Mrs. Brown serves on the Board of Trustees,
79,303 shares held by the 2002 Kathryn Carell Brown
Charitable Remainder Trust, 17,050 shares held by trusts of
which Mrs. Brown is the trustee, 89,546 shares held by
trusts of which Mrs. Brown is a co-trustee and 3,999
restricted shares. Also includes 2,021,887 shares held by
various trusts of which Mrs. Brown serves on a committee of
three persons that has investment power with respect to Central
Parking common stock held by such trusts; because a majority of
the votes of such committee is required to vote or dispose of
such shares, Mrs. Brown does not have the independent
ability to determine the outcome of such a vote and therefore
disclaims beneficial ownership of such shares. This amount
excludes 6,257,127 shares held by The Carell
Childrens Trust with respect to which Mrs. Brown is a
beneficiary. See footnote 3. This amount also excludes
61,823 shares held by trusts for the benefit of
Mrs. Browns children and her spouse, of which
Mrs. Brown disclaims beneficial ownership. |
|
(10) |
|
Includes 3,333 restricted shares. |
|
(11) |
|
Includes 4,500 shares held by Mr. Nelsons
spouse, of which Mr. Nelson disclaims beneficial ownership,
and options to purchase 23,000 shares of common stock,
restricted shares of 3,999 and directly owned shares of 14,145. |
|
(12) |
|
Includes 18,616 deferred stock units, options to purchase
249,250 shares of common stock and 16,376 shares
directly owned by Mr. Eads. |
|
(13) |
|
Includes options to purchase 14,125 shares of common stock. |
|
(14) |
|
Includes 13,890 deferred stock units, options to purchase
179,250 shares of common stock and 11,491 shares
directly owned by Mr. Kahn. |
|
(15) |
|
Includes 667,779 shares of common stock owned by a
partnership of which Mr. Katz is a general partner, options
to purchase 25,250 shares of our common stock, 3,999
restricted shares and 6,658 shares directly owned by
Mr. Katz. |
|
(16) |
|
Includes 8,001 shares directly owned and 3,999 restricted
shares. |
|
(17) |
|
Includes 4,001 shares directly owned and 3,999 restricted
shares. |
|
(18) |
|
Includes options to purchase 93,125 shares of common stock. |
|
(19) |
|
Includes options to purchase 1,924,294 shares of our common
stock, 148,465 deferred stock units and 295,077 restricted
shares. |
65
DESCRIPTION
OF CENTRAL PARKING CORPORATION
Central Parking Corporation, a corporation organized under the
laws of Tennessee, 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, Greece, Italy and Switzerland. Central Parking
also provides ancillary products and services, including parking
consulting, shuttle, valet, on-street and parking meter
enforcement, and billing and collection services. As of
December 31, 2006, Central Parking operated 1,599 parking
facilities through management contracts, leased 1,279 parking
facilities, and owned 134 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. Pending the closing of the merger, Central Parking
intends to continue to implement certain elements of its
previously announced strategic plan, including the possible
divestiture of operations in certain markets and opportunistic
sales of real estate.
Our common stock is quoted on the New York Stock Exchange under
the symbol CPC.
DESCRIPTION
OF KCPC HOLDINGS, INC.
KCPC Holdings, Inc., which we also refer to as Parent, is a
Delaware corporation that was formed solely for the purpose of
acquiring Central Parking. Parent has not engaged in any
business except as contemplated by the merger agreement. The
principal office address of Parent is 111 Radio Circle, Mount
Kisco, New York 10549, telephone:
(914) 241-7430.
At the time of the merger, KCPC Holdings will be owned by,
directly or indirectly through one or more wholly-owned
subsidiaries, funds managed by affiliates of Kohlberg &
Company, L.L.C., Lubert-Adler Partners, L.P. and Chrysalis
Capital Partners, L.P.
DESCRIPTION
OF KCPC ACQUISITION, INC.
KCPC Acquisition, Inc., which we also refer to as Merger Sub, is
a Tennessee corporation that was formed solely for the purpose
of completing the proposed merger. Upon the consummation of the
proposed merger, KCPC Acquisition will cease to exist and
Central Parking will continue as the surviving corporation.
Merger Sub is wholly-owned by KCPC Holdings and has not engaged
in any business except as contemplated by the merger agreement.
The principal office address of Merger Sub is 111 Radio Circle,
Mount Kisco, New York 10549, telephone:
(914) 241-7430.
FUTURE
SHAREHOLDER PROPOSALS
If the merger is consummated, we will not have public
shareholders and there will be no public participation in any
future meetings of shareholders. If the merger is not
consummated, proposals of shareholders intended for inclusion in
Central Parkings proxy materials to be furnished to all
shareholders entitled to vote at the 2007 Annual Meeting of
Shareholders pursuant to SEC
Rule 14a-8
must be received at our principal executive offices not later
than such date as Central Parking shall publish in an upcoming
quarterly report on
Form 10-Q.
Proposals of shareholders received after such date will be
considered untimely.
Under our bylaws, shareholders who wish to make a proposal at
the 2007 Annual Meeting of Shareholders, other than one that
will be included in our proxy materials, must send notice in
written form to the Secretary (whose name appears on the cover
of this proxy statement) at our principal executive offices. To
be considered timely, the notice must be delivered to, or mailed
to and received at, the principal executive offices not less
than 60 days nor more than 90 days prior to the date
of the 2007 Annual Meeting of
66
Shareholders. If a shareholder who wishes to present a proposal
fails to notify Central Parking by these deadlines, the
shareholder would not be entitled to present the proposal at the
meeting. If, however, notwithstanding the requirements of our
bylaws, the proposal is brought before the meeting, then under
the SECs proxy rules the proxies solicited by management
with respect to the 2007 Annual Meeting of Shareholders will
confer discretionary voting authority with respect to the
shareholders proposal on the persons selected by
management to vote the proxies. If a shareholder makes a timely
notification, the proxies may still exercise discretionary
voting authority under circumstances consistent with the
SECs proxy rules. In order to minimize controversy as to
the date on which a proposal was received by Central Parking, it
is suggested that shareholders submit their proposals by
Certified Mail Return Receipt Requested.
HOUSEHOLDING
OF PROXY STATEMENT
Some banks, brokers and other nominee record holders may be
participating in the practice of householding proxy
statements. This means that only one copy of our proxy statement
may have been sent to multiple shareholders in your household.
We will promptly deliver a copy of the proxy statement to you if
you write or call us at the following address or phone number:
Central Parking Corporation, 2401 21st Avenue South,
Nashville, Tennessee 37212 Attention: Secretary,
(615) 297-4255.
If you would like to receive separate copies of annual reports
or proxy statements in the future, or if you are receiving
multiple copies and would like to receive only one copy for your
household, you should contact your bank, broker or other nominee
holder, or you may contact us at the above address and phone
number.
WHERE YOU
CAN FIND MORE INFORMATION
Central Parking files annual, quarterly and current reports,
proxy statements and other information with the SEC under the
Exchange Act. You may read and copy this information at, or
obtain copies of this information by mail from, the SECs
Public Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Please call
the SEC at
1-800-SEC-0330
for further information about the public reference room.
The filings of Central Parking with the SEC are also available
to the public from commercial document retrieval services and at
the web site maintained by the SEC at
http://www.sec.gov.
Any person, including any beneficial owner, to whom this proxy
statement is delivered may request copies of reports, proxy
statements or other information concerning us, without charge,
by calling D.F. King toll-free at (800) 431-9643. You may also
request a copy of these filings, at no cost, by writing or
calling Benjamin F. Parrish, Jr., Central Parking Corporation
Legal Department, 2401 21st Avenue South, Nashville,
Tennessee 37212;
(615) 297-4255;
or via
e-mail to
bparrish@parking.com.
This proxy statement is accompanied by certain documents we file
with the SEC. These documents are considered to be a part of
this proxy statement. These documents include:
|
|
|
|
|
Central Parkings Annual Report on
Form 10-K
for the year ended September 30, 2006;
|
|
|
|
Central Parkings Quarterly Report on
Form 10-Q
for the quarters ended December 31, 2006;
|
No persons have been authorized to give any information or to
make any representations other than those contained in this
proxy statement and, if given or made, such information or
representations must not be relied upon as having been
authorized by us or any other person. This proxy statement is
dated April 30, 2007. You should not assume that the
information contained in this proxy statement is accurate as of
any date other than that date, and the mailing of this proxy
statement to shareholders shall not create any implication to
the contrary.
YOUR VOTE IS IMPORTANT. Whether or not you plan to
attend the special meeting, please sign and date the enclosed
proxy card and return it promptly in the envelope provided or
vote through the Internet or by telephone as described in the
enclosed proxy card. Giving your proxy now will not affect your
right to vote in person if you attend the meeting.
If you have more questions about the merger or how to submit
your proxy, or if you need additional copies of this proxy
statement or the enclosed proxy card or voting instructions,
please call D.F. King at (800) 431-9643.
67
AGREEMENT
AND PLAN OF MERGER
by and among
KCPC HOLDINGS, INC.
KCPC ACQUISITION, INC.
and
CENTRAL PARKING CORPORATION
Dated as of
February 20, 2007
TABLE OF
CONTENTS
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ARTICLE I CERTAIN
DEFINITIONS
|
|
|
A-1
|
|
|
Section 1.1
|
|
|
Definitions
|
|
|
A-1
|
|
|
|
|
|
|
ARTICLE II THE
MERGER
|
|
|
A-7
|
|
|
Section 2.1
|
|
|
The Merger
|
|
|
A-7
|
|
|
Section 2.2
|
|
|
Effective Time
|
|
|
A-8
|
|
|
Section 2.3
|
|
|
Closing of the Merger
|
|
|
A-8
|
|
|
Section 2.4
|
|
|
Effects of the Merger; Further
Actions
|
|
|
A-8
|
|
|
Section 2.5
|
|
|
Certificate of Incorporation and
Bylaws
|
|
|
A-8
|
|
|
Section 2.6
|
|
|
Board and Officers of the
Surviving Corporation
|
|
|
A-9
|
|
|
Section 2.7
|
|
|
Effect on Capital Stock
|
|
|
A-9
|
|
|
Section 2.8
|
|
|
Company Options; Deferred Units
|
|
|
A-9
|
|
|
Section 2.9
|
|
|
Exchange Procedures
|
|
|
A-10
|
|
|
|
|
|
|
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
|
|
A-11
|
|
|
Section 3.1
|
|
|
Incorporation; Authorization
|
|
|
A-11
|
|
|
Section 3.2
|
|
|
Capitalization; Structure
|
|
|
A-13
|
|
|
Section 3.3
|
|
|
Sufficiency of Assets
|
|
|
A-14
|
|
|
Section 3.4
|
|
|
Financial Statements; Company
Reports; Absence of Changes
|
|
|
A-14
|
|
|
Section 3.5
|
|
|
Undisclosed Liabilities; Material
Adverse Effect
|
|
|
A-16
|
|
|
Section 3.6
|
|
|
Litigation; Orders
|
|
|
A-16
|
|
|
Section 3.7
|
|
|
Compliance with Laws; Permits
|
|
|
A-16
|
|
|
Section 3.8
|
|
|
Contracts
|
|
|
A-17
|
|
|
Section 3.9
|
|
|
Leases and Management Contracts
|
|
|
A-17
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|
|
Section 3.10
|
|
|
Taxes
|
|
|
A-19
|
|
|
Section 3.11
|
|
|
ERISA
|
|
|
A-20
|
|
|
Section 3.12
|
|
|
Environmental Matters
|
|
|
A-21
|
|
|
Section 3.13
|
|
|
Intellectual Property
|
|
|
A-22
|
|
|
Section 3.14
|
|
|
Brokers, Finders
|
|
|
A-22
|
|
|
Section 3.15
|
|
|
Affiliate Transactions
|
|
|
A-22
|
|
|
Section 3.16
|
|
|
Labor Matters
|
|
|
A-23
|
|
|
Section 3.17
|
|
|
Insurance
|
|
|
A-23
|
|
|
Section 3.18
|
|
|
[Reserved]
|
|
|
A-23
|
|
|
Section 3.19
|
|
|
[Reserved]
|
|
|
A-23
|
|
|
Section 3.20
|
|
|
Real Estate
|
|
|
A-23
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|
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|
|
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|
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|
ARTICLE IV REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
|
|
|
A-24
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|
|
Section 4.1
|
|
|
Incorporation; Authorization
|
|
|
A-24
|
|
|
Section 4.2
|
|
|
Litigation; Orders
|
|
|
A-25
|
|
|
Section 4.3
|
|
|
Financing
|
|
|
A-25
|
|
|
Section 4.4
|
|
|
Guarantee
|
|
|
A-25
|
|
|
Section 4.5
|
|
|
Interim Operations of Merger Sub
|
|
|
A-26
|
|
|
Section 4.6
|
|
|
Solvency
|
|
|
A-26
|
|
|
Section 4.7
|
|
|
Proxy Statement Information
|
|
|
A-26
|
|
A-i
|
|
|
|
|
|
|
|
|
|
Section 4.8
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Brokers, Finders
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A-26
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Section 4.9
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No Other Representation
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A-26
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ARTICLE V COVENANTS OF THE
COMPANY AND PARENT
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A-26
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Section 5.1
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Investigation of Business; Access
to Properties and Records
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A-26
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Section 5.2
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Agreement to Cooperate
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A-27
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Section 5.3
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Further Assurances
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A-28
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Section 5.4
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Conduct of Business
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A-28
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Section 5.5
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Public Announcements
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A-30
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Section 5.6
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Indebtedness; TIPS
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A-30
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Section 5.7
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Directors and Officers
Indemnification
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A-31
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Section 5.8
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Shareholder Approval
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A-32
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Section 5.9
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Restrictions on Parent and the
Company
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A-32
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Section 5.10
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Merger Sub
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A-32
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Section 5.11
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Acquisition Proposals
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A-32
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Section 5.12
|
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Notice of Developments
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A-34
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Section 5.13
|
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State Takeover Laws
|
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A-35
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Section 5.14
|
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Tax Sharing Agreements
|
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A-35
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Section 5.15
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Cooperation with Financing
|
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A-35
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Section 5.16
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Stock Exchange De-listing
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A-36
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ARTICLE VI CONDITIONS TO
THE OBLIGATIONS OF EACH PARTY TO CLOSE
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A-36
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Section 6.1
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Company Shareholder Approval
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A-36
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Section 6.2
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HSR
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A-36
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Section 6.3
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Laws; Orders
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A-36
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ARTICLE VII CONDITIONS OF
PARENTS OBLIGATION TO CLOSE
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A-36
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Section 7.1
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Covenants
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A-36
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Section 7.2
|
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Representations and Warranties
|
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A-36
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Section 7.3
|
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Certificate
|
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A-36
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Section 7.4
|
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[Reserved]
|
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A-36
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Section 7.5
|
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Consents
|
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A-37
|
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Section 7.6
|
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Payoff Letters
|
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A-37
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Section 7.7
|
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Government Approvals
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A-37
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ARTICLE VIII CONDITIONS TO
THE COMPANYS OBLIGATIONS TO CLOSE
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A-37
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Section 8.1
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Covenants
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A-37
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Section 8.2
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Representations and Warranties
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A-37
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Section 8.3
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Certificates
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A-37
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Section 8.4
|
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Merger Consideration and Other
Payments
|
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A-37
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ARTICLE IX
TERMINATION
|
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A-37
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Section 9.1
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Termination
|
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A-37
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Section 9.2
|
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Procedure and Effect of Termination
|
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A-38
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ARTICLE X
MISCELLANEOUS
|
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A-39
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Section 10.1
|
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Notices
|
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A-39
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Section 10.2
|
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Governing Law
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A-40
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A-ii
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Section 10.3
|
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Entire Agreement
|
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A-40
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Section 10.4
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Expenses
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A-40
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Section 10.5
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Counterparts
|
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A-40
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Section 10.6
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Successors and Assigns
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A-40
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Section 10.7
|
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Amendments and Waivers
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A-41
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Section 10.8
|
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No Implied Representation;
Non-Survival
|
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A-41
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Section 10.9
|
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Construction of Certain Provisions
|
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A-41
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Section 10.10
|
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Headings
|
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A-41
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Section 10.11
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Knowledge
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A-41
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Section 10.12
|
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Third-Party Beneficiaries
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A-41
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Section 10.13
|
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Partial Invalidity
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A-42
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Section 10.14
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Waiver of Jury Trial
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A-42
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A-iii
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this
Agreement), dated as of February 20, 2007,
is by and among KCPC Holdings, Inc., a Delaware corporation
(Parent), KCPC Acquisition, Inc., a Tennessee
corporation and wholly-owned subsidiary of Parent
(Merger Sub), and Central Parking
Corporation, a Tennessee corporation
(Company).
WHEREAS, the respective Boards of Directors of the Company,
Parent and Merger Sub have determined to engage in a business
combination transaction on the terms and subject to the
conditions stated herein;
WHEREAS, the respective Boards of Directors of Parent, Merger
Sub and the Company have approved this Agreement, and deem it
advisable and in the best interests of their respective
shareholders to consummate the merger of Merger Sub with and
into the Company on the terms and conditions set forth herein
(the Merger) whereby the Company would be the
surviving entity;
WHEREAS, concurrently with the execution of this Agreement, as a
condition and inducement to Parents willingness to enter
into this Agreement, the Parent and certain shareholders of the
Company are entering into a Voting Agreement, of even date
herewith, in respect of shares of Company Common Stock
beneficially owned by such shareholder of the Company (the
Voting Agreement);
WHEREAS, the Board of Company has recommended that this
Agreement be adopted by the Companys shareholders;
WHEREAS, upon the consummation of the Merger, each issued and
outstanding share of common stock, $0.01 par value, of the
Company (the Company Common Stock), other
than the Cancelled Shares and Rollover Shares, if any (each as
defined below), will be converted into the right to receive
$22.53 per share in cash, upon the terms and subject to the
conditions of this Agreement;
NOW, THEREFORE, in consideration of and reliance upon the
premises and the representations, warranties, covenants and
agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound hereby,
the parties hereto agree as follows:
ARTICLE I
CERTAIN
DEFINITIONS
Section 1.1 Definitions. As
used in this Agreement the following terms shall have the
following respective meanings:
Acquisition Agreement shall have the meaning
set forth in Section 5.11(c).
Acquisition Proposal shall have the meaning
set forth in Section 5.11(f).
Action shall mean any claim, action, cause of
action or suit (whether in contract or tort or otherwise),
litigation (whether at law or in equity, whether civil or
criminal), controversy, assessment, arbitration, investigation,
hearing, complaint, demand or proceeding to, from, by or before
any Governmental Authority.
Adverse Recommendation Change shall have the
meaning set forth in Section 5.11(c).
Affiliate shall mean, with respect to any
Person, any other Person, directly or indirectly, controlling,
controlled by or under common control with such first Person. A
Person shall be deemed to control another Person if such first
Person possesses, directly or indirectly, the power to direct or
to cause the direction of the management and policies of such
other Person, whether through the ownership of voting
securities, by contract or otherwise.
Agreement shall have the meaning set forth in
the Preamble.
Articles of Merger shall have the meaning set
forth in Section 2.2.
A-1
Audited Financial Statements shall have the
meaning set forth in Section 3.4(a).
Balance Sheet shall have the meaning set
forth in Section 3.4(a).
Board of Directors shall mean, with respect
to any Person, the board of directors of such Person.
Business Condition shall mean, with respect
to any Person, the condition (business, financial or otherwise),
assets (including the value thereof) and results of operations
of such Person and its Subsidiaries, taken as a whole.
Cancelled Shares shall have the meaning set
forth in Section 2.7(b).
Cap shall have the meaning set forth in
Section 5.7(b).
Certificate shall mean, with respect to
shares of Company Common Stock, certificates that, immediately
prior to the Effective Time, represented any such shares, and
with respect to Company Options, Deferred Units, or the TIPS,
the appropriate corresponding documentation that, immediately
prior to the Effective Time, represented such securities.
Closing shall have the meaning set forth in
Section 2.3.
Closing Date shall have the meaning set forth
in Section 2.3.
Code shall mean the Internal Revenue Code of
1986, as amended.
Common Stock Merger Consideration shall have
the meaning set forth in Section 2.7(a).
Company shall have the meaning set forth in
the Preamble.
Company Common Stock shall have the meaning
set forth in the Recitals.
Company Joint Venture shall mean any entity
(including partnerships, limited liability companies and other
business associations and joint ventures) that is not a
Subsidiary in which the Company or a Subsidiary of the Company,
directly or indirectly, owns an equity or ownership interest and
(i) does not have voting power under ordinary circumstances
to elect a majority of the board of directors, board of
managers, executive committee or other person or body performing
similar functions but in which the Company or a Subsidiary of
the Company has rights with respect to the management of such
Person
and/or
(ii) which operates or is a general partner or managing
partner or equivalent of an entity which operates, or receives
the financial benefits of operating, one or more parking
facilities.
Company Losses shall mean any Losses incurred
by the Company or any of its Subsidiaries.
Company Options shall have the meaning set
forth in Section 2.8(a).
Company Option Plans shall have the meaning
set forth in Section 2.8(a).
Company Permits shall have the meaning set
forth in Section 3.7(b).
Company Plans shall have the meaning set
forth in Section 3.11(a).
Company Preferred Stock shall mean the shares
of preferred stock, $0.01 par value, of the Company.
Company Required Governmental Approvals shall
have the meaning set forth in Section 3.1(d).
Company Reports shall have the meaning set
forth in Section 3.4(b).
Company Shareholder Approval shall have the
meaning set forth in Section 3.1(b).
Confidentiality Agreements shall have the
meaning set forth is Section 5.1(b).
Contracts shall mean, with respect to any
Person, any contract, agreement, deed, mortgage, lease,
sublease, license, commitment, undertaking or arrangement,
whether written or oral, or other document or instrument to
which or by which such Person is a party or otherwise subject or
bound or to which or by which any property, business, operation
or right of such Person is subject or bound.
A-2
Convertible Debentures shall mean the
5.25% Convertible Subordinated Debentures due 2028 issued
by the Company to its wholly-owned subsidiary, Central Parking
Finance Trust, in connection with the TIPS.
Convertible Securities shall mean any
subscriptions, options, warrants, debt securities or other
securities convertible into or exchangeable or exercisable for
any shares of Equity Securities.
Credit Agreements shall mean the Credit
Facilities and the Indenture.
Credit Facilities shall mean (i) the
Companys Credit Agreement dated February 28, 2003, as
amended August 12, 2003, June 4, 2004,
January 25, 2005, August 11, 2005 and April 7,
2006, by and among Central Parking Corporation and certain
Affiliates, Bank of America, N.A. as Administrative Agent, and
the other Lenders that are a party thereto, (ii) the Loan
Agreement dated March 15, 2000 by and among Black Angus LLC
and Fleet Bank, N.A., with Central Parking Corporation as
Guarantor and (iii) the Sterling Overdraft Facility.
Debt means, with respect to any Person, and
without duplication, all obligations (including all obligations
in respect of principal, accrued interest, penalties, fees and
premiums) of such Person (a) for borrowed money,
(b) evidenced by notes, bonds, debentures or similar
obligations, (c) for the deferred purchase price of
property, goods or services (other than trade payables or
accruals incurred in the ordinary course of business) or created
or arising under any conditional sale or other title retention
agreement with respect to property, (d) under capital
leases (in accordance with GAAP), (e) in respect of letters
of credit and bankers acceptances, (f) for
obligations arising out of Contracts relating to interest rate
protection, swap agreements and collar agreements and
(g) in the nature of guarantees of the obligations
described in clauses (a) through (f) above of any
other Person; provided, however, as used in
Section 3.4(c)(x) and 3.5 only, that the term
Debt shall not include obligations under the Leases
and Management Agreements.
Deferred Units shall have the meaning set
forth in Section 2.8(b).
Deferred Units Amendments and Consents shall
have the meaning set forth in Section 2.8(b).
DGCL shall mean the Delaware General Corporation
Law.
Director Plan shall have the meaning set
forth in Section 2.8(a).
Disclosure Schedule shall have the meaning
set forth in Article III.
Effective Time shall have the meaning set
forth in Section 2.2.
Employee Benefit Plan shall mean each
employee benefit plan (within the meaning of
Section 3(3) of ERISA), including pension, profit sharing,
401(k), severance, welfare, disability, deferred compensation,
and all other employee benefit plans, including severance, stock
purchase, stock option, employment, vacation,
change-in-control,
fringe benefit, bonus, incentive agreements, programs, policies
or other arrangements, whether or not subject to ERISA
(including any funding mechanism therefor now in effect or
otherwise), whether formal or informal, or oral or written.
Encumbrance shall mean (i) any mortgage,
pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement
of any kind or nature whatsoever (including any conditional sale
or other title retention agreement), (ii) any financing
lease having substantially the same economic effect as any of
the foregoing described in clause (i), and (iii) with
respect to any Owned Real Estate, any (a) lease, license,
sublease or sublicense for any real property, any other right,
concession or other agreement to use, possess or occupy such
Owned Real Estate, and (b) any covenant, condition,
restriction, easement, encumbrance, or other similar matter
affecting title to such Owned Real Estate.
End Date shall have the meaning set forth in
Section 9.1(b).
Environmental Laws shall mean all Laws
relating to pollution, protection of human health from Hazardous
Materials or the environment (including ambient air, surface
water, groundwater, land surface
A-3
or subsurface strata), including those relating to emissions,
discharges, releases or threatened releases of Hazardous
Materials into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of, or exposure to, Hazardous
Materials, as well as all authorizations, codes, decrees,
injunctions, judgments, licenses, notices, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.
Environmental Permits shall mean any permit,
approval, license or other authorization required for the
Company to conduct its business under or issued pursuant to any
applicable Environmental Law.
Equity Securities shall mean any shares of
capital stock of, or other equity interests or voting securities
in, the Company or any of its Subsidiaries, as applicable.
Equity Sponsors shall mean, collectively,
Kohlberg Investors V, L.P., Lubert-Adler Real Estate
Fund V, L.P. and Chrysalis Capital Partners, LP.
ERISA shall mean the Employee Retirement
Income Security Act of 1974, as amended.
ERISA Affiliate shall mean, with respect to
any entity, trade or business, any other entity, trade or
business that is, or was at the relevant time, a member of a
group described in Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA that
includes or included the first entity, trade or business, or
that is, or was at the relevant time, a member of the same
controlled group as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.
ESPP shall have the meaning set forth in
Section 2.8(d).
Exchange Act shall have the meaning set forth
in Section 3.4(b).
Financial Statements shall have the meaning
set forth in Section 3.4(a).
Financing shall have the meaning set forth in
Section 4.3(a).
Financing Letters shall have the meaning set
forth in Section 4.3(a).
Foreign Plans shall have the meaning set
forth in Section 3.11(d).
GAAP shall mean United States generally
accepted accounting principles, as in effect from time to time,
consistently applied with past practice.
Governmental Authority shall have the meaning
set forth in Section 3.1(d).
Governmental Order shall have the meaning set
forth in Section 3.6.
Guarantees shall have the meaning set forth
in Section 4.4.
Hazardous Materials shall mean any pollutant,
petroleum or petroleum products, contaminant or toxic or
hazardous material including (i) toxic mold, radioactive
materials, asbestos that is friable, urea formaldehyde foam
insulation, transformers or other equipment that contain
dielectric fluid containing levels of poly-chlorinated
biphenyls, and radon gas at levels exceeding the EPA guidance
level of four (4) picocuries per liter, and (ii) any
chemicals, materials or substances defined as hazardous
materials, extremely hazardous wastes,
restricted hazardous wastes, toxic
substances, toxic pollutants or words of
similar import under any applicable Environmental Law.
Highly Compensated Employee shall have the
meaning set forth in Section 5.4(b)(viii).
HSR Act shall mean the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
Indenture shall mean the Indenture dated
March 18, 1998 between the Company and Chase Bank of Texas,
N.A. as Trustee related to the Convertible Debentures.
Insurance Policies shall have the meaning set
forth in Section 3.17(a).
Intellectual Property shall refer to all
rights, title and interests, wherever in the world located, in
and to trademarks, service marks, trade dress and other indicia
of source of origin, non-patented formulae,
A-4
copyrights, patents, inventions, know-how, manufacturing
procedures, processes, trade secrets, proprietary information,
software, registered and unregistered design rights, any and all
registrations, applications, licenses, all works, discoveries,
innovations, know-how, information, and all other forms of
technology, including improvements, modifications, works in
process, derivatives or changes, whether tangible or intangible,
embodied in any form, whether or not protectible or protected by
patent, copyright, trade secret law or otherwise, and
contractual obligations relating to any of the foregoing and all
rights to obtain renewals, continuations, divisions or other
extensions of legal protections pertaining thereto, in each
case, that are used in the business of the Company and its
Subsidiaries. For the avoidance of doubt Intellectual Property
includes all material rights to characters and material
proprietary designs granted to the Company or its Subsidiaries.
Interim Financial Statements shall have the
meaning set forth in Section 3.4(a).
IT Assets means the Companys and its
Subsidiaries computers, computer software, firmware,
middleware, servers, workstations, routers, hubs, switches, data
communications lines, and all other information technology
equipment, and all associated documentation.
Key Personnel Plan shall have the meaning set
forth in Section 2.8(a).
Knowledge of the Company shall have the
meaning set forth in Section 10.11.
Knowledge of the Parent shall have the
meaning set forth in Section 10.11.
Law shall mean any United States federal,
state or local or foreign law, statute, standard, ordinance,
code, rule, regulation, or any Governmental Order or any similar
provision having the force or effect of law.
Lease shall have the meaning set forth in
Section 3.9(a).
Leased Real Property shall have the meaning
set forth in Section 3.9(a).
Letter of Transmittal shall have the meaning
set forth in Section 2.9(b).
Liabilities shall have the meaning set forth
in Section 3.5.
Long-Term Incentive Plan shall have the
meaning set forth in Section 2.8(a).
Losses shall mean all damages, losses, fines,
costs and expenses (including, without limitation, settlement
costs and any legal, accounting, or other expenses for
investigating or defending any Actions or threatened Actions).
Management Agreement shall have the meaning
set forth in Section 3.9(a).
Managed Real Property shall have the meaning
set forth in Section 3.9(a).
Material Adverse Effect shall mean any event,
effect, circumstance or change, as applicable, that,
individually or in the aggregate, is, or is reasonably likely to
be, materially adverse to the Business Condition of the Company
and its Subsidiaries taken as a whole (that is not cured prior
to Closing), or on the ability of the Company to consummate on a
timely basis the transactions contemplated by this Agreement,
other than any event, effect, circumstance or change arising or
resulting from or relating to (w) the economy, the
financial or securities markets in general or the industries in
which the Company
and/or its
Subsidiaries operate, (x) any acts of terrorism, military
actions or war, (y) rules or restrictions imposed by any
governmental or quasi-governmental agency or similar authority
that affect the Companys business or industry or
(z) the announcement or pendency of this Agreement or the
transactions contemplated hereby; provided that any
event, effect, circumstance or change in the foregoing
clauses (w) shall not constitute or give rise to a Material
Adverse Effect only if and to the extent that such event, effect
or change does not disproportionately affect the Company and its
Subsidiaries, taken as a whole, or the industry in which they
operate, as compared to other Persons or industries, as
applicable, impacted thereby.
Material Contracts shall have the meaning set
forth in Section 3.8.
A-5
Material Leases shall have the meaning set
forth in Section 3.9(a).
Material Management Agreements shall have the
meaning set forth in Section 3.8.
Merger shall have the meaning set forth in
the Recitals.
Merger Sub shall have the meaning set forth
in the Preamble.
Merger Sub Common Stock shall have the
meaning set forth in Section 2.7(c).
New Financing Commitments shall have the
meaning set forth in Section 4.3(c).
Notice of Superior Proposal shall have the
meaning set forth in Section 5.11(c).
Obligations shall mean the obligations
described in the Credit Facilities.
Option Amendments and Consents shall have the
meaning set forth in Section 2.8(a).
Owned Real Estate shall have the meaning set
forth in Section 3.20.
Parent shall have the meaning set forth in
the Preamble.
Parent Disclosure Schedule shall have the
meaning set forth in Article IV.
Parent Required Governmental Approvals shall
have the meaning set forth in Section 4.1(d).
Paying Agent shall have the meaning set forth
in Section 2.9(a).
Permitted Encumbrance shall mean any
(i) Encumbrances disclosed on the Balance Sheet or notes
thereto or securing liabilities reflected on the Balance Sheet;
(ii) liens incurred and pledges and deposits made in the
ordinary course of business in connection with workers
compensation, unemployment insurance, old-age pensions and other
social security benefits under applicable Law; (iii) zoning
(and related variances or legally nonconforming uses),
entitlement, building and other land use regulations imposed by
Governmental Authorities having jurisdiction over any Owned Real
Estate or Leased Real Property; (iv) covenants, conditions,
restrictions, easements, encumbrances, encroachments, and other
similar matters affecting title to but not adversely affecting
current occupancy or use of the Owned Real Estate or Leased Real
Property in any material respect or that either (x) are of
record as of the date hereof as identified in title commitments
or title policies (pro forma or final), or (y) would have
been disclosed on an ALTA/ACSM survey of the Owned Real Estate
or Leased Real Property as of the date hereof; (v) liens
securing the performance of bids, tenders, leases, contracts
(other than for the repayment of debt), statutory obligations,
surety, customs and appeal bonds and other obligations of like
nature, incurred as an incident to and in the ordinary course of
business consistent with past practice which liens would not be
material to the Company and its Subsidiaries taken as a whole;
(vi) liens imposed by Law, such as carriers,
warehousemans, mechanics, materialmens,
landlords, laborers, suppliers and
vendors liens, incurred in good faith in the ordinary
course of business which liens would not be material to the
Company and its Subsidiaries taken as a whole;
(vii) statutory liens securing the payment of Taxes, either
(A) not delinquent or (B) being contested in good
faith by appropriate legal or administrative proceedings, which
are reflected in the Financial Statements (to the extent
required) and for which appropriate reserves have been
established in accordance with GAAP; (viii) any
Encumbrances arising under the Credit Agreements that will be
discharged upon payment in full pursuant to the payoff letters
contemplated in Section 7.6 of the Disclosure Schedule; and
(ix) leases, licenses, subleases, sublicenses or other
agreements to use, possess or occupy any Leased Real Estate or
Owned Real Estate that are (A) identified in the Disclosure
Statement or in agreements made available to Parent by the
Company, or (B) incurred in the ordinary course of business
consistent with past practice.
Person shall mean any individual,
corporation, partnership, limited liability company, joint
venture, trust, unincorporated organization, or other form of
business or legal entity.
Plans shall have the meaning set forth in
Section 3.11(a).
Proxy Statement shall have the meaning set
forth in Section 5.8.
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Qualified Plans shall have the meaning set
forth in Section 3.11(a).
Required Consents shall mean the third party
consents set forth in Section 7.5.
Restricted Stock shall have the meaning set
forth in Section 2.8(c).
Rollover Shares shall mean each Equity
Security or Convertible Security owned by an employee of the
Company contributed by such employee to the Parent immediately
prior to the Effective Time in exchange for equity securities or
convertible securities of Parent pursuant to an agreement
between such employee and the Parent to be entered into between
the date hereof and the Closing Date.
Sarbanes-Oxley Act shall have the meaning set
forth in Section 3.4(d).
SEC shall mean the Securities and Exchange
Commission.
Securities Act shall mean the Securities Act
of 1933, as amended, and the rules and regulations promulgated
thereunder.
Special Meeting shall have the meaning set
forth in Section 5.8.
Sterling Overdraft Facility shall mean the
Sterling Overdraft Facility and other Ancillary Facilities dated
October 30, 2002 by and between Central Parking System of
the UK Limited and Barclay Bank PLC.
Subsidiary or Subsidiaries
shall mean any corporation, partnership, joint venture or other
legal entity of which the Company or such other Person, as the
case may be with respect to when such term is used (either alone
or through or together with any other Subsidiary thereof), owns,
directly or indirectly, stock or other equity interests the
holders of which are generally entitled to elect a majority of
the board of directors or other governing body or other Persons
performing similar functions of such corporation or other legal
entity.
Superior Proposal shall have the meaning set
forth in Section 5.11(g).
Surviving Corporation shall have the meaning
set forth in Section 2.1.
Tax Return shall have the meaning set forth
in Section 3.10(f)
Taxes shall have the meaning set forth in
Section 3.10(e)
Taxing Authority shall mean any Governmental
Authority or quasi-governmental or private body having
jurisdiction over the assessment, determination, collection or
imposition of any Tax.
Tennessee Secretary shall have the meaning
set forth in Section 2.2.
TBCA shall mean the Tennessee Business
Corporation Act.
TIPS shall mean the 5.25% convertible
Trust Issued Preferred Securities issued by Central Parking
Finance Trust, a statutory business trust and wholly owned
subsidiary of the Company, the proceeds from the issuance of
which were invested in the Convertible Debentures of the Company.
Trust Agreement shall mean the Amended
and Restated Declaration of Trust of Central Parking Finance
Trust, dated as of March 18, 1998.
Voting Agreement shall have the meaning set
forth in the Recitals.
WARN Act shall have the meaning set forth in
Section 5.4(b)(xx).
ARTICLE II
THE MERGER
Section 2.1 The
Merger. At the Effective Time, and subject to
and upon the terms and conditions of this Agreement and in
accordance with the TBCA, Merger Sub shall be merged with and
into the Company and the separate corporate existence of Merger
Sub shall cease. The Company shall continue as the surviving
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corporation (sometimes referred to as the Surviving
Corporation) under the laws of the State of Tennessee
in the Merger, and as of the Effective Time shall be a
wholly-owned Subsidiary of Parent.
Section 2.2 Effective
Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in
Articles VI, VII and VIII, but on or prior to the Closing
Date, the Company, Parent and Merger Sub will cause the articles
of merger with respect to the Merger meeting the applicable
requirements of the TBCA (Articles of Merger)
to be executed and filed with the Secretary of State of the
State of Tennessee in accordance with the provisions of the
TBCA. The Merger shall become effective at such time as the
Articles of Merger have been duly filed with the Secretary of
State of the State of Tennessee (the Tennessee
Secretary), or at such later time as is agreed between
the parties and specified in the Articles of Merger
(Effective Time). If the Tennessee Secretary
requires any changes in the Articles of Merger as a condition to
filing or issuing a certificate to the effect that the Merger is
effective, Merger Sub, Parent
and/or the
Company shall execute any necessary document incorporating such
changes, provided such changes are not inconsistent with and do
not result in any material change in the terms of this Agreement.
Section 2.3 Closing
of the Merger. Unless this Agreement shall
have been terminated and the transactions herein contemplated
shall have been abandoned pursuant to Article IX, and
subject to the satisfaction or waiver of each of the conditions
contained in Articles VI, VII and VIII, the closing of the
Merger (Closing) shall take place at
10:00 a.m., local time, on the second business day after
satisfaction or waiver of the conditions set forth in
Articles VI, VII and VIII (the Closing
Date), at the offices of Ropes & Gray LLP,
1211 Avenue of the Americas, New York, NY, unless another time,
date or place is agreed to in writing by the parties hereto;
provided, that the Closing shall not occur prior to
ninety (90) days from the date of this Agreement unless
agreed to by the Parent and Merger Sub in their sole discretion.
Section 2.4 Effects
of the Merger; Further Actions.
(a) From and after the Effective Time, the Merger shall
have the effects set forth in the Articles of Merger and in the
applicable provisions of the TBCA. Without limiting the
generality of the foregoing, at the Effective Time, all the
property, rights, privileges, powers and franchises of the
Company and Merger Sub shall vest in the Surviving Corporation
following the Merger, and all debts, liabilities and duties of
the Company and Merger Sub shall become the debts, liabilities
and duties of the Surviving Corporation following the Merger.
(b) If at any time after the Effective Time any further
action is necessary to vest in the Surviving Corporation the
title to all property or rights of Merger Sub or the Company,
the authorized officers and directors of the Surviving
Corporation are fully authorized in the name of Merger Sub or
the Company, as the case may be, to take, and shall take, any
and all such lawful action.
(c) At the Effective Time, by virtue of the Merger and
without any action on the part of the Company, Parent, Merger
Sub, or the holders thereof, all shares of Company Common Stock
(other than Rollover Shares or Cancelled Shares, if any) shall
no longer be outstanding and shall automatically cease to exist
and each holder of a Certificate shall cease to have any rights
with respect thereto, except the right to receive for each share
of Company Common Stock, the Common Stock Merger Consideration
in accordance with Section 2.7(a). In addition to the
foregoing, at the Effective Time by virtue of the Merger and the
terms of the Trust Agreement and the Indenture, and without
any action on the part of the Company, Parent, Merger Sub or the
holders thereof, the TIPS shall no longer be convertible into
Company Common Stock. Notwithstanding anything to the contrary
herein, upon surrender of any Certificate representing
fractional shares of Company Common Stock, the holder thereof
shall be paid the cash value of such fraction, which shall be
equal to such fraction multiplied by the Common Stock Merger
Consideration.
Section 2.5 Certificate
of Incorporation and Bylaws. At the Effective
Time:
(a) The certificate of incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by
applicable Law.
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(b) The bylaws of the Company, as in effect immediately
prior to the Effective Time, shall be the bylaws of the
Surviving Corporation until thereafter changed or amended as
provided therein or by applicable Law.
Section 2.6 Board
and Officers of the Surviving Corporation. At
the Effective Time:
(a) The directors of Merger Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving
Corporation following the Merger, each to hold office until the
earlier of such individuals resignation or removal or
until a successor is duly elected and qualified, as the case may
be.
(b) The officers of the Surviving Corporation following the
Merger shall be the persons set forth on Exhibit A
attached hereto, each to hold office until the earlier of such
individuals resignation or removal or until a successor is
duly elected and qualified, as the case may be.
Section 2.7 Effect
on Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of
the Company, Parent, Merger Sub or any holder of any shares of
Company Common Stock or any shares of capital stock of Merger
Sub:
(a) Conversion of Company Common
Stock. Subject to the terms and upon the
conditions herein (including Schedule 5.2 of the
Disclosure Schedule), each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other
than the Cancelled Shares and the Rollover Shares, if any) shall
be converted into the right to receive an amount equal to $22.53
in cash without interest (Common Stock Merger
Consideration).
(b) Cancellation of Company-Owned Stock and
Parent-Owned Stock. Each share of Company
Common Stock that is owned by Parent, Merger Sub and the Company
issued and outstanding immediately prior to the Effective Time
(including Rollover Shares, if any) (the Cancelled
Shares) (i) shall be automatically be cancelled
and retired and (ii) shall cease to exist, and no Common
Stock Merger Consideration shall be delivered with respect
thereto.
(c) Common Stock of Merger
Sub. Each share of common stock, par value
$0.01 per share, of Merger Sub (Merger Sub Common
Stock) issued and outstanding immediately prior to the
Effective Time shall be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving
Corporation.
(d) TIPS. The TIPS issued and
outstanding immediately prior to the Effective Time will not be
convertible at or after the Effective Time into shares of
Company Common Stock. Such conversion feature thereafter will
permit the conversion of TIPS into an amount equal to the
product of (i) the Common Stock Merger Consideration times
(ii) the number of shares of Company Common Stock into
which the TIPS could have been converted as of the Effective
Time.
(e) Adjustment of Common Stock Merger
Consideration. Without limiting the other
provisions of this Agreement, if at any time during the period
between the date of this Agreement and the Effective Time, any
change in the number of outstanding shares of Company Common
Stock shall occur as a result of a reclassification,
recapitalization, stock split (including a reverse stock split),
or combination, exchange or readjustment of shares, or any stock
dividend or stock distribution with a record date during such
period, the Common Stock Merger Consideration as provided in
Section 2.7(a) shall be equitably adjusted to reflect such
change (including, without limitation, to provide holders of
shares of Company Common Stock the same economic effect as
contemplated by this Agreement prior to such transaction).
Section 2.8 Company
Options; Deferred Units.
(a) Except as separately agreed to by Parent and any Person
holding Company Options (as defined below), subject to and upon
the terms and conditions herein, all stock options (the
Company Options) granted under the
Companys 1995 Incentive and Nonqualified Stock Option Plan
for Key Personnel (the Key Personnel Plan),
as amended, the Companys 1996 Nonqualified Stock Option
Plan for Directors, as amended (the Director
Plan), or the Companys 2006 Long-Term Incentive
Plan (the Long-Term Incentive Plan and,
together with the Key Personnel Plan and the Director Plan, the
Company Option
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Plans), or otherwise, which remain unvested
immediately prior to the Effective Time shall immediately vest
and become exercisable pursuant to the provisions of the Company
Option Plans at the Effective Time. Except as separately agreed
to by Parent and any Person holding Company Options, all Company
Options shall be immediately cancelled concurrently with the
Effective Time and each holder of a Company Option that is
outstanding immediately prior to the Effective Time shall be
entitled to receive an amount in cash equal to the product of
(i) the number of shares (or fraction thereof) of Company
Common Stock subject to such Company Option at the time of such
cancellation, multiplied by (ii) the positive difference
between (A) the Common Stock Merger Consideration, and
(B) the per share exercise price of such Company Option. In
the event that the strike price of a Company Option exceeds the
Common Stock Merger Consideration, such Company Option shall be
cancelled concurrent with the Effective Time without payment
therefor. Prior to the Effective Time, the Company shall take
any and all actions necessary to effectuate this
Section 2.8(a) including, without limitation, adopting any
plan amendments and obtaining any required consents (the
Option Amendments and Consents).
(b) Except as separately agreed to by Parent and any Person
holding Deferred Units (as defined below), subject to and upon
the terms and conditions herein, all deferred units granted
under the Companys 1996 Deferred Stock Unit Plan (the
Deferred Units) that remain unvested
immediately prior to the Effective Time shall immediately vest.
Except as separately agreed to by Parent and any Person holding
Deferred Units, all Deferred Units shall be immediately
cancelled concurrently with the Effective Time and each holder
of a Deferred Unit that is outstanding immediately prior to the
Effective Time shall be entitled to receive an amount in cash
equal to the product of (i) the number of shares (or
fraction thereof) of Company Common Stock issuable with respect
to such Deferred Unit at the time of such cancellation,
multiplied by (ii) the Common Stock Merger Consideration.
Prior to the Effective Time, the Company shall take any and all
actions necessary to effectuate this Section 2.8(b)
including, without limitation, adopting any plan amendments and
obtaining any required consents (the Deferred Units
Amendments and Consents).
(c) Except as separately agreed to by Parent and any Person
holding Restricted Stock (as defined below), subject to and upon
the terms and conditions herein, all restricted shares of
Company Common Stock (the Restricted
Stock) that remain restricted immediately prior
to the Effective Time shall immediately become unrestricted and
will be treated for all purposes in accordance with
Section 2.7(a) hereof.
(d) The Board of Directors of the Company will take all
actions necessary to continue the suspension of the 1996
Employee Stock Purchase Plan (ESPP) from the
date hereof through the Effective Time. The Board of Directors
of the Company shall, prior to the Effective Time, take all
actions necessary to terminate the ESPP coincident with the
Effective Time.
Section 2.9 Exchange
Procedures.
(a) Paying Agent. Prior to the
Effective Time, for the benefit of holders of Company Common
Stock and Company Options, Parent shall designate, or shall
cause to be designated (pursuant to an agreement in form and
substance reasonably acceptable to Parent and the Company), a
bank or trust company reasonably acceptable to the Company to
act as agent for the payment of the cash amounts contemplated
pursuant to Section 2.7(a) and Section 2.8 upon
surrender of Certificates in accordance with this
Article II (Paying Agent), from time to
time at or after the Effective Time. Prior to the Effective
Time, Parent shall deposit, or cause Merger Sub to deposit, with
the Paying Agent cash in an amount sufficient for the payment of
the aggregate amounts payable pursuant to Section 2.7(a)
and Section 2.8.
(b) Exchange Procedure. As soon as
reasonably practicable after the date hereof but in no event
later than the tenth business day prior to the anticipated
Closing Date (as mutually and reasonably determined by Parent
and the Company), Parent shall cause the Paying Agent to mail to
each holder of record of a Certificate (i) a form of letter
of transmittal (the Letter of Transmittal) in
customary form (with no representations or warranties other than
with respect to ownership) that specifies that delivery shall be
effected and risk of loss and title to the Certificates shall
pass only upon proper delivery of the Certificates to the Paying
Agent, and (ii) instructions for use in effecting the
surrender of Certificates in exchange for the amount of cash
such holder shall be entitled to receive pursuant to
Section 2.7(a) and Section 2.8. Following the Closing,
upon surrender of a Certificate for cancellation to the Paying
Agent, together with such Letter of Transmittal, duly
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completed and validly executed, and such other documents as may
reasonably be required by the Paying Agent consistent with this
Section 2.9, the holder of such Certificate shall be
entitled to receive in exchange therefor the amount of cash into
which the shares, options, or units formerly represented by such
Certificate shall have been converted pursuant to
Section 2.7(a) and Section 2.8, and the Certificate so
surrendered shall forthwith be cancelled. Parents
agreement with the Paying Agent shall provide that, upon
surrender of a Certificate for cancellation to the Paying Agent,
any holder of shares of Company Common Stock (including shares
issuable upon the exercise of Company Options or pursuant to
Deferred Units) shall be entitled to receive payment of
(1) the amount of cash such holder shall be entitled to
receive pursuant to Section 2.7(a) in respect of the shares
of Company Common Stock, and (2) the amount of cash such
holder shall be entitled to receive pursuant to Section 2.8
in respect of any Company Options or Deferred Units held by such
holder on the Closing Date.
(c) Stock Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be
closed, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock or Company Options that were
outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving
Corporation or the Paying Agent for transfer or for any other
reason, they shall be cancelled and exchanged as provided in
this Article II.
(d) No Liability. None of Parent,
Merger Sub, the Company or the Paying Agent shall be liable to
any Person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat, or
similar Law. All funds held by the Paying Agent for payment to
the holders of unsurrendered Certificates and unclaimed at the
end of one year after the Effective Time shall be returned to
Parent, after which time any holder of unsurrendered
Certificates shall look as a general creditor only to the
Surviving Corporation for payment of such funds to which such
holder may be due, subject to applicable Law.
(e) Lost Documents. If any
Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond,
in such reasonable amount as the Surviving Corporation may
direct, as indemnity against any claim that may be made against
it with respect to such Certificate, the Paying Agent shall pay
in respect of such lost, stolen or destroyed Certificate the
amount of cash contemplated pursuant to Section 2.7(a) or
Section 2.8, as the case may be.
(f) Withholding Rights. Parent,
the Surviving Corporation or the Paying Agent shall be entitled
to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company
Common Stock, Company Options, Restricted Stock and Deferred
Units such amounts as Parent, the Surviving Corporation or the
Paying Agent is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of
U.S. state, local or foreign tax Law. To the extent that
amounts are so withheld and paid over to the appropriate Taxing
Authority by Parent, the Surviving Corporation or the Paying
Agent, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the
shares of Company Common Stock, Company Options, Restricted
Stock and Deferred Units in respect of which such deduction and
withholding was made by Parent, the Surviving Corporation or the
Paying Agent.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent that,
except as set forth explicitly in the Company Reports filed
prior to the date of this Agreement or the corresponding section
of the disclosure schedule dated as of the date of this
Agreement delivered by the Company to Parent (the
Disclosure Schedule):
Section 3.1 Incorporation;
Authorization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its organization. Section 3.1 of the Disclosure Schedule
sets forth for each of the Companys Subsidiaries and the
Company Joint Ventures its name and jurisdiction of
organization. Each of the Subsidiaries of the Company is duly
organized, validly existing and in good standing under the laws
of the
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jurisdiction of its organization. Each of the Company and its
Subsidiaries has all requisite power and authority to own, lease
and operate its properties and assets and to carry on its
business as it is now being conducted, and is duly qualified to
transact business in each jurisdiction in which the nature of
property owned or leased by it or the conduct of its business
requires it to be so qualified, except where the failure to be
duly qualified to transact business has not had or would not
have a Material Adverse Effect. True and complete copies of the
certificate of incorporation and bylaws, or other organizational
documents (in each case, together with all amendments thereto)
of the Company and each of its Subsidiaries have been delivered
or made available to Parent. The Company and its Subsidiaries
are not in material default or in violation of any provisions of
their respective organizational documents.
(b) The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder and, subject to the approval of the
shareholders of the Company as required by the TBCA
(Company Shareholder Approval), to consummate
the transactions contemplated hereby. The execution and delivery
of this Agreement, the performance of the Companys
obligations hereunder and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company, and no other corporate
proceedings or actions on the part of the Company, the Board of
Directors of the Company or the shareholders of the Company are
necessary to authorize the execution and delivery of this
Agreement, to perform the Companys obligations hereunder
and, except for the Company Shareholder Approval, to consummate
the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company, and, assuming the
due execution and delivery of this Agreement by Parent and
Merger Sub, this Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms, except for (i) the
effect of any applicable bankruptcy, insolvency, reorganization,
moratorium and similar Laws relating to or affecting the rights
of creditors generally and (ii) the effect of equitable
principles of general application.
(c) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby will not (i) violate any provision of the
certificate of incorporation or bylaws, or similar
organizational documents, of the Company or any of its
Subsidiaries, (ii) except as disclosed in
Section 3.1(c) of the Disclosure Schedule, violate or
conflict with any provision of, or result in the termination or
acceleration of or entitle any party to terminate, accelerate,
modify or cancel any obligation under, or constitute a default
(with notice or lapse of time or both) or result in the
imposition of any lien upon or the creation of a security
interest in any of the Companys or any of its
Subsidiaries assets or properties, or the loss of a
benefit under, or require notice to any Person, pursuant to any
Contract or Company Permit, or (iii) except as described in
Section 3.1(c) of the Disclosure Schedule, violate or
conflict with any Law or Governmental Order to which the Company
or any of its Subsidiaries is subject, except for those that, in
the case of clauses (ii) and (iii) above, would not
have a Material Adverse Effect.
(d) No registrations, filings, applications, notices,
consents, approvals, orders, qualifications, authorizations or
waivers are required to be made, filed, given or obtained by the
Company or any of its Subsidiaries with, to or from any foreign,
federal, state, local or other governmental or administrative
authority or regulatory agency, commission, department or other
governmental or administrative subdivision, court, tribunal or
body or arbitrator or arbitral body (each, a
Governmental Authority) in connection with
the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for
(i) those set forth in Section 3.1(d) of the
Disclosure Schedule, (ii) those arising from the Exchange
Act, (iii) filings under the HSR Act, (iv) the filing
and recordation of appropriate merger documents as required by
the TBCA and other appropriate documents with the relevant
Governmental Authorities of other states in which the Company is
authorized to do business, (v) applicable requirements of
the New York Stock Exchange, or (vi) those that the failure
to make, file, give or obtain would not have a Material Adverse
Effect (clauses (i) through (v) collectively, the
Company Required Governmental Approvals).
(e) The Board of Directors of the Company, at a meeting
duly called and held, adopted resolutions that are in full force
and effect as of the date of this Agreement, (i) approving
and declaring advisable the Merger and this Agreement,
(ii) declaring that the Merger and this Agreement are in
the best interests of the Companys shareholders,
(iii) recommending that the Companys shareholders
approve and adopt this
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Agreement, and (iv) exempting, to the extent necessary,
this Agreement, the Voting Agreement and the transactions
contemplated hereby from the restrictions of the Tennessee
Business Combination Act.
(f) The only vote of the holders of any class or series of
capital stock of the Company necessary to approve this
Agreement, the Merger and the other transactions contemplated
hereby is the affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock.
(g) Dissenters rights under Chapter 23 of the
TBCA are not available to the Companys shareholders for
the transactions contemplated by this Agreement.
(h) The Company and its Subsidiaries are not creditors or
claimants with respect to any debtors or
debtor-in-possession
subject to proceedings under chapter 11 of title 11 of
the United States Code with respect to claims that, in the
aggregate, are material to the Company and its Subsidiaries
(excluding cash and cash equivalents).
(i) The Board of Directors of the Company has received the
opinion of its financial advisor, The Blackstone Group, to the
effect that the Common Stock Merger Consideration is fair from a
financial point of view to such holders of Company Common Stock,
a copy of which opinion has been delivered to Parent.
Section 3.2 Capitalization;
Structure.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock and
1,000,000 shares of Company Preferred Stock. As of the date
of this Agreement, (i) 32,259,834 shares of Company
Common Stock are issued and outstanding (including
267,750 shares of restricted Company Common Stock described
in (viii) below); (ii) no shares of Company Preferred
Stock are issued and outstanding;
(iii) 7,317,500 shares of Company Common Stock have
been reserved for issuance under the Companys Key
Personnel Plan and the Companys 1995 Restricted Stock
Plan, of which Company Options to purchase 2,917,442 shares
of Company Common Stock are currently outstanding and
4,662 shares of restricted Company Common Stock are
currently outstanding under the 1995 Restricted Stock Plan;
(iv) 475,000 shares of Company Common Stock have been
reserved for issuance pursuant to the Directors Plan of which
Company Options to purchase 48,250 shares of Company Common
Stock are currently outstanding; (v) 850,000 shares of
Company Common Stock have been reserved for issuance pursuant to
the 1996 Employee Stock Purchase Plan, which Employee Stock
Purchase Plan was suspended for the April 1, 2005 to
March 31, 2006 plan year and has been suspended for the
April 1, 2006 to March 31, 2007 plan year;
(vi) 1,500,000 shares of Company Common Stock have
been reserved for issuance pursuant to the 2006 Long-Term
Incentive Plan, of which Company Options to purchase
300,000 shares of Company Common Stock are currently
outstanding and 28,000 shares of restricted Company Common
Stock are currently outstanding; (vii) 375,000 shares
of Company Common Stock have been reserved for issuance under
the 1996 Deferred Stock Unit Plan of which vested units
representing 150,396.03 shares and unvested units
representing 12,079.55 shares of Company Common Stock have
been deferred; and (viii) 267,750 shares of Company
Common Stock are restricted pursuant to Mr. James
Bonds Performance Unit Agreement, as amended. As of the
date of this Agreement, there are 3,123,405 shares of TIPS
outstanding (excluding those shares of TIPS that are held by the
Company) that are convertible into 1,419,583 shares of
Company Common Stock. From and after the Effective Time, the
TIPS will convert, pursuant to the terms of the
Trust Agreement, only into cash at a rate of
$19.18 per $25.00 face amount per each outstanding share of
TIPS. Section 3.2 of the Disclosure Schedule has a complete
and accurate list of all outstanding Company Options, Deferred
Units and Restricted Stock, including grant date, exercise
price, vesting date, holder name and address. Each Company
Option, Deferred Unit or Restricted Stock (A) was granted
in compliance with all applicable Laws and all of the terms and
conditions of the applicable plan pursuant to which it was
issued, (B) in the case of Company Options, has an exercise
price per share equal to or greater than the fair market value
of a Share at the close of business on the date of such grant,
(C) has a grant date identical to the date on which the
Companys board of directors or compensation committee
actually awarded it, and (D) qualifies for the tax and
accounting treatment afforded to such award in the
Companys tax returns and the Companys financial
statements, respectively. All of the outstanding shares of
Company Common Stock have been duly authorized, are validly
issued, fully paid and nonassessable and have not been issued in
violation of any preemptive rights, redemption rights,
repurchase rights or other similar rights. The Company holds no
shares of its capital stock in its
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treasury. The Disclosure Schedule contains a true and complete
list of all Subsidiaries. Except as otherwise set forth in the
Disclosure Schedule, all of the outstanding shares of capital
stock or other equity interests of each of the Companys
Subsidiaries have been duly authorized, have been validly issued
and are fully paid and nonassessable, have not been issued in
violation of any preemptive rights, redemption rights or
repurchase rights and, at Closing, will be owned by the Company
directly or indirectly, free and clear of all Encumbrances other
than Permitted Encumbrances or Encumbrances imposed by
applicable securities Laws. Except as set forth in this
Section 3.2 or as set forth in the Disclosure Schedule,
neither the Company nor any of its Subsidiaries has issued,
granted or entered into any options, warrants, calls,
commitments, securities, Contracts or other rights of any kind
to acquire, or any securities that, upon conversion, exchange or
exercise would require or give any Person the right to require
the issuance, sale or transfer of, or obligations to issue, sell
or transfer, shares of capital stock of any class of, or other
debt obligations of or equity interests in, the Company or of
any of its Subsidiaries.
(b) Section 3.2 of the Disclosure Schedule sets forth
(i) each of the Companys Subsidiaries and the
ownership interest of the Company in each such Subsidiary, as
well as the ownership interest of any other Person or Persons in
each such Subsidiary and (ii) the Companys or its
Subsidiaries capital stock, equity interest or other
direct or indirect ownership interest in any other person other
than securities constituting less than 1% of the outstanding
capital stock of a publicly traded company.
Section 3.3 Sufficiency
of Assets. The assets, property, rights,
agreements and interests of the Company and its Subsidiaries
constitute all of the assets, properties and rights of every
type and description, whether real or personal, tangible or
intangible, used or held for use, and sufficient in all material
respects, to conduct the business of the Company and its
Subsidiaries as conducted as of the date of this Agreement.
Section 3.4 Financial
Statements; Company Reports; Absence of Changes.
(a) Prior to the date hereof, the Company made available
(i) the Companys
Form 10-K
for 2006 including the audited consolidated balance sheet of the
Company and its Subsidiaries as of September 30, 2006
(Balance Sheet), and the related audited
consolidated statements of operations, shareholders equity
and cash flows for the year ended September 30, 2006
(including the notes thereto) (the Audited Financial
Statements) and (ii) the Companys
Form 10-Q
for the quarter ended December 31, 2006 including the
unaudited consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 2006 and the related
unaudited consolidated statements of operations,
shareholders equity and cash flows for the quarter ended
December 31, 2006 (the Interim Financial
Statements and together with the Audited Financial
Statements, the Financial Statements). The
Financial Statements and each of the consolidated balance sheets
included in or incorporated by reference into the Company
Reports (as defined below) (including the related notes and
schedules) have been prepared, or in the case of Company Reports
(as defined below) filed after the date of this Agreement will
be prepared, in all material respects, in conformity with the
practices consistently applied by the Company and its
Subsidiaries in the immediately preceding fiscal periods (except
as may be indicated in the notes thereto to the contrary) and
present fairly, or in the case of Company Reports (as defined
below) filed after the date of this Agreement will fairly
present, in all material respects, the consolidated financial
position, cash flows and results of operations of the Company
and its Subsidiaries, for the periods and as of the dates set
forth therein, in each case in conformity with GAAP (subject, in
the case of the Interim Financial Statements, to normal year-end
audit adjustments, the effect of which will not, individually or
in the aggregate, be materially adverse and the absence of notes
that, if presented, would not differ materially from those
included in the Audited Financial Statements).
(b) The Company and its Subsidiaries have filed or
furnished, as applicable, all required reports, schedules,
forms, certifications and other documents required to be filed
by them with the SEC under the Securities Act, or the Securities
Exchange Act of 1934, as amended (the Exchange
Act), as the case may be, since September 30,
2004 (the Applicable Date) (the forms,
statements, reports and documents filed or furnished since the
Applicable Date and those filed or furnished subsequent to the
date of this Agreement, including any amendments thereto,
together with all exhibits and schedules thereto and documents
incorporated therein by reference, collectively the
Company Reports). Each of the Company
Reports, at the time of its filing or being furnished (or, if
amended prior to the date of this Agreement, as of the date of
such
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amendment) complied or, if not yet filed, will comply with the
requirements of the Securities Act, the Exchange Act and the
Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley
Act), and in each case the published rules and
regulations of the SEC thereunder, each as applicable to the
Company Reports. As of their respective dates (or, if amended
prior to the date of this Agreement, as of the date of such
amendment), the Company Reports did not, and any Company reports
filed with or furnished to the SEC subsequent to the date of
this Agreement will not, contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. No Subsidiary of the Company is required
to file any form or report with the SEC.
(c) Since September 30, 2006, (x) the Company and
its Subsidiaries have conducted the businesses of the Company
and its Subsidiaries, taken as a whole, only in, and have not
engaged in any material transaction other than according to, the
ordinary and usual course of such businesses consistent with
past practice and (y) there has not been:
(i) any material loss, damage or destruction to, or any
material interruption in the use of, the assets of the Company
or any of its Subsidiaries (whether or not covered by insurance);
(ii) any declaration, setting aside or payment of any
dividend or other distribution in respect of the Company Common
Stock or any shares of capital stock of any non-wholly-owned
Subsidiary or any repurchase, redemption or other acquisition by
the Company of any outstanding shares of Company Common Stock or
any shares of capital stock of any Subsidiary or other
securities of the Company or any of its Subsidiaries, except for
regular quarterly cash dividends on its Common Stock publicly
announced prior to the date hereof and regular quarterly cash
dividends on the TIPS paid in accordance with the
Trust Agreement prior to the date hereof;
(iii) purchases, redemption or acquisition of any shares of
the Companys capital stock, except upon the exercise of
the Company Options;
(iv) any amendment to the charter or bylaws of the Company,
or any recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(v) any changes of its methods of accounting or accounting
practices in any respect other than those required by GAAP;
(vi) any off balance sheet transaction;
(vii) other than as set forth in Section 3.4(c)(vii)
of the Disclosure Schedules, capital expenditures by the Company
and its Subsidiaries in excess of $750,000 in the aggregate;
(viii) other than as set forth in Section 3.4(c)(viii)
of the Disclosure Schedules, any assets of the Company or its
Subsidiaries becoming subject to an Encumbrance other than a
Permitted Encumbrance;
(ix) any making, changing or revocation of any material Tax
election, any election or changing of any method of accounting
for Tax purposes, any settlement of any Action in respect of
Taxes or entry into any Contracts in respect of Taxes with any
Governmental Authority;
(x) other than as set forth in Section 3.4(c)(x) of
the Disclosure Schedules, entry into any Contracts resulting in
Debt (other than under the Credit Facilities) of the Company and
its Subsidiaries, taken as a whole, in excess of $1,000,000;
(xi) any increase in the compensation payable or to become
payable to its officers or employees (except for increase in the
ordinary course of business and consistent with past
practice); and
(xii) any Contract to take any of the actions referred to
in clauses (i) through (xi) above.
(d) The Company has established and maintains disclosure
controls and procedures and internal control over financial
reporting (as such terms are defined in
paragraphs (e) and (f), respectively, of
Rule 13a-15
under the Exchange Act) as required by
Rule 13a-15
under the Exchange Act. The Companys disclosure controls
and procedures are reasonably designed to ensure that all
material information required to be disclosed by the
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Company in the reports that it files or furnishes under the
Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the
SEC, and that all such material information is accumulated and
communicated to the Companys management as appropriate to
allow timely decisions regarding required disclosure and to make
the certifications required pursuant to Sections 302 and
906 of the Sarbanes-Oxley Act. The Companys management has
completed assessment of the effectiveness of the Companys
internal control over financial reporting in compliance with the
requirements of Section 404 of the Sarbanes-Oxley Act for
the fiscal year ended September 30, 2006, and such
assessment concluded that such controls were effective. The
Company has disclosed, based on its most recent evaluation prior
to the date of this Agreement, to the Companys auditors
and the audit committee of the Board of Directors and Parent
(A) any significant deficiencies and material weaknesses in
the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect in any
material respect the Companys ability to record, process,
summarize and report financial information and (B) any
fraud, whether or not material, that involves executive officers
or employees who have a significant role in the Companys
internal controls over financial reporting. As of the date of
this Agreement, the Company has not identified any material
weaknesses in the design or operation of internal controls over
financial reporting other than as described in the Company
Reports. There are no outstanding loans made by the Company or
any of its Subsidiaries to any executive officer (as defined in
Rule 3b-7
under the Exchange Act) or director of the Company.
Section 3.5 Undisclosed
Liabilities; Material Adverse Effect. Except
as set forth in Section 3.5 of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries has any
outstanding claims, liabilities or indebtedness, including any
Debt or guarantee thereof (whether accrued, absolute, contingent
or otherwise, and whether due or to become due)
(Liabilities), except Liabilities
(i) reflected or reserved against in the Financial
Statements; (ii) incurred after the date of the Audited
Financial Statements in the ordinary course of business
consistent with past practice or in connection with this
Agreement or the Merger or the other transactions contemplated
hereby; (iii) that have been discharged or paid in full
prior to the date hereof; (iv) that are of a nature not
required to be reflected in the consolidated financial
statements of the Company and its Subsidiaries prepared in
accordance with GAAP consistently applied; or (v) that,
individually or in the aggregate, would not be material to the
Company and its Subsidiaries taken as whole. Since the date of
the Audited Financial Statements, there has not occurred any
circumstance or event that would have a Material Adverse Effect.
Section 3.6 Litigation;
Orders. Except as set forth in
Section 3.6 of the Disclosure Schedule, there are no
Actions pending or, to the Knowledge of the Company, threatened
against the Company or any of its Subsidiaries that
(a) would have a Material Adverse Effect, or (b) as of
the date of this Agreement, seek to restrain or prohibit or
otherwise challenge the consummation, legality or validity of
the transactions contemplated hereby. Except as set forth in
Section 3.6 of the Disclosure Schedule there are no writs,
judgments or outstanding orders, injunctions, decrees,
stipulations, determinations or awards, whether rendered by a
Governmental Authority, or by an arbitrator (each a
Governmental Order), against the Company or
any of its Subsidiaries or any of their respective properties,
assets or businesses that would have a Material Adverse Effect.
Section 3.7 Compliance
with Laws; Permits.
(a) Except for (i) matters that are described in
clauses (iii) or (iv) of the definition of
Permitted Encumbrances or (ii) as set forth in
Section 3.7 of the Disclosure Schedule, each of the Company
and its Subsidiaries is in compliance with, and is not in
default under or in violation of, or has been given written
notice of any violation of, any Law, except where the failure to
be in compliance, or being in default or violation, would not
have a Material Adverse Effect. Without limiting the foregoing,
in the conduct of the business, neither the Company nor any of
its Subsidiaries nor, to the Knowledge of the Company, any of
its directors, officers, employees or agents, has
(a) directly or indirectly, given, or agreed to give, any
illegal gift, contribution, payment or similar illegal benefit
to any supplier, customer, governmental official or employee or
other Person who was, is or may be in a position to help or
hinder the Company or any of its Subsidiaries (or assist in
connection with any actual or proposed transaction) or made, or
agreed to make, any illegal contribution, or reimbursed any
illegal political gift or contribution made by any other Person,
to any candidate
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for federal, state, local or foreign public office or
(b) established or maintained any unrecorded fund or asset
or made any false entries on any books or records for any
purpose.
(b) Except for (i) matters that are described in
clauses (iii) or (iv) of the definition of
Permitted Encumbrances or (ii) as set forth in
Section 3.7 of the Disclosure Schedule, the Company and its
Subsidiaries have, and are in compliance with, in all material
respects, all permits, licenses, certificates of authority,
franchises, variances, exemptions, orders and other governmental
authorizations, consents and approvals that are necessary for or
material to the Company and its Subsidiaries taken as a whole to
conduct their businesses substantially as presently conducted
(collectively, Company Permits). All Company
Permits are in full force and effect, except where the failure
to be in full force and effect would not have a Material Adverse
Effect.
Section 3.8 Contracts. Section 3.8
of the Disclosure Schedule contains a list of all Contracts to
which the Company or any Subsidiary is a party and which fall
within any of the following categories (other than the Leases
and the Management Agreements not described in
clause (xiii) below, which shall be deemed not to be
Material Contracts): (i) material contracts
within the meaning of Item 601(b)(10) of
Regulation S-K;
(ii) Contracts material to the Company and its
Subsidiaries, taken as a whole, not entered into in the ordinary
course of business; (iii) pending Contracts for the
disposition of any assets or line of business of the Surviving
Corporation or its Subsidiaries having a fair market value in
excess of $1,000,000 in the aggregate;(iv) Contracts that are
reasonably likely to result in payments to or from the Surviving
Corporation or its Subsidiaries in excess of $1,000,000 that
grant most favored nation status that, following the
Merger, would apply to the Surviving Corporation and its
Subsidiaries;(v) joint venture, partnership and similar
agreements; (vi) Contracts containing covenants purporting
to limit the freedom of the Company or any of its Affiliates to
compete in any line of business in any geographic area or to
hire or solicit any individual or group of individuals;
(vii) Contracts that after the Effective Time would have
the effect of limiting the freedom of the Surviving Corporation
or any of its Affiliates to compete in any line of business in
any geographic area or to hire any individual or group of
individuals; (viii) Contracts that contain minimum purchase
conditions or requirements in excess of $1,000,000 or other
terms that materially restrict or limit the purchasing
relationships of the Company or any Subsidiary;
(ix) Contracts relating to any outstanding commitment for
capital expenditures in excess of $1,000,000;
(x) indentures, mortgages, notes, bonds, debentures,
instruments, credit agreements and loan agreements and all other
documents and contracts (including guarantees) in respect of or
evidencing Debt in excess of $1,000,000, letters of credit or
other Contracts or instruments of the Company or any Subsidiary
or commitments for the borrowing or the lending of amounts or
availability of other Debt in excess of $1,000,000 by the
Company or any Subsidiary or providing for the creation of any
Encumbrance upon any of the assets of the Company or any
Subsidiary; (xi) collective bargaining agreements;
(xii) Contracts with or for the benefit of any Affiliate of
the Company (other than Subsidiaries or contracts relating to
employee benefits in connection with employment by the Company)
and (xiii) the Material Leases and Management Agreements.
The contracts and other commitments described in this
Section 3.8 are collectively referred to as
Material Contracts, whether or not listed in
Section 3.8 of the Disclosure Schedule (other than the
Leases and the Management Agreements not described in
clause (xiii) above, which shall be deemed not to be
Material Contracts). True and correct copies of each Material
Contract have been made available to Parent. All of the Material
Contracts are in full force and effect and are valid and binding
obligations of the Company or a Subsidiary and, to the Knowledge
of the Company, the valid and binding obligation of each other
party thereto, except as would not have a Material Adverse
Effect. Neither the Company nor any Subsidiary nor, to the
Knowledge of the Company, any other party thereto, is in
violation of or in default in respect of, nor has there occurred
any event or condition which with the passage of time or giving
of notice (or both) could constitute a default under, any
Material Contract which, in any such case, would reasonably
likely to result in Company Losses in excess of $5,000,000.
Section 3.9 Leases
and Management Contracts.
(a) Section 3.9(a)(i) of the Disclosure Schedule sets
forth a list of the locations for the real properties leased,
licensed or subleased by the Company and its Subsidiaries as of
February 16, 2007 for use as a parking facility (each, a
Lease and collectively, the
Leases; the property covered by Leases is
referred to herein as the Leased Real
Property). Section 3.9(a)(ii) of the Disclosure
Schedule also sets forth a list of the
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locations of the real properties managed as of February 16,
2007 by the Company or any of its Subsidiaries pursuant to a
management agreement (each, a Management
Agreement and collectively the Management
Agreements; the property covered by the Management
Agreements is referred to herein as the Managed Real
Property). Section 3.9(a)(iii)of the Disclosure
Schedule sets forth a list of (x) 200 of the Leases that
based on a good faith inspection of the Companys records
are responsible for the highest amount of earnings before
interest, taxes, depreciation and amortization
(EBITDA) to the Company and its Subsidiaries,
taken as a whole, amongst all of the Leases for the one-year
period ended September 30, 2006 that were in effect as of
February 16, 2007; (y) 100 of the Management
Agreements that based on a good faith inspection of the
Companys records have the highest amount of annual fees
paid to the Company and its Subsidiaries, taken as a whole,
amongst all of the Management Agreements for the one year period
ended September 30, 2006; and (z) 50 of the Leases
that are responsible for the lowest amount of revenues to the
Company and its Subsidiaries, taken as a whole, amongst all of
the Leases for the one-year period ended September 30, 2006
that were in effect as of February 16, 2007 (each Lease
referenced in clauses (x) and (z) and each Lease
listed in Section 5.4(b)(xv) of the Disclosure Schedule, a
Material Lease and each Management Agreement
referenced in clause (y), a Material Management
Agreement and collectively, the Material
Leases and Management Agreements). Each of the Leases
and Management Agreements constitutes the valid and legally
binding obligation of the Company or its Subsidiaries and, to
the Knowledge of the Company, the valid and binding obligation
of each other party thereto, enforceable in accordance with its
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar Laws of general applicability relating to
or affecting creditors rights or by general equity
principles, or except as would not have a Material Adverse
Effect. Each Lease and Management Agreement is in full force and
effect, and the Company or a Subsidiary holds a valid leasehold
interest in the Leased Real Property. Except as described in
Section 3.9(a)(iv) of the Disclosure Schedule or
constituting a Permitted Encumbrance, there are no written or
oral subleases, licenses, concessions, occupancy or other
agreements granting to any other Person the right of use or
occupancy of the Leased Real Property and there is no Person
(other than the Company or its Subsidiaries) in possession of
the Leased Real Property.
(b) There is no violation or default (nor does there exist
any condition, which with the passage of time or the giving of
notice or both, would cause such a violation or default) by the
Company or its Subsidiaries under any Lease or Management
Agreement, except for such violations or defaults that would
not, individually or in the aggregate, be reasonably likely to
result in Company Losses in excess of $5,000,000.
(c) The Leased Real Property and Managed Real Property are
adequate to permit the use thereof in the manner they are
currently utilized by the Company and its Subsidiaries, except
as would not have a Material Adverse Effect.
(d) The Company has made available to Parent true, correct
and complete copies of the Material Leases and Management
Agreements, including all amendments, modifications, notices or
memoranda of lease thereto.
(e) Except as set forth in Section 3.9 of the
Disclosure Schedules, none of the Leases contains any
unsatisfied capital expenditure requirement or remodeling
obligation on the part of the Company or any of its Subsidiaries
other than ordinary maintenance and repair obligations, except
as would not have a Material Adverse Effect.
(f) To the Knowledge of the Company, there is no
condemnation, expiration or other proceeding in eminent domain
pending, affecting the ground leases identified in
Section 3.9 of the Disclosure Schedule.
(g) Neither the Company nor any Subsidiary has assigned,
sublet or otherwise transferred, in whole or in part, its
leasehold interest in any Material Lease or the applicable
Leased Real Property leased, licensed or subleased thereunder.
Other than matters identified in clause (iv) of the
definition of Permitted Encumbrances, there are no
options, rights of first refusal, rights of first offer or other
similar rights outstanding or that may become exercisable
against the Company or any Subsidiary in the future with respect
to all or any portion of any Material Lease or all or any
portion of the Leased Real Property leased, licensed or
subleased thereunder.
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Section 3.10 Taxes.
(a) Except as set forth in Section 3.10 of the
Disclosure Schedule, (i) the Company and its Subsidiaries
have duly filed with the appropriate Taxing Authorities all
material Tax Returns required to be filed by the Company and its
Subsidiaries; (ii) such Tax Returns were correct and
complete in all material respects; and (iii) the Company
and its Subsidiaries (X) have paid in full or have accrued
on the Companys Balance Sheet all material Taxes required
to be paid by the Company and its Subsidiaries whether or not
shown on such Tax Returns, and (Y) have not given or
requested with respect to the Company and its Subsidiaries any
waivers of statutes of limitations or extensions of time with
respect to an assessment of deficiency in connection with any
Taxes or Tax Returns. There are no material Encumbrances for
Taxes upon the assets of the Company or of its Subsidiaries
except for statutory liens for current Taxes not yet due. Except
as set forth in Section 3.10 of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries has any material
unpaid deficiency or assessment from any Taxing Authority with
respect to Taxes or Tax Returns of the Company or any of its
Subsidiaries. Except as set forth in Section 3.10 of the
Disclosure Schedule, no dispute, claim, adverse adjustment or
deficiency for any Taxes has been proposed, asserted or assessed
(in each case, in writing) against the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries is
liable for Taxes of any other Person under Treasury
Regulation 1.1502-6
(or any similar provision of state, local or foreign Law), as a
transferee or successor, by contract or otherwise. The unpaid
Taxes of the Company and its Subsidiaries (i) did not as of
September 30, 2006 exceed by more than a material amount
the liabilities for Taxes (other than deferred Taxes established
to reflect book-tax timing differences) set forth on the face of
the Financial Statements (rather than any notes thereto) and
(ii) will not exceed by more than a material amount such
stated liabilities for Taxes as adjusted for the passage of time
through the Closing Date in accordance with the past custom and
practice of the Company in filing its Tax Returns.
(b) The Company and each of its Subsidiaries have deducted,
withheld and timely paid to the appropriate Governmental
Authority all material Taxes required to be deducted, withheld
or paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or other
third party, and the Company and each Subsidiary have complied
in all material respects with all reporting and recordkeeping
requirements.
(c) Except as set forth on Section 3.10 of the
Disclosure Schedule. neither the Company nor any of its
Subsidiaries will be required to include any amount in taxable
income or exclude any item of deduction or loss from taxable
income for any taxable period (or portion thereof) ending after
the Closing Date as a result of (i) any Tax accounting
method change, (ii) any closing agreement as
described in Code Section 7121 (or any corresponding or
similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date, (iii) installment
sale or open transaction disposition made on or prior to the
Closing Date, or (iv) any prepaid amount received on or
prior to the Closing Date. Section 3.10 of the Disclosure
Schedule lists all closing agreements, private letter rulings,
technical advice memoranda or similar agreements or rulings
relating to Taxes that have been entered into or issued by any
Governmental Authority with or in respect of the Company or any
of its Subsidiaries that have effect for any period after the
Effective Time.
(d) The Company has not been a distributing
corporation or a controlled corporation in a
transaction intended to qualify under Code Section 355.
Neither the Company nor any of its Subsidiaries has participated
in any reportable transaction within the meaning of
Treasury
Regulation Section 1.6011-4
or any tax shelter within the meaning of
Section 6662 of the Code.
(e) For the purposes of this Agreement,
Taxes shall mean all federal, state, local
and foreign taxes, charges, fees, imposts or other governmental
assessments, of any kind whatsoever, including all net income,
gross income, sales, use, franchise, profits, service, gross
receipts, capital, ad valorem, value added, transfer, inventory,
capital stock, license, social security, unemployment,
severance, stamp, recording, occupation, withholding, payroll,
employment, excise, or property taxes and estimated taxes,
custom duties, fees, assessments, or escheat obligations,
whether such Taxes are disputed or not, together with interest
and any penalties with respect thereto.
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(f) For purposes of this Agreement, Tax
Return shall mean any return, declaration, report,
estimate, schedule, information return or other document
(including any related or supporting information) with respect
to Taxes, including any amendments thereto.
Section 3.11 ERISA.
(a) The Disclosure Schedule contains a true and complete
list of all material Employee Benefit Plans, programs and
policies maintained, sponsored or participated in by the Company
and its Subsidiaries in which any current or former employees or
directors (or their dependents) of the Company or its
Subsidiaries participate (collectively, the
Plans or the Company
Plans). The Disclosure Schedule identifies each Plan
that is intended to be a qualified plan within the
meaning of Section 401(a) of the Code (Qualified
Plans). Neither the Company nor any of the
Subsidiaries has or may have any Liability with respect to any
Employee Benefit Plan other than with respect to the Company
Plans.
(b) Except as set forth in Section 3.11(b) of the
Disclosure Schedule, with respect to each Qualified Plan, either
(i) the Internal Revenue Service has issued a favorable
determination letter or, in the case of a prototype plan, a
current opinion letter with respect to such Qualified Plan and
the related trust within the preceding three years that has not
been revoked or (ii) such Qualified Plan has applied to the
Internal Revenue Service for a favorable determination letter,
which application remains pending on the date hereof and the
Company knows of no facts or existing circumstances that would
reasonably be expected to result in denial of such application.
There are no existing facts or existing circumstances that could
materially adversely affect the qualified status of any
Qualified Plan or the related trust that could not be remedied
without material liability.
(c) Company Sponsored Plans and Multiemployer Plans.
(i) Company Sponsored Plans. (A) All
Company Sponsored Plans (as herein defined) are in material
compliance with and have been administered in material
compliance with all applicable requirements of Law, including
the Code and ERISA, and have been operated in accordance with
their terms; (B) no prohibited transaction (as
defined in Section 4975 of the Code) or breach of fiduciary
duty has occurred with respect to any Company Sponsored Plan
which would reasonably be expected to subject any Company
Sponsored Plan (or its related trust), the Company or any of its
Subsidiaries to a material tax or penalty imposed under
Section 4975 of the Code or Section 502 of ERISA; and
(C) no Company Sponsored Plan is subject to Title IV
or Section 302 of ERISA or Section 412 or 4971 of the
Code, neither the Company nor any of its ERISA Affiliates have
incurred or is expected to incur any material Liability under
Title IV of ERISA, and no event has occurred and no
condition exists that would reasonably be expected to result in
the Company or any of its ERISA Affiliates incurring a material
liability under Title IV of ERISA. No Company Sponsored
Plan is under audit or investigation by the Internal Revenue
Service, or the Department of Labor, and to the Knowledge of the
Company, no such audit or investigation is pending or
threatened. For purposes of this Section 3.11(c), the term
Company Sponsored Plan means a Company Plan other
than a Multiemployer Plan (as defined in Section 4001(a)(3)
of ERISA) or any other Plan which is sponsored or operated by a
joint board of labor and management trustees in connection with
the provision of benefits for collectively bargained Employees.
(ii) Multiemployer Plans. There are no
facts and circumstances in existence that will create a
liability for the Company or any of its Subsidiaries with
respect to one or more multiemployer plans (as
defined in Section 4001(a)(3) of ERISA) and, to the
Companys Knowledge, no liability currently exists with
respect to any such plans, that would have, either individually,
or in the aggregate, a Material Adverse Effect; provided,
however, that the representation in this
Section 3.11(c)(ii) does not extend to contingent
liabilities that could arise as a result of actions of the
Company following Closing.
(d) All employee benefit plans, agreements, or arrangements
maintained outside the United States by the Company or any of
its Subsidiaries (Foreign Plans) are
maintained in accordance with applicable Law and their terms,
and there are no material undisclosed liabilities with respect
to such plans or arrangements. With respect to the Foreign
Plans: (i) all required contributions have been made in
accordance with applicable local statutory requirements or
accrued to the extent required by applicable local statutory
requirements; (ii) the fair market value of the assets of
each funded Foreign Plan, the Liability of each insurer for any
Foreign Plan
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funded through insurance or the book reserve established for any
Foreign Plan, together with any accrued contributions, is
sufficient to procure or provide for the benefits determined on
any ongoing basis (actual or contingent) accrued to the closing
date (i.e. on an accrued benefit obligation basis as
is defined in SFAS 87 or equivalent under local generally
accepted accounting principles) with respect to all current and
former participants under such Foreign Plan according to the
actuarial assumptions and valuations most recently used to
determine employer contributions to such Foreign Plan, and none
of the transactions contemplated by this Agreement shall cause
such assets or insurance obligations or book reserves to be less
than such benefit obligations; and (iii) there is no
Liability with respect to any Foreign Plan which will result by
reason of the transactions contemplated by this Agreement.
Notwithstanding the foregoing, this Section 3.11(d) is
subject to exception as set forth in Section 3.11(d) of the
Disclosure Schedule.
(e) Except as set forth in Section 3.11(e) of the
Disclosure Schedule, no Company Plan provides medical or other
welfare benefits (whether or not insured) with respect to
current or former employees for periods extending beyond their
retirement or other termination of employment, other than
pursuant to Section 4980B of the Code or as mandated by
applicable Law. The Company and its Subsidiaries may amend or
terminate any such plan at any time without incurring any
liability thereunder other than in respect of claims incurred
prior to such amendment or termination. There is no material
pending, or to the Knowledge of the Company, threatened,
litigation relating to the Plans.
(f) There has been no amendment to, announcement by the
Company or any of its subsidiaries relating to, or change in
employee participation or coverage under, any Plan which would
increase materially the expense of maintaining such Plan above
the level of the expense incurred therefor for the most recent
fiscal year. Except as specifically disclosed in
Section 3.11(f) of the Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement
will (alone or together with other events) neither result in or
entitle any current or former employee or other service provider
of the Company or any Subsidiary to severance benefits or any
other payment under any Company Plan nor result in an excise tax
imposed on any Person under Section 4999 of the Code or
cause any amounts payable under any Company Plan to fail to be
deductible for federal income tax purposes by virtue of
Section 280G of the Code.
(g) With respect to each of the Plans, all material
contributions or premium payments due and payable on or before
Closing have been timely made, and to the extent not presently
payable, appropriate reserves have been established for the
payment and properly accrued and reflected in the Financial
Statements in accordance with GAAP.
(h) With respect to each Plan, and to the extent
applicable, each Foreign Plan, the Company has heretofore
delivered or made available to Parent true and complete copies
of each of the following documents: (i) a copy of the Plan
or Foreign Plan (including all amendments thereto) and any
insurance policies, trust agreements or other funding vehicles
related to any Plan or Foreign Plan; (ii) a copy of the
most recent annual report, if required to be filed with the
Internal Revenue Service under ERISA or any Canadian supervisory
authority under applicable Canadian Law (including schedules,
attachments, financial statements, and accountants
opinions); (iii) a copy of the most recent Summary Plan
Description (as defined in ERISA), if applicable, or other
summary provided to employees; and (iv) with respect to
each Qualified Plan, the most recent determination letter
received from the Internal Revenue Service.
Section 3.12 Environmental
Matters. Except as disclosed in
Section 3.12 of the Disclosure Schedule or for matters that
would not have a Material Adverse Effect, (i) the Company,
each of its Subsidiaries and each Company Joint Venture have
conducted their businesses and are currently in compliance with
all applicable Environmental Laws and Environmental Permits;
(ii) neither the Company, any of its Subsidiaries nor any
Company Joint Venture is subject to any pending or, to the
Knowledge of the Company, threatened action by or before any
Governmental Authority under any Environmental Law;
(iii) neither the Company, any of its Subsidiaries nor any
Company Joint Venture has received any notices, demand letters
or requests for information from any Governmental Authority
indicating that the Company, any of its Subsidiaries or any
Company Joint Venture may be in violation of, or liable under,
any Environmental Law; (iv) no Hazardous Material has been
disposed of, released or transported by the Company or its
Subsidiaries at or from any properties presently or formerly
owned, leased or operated by the Company, any of its
Subsidiaries or any
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Company Joint Venture as a result of any activity of the
Company, any of its Subsidiaries or any Company Joint Venture
during the time such properties were owned, leased or operated
by the Company, any of its Subsidiaries or any Company Joint
Venture and there have been no other releases, except to the
extent such release is not in violation of or does not give rise
to any liability to the Company, any of its Subsidiaries or any
Company Joint Venture under any applicable Environmental Laws or
was a minor release from a motor vehicle and (v) neither
the Company, its Subsidiaries, the Company Joint Ventures nor
any of their respective properties are subject to any
Liabilities relating to any Action, indemnity or agreement with
any third party, or Governmental Order asserted, arising under
or related to any Environmental Law. The Company has made
available to Parent true and complete copies of all material
environmental records, reports, notifications, certificates of
need, permits, engineering studies, and environmental studies or
assessments, in each case as requested by Parent and in the
Companys possession, and in each case as amended and in
effect.
Section 3.13 Intellectual
Property.
(a) Section 3.13 of the Disclosure Schedule sets forth
a complete and correct list of all registered (including pending
applications and domain name registrations) Intellectual
Property owned by the Company or any of its Subsidiaries that is
material to the Company and its Subsidiaries. Except as set
forth in the Disclosure Schedule, or except for those the
absence of which would not have a Material Adverse Effect, the
Company and its Subsidiaries possess legally enforceable rights
to use, free and clear of all Encumbrances, other than Permitted
Encumbrances, all Intellectual Property necessary for the
conduct of their respective businesses as such businesses are
currently conducted and (i) no claims are pending or, to
the Knowledge of the Company, threatened, and the Company and
its Subsidiaries have not received any notice or notification
alleging that the Company or any of its Subsidiaries is
infringing on or otherwise violating the rights of any person
with regard to any Intellectual Property owned by, licensed to
and/or used
by the Company or its Subsidiaries and, to the Knowledge of the
Company, there is no basis therefor; (ii) to the Knowledge
of the Company, neither the Company nor any of its Subsidiaries
has infringed upon or misappropriated, or is infringing upon or
misappropriating, any U.S. or foreign patents or copyrights
or any U.S., state or foreign trademarks, or other Intellectual
Property rights of any Person; and (iii) to the Knowledge
of the Company, no Person is infringing on or otherwise
violating any right of the Company or any of its Subsidiaries
with respect to any Intellectual Property owned by
and/or
licensed to the Company or its Subsidiaries (except, in the case
of the foregoing clauses (ii) and (iii), such infringement
or misappropriation as would not have a Material Adverse Effect
on the Company).
(b) The IT Assets owned, used or held for use by the
Company or any of its Subsidiaries operate and perform in all
material respects as required by the Company and its
Subsidiaries in connection with its business. To the Knowledge
of the Company, no person has gained unauthorized access to the
IT Assets that would be reasonably likely to have a Material
Adverse Effect.
Section 3.14 Brokers,
Finders. Except as set forth in
Section 3.14 of the Disclosure Schedule, neither the
Company, any of its Subsidiaries, nor any party acting on their
behalf has employed, paid or become obligated to pay any fee or
commission to any broker, finder, consultant or other
intermediary in connection with the transactions contemplated by
this Agreement or the sale process undergone by the Company and
its financial advisors leading to this transaction who or that
might be entitled to a fee or commission in connection with such
transactions.
Section 3.15 Affiliate
Transactions. Except as set forth in
Section 3.15 of the Disclosure Schedule, and other than any
employment or compensation agreement or arrangement with
directors, officers and employees entered into in the ordinary
course of business consistent with past practice, neither the
Company nor any of its Subsidiaries is a party to any Contract
with any Affiliate, and since September 30, 2006, no
material transactions have taken place between the Company or
any of its Subsidiaries on the one hand, and any Affiliate, on
the other hand, that will not have been discharged, terminated
or otherwise consummated on or prior to the Closing Date with no
further obligation on the part of the Company or any of its
Subsidiaries.
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Section 3.16 Labor
Matters.
(a) Except as set forth in Section 3.16 of the
Disclosure Schedule, there is no collective bargaining
agreement, other labor agreement or employment or consulting
contract to which the Company or any Subsidiary is a party or by
which it is bound and, in the case of employment contracts,
involving employees at the city manager level or higher.
(b) Except as set forth in Section 3.16 of the
Disclosure Schedule, (i) no labor union or organization has
been certified or recognized as a representative of any
employees of the Company or any Subsidiary; (ii) to the
Knowledge of the Company, there are no current or threatened
organizational activities or demands for recognition by a labor
organization seeking to represent employees of the Company or
any Subsidiary, and no labor strikes, material arbitrations or
material labor grievances or difficulties and (iii) to the
Knowledge of the Company, no such activities have occurred
during the past 12 months.
Section 3.17 Insurance. All
insurance policies, including property, casualty, workers
compensation, general liability, health and management liability
insurance policies, maintained by the Company or any of its
Subsidiaries (Insurance Policies) are with
reputable insurance carriers, provide insurance in reasonable
character and amount, except for any such failures to maintain
insurance policies that would not have, and have not had, a
Material Adverse Effect. Each Insurance Policy is in full force
and effect and all premiums due with respect to all Insurance
Policies have been paid, with such exceptions that would not
result in a Material Adverse Effect. Neither the Company nor any
of its Subsidiaries has received any written notice of any
material increase of premiums with respect to any Insurance
Policy. There are no claims by the Company or any of its
Subsidiaries, any client thereof or any other insured
beneficiary of such policy under any of such policies relating
to the business, activities, actual or alleged conduct, assets
or properties of the Company or its Subsidiaries as to which any
insurance company is denying liability or defending under a
reservation of rights or similar clause.
Section 3.18 [Reserved].
Section 3.19 [Reserved].
Section 3.20 Real
Estate.
(a) Section 3.20 of the Disclosure Schedule lists each
parcel of real estate owned by the Company or its Subsidiaries
including owner of record and street address (Owned
Real Estate). Except for Permitted Encumbrances or as
set forth in Section 3.20 of the Disclosure Schedule, the
Company or its applicable Subsidiary has good and marketable fee
simple title to all Owned Real Estate, including the buildings,
structures, fixtures and improvements situated thereon, in each
case, as of Closing, free and clear of all Encumbrances. Except
as disclosed in Section 3.20 of the Disclosure Schedule,
neither the Company nor any of its Affiliates has received any
written notice from any Governmental Authority of any material
violation of any zoning, building, fire or health code in
respect of the Owned Real Estate, other than any such violation
that has been corrected, and to the Knowledge of the Company the
Merger will not cause any violation of any certificates of
occupancy, licenses, permits or Laws. Except for Permitted
Encumbrances or as set forth in Section 3.20 of the
Disclosure Schedule, none of the Company or its Subsidiaries has
leased, licensed or otherwise granted to any Person the right to
use, possess or occupy the Owned Real Estate or any portion
thereof. Except for matters identified in clause (iv) of
the definition of Permitted Encumbrances or as set forth in
Section 3.20 of the Disclosure Schedule, there are no
options, rights of first refusal or rights of first offer
outstanding or which may become exercisable in the future,
including pursuant to which the Company or any of its
Subsidiaries is or may become bound to sell, lease or dispose
of, or grant any Encumbrance on, any of the Owned Real Estate or
any portion thereof. There is no condemnation, expiration or
other proceeding in eminent domain pending, or, to the Knowledge
of the Company, threatened, affecting any parcel of Owned Real
Estate or any portion thereof or interest therein except for
such condemnation, expiration or other proceedings as would not
have a Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries has any
Knowledge that (i) except as set forth in Section 3.20
of the Disclosure Schedule, it is in default under any agreement
encumbering the Owned Real Estate, or (ii) except for
Permitted Encumbrances, there are any material encroachments
from or onto the
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Owned Real Estate that could adversely affect Merger Subs
ability to own, use, operate or develop any of the Owned Real
Estate.
(c) Except for Permitted Encumbrances or as set forth on
Section 3.20 of the Disclosure Schedules, neither the
Company nor any of its Subsidiaries has any Knowledge of any
agreements, consent orders, decrees, judgments, licenses, or
permits issued by any Governmental Authority that would impose
any material limitation or restriction on the use or operations
of the Owned Real Estate.
(d) To the Knowledge of the Company and other than the
Permitted Encumbrances, each parcel of land that constitutes the
Owned Real Estate is separate and distinct from any tax lot
allocated to any contiguous air right, development right or
parcel of land that is not Owned Real Estate.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule dated as of the
date of this Agreement delivered by Parent and Merger Sub to the
Company (Parent Disclosure Schedule), each of
Parent and Merger Sub hereby jointly and severally represents
and warrants to the Company that:
Section 4.1 Incorporation;
Authorization.
(a) Each of Parent and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, except where the
failure to be duly organized, validly existing or in good
standing, would not, individually or in the aggregate, be
expected to impair in any material respect the ability of Parent
or Merger Sub to perform its obligations under this Agreement or
have a material adverse effect on the Parent and its
Subsidiaries, taken as a whole, or prevent or delay the
consummation of the Merger or the other transactions
contemplated by this Agreement. The copies of the certificate of
incorporation and bylaws, or other organizational documents (in
each case, together with all amendments thereto) of Parent and
Merger Sub that have been previously delivered or made available
to the Company are true and correct.
(b) Each of Parent and Merger Sub has all requisite
corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement, the performance of each of
Parents and Merger Subs obligations hereunder, and
the consummation of the transactions contemplated hereby have
been duly and validly authorized by the respective Boards of
Directors of Parent and Merger Sub, and no other corporate
proceedings or actions on the part of Parent or Merger Sub or
the shareholders thereof are necessary therefor. This Agreement
has been duly executed and delivered by each of Parent and
Merger Sub, and, assuming the due execution and delivery of this
Agreement by the Company, this Agreement constitutes the legal,
valid and binding obligation of each of Parent and Merger Sub,
enforceable against each in accordance with its terms, except
for (i) the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium and similar Laws relating
to or affecting the rights of creditors generally and
(ii) the effect of equitable principles of general
application.
(c) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby will not (i) violate any provision of the
certificate of incorporation or bylaws, or similar
organizational documents of Parent or Merger Sub,
(ii) violate or conflict with any provision of, or be an
event that is (or with the passage of time will result in) a
violation or conflict of, or result in the termination or
acceleration of or entitle any party to terminate, accelerate,
modify or cancel any obligation under, or constitute a default,
or result in the imposition of any lien upon or the creation of
a security interest in any of the Parents or Merger
Subs assets or properties or require notice to any Person
pursuant to, any mortgage, lien, lease, agreement, contract,
license, instrument, order, arbitration award, judgment, decree
or other arrangement to which Parent is a party or by which it
or any of its assets are bound, or (iii) violate or
conflict with any Law or Governmental Order to which Parent or
Merger Sub is subject, except for those that, in the case of
clauses (ii) and (iii) above, would not reasonably be
expected to impair in any material respect the
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ability of Parent or Merger Sub to perform its obligations under
this Agreement or have a material adverse effect on the Parent
and its Subsidiaries, taken as a whole, or prevent or delay the
consummation of the Merger or the other transactions
contemplated by this Agreement.
(d) No registrations, filings, applications, notices,
consents, approvals, orders, qualifications or waivers are
required to be made, filed, given or obtained by Parent or
Merger Sub with, to or from any Governmental Authority in
connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except
for (i) (ii) filings under the HSR Act, (iii) the
filing and recordation of appropriate merger documents as
required by the DGCL or the TBCA and other appropriate documents
with the relevant Governmental Authorities of other states in
which the Merger Sub is authorized to do business or
(iv) those that the failure to make, file, give or obtain
would not, individually or in the aggregate, be reasonably
expected to impair in any material respect the ability of Parent
or Merger Sub to perform its obligations under this Agreement or
have a material adverse effect on the Parent and its
Subsidiaries, taken as a whole, or prevent or delay the
consummation of the Merger or the other transactions
contemplated hereby (clauses (i) through (iv) above,
collectively, the Parent Required Governmental
Approvals).
Section 4.2 Litigation;
Orders. There are no pending or, to the
Knowledge of Parent, threatened Actions against the Parent or
Merger Sub which would reasonably be expected to impair in any
material respect the ability of Parent or Merger Sub to perform
its obligations under this Agreement or have a material adverse
effect on the Business Condition of Parent and its Subsidiaries,
taken as a whole, or prevent or impede or delay the consummation
of the Merger or the other transactions contemplated hereby.
Section 4.3 Financing.
(a) Parent and Merger Sub have obtained, subject to the
conditions set forth therein, commitments for debt financing
(the Financing) from certain financing
sources in the form of debt financing letters (collectively, the
Financing Letters) which provide for debt
financing necessary or appropriate (together with cash on hand,
the cash committed pursuant to certain equity commitment letters
issued by the Equity Sponsors, copies of which have been
delivered to the Company, and the other sources contemplated by
the Financing Letter) to consummate the Merger and transactions
contemplated by this Agreement, including payment of the Common
Stock Merger Consideration and to repay any indebtedness of the
Company anticipated to be repaid at Closing, and, in each case,
all associated costs and expenses, upon consummation of the
Merger and other transactions contemplated by this Agreement.
Parent and Merger Sub have provided to Company copies of the
Financing Letter. The debt financing sources obligations
to fund the commitments under the Financing Letter are not
subject to any conditions other than as set forth in the
Financing Letter.
(b) Each of Parent and Merger Sub shall use reasonable best
efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to
arrange the Financing on terms and conditions described in the
Financing Letter, to the extent such actions or causes of
actions are within the control of Parent or Merger Sub.
(c) Notwithstanding anything in this Agreement to the
contrary, the Financing Letter may be amended, modified,
supplemented, replaced, restated or superseded at the option of
Parent and Merger Sub after the date hereof but prior to the
Effective Time (the New Financing
Commitments); provided that the terms of any New
Financing Commitment shall not add additional conditions
precedent to the Financing committed pursuant to the Financing
Letter as set forth in the existing Financing Letter in a manner
that would reasonably be expected to have an adverse impact on
the ability of Merger Sub to obtain the Financing to consummate
the transactions contemplated hereby.
Section 4.4 Guarantee. Concurrently
with the execution of this Agreement, Parent has delivered to
the Company the duly executed guarantees of each of the Equity
Sponsors in the form attached hereto as Exhibit B
(the Guarantees). Each of the Guarantees is
valid and in full force and effect, and no event has occurred
which, with or without notice, lapse of time or both, would
constitute a default on the part of the Equity Sponsors under
their respective Guarantees.
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Section 4.5 Interim
Operations of Merger Sub. Merger Sub was
formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, and has engaged in no business
and has incurred no liabilities other than in connection with
the transactions contemplated by this Agreement.
Section 4.6 Solvency. As
of the date hereof, to the Knowledge of Parent and Merger Sub,
immediately after the Effective Time and after giving effect to
the Merger and the transactions contemplated by this Agreement,
the Company and its Subsidiaries, taken as a whole, will not
(i) be insolvent (either because its financial condition is
such that the sum of its debts is greater than the fair market
value of its assets or because the fair saleable value of its
assets is less than the amount required to pay its probable
liability on its existing debts as they mature), (ii) have
unreasonably small capital with which to engage in its business
or (iii) have incurred debts beyond its ability to pay as
they become due.
Section 4.7 Proxy
Statement Information. The information
supplied by Parent and Merger Sub specifically for inclusion in
the Proxy Statement on the date such Proxy Statement (and the
date of any amendment or supplement thereto) is first sent or
provided to shareholders of the Company will not contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading with
respect to the Parent or Merger Sub. Notwithstanding the
foregoing, Parent and Merger Sub make no representation or
warranty with respect to any information supplied by or on
behalf of the Company that is contained in the Proxy Statement
or any amendment or supplement thereto.
Section 4.8 Brokers,
Finders. Neither Parent nor any party acting
on its behalf has employed, paid or become obligated to pay any
fee or commission to any broker, finder, consultant or other
intermediary in connection with the transactions contemplated by
this Agreement who or that might be entitled to a fee or
commission from the Company in connection with such transactions.
Section 4.9 No
Other Representation. Except for the
representations and warranties expressly contained in this
Article IV, none of the Parent, the Merger Sub or any
Affiliate of or other Person acting on behalf of the Parent or
Merger Sub makes any representation or warranty to the Company
or the shareholders of the Company, express or implied.
ARTICLE V
COVENANTS OF
THE COMPANY AND PARENT
Section 5.1 Investigation
of Business; Access to Properties and Records.
(a) After the date of this Agreement, to the extent
reasonably requested, upon reasonable advance notice and subject
to applicable Law, the Company shall afford to the officers,
employees and authorized representatives of Parent (including
its attorneys and accountants and any financial institution
providing or proposing to provide or underwrite financing in
connection with the transactions contemplated hereby) reasonable
access during normal business hours to the properties, books,
contracts, commitments, personnel, financial and operating data
and records of the Company and its Subsidiaries, and shall
furnish to Parent or its authorized representatives, such
additional information concerning the Company, its Subsidiaries
and their properties, assets, employees, businesses and
operations as shall be reasonably requested. Parent and Merger
Sub covenant that any such access shall be conducted in such a
manner as not to interfere unreasonably with the operations of
the Company or its Subsidiaries.
(b) Any information provided to Parent or Merger Sub or
their respective representatives pursuant to this Agreement
shall be held by Parent, Merger Sub and their representatives in
accordance with, and shall be subject to the terms of, that
certain Confidentiality Agreement, dated as of
September 29, 2006 by and between the Company and Kohlberg
Management V, LLC, that certain Confidentiality Agreement,
dated as of September 27, 2006 by and between the Company
and Lubert-Adler Partners, L.P. and that certain Confidentiality
Agreement, dated as of October 10, 2006 by and between the
Company and Chrysalis Capital Partners, Inc. (collectively, the
Confidentiality Agreements), which are hereby
incorporated in this Agreement by reference as though fully set
forth in this Agreement and shall continue in force until the
Effective Time, at
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which time such Confidentiality Agreements shall terminate;
provided that Parent, Merger Sub and the Company may disclose
such information as may be necessary in connection with seeking
the Parent Required Governmental Approvals, the Company Required
Governmental Approvals and the Company Shareholder Approval;
provided further that if this Agreement is terminated in
accordance with Article IX of this Agreement prior to the
Effective Time, the Confidentiality Agreements shall remain in
full force and effect, in accordance with their terms.
Section 5.2 Agreement
to Cooperate.
(a) Prior to Closing, subject to the terms and conditions
of this Agreement, each of the Company, on the one hand, and
each of Parent and Merger Sub, on the other hand, shall use (and
shall cause its respective Subsidiaries to use) its reasonable
best efforts to take, or cause to be taken, all actions (other
than the actions contemplated by Section 5.2(b)) and to do,
or cause to be done, all things necessary, proper or advisable
under applicable Law and regulations to consummate and make
effective as promptly as practicable the Merger and other
transactions contemplated by this Agreement; provided, however,
(x) except as otherwise provided in the Disclosure
Schedule, notwithstanding any other provision of this Agreement,
nothing herein shall require the Company or any of its
Subsidiaries to make any
out-of-pocket
expenses, accrue any liability for its account or make any
accommodation or concession to Parent, Merger Sub or any third
party in connection with the foregoing and (y) neither the
Company nor any of its Subsidiaries shall incur any such
expenses to be paid at Closing in excess of $24.2 million
in the aggregate as estimated on Section 5.2 of the
Disclosure Schedule without Parents prior written consent.
(b) In addition to and without limitation of the foregoing,
each of Parent, Merger Sub and the Company undertakes and agrees
to (i) file (and Parent agrees to cause any Person that may
be deemed to be the ultimate parent entity or otherwise to
control Parent to file, if such filing is required by Law) as
soon as practicable, and in any event prior to ten business days
after the date hereof, a Notification and Report Form under the
HSR Act with the United States Federal Trade Commission and the
Antitrust Division of the United States Department of Justice
(and shall file as soon as practicable any form or report
required by any other Governmental Authority, including, without
limitation, any foreign antitrust authority, relating to
antitrust, competition, trade or other regulatory matters), and
(ii) take any act, make any undertaking or receive any
clearance or approval required by any Governmental Authority or
applicable Law; provided, however, that no party shall be
required to, and the Company may not (without the prior written
consent of Parent) make any such filing or undertaking or take
any such action which filing, undertaking or action would have a
Material Adverse Effect. Each of Parent and the Company shall
(i) request early termination in connection with the
antitrust filings under the HSR Act or any foreign antitrust
Law, to the extent applicable, (ii) respond as promptly as
practicable to any inquiries or requests received from any
Governmental Authority for additional information or
documentation, and (iii) not extend any waiting period
under the HSR Act or enter into any agreement with any
Governmental Authority not to consummate the transactions
contemplated by this Agreement, except with the prior consent of
the other parties hereto. Parent and the Company shall take any
and all commercially reasonable steps necessary to avoid or
eliminate each and every impediment under any antitrust,
competition, or trade Law that may be asserted by any
Governmental Authority with respect to the Merger so as to
enable the Effective Time to occur as soon as reasonably
possible and to avoid any Action or proceeding that would
otherwise have the effect of preventing or delaying the
Effective Time. Each party shall (i) promptly notify the
other party of any written communication to that party or its
Affiliates from any Governmental Authority and, subject to
applicable Law, permit the other party to review in advance any
proposed written communication to any of the foregoing;
(ii) not agree to participate, or to permit its Affiliates
to participate, in any substantive meeting or discussion with
any Governmental Authority in respect of any filings,
investigation or inquiry concerning this Agreement or the Merger
unless it consults with the other party in advance and, to the
extent permitted by such Governmental Authority, gives the other
party the opportunity to attend and participate thereat; and
(iii) furnish the other party with copies of all
correspondence, filings, and communications between them and
their affiliates and their respective representatives on the one
hand, and any Governmental Authority or members of their
respective staffs on the other hand, with respect to this
Agreement and the Merger (except that the Company shall be under
no obligation of any kind to provide any
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other party documents, material or other information relating to
the valuation of the Company or to alternatives to the proposed
Merger and this Agreement).
Section 5.3 Further
Assurances. Subject to the terms and
conditions of this Agreement and not in limitation of any such
provisions, including Section 5.2, each party hereby agrees
to use, other than with respect to the actions contemplated by
Section 5.2(b), all reasonable best efforts to take, or
cause to be taken, all action, and to do, or cause to be done,
all things necessary, proper or advisable under applicable Laws
to satisfy all conditions to, and to consummate, the
transactions contemplated by this Agreement and to carry out the
purposes hereof, including to perform and cause to be performed
any further acts and to execute and deliver and cause to be
executed and delivered any documents that may be reasonably
necessary to carry out the provisions of this Agreement;
provided that, except as otherwise provided in this Agreement,
notwithstanding anything to the contrary stated in this
Agreement, the Company shall not be required to pay any
consideration for any third-party consent or waiver.
Section 5.4 Conduct
of Business.
(a) Except as otherwise permitted or required by the terms
of this Agreement and the Disclosure Schedule, from the date of
this Agreement until Closing (or earlier termination of this
Agreement), the Company shall, and shall cause each of its
Subsidiaries to, (i) operate and carry on its business only
in the ordinary course consistent with past practice,
(ii) use commercially reasonable efforts consistent with
good business practice to keep and maintain its respective
assets and properties in normal operating condition and repair,
reasonable wear and tear and damage by fire or other casualty
excepted, and (iii) use commercially reasonable efforts to
maintain the present business organization of the Company and
its Subsidiaries intact and preserve the goodwill of the
suppliers, contractors, licensors, employees, customers,
distributors and others having significant business relations
with them in all material respects.
(b) Except as contemplated by this Agreement, as set forth
in Section 5.4 of the Disclosure Schedule or as otherwise
required to maintain the business and assets of the Company and
its Subsidiaries, consistent with past practice, the Company
shall not, and shall not cause or allow any of its Subsidiaries
to, without the prior consent in writing of Parent (which
consent shall not be unreasonably withheld, conditioned or
delayed):
(i) amend its or any of its Subsidiaries certificate
of incorporation or bylaws or equivalent organizational
documents or amend the terms of its or any of its
Subsidiaries outstanding equity securities;
(ii) except for transactions between the Company and its
Subsidiaries, or among the Companys Subsidiaries, issue,
sell, grant, transfer, dispose of, pledge or encumber or agree
to issue, sell, transfer, dispose of, pledge or encumber any
Equity Securities or Convertible Securities, provided, however,
(A) the Company may issue or agree to issue shares of
capital stock of the Company upon exercise of the Company
Options outstanding on the date hereof pursuant to the terms of
such securities on the date hereof, and (B) the Company may
issue or agree to issue shares of capital stock of the Company
upon the conversion of the TIPS in accordance with the terms of
such securities on the date hereof;
(iii) adjust, split, combine, or reclassify any shares of
Company Common Stock or other capital stock of the Company or
declare, set aside or pay any dividends or make any other
distributions (whether in cash, stock or other property) in
respect of Company Common Stock or other capital stock of the
Company, except for (A) the payment of dividends in
accordance with the terms of the TIPS, (B) the payment of
quarterly dividends consistent with historical amounts, or
(C) the payment of dividends or distributions by a
wholly-owned Subsidiary to the Company or another wholly-owned
Subsidiary or by a non wholly-owned Subsidiary of the Company
pro rata to the equity holders thereof;
(iv) redeem, purchase or otherwise acquire for any
consideration (other than pursuant to the conversion provision
as required by the terms of the TIPS) (A) any outstanding
shares of its capital stock or securities carrying the right to
acquire, or which are convertible into or exchangeable or
exercisable for, with or without additional consideration, such
stock, (B) any other securities of the Company or any of
its Subsidiaries, or (C) any interest in any of the
foregoing;
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(v) (A) incur or assume the terms of any Debt or other
Liability other than under the Credit Facilities or pursuant to
lease financing arrangements for equipment not in excess of
$1,000,000 in the aggregate, (B) amend, supplement or
otherwise modify in any material way any of the terms of the
Credit Agreements or any other Debt or Liability except in the
ordinary course of business consistent with past practice of the
Company and its Subsidiaries, or (C) assume, guarantee,
endorse or otherwise become liable or responsible for the
obligations of any other Person;
(vi) make any acquisition or lease, assignment, transfer or
disposition (or series of related acquisitions or leases,
assignments, transfers or dispositions) of (a) Leased Real
Property that is set forth in Section 5.4(b)(vi) of the
Disclosure Schedule or any Owned Real Property, or
(b) stock or assets (including, without limitation, the
Leases and the Management Agreements) of or to any third party
in excess of $1,000,000 in the aggregate other than inventory,
supplies or other assets in the ordinary course of business
consistent with past practice of the Company and its
Subsidiaries;
(vii) merge or consolidate with any corporation or other
entity, or adopt a plan of complete or partial liquidation,
dissolution, bankruptcy, restructuring, recapitalization or
other reorganization, including transactions between or among
the Company
and/or among
its wholly-owned Subsidiaries;
(viii) enter into or amend (except as necessary to comply
with Section 409A of the Code and the regulations
promulgated thereunder ) any employment, retention, severance,
consulting or similar contract with, or increase the
compensation
and/or
benefits (A) of any employee whose base salary or
independent contractor whose pay is in excess of
$200,000 per year as of the date of this Agreement other
than the agreement set forth in Section 5.4(b)(viii) of the
Disclosure Schedule (a Highly Compensated
Employee), (B) of any director or officer of the
Company or any of its Subsidiaries, (C) of any shareholder
beneficially owning in excess of ten percent (10%) of the
Company or any Affiliate thereof or (D) of any employee
(including Highly Compensated Employees) resulting in an
increase in the payment obligations of the Company and its
Subsidiaries with respect to compensation
and/or
benefits of employees in excess of $500,000 per year in the
aggregate;
(ix) except for increases in compensation and benefits that
are required by applicable Law or a contract (a copy of which
has been made available to Parent) in effect on the date of this
Agreement or increases not exceeding 3% to employees (other than
Highly Compensated Employees, officers or non-employee
directors) made in the ordinary course of business consistent
with past practice, increase the compensation
and/or
benefits of employees, officers or directors, as of the date
hereof;
(x) enter into, adopt or amend in any material respect, or
increase the benefits payable under any employment agreement,
Employee Benefit Plan, stock option or restricted stock plan, or
severance plan, or terminate any employee in a manner that would
result in any severance or other payment becoming due;
(xi) (A) adopt, amend or terminate any Employee
Benefit Plan, severance plan or collective bargaining agreement,
except as required by Law or by the terms of any such plan or
agreement or contract as in existence on the date of this
Agreement and listed on Section 5.4(b)(xi)(A) of the
Disclosure Schedule, or (B) grant or make any loan, bonus,
fees, incentive compensation, service award or other like
benefit, to or for the benefit of any officer or Highly
Compensated Employee except as specifically described in
Section 5.4(b)(xi)(B) of the Disclosure Schedule;
(xii) mortgage, pledge, or otherwise voluntarily encumber
any part of its assets, tangible or intangible, other than
pledges or Encumbrances pursuant to the Credit Facilities;
(xiii) except as required by changes in GAAP first
effective after the date hereof, make any material change in its
accounting principles, practices or the methods by which such
principles are applied for financial reporting purposes;
(xiv) pay, discharge, waive, release, assign, settle,
compromise, satisfy, cancel or forgive any Action, except in the
ordinary course of business consistent with past practice of the
Company and its Subsidiaries;
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(xv) except as permitted under Section 5.4(b)(v),
cancel or terminate, or amend, modify or waive in any material
way the terms of (1) the Material Leases listed in
Section 5.4(b)(xv) of the Disclosure Schedule or
(2) any Contract to which it is a party or by which it or
any of its assets are bound, which, in the case of any Contract
described in clause (2), (A) provides for payment by
or to the Company or its Subsidiaries in excess of $750,000 over
the life of such Contract or (B) involves the performance
of services or the delivery of goods by or to the Company or its
Subsidiaries of an amount or value in excess of $750,000 over
the life of such agreement, contract or commitment, in each case
under the foregoing clause (A) or (B), other than in
the ordinary course of business consistent with past practice;
(xvi) make an investment in, make a loan or advance or
agreement to loan or advance to, enter into any joint venture,
partnership or other similar arrangement for the conduct of
business with any Person that constitutes a division or
operating unit of such third party, in each case, in excess of
$1,000,000 individually and $5,000,000 in the aggregate
(provided that such third party or Person is not an Affiliate);
for purposes of this Section 5.4(b)(xvi) it is acknowledged
and agreed that such transactions solely between the Company and
any of its wholly-owned Subsidiaries shall not be prohibited;
(xvii) (A) make, change or revoke any material Tax
election, or elect or change any method of accounting for Tax
purposes other than in the ordinary course of business
consistent with past practice, or (B) settle any material
action in respect of Taxes or enter into any material agreement
or contract in respect of Taxes with any Taxing Authority;
(xviii) engage in any transaction with, or enter into any
Contract with, directly or indirectly, any current or former
director, officer, holder of capital stock or other equity
interest, partner, member or Affiliate of the Company or any of
its Subsidiaries, or make any payment or distribution to any of
the foregoing other than with respect to matters related to the
Companys employment of such person in the ordinary course
of business consistent with past practice;
(xix) cancel or materially alter or amend any insurance
policy, enter into or amend any insurance broker or similar
agreement or, except for amendments, terminations or
non-renewals in the ordinary course of business and consistent
with past practices of the Company and its Subsidiaries,
materially amend, terminate or fail to use its commercially
reasonable efforts to renew any Contract;
(xx) lay off or otherwise terminate the employment of any
employees within 91 days of the Closing Date for a reason
that would constitute an employment loss under the
Worker Adjustment and Retraining Notification Act, or any
successor federal law or any applicable state plant closing,
mass layoff or severance pay or notification law or like law
(all of the foregoing, collectively, the WARN
Act);
(xxi) grant any license or sublicense or amend the terms of
any material rights with respect to any Intellectual Property,
other than in the ordinary course of business consistent with
past practice; or (xxii) make or authorize any capital
expenditure that individually or in the aggregate exceeds
$1,000,000, except for capital expenditures made in the ordinary
course of business and consistent with past practice (which such
expenditures shall not exceed $5,000,000 in the
aggregate); or
(xxiii) agree, commit or resolve to do or authorize any of
the foregoing.
Section 5.5 Public
Announcements. The parties have agreed to an
initial press release that shall be released as soon as
practicable after the date hereof, and the parties further agree
that any future press release or public announcement concerning
the transactions contemplated hereby shall not be issued by the
Company, Parent or Merger Sub without the prior consent of
Parent and the Company, except as such release or public
announcement may be required by Law, in which case the party
required to issue the release or announcement shall allow Parent
and the Company, as applicable, reasonable time to comment on
such release or announcement in advance of its issuance.
Section 5.6 Indebtedness;
TIPS.
(a) On the Closing Date, simultaneously with Closing,
Parent shall cause all outstanding Obligations (other than the
Obligations arising under or with respect to the Sterling
Overdraft Facility) to be paid in full,
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providing funds to the Company to do so if necessary, and
immediately upon such payment and any other payments in
connection thereto, cause the Credit Facilities (other than the
Sterling Overdraft Facility) to be paid in full.
(b) The Company shall deliver or cause to be timely
delivered to the TIPS holders all notices required pursuant to
the terms of the Indenture and Trust Agreement.
Section 5.7 Directors
and Officers Indemnification.
(a) For a period of six years from the Effective Time, the
provisions of the certificate of incorporation and bylaws, or
similar organization documents, of the Surviving Corporation and
of each of its Subsidiaries concerning elimination of liability
and indemnification of directors and officers shall not be
amended in any manner that would adversely affect the rights
thereunder of any Person that is as of the date of this
Agreement an officer or director of the Company or of any such
Subsidiary except as may be required by applicable Law. From and
after the Effective Time, Parent shall assume, be jointly and
severally liable for, and honor, guarantee and stand surety for,
and shall cause the Company to honor, in accordance with their
respective terms, each of the covenants contained in this
Section 5.7. In addition to the foregoing, from and after
the Closing Date, to the extent permitted by applicable Law,
Parent and the Surviving Corporation, jointly and severally,
shall indemnify, hold harmless and defend each Person who is a
current or former officer or director of the Company or any of
its Subsidiaries against all losses and expenses (including all
losses, costs, obligations, liabilities, settlement payments,
awards, judgments, fines, penalties, damages (including
compensatory, punitive and consequential damages), demands,
claims, actions, causes of action, assessments, deficiencies and
other charges and attorneys fees) arising out of or
pertaining to acts or omissions (or alleged acts or omissions)
by them in their capacities as such, which acts or omissions
occurred at or prior to Closing. To the maximum extent permitted
by applicable Law, the indemnification and related rights
hereunder shall be mandatory rather than permissive, and Parent
and/or the
Surviving Corporation shall promptly advance expenses in
connection with such indemnification to the fullest extent
permitted under applicable Law; provided that, to the extent
required by Law, the Person to whom expenses are advanced
provides an undertaking to repay such advances if it is
ultimately determined that such Person is not entitled to
indemnification and provided further that neither Parent nor the
Company shall be liable for any losses or expenses arising out
of (i) any Action initiated by the indemnified Person or
(ii) any settlement effected without its prior written
consent. At Closing, Parent shall assume and become liable for,
jointly and severally with the Surviving Corporation and each
such Subsidiary, any liability and all obligations of the
Company and each such Subsidiary under such provisions.
(b) Parent agrees that the Company and, from and after the
Effective Time, the Surviving Corporation, shall cause to be
maintained in effect for not less than six years from the
Effective Time the current policies of directors and
officers fiduciary and liability insurance maintained by
the Company by purchasing a policy providing tail
coverage for a period of not less than six years from the
Effective Time with a carrier (or carriers) and in a form
reasonably agreed upon by Company. Parent shall make available
to Company evidence of said coverage immediately prior to the
Effective Time; provided, however that Parent, the Surviving
Corporation and its Subsidiaries will not, in the aggregate, be
required to pay a premium in excess of 250% of the last annual
premium paid by the Company prior to the date of this Agreement
(the Cap) in order to purchase such policy;
and provided, further, that if tail coverage cannot be obtained,
or can be obtained only by paying an annual premium in excess of
the Cap, then Parent shall cause the Surviving Corporation and
its Subsidiaries to purchase a policy or maintain policies that,
in Parents good faith judgment, provides as much
comparable insurance as is available at an aggregate premium
equal to the Cap.
(c) Following the Effective Time, the provisions of this
Section 5.7 are (i) intended to be for the benefit of,
and shall be enforceable by, each Person entitled to
indemnification hereunder and each such Persons heirs,
representatives, successors or assigns, it being expressly
agreed that such Persons shall be third-party beneficiaries of
this Section, and (ii) in addition to, and not in
substitution for, any other rights to indemnification or
contribution that any such Person may have by contract or
otherwise.
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(d) Parent shall pay all reasonable expenses, including
reasonable attorneys fees, that may be incurred by any
director or officer that is the prevailing party in any action
or proceeding to enforce the indemnity and other obligations
provided in this Section 5.7.
(e) In the event Parent, the Surviving Corporation or any
of their respective successors or assigns (i) consolidates
with or merges into any other Person and shall not be the
continuing or surviving corporation or entity in such
consolidation or merger or (ii) transfers all or
substantially all of its properties and assets in one or more
transactions, regardless of whether related or unrelated, to any
Person or Persons, then and in either such case, proper
provision shall be made so that the successors and assigns of
Parent or the Surviving Corporation, as the case may be, shall
assume the obligations set forth in this Section 5.7.
Section 5.8 Shareholder
Approval. The Company shall, promptly after
the date hereof, prepare and file with the SEC a proxy statement
(the Proxy Statement) and thereafter use its
reasonable best efforts to obtain from the shareholders of the
Company their approval and adoption of this Agreement and the
transactions contemplated hereby (including the Merger) at a
meeting of the shareholders called for such purpose (the
Special Meeting). If at any time prior to the
receipt of the approval of the Companys shareholders there
occurs any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company will promptly
prepare and mail to its shareholders such an amendment or
supplement. Delivery of the Proxy Statement and any amendment or
supplement thereto shall be subject to the prior review and
reasonable approval of Parent and Merger Sub. Subject to
Section 5.11, (i) the Proxy Statement will contain the
recommendation of the Companys Board of Directors that the
Companys shareholders vote to adopt and approve this
Agreement and the Merger and (ii) the Companys Board
of Directors shall not rescind its authorization or approval of
this Agreement and the Merger.
Section 5.9 Restrictions
on Parent and the Company. Parent and the
Company agree that, from and after the date hereof and prior to
the Effective Time, and except as may be agreed in writing by
the other parties hereto or as may be expressly permitted
pursuant to this Agreement, they shall not, and shall not permit
any of their Subsidiaries to, agree, in writing or otherwise, to
take any action that could reasonably be expected to delay the
consummation of the Merger or result in the failure to satisfy
any condition to consummation of the Merger. Nothing contained
in this Agreement shall require any party hereto to pay any
consideration (except filing and application fees) to any other
Person from whom any such approvals, authorizations, consents,
orders, licenses, permits, qualifications, exemptions or waivers
are requested.
Section 5.10 Merger
Sub. Parent will take all action necessary
(i) to cause Merger Sub to perform its obligations under
this Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement, and (ii) to ensure
that, prior to the Effective Time, Merger Sub shall not conduct
any business or activities or make any investments other than as
specifically contemplated by this Agreement, or incur or
guarantee any indebtedness.
Section 5.11 Acquisition
Proposals.
(a) Without limiting any of its other obligations under
this Agreement, the Company agrees that it and its Subsidiaries
and the officers and directors of it and its Subsidiaries shall
not, and that it shall direct and use its reasonable best
efforts to cause the Company and the Company Subsidiaries
Affiliates, employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any
of the Company Subsidiaries) not to, directly or indirectly,
(i) initiate, solicit, entertain, encourage or facilitate
(including by way of furnishing information) an Acquisition
Proposal, (ii) enter into, consider, continue or otherwise
participate in or pursue in any manner any discussions or
negotiations regarding, or provide any confidential information
or data to any person relating to, an Acquisition Proposal,
knowingly facilitate any effort or attempt to make or implement
an Acquisition Proposal, or otherwise cooperate in any way with,
any Acquisition Proposal (iii) approve or recommend, or
propose publicly to approve or recommend, any Acquisition
Proposal; or (iv) approve or recommend, or propose to
approve or recommend, or execute or enter into, any letter of
intent, agreement in principle, merger agreement, acquisition
agreement, option agreement or other similar agreement related
to any Acquisition Proposal or propose or agree to do any of the
foregoing. The Company will (x) immediately cease and cause
to be terminated all activities, discussions or negotiations
with any parties with respect to any Acquisition Proposal, other
than the Merger and (y) notify the Parent
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immediately if any Person makes any proposal, offer, inquiry or
contact with respect to any of the foregoing (whether solicited
or unsolicited).
(b) Notwithstanding anything to the contrary contained in
Section 5.11(a) or elsewhere in this Agreement, at any time
prior to obtaining the Company Shareholder Approval, to the
extent the Board of Directors of the Company in response to a
bona fide written Acquisition Proposal, after consultation with
independent legal counsel, determines in good faith that such
Acquisition Proposal constitutes or is reasonably likely to lead
to a Superior Proposal, and which Acquisition Proposal was not
solicited after the date hereof and was made after the date
hereof and did not otherwise result from a breach of
Section 5.11(a), that any action otherwise prohibited by
Section 5.11(a) is necessary for the Company Board to
comply with its fiduciary duties under applicable Law, the
Company and its representatives may, subject to compliance with
Section 5.11(d), (x) furnish non-public information
to, and afford access to the properties, books, records,
officers, employees and representatives of the Company to the
Person making such Acquisition Proposal (and its
Representatives) pursuant to a customary confidentiality
agreement not less restrictive to such Person (and no less
favorable to the Company) than the confidentiality provisions of
the Confidentiality Agreements; and (y) participate in
discussions or negotiations with the Person making such
Acquisition Proposal (and its Representatives) regarding such
Acquisition Proposal; provided that all such information has
previously been provided to the Parent or Merger Sub or is
provided to the Parent or Merger Sub prior to or substantially
concurrent with the time it is provided to such Person, and
prior to taking such action, the Company shall (to the extent
practicable) provide notice to Parent to the effect that it is
taking such action.
(c) The Board of Directors of the Company shall not (and
shall not permit any committee thereof to)
(i) (A) withdraw (or amend, qualify or modify in a
manner adverse to Parent or Merger Sub), or publicly propose to
withdraw (or amend, qualify or modify in a manner adverse to
Parent or Merger Sub), the approval, adoption or recommendation
by such board of directors of this Agreement and the Merger or
fail to recommend to the shareholders in the Proxy Statement
that they approve the Merger and give the Company Shareholder
Approval or (B) endorse, approve, adopt, submit to Company
shareholders (including by seeking to obtain an action by
written consent of some or all of the Companys
shareholders) or recommend, or propose publicly to endorse,
approve, adopt, submit to shareholders of the Company or
recommend, any Acquisition Proposal (any action described in
this clause (i) being referred to as an Adverse
Recommendation Change) or (ii) enter into, adopt
or recommend, or publicly propose to enter into, adopt or
recommend, or allow the Company to execute or enter into, any
letter of intent, memorandum of understanding, agreement in
principle, merger agreement, acquisition agreement, option
agreement, joint venture agreement, partnership agreement or
other similar contract constituting or related to, or that is
intended to or would reasonably be expected to lead to, any
Acquisition Proposal (other than a confidentiality agreement
referred to in Section 5.11(b)) (any such document, an
Acquisition Agreement). Notwithstanding the
foregoing, at any time prior to obtaining the Company
Shareholder Approval and subject to Section 5.11(d), the
Board of Directors of the Company may in response to an
Acquisition Proposal that the Board of Directors of the Company
reasonably in its good faith judgment determines (after
consultation with its outside counsel and its financial advisor)
constitutes a Superior Proposal and that was unsolicited and
made after the date hereof and that did not otherwise result
from a breach of this Section 5.11, (1) make an
Adverse Recommendation Change if such action is required for the
Board of Directors of the Company to comply with their fiduciary
duties under applicable Laws or (2) if such action is
required for the Board of Directors of the Company to comply
with their fiduciary duties under applicable Laws, cause the
Company to terminate this Agreement pursuant to
Section 9.1(e) and concurrently with such termination enter
into an Acquisition Agreement; provided, however, that
the Company shall not be entitled to exercise its right to make
an Adverse Recommendation Change or terminate this Agreement
pursuant to Section 9.1(e) until after the fifth business
day following receipt by Parent and Merger Sub of written notice
(a Notice of Superior Proposal) from the
Company advising Parent and Merger Sub that the Board of
Directors of the Company intends to take such action and
specifying the reasons therefor, including the material terms
and conditions of any Superior Proposal that is the basis of the
proposed action by the Board of Directors of the Company
(including a copy thereof with all accompanying documentation
and the identity of Person making such Superior Proposal).
During such five-business-day period, Parent and Merger Sub may
offer the Company adjustments to the terms and conditions of
this Agreement that will permit the Board of Directors of the
Company to determine that,
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with such adjustments, the Merger is at least as favorable to
the shareholders as such Superior Proposal. In determining
whether to make an Adverse Recommendation Change or to cause the
Company to so terminate this Agreement, the Board of Directors
of the Company shall take into account any changes to the
financial or other terms of this Agreement proposed by Parent
and Merger Sub in response to a Notice of Superior Proposal or
otherwise.
(d) Notification. In addition to
the obligations of the Company set forth in paragraphs (a),
(b) and (c) of this Section 5.11, the Company
shall promptly (and in any event within 48 hours) advise
Parent and Merger Sub in writing of any Acquisition Proposal,
indication of interest or request for nonpublic information or
any similar or related inquiry relating to the Company or any of
its Subsidiaries or for access to properties, books or records
of the Company or any of its Subsidiaries by any Person or group
that informs the Board of Directors of the Company or any of its
Subsidiaries that it is considering making, or has made, an
Acquisition Proposal, the material terms and conditions of any
such Acquisition Proposal (including any material changes
thereto) and the identity of the Person making any such
Acquisition Proposal as well as the Companys intention to
furnish information to, or enter into discussions or
negotiations with, such Person or group. The Company shall keep
Parent and Merger Sub informed in all material respects of the
status and details (including any material change to the terms
thereof) of any Acquisition Proposal or other activity described
above.
(e) Certain Permitted
Actions. Nothing contained in this
Section 5.11 shall prohibit the Company from
(i) taking and disclosing to its shareholders a position
contemplated by
Rule 14e-2(a)
under the Exchange Act or (ii) making any disclosure to the
shareholders of the Company that is required by applicable Law;
provided, however, that in no event shall the Company or its
Board of Directors take, or agree or resolve to take, any action
prohibited by Section 5.11(c).
(f) As used in this Agreement, Acquisition
Proposal shall mean any inquiry, proposal or offer
from any Person or group (as defined in
Section 13(d) of the Exchange Act), other than Parent and
its Subsidiaries, relating to any (a) direct or indirect
acquisition (whether in a single transaction or a series of
related transactions) of assets of the Company and its
Subsidiaries (including securities of Subsidiaries) equal to 20%
or more of the Companys consolidated assets or to which
20% or more of the Companys revenues or earnings on a
consolidated basis are attributable (or any long-term lease
agreement having similar economic effect), (B) direct or
indirect acquisition (whether in a single transaction or a
series of related transactions) of beneficial ownership (within
the meaning of Section 13 under the Exchange Act) of 20% or
more of any class of equity securities of the Company,
(C) tender offer or exchange offer that if consummated
would result in any Person or group (as defined in
Section 13(d) of the Exchange Act) beneficially owning 20%
or more of any class of Equity Securities of the Company or
(D) merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its
Subsidiaries; in each case, other than the Merger.
(g) As used in this Agreement, Superior
Proposal shall mean an Acquisition Proposal (assuming
for purposes of this definition that references to
20% shall be deemed to be reference to 50%), which
the Board of Directors of the Company reasonably determines in
its good faith judgment (i) is reasonably likely to be
consummated, taking into account all legal, tax and regulatory
aspects of the proposal, (ii) has committed financing, to
the extent required, on terms as likely to be satisfied as the
terms of the Financing contemplated by this Agreement, and
(iii) (after consultation with its financial advisor) to be
more favorable to the shareholders of the Company from a
financial point of view than the Merger (taking into account all
the terms and conditions of such proposal and this Agreement
(including any changes to this Agreement proposed by Parent or
Merger Sub pursuant to Section 5.11(c) hereof)).
Section 5.12 Notice
of Developments. Each party hereto shall give
prompt written notice to the other party of (i) the
occurrence, or failure to occur, of any event, which occurrence
or failure to occur would be reasonably likely to cause any
representation or warranty made by such party in this Agreement,
the Disclosure Schedule, the Parent Disclosure Schedule, or the
Guarantees to be materially untrue or inaccurate and
(ii) any failure by such other party to comply with,
perform or satisfy any covenant, condition or agreement to be
complied with, performed by or satisfied by it under this
Agreement.
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Section 5.13 State
Takeover Laws. If any fair price,
business combination or control share
acquisition statute or other similar Law is or may become
applicable to the Merger, the Company, Merger Sub and Parent
shall each take such commercially reasonable actions as are
necessary so that the transactions contemplated in this
Agreement may be consummated as promptly as practicable on the
terms contemplated hereby and otherwise act to eliminate or
minimize the effects of any such Law on the Merger.
Section 5.14 Tax
Sharing Agreements. All material Tax sharing
agreements or similar agreements and, to the Knowledge of the
Company, all other Tax sharing agreements or similar agreements
and all known powers of attorney with respect to or involving
the Company or any of its Subsidiaries will be terminated prior
to the Closing and, after the Closing, the Company and each of
its Subsidiaries will not be bound thereby or have any Liability
thereunder.
Section 5.15 Cooperation
with Financing. The Company shall use its
commercially reasonable efforts to provide and cause its
Subsidiaries to provide, and shall cause its and their
respective officers, directors, employees, consultants,
accountants, legal counsel, investment bankers, agents and other
representatives to provide, all necessary cooperation in
connection with the Financing as may be reasonably requested by
Parent, including (i) participation on a timely basis in
meetings, drafting sessions, due diligence, road shows and other
presentations, including presentations with rating agencies;
(ii) furnishing Parent, Merger Sub and their financing
sources as promptly as reasonably practicable with all financial
statements, pro forma statements, business plans, budgets and
other pertinent data and information as may be available and
reasonably requested by Parent or Merger Sub, including of the
type as are customary for the financings contemplated by the
Financing Letter or necessary for the satisfaction of the
conditions set forth in the Financing Letter;
(iii) reasonably cooperating with the marketing efforts of
Parent and its financing sources for any portion of the
financings contemplated by the Financing Letter and assisting
Parent and its financing sources in the timely preparation of
offering documents, private placement memoranda, prospectuses,
bank information memoranda and similar documents and of
materials for lender and rating agency presentations;
(iv) using commercially reasonable efforts to satisfy the
conditions precedent set forth in the Financing Letter (to the
extent within the control of the Company or requiring action or
cooperation by the Company) and taking all corporate and similar
actions reasonably necessary to permit the consummation of the
financings contemplated thereby and to permit the proceeds
thereof to be made available to the Company; (v) using
commercially reasonable efforts to assist Parent in obtaining,
and to cooperate with Parent in its efforts to obtain
accountants comfort letters, legal opinions, solvency
opinions, appraisals, surveys, environmental assessments, and
title insurance, ratings and other documentation and items
relating to the Financing as reasonably requested by Parent and,
if requested by Parent, to reasonably cooperate with and assist
Parent, Merger Sub or its financing sources in obtaining the
foregoing; (vi) executing and delivering any mortgages,
pledge and security documents, other definitive financing
documents, or other certificates, legal opinions or documents,
as may be reasonably requested by Parent (including a
certificate of the Chief Financial Officer of the Company or any
Subsidiary with respect to solvency matters and consents of
accountants for use of their reports in any materials relating
to the Financing) and otherwise reasonably facilitating the
pledging of collateral (including cooperation in connection with
the pay-off of existing indebtedness and the release of related
Encumbrances); (vii) allowing Parent and its and its
lenders representatives such access as may be reasonably
necessary for their property level due diligence and for Parent,
Merger Sub or its financing sources to evaluate the
Companys current assets, cash management and accounting
systems, policies and procedures relating thereto for the
purposes of establishing collateral arrangements and using
commercially reasonable best efforts to establish bank and other
accounts and blocked account agreements and lock box
arrangements in connection with the Financing; (viii) using
commercially reasonable efforts to assist Parent in obtaining,
and to cooperate with Parent in its efforts to obtain an
estoppel (and any related consent or approval) from the other
party to the Material Lease relating to the Leased Real Property
listed in Section 5.15 of the Disclosure Schedule;
(ix) using commercially reasonable efforts to prepare
documents and instruments to remove exceptions on title policies
(as reasonable and customary), preparing any conveyance
instruments necessary to transfer prior to the Closing record
ownership of the Owned Real Estate to the correct legal owner as
of the date of this Agreement, and effecting such conveyances,
assisting Parent with its preparation of any necessary transfer
documentation with respect to the real properties to be subject
to any real estate financings; (x) using reasonable best
efforts to provide monthly financial statements within
25 days of the end of each month prior
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to the Closing Date; and (xi) taking such actions to form
new subsidiaries (including bankruptcy-remote special purpose
entities) to facilitate any real estate financings;
provided that none of the Company or any of its
Subsidiaries shall be required to pay any commitment or other
similar fee or incur any other liability in connection with the
Financing prior to the Effective Time and provided
further that Parent shall be solely responsible for all
out-of-pocket
expenses of the Company incurred in connection with the
foregoing. The Company hereby consents to the use of its and its
Subsidiaries logos in connection with the Financing.
Section 5.16 Stock
Exchange De-listing. Prior to the Closing,
the Company shall cooperate with Parent and use reasonable best
efforts to take, or cause to be taken, all actions, and do or
cause to be done all things, reasonably necessary, proper or
advisable on its part under applicable Laws and rules and
policies of the NYSE to enable the de-listing by the Surviving
Corporation of the Company Common Stock from the NYSE and the
deregistration of the Company Common Stock under the Exchange
Act as promptly as practicable after the Effective Time.
ARTICLE VI
CONDITIONS
TO THE OBLIGATIONS OF EACH PARTY TO CLOSE
The respective obligations of the Company, Parent and Merger Sub
to consummate the Merger shall be subject to the satisfaction or
waiver, on or prior to the Closing Date, of the following
conditions:
Section 6.1 Company
Shareholder Approval. This Agreement and the
Merger shall have been approved and adopted by the requisite
action of the shareholders of the Company and not revoked.
Section 6.2 HSR. All
filings and waiting periods applicable (including any extensions
thereof) under the HSR Act shall have expired or been terminated.
Section 6.3 Laws;
Orders. At the Closing Date, there shall be
no Law, Governmental Order, injunction, restraining order or
decree of any kind that is in effect that restrains or prohibits
the consummation of the Merger; provided that, with respect to
any Governmental Order, the party against whom such Governmental
Order is directed shall have used its commercially reasonable
efforts to have such Governmental Order vacated or lifted.
ARTICLE VII
CONDITIONS
OF PARENTS OBLIGATION TO CLOSE
Parents obligation to consummate the Merger shall be
subject to the satisfaction or waiver, on or prior to the
Closing Date, of the following conditions:
Section 7.1 Covenants. The
Company shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior
to Closing.
Section 7.2 Representations
and Warranties. The representations and
warranties of the Company contained in this Agreement shall be
true and correct at and as of Closing (without regard to any
qualifications therein as to materiality or Material Adverse
Effect), as though made at and as of such time (or, if made as
of a specific date, at and as of such date), except where such
failure to be true and correct has not had and would not have a
Material Adverse Effect, provided, however, that notwithstanding
the foregoing, the representations and warranties contained in
Sections 3.1, 3.2 and 3.14 shall be true and correct in all
material respects or if qualified by materiality or Material
Adverse Effect, shall be true and correct in all respects.
Section 7.3 Certificate. Parent
shall have received a certificate signed on behalf of the
Company by the chief financial officer of the Company indicating
that the conditions provided in Sections 7.1 and 7.2 have
been satisfied.
Section 7.4 [Reserved].
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Section 7.5 Consents.
The consents disclosed in Section 7.5 of the Disclosure
Schedule will have been obtained (the Required
Consents).
Section 7.6 Payoff
Letters. The payoff letters disclosed in
Section 7.6 of the Disclosure Schedule will have been
delivered.
Section 7.7 Government
Approvals. The Parent Required Governmental
Approvals listed on Section 7.7 of the Parent Disclosure
Schedule shall have been made, filed, given or obtained, as the
case may be.
ARTICLE VIII
CONDITIONS
TO THE COMPANYS OBLIGATIONS TO CLOSE
The Companys obligations to consummate the Merger are
subject to the satisfaction or waiver, on or prior to the
Closing Date, of all of the following conditions:
Section 8.1 Covenants. Each
of Parent and Merger Sub shall have performed in all material
respects all of their obligations hereunder required to be
performed by them at or prior to Closing.
Section 8.2 Representations
and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement
shall be true and correct at and as of Closing (without regard
to any qualifications therein as to materiality or Material
Adverse Effect), as though made at and as of such time (or, if
made as of a specific date, at and as of such date), except
where such failure to be true and correct has not and would not
reasonably be expected to materially impair, delay or prevent
consummation of the Merger, provided, however, that
notwithstanding the foregoing, the representations and
warranties contained in Sections 4.1 and 4.8 shall be true
and correct in all material respects or if qualified by
materiality or material adverse effect, shall be true and
correct in all respects.
Section 8.3 Certificates. The
Company shall have received a certificate signed on behalf of
Parent by an executive officer of Parent indicating that the
conditions provided in Sections 8.1 and 8.2 have been
satisfied.
Section 8.4 Merger
Consideration and Other Payments. The Paying
Agent shall have received, concurrent with Closing, on behalf of
the holders of outstanding shares of Company Common Stock,
Company Options, and Deferred Units, the Common Stock Merger
Consideration to be paid in accordance with Sections 2.7(a)
and 2.8. The Company shall have received all funds necessary to
pay the Obligations and any other indebtedness of the Company
that will be repayable (including at the option of the relevant
creditor).
ARTICLE IX
TERMINATION
Section 9.1 Termination. Anything
in this Agreement to the contrary notwithstanding, this
Agreement may be terminated at any time prior to Closing by:
(a) the mutual written consent of the Company and Parent;
(b) either Company or Parent, in the event that the
Effective Time shall not have occurred on or before
July 31, 2007 (the End Date) and the
party seeking to terminate this Agreement pursuant to this
Section 9.1(b) shall not have breached in any material
respect its obligations under this Agreement in any manner that
shall have proximately caused the failure to consummate the
Merger on or before such date or failed to use its required
efforts to consummate the transactions contemplated hereby;
(c) either the Company or Parent, if an injunction, order,
decree or ruling shall have been entered permanently
restraining, enjoining or otherwise prohibiting the consummation
of the Merger and such injunction shall have become final and
non-appealable, provided that the party seeking to terminate
this Agreement pursuant to this Section 9.1(c) shall have
used its reasonable best efforts to remove such injunction,
order, decree or ruling as and to the extent required by this
Agreement;
A-37
(d) either the Company or Parent, if the Special Meeting
(including any adjournments and postponements thereof) shall
have concluded and the Company Shareholder Approval contemplated
by this Agreement shall not have been obtained; provided,
however, that the right to terminate this Agreement pursuant to
this Section 9.1(d) shall not be available to any party
whose breach of a representation or warranty or failure to
fulfill any obligation under this Agreement caused the failure
to obtain the Company Shareholder Approval;
(e) either Company or Parent, if before Closing the
Company, the Board of Directors of the Company or any committee
thereof shall have (i) executed an Acquisition Agreement in
accordance with Section 5.11(c) or (ii) resolved to do
the foregoing;
(f) Parent, if before Closing the Board of Directors of the
Company or any committee thereof shall have (i) made an
Adverse Recommendation Change or (ii) resolved to do the
foregoing; or
(g) the Company, at any time after ninety (90) days
from the date of this Agreement, if Parent shall not
(i) have received the proceeds of the Financing sufficient
to consummate the Merger and the transactions contemplated
hereby within five (5) business days after notice by the
Company to Parent that the conditions set forth in
Sections VI and VII are satisfied (or, upon an immediate
Closing, would be satisfied as of such Closing) which notice may
be delivered at any time after eighty-five (85) days from
the date of this Agreement and (ii) proceed immediately
thereafter to give effect to a Closing.
Section 9.2 Procedure
and Effect of Termination.
(a) In the event of termination of this Agreement by a
party hereto entitled to terminate this Agreement pursuant to
Section 9.1, written notice thereof shall forthwith be
given by the terminating party to the other party hereto, and
this Agreement shall thereupon terminate and become void and
have no effect, and the transactions contemplated hereby shall
be abandoned without further action by the parties hereto,
except that the provisions of Sections 5.1(b), 9.2(b), and
10.1 through 10.14 shall survive the termination of this
Agreement; provided, however, that such termination shall not
relieve any party hereto of any liability for any willful breach
of any covenant or agreement of such party contained in this
Agreement.
(b) In the event that:
(i) (A) Parent or the Company shall have terminated
this Agreement pursuant to Section 9.1(d), (B) at or
prior to the Special Meeting, any Person (other than Parent,
Merger Sub or their respective Affiliates) shall have made
public an Acquisition Proposal and (C) within one
(1) year of termination of this Agreement, the Company
executes an Acquisition Agreement; or
(ii) this Agreement is terminated pursuant to
Section 9.1(e) or 9.1(f), then the Company shall pay to the
Persons listed in Section 9.2(b) of the Parent Disclosure
Schedule an aggregate fee of $22.4 million (in the
individual amounts set forth opposite each such Persons
name in such Section 9.2 of the Parent Disclosure Schedule)
by wire transfer of immediately available funds no later than
five business days after such termination (in the case of
clause (ii) above) or on the date of entry into such
Acquisition Agreement (in the case of clause (i) above).
The Company acknowledges that the agreements contained in this
Section 9.2(b) are an integral part of the transactions
contemplated in this Agreement, and that, without these
agreements, the Parent and Merger Sub would not enter into this
Agreement. The Company and Parent, on behalf of themselves and
their Affiliates, agree that any payment required to be made
pursuant to Section 9.2(b) shall be in full satisfaction of
any expense reimbursement claims and shall represent liquidated
damages and not a penalty and shall be the exclusive remedy of
the Parent and its Affiliates for the Loss suffered as a result
of the failure of the Merger to be consummated and upon payment
in accordance herewith neither the Company nor its Affiliates
shall have any further liability or obligation relating to or
arising out of this Agreement or the transactions contemplated
herein. For the purpose of this Section 9.2(b) references
to Acquisition Proposal (including its use in
determining whether there exists an Acquisition Agreement) shall
have the meaning ascribed to such term, except that references
to twenty percent (20%) shall be deemed to be
references to fifty percent (50%).
(c) In the event that this Agreement is terminated by the
Company pursuant to Section 9.1(g), then the Parent shall
pay to Company a fee of $30.0 million by wire transfer of
immediately available funds no later
A-38
than five business days after such termination. The Parent
acknowledges that the agreements contained in this
Section 9.2(c) are an integral part of the transactions
contemplated in this Agreement, and that, without these
agreements, the Company would not enter into this Agreement. The
Company and Parent, on behalf of themselves and their
Affiliates, agree that any payment required to be made pursuant
to Section 9.2(c) shall be in full satisfaction of any
expense reimbursement claims and shall represent liquidated
damages and not a penalty and shall be the exclusive remedy of
the Company and its Affiliates for the Loss suffered as a result
of the failure of the Merger to be consummated and upon payment
in accordance herewith neither the Parent nor its Affiliates
(including without limitation the Equity Sponsors, affiliates
and Merger Sub) shall have any further liability or obligation
relating or arising out of this Agreement or the transactions
contemplated herein.
ARTICLE X
MISCELLANEOUS
Section 10.1 Notices.
(a) All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be
deemed to have been duly given or made (i) five business
days after being sent by registered or certified mail, return
receipt requested, (ii) upon delivery, if hand delivered,
(iii) one business day after being sent by prepaid
overnight courier with guaranteed delivery, with a record of
receipt, or (iv) upon transmission with confirmed delivery
if sent by telecopy, in each case, to the appropriate address or
number as set forth below.
(b) Notices to the Company shall be addressed to:
Central Parking Corporation
2401 21st Avenue South, Suite 200
Nashville, Tennessee 37212
Attn: Emmanuel Eads
with a copy to:
Harwell Howard Hyne Gabbert & Manner, P.C.
1800 AmSouth Center
315 Deaderick Street
Nashville, Tennessee 37238
Attn: Mark Manner
or at such other address and to the attention of such other
Person as the Company may designate by written notice to the
other party hereto.
(c) Notices to Parent or Merger Sub shall be addressed to:
Kohlberg & Company LLC
111 Radio Circle
Mt. Kisco, NY 10549
Attn: Samuel P. Frieder
Lubert-Adler Partners, L.P.
The Cira Center
2929 Arch Street
Philadelphia, PA 19104
Attn: Dean Adler
Chrysalis Capital Partners, Inc.
The Cira Center
2929 Arch Street
Philadelphia, PA 19104
Attn: Greg Segall
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with a copy to:
Ropes & Gray LLP
One International Place
Boston, MA 02110
Attn: Daniel S. Evans
Sullivan & Cromwell LLP
1888 Century Park East, Suite 2100
Los Angeles, CA 90067
Attn: Alison S. Ressler
or at such other address and to the attention of such other
Person as Parent and Merger Sub may designate by written notice
to the Company.
Section 10.2 Governing
Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE
LAWS OF THE STATE OF TENNESSEE APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT GIVING
EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE.
Section 10.3 Entire
Agreement . This Agreement, the Disclosure Schedule, the
Parent Disclosure Schedule, and the Confidentiality Agreements
contain the entire agreement between the parties with respect to
the subject matter of this Agreement and supersede all prior
agreements, understandings, and negotiations, both written and
oral, between the parties with respect to the subject matter of
this Agreement.
Section 10.4 Expenses. Except
as otherwise set forth in this Agreement or the Disclosure
Schedule, each party shall be responsible for and shall pay all
costs and expenses incurred by such party in connection with
this Agreement and the transactions contemplated by this
Agreement, whether the Merger is or is not consummated;
provided, however, that in the event that this Agreement is
terminated for any reason whatsoever, Parent shall upon such
termination reimburse 100% of the aggregate amount of all of the
out-of-pocket
fees and expenses incurred by or on behalf of, or paid or to be
paid by, the Company or any of its Subsidiaries relating to any
work undertaken to assist Parent with financing the Merger and
the transactions contemplated hereby (including, in each case,
fees and expenses of counsel, investment bankers, accountants,
and appraisers). No later than five (5) business days prior
to the Closing Date, the Company shall deliver to Parent pay-off
letters or final invoices for the parties disclosed in
Section 10.4 of the Disclosure Schedule. The pay-off
letters or final invoices shall provide that the amounts set
forth therein represent payment in full for all fees and
expenses payable by the Company in connection with the
transactions contemplated by this Agreement. All such amounts
shall be paid by the Company at or prior to Closing.
Section 10.5 Counterparts. This
Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall
become effective against the parties that have executed and
delivered the Agreement when one or more counterparts have been
signed by Parent, Merger Sub and the Company and delivered to
Parent, Merger Sub and the Company.
Section 10.6 Successors
and Assigns. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be
assigned prior to the Closing by any of the parties hereto
without the prior written consent of the other party. Subject to
the foregoing, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective
successors or assigns, heirs, legatees, distributees, executors,
administrators and guardians. At the election of Parent, any
direct or indirect wholly-owned Subsidiary of Parent may be
substituted for Merger Sub as a constituent corporation in the
Merger, so long as such substitution would not reasonably be
expected to (i) impose any material delay in the obtaining
of, or significantly increase the risk of not obtaining, any
Company Required Governmental Approval or Parent Required
Governmental Approval or the expiration or termination of any
applicable waiting period, (ii) significantly increase the
risk of any Governmental Authority entering an order prohibiting
the consummation of the Merger, (iii) significantly
increase the risk of not being able to remove any such order on
appeal or otherwise, (iv) materially delay the consummation
of the Merger or (v) otherwise negatively affect the
Company or its
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shareholders. If the requirements of the previous sentence are
met and Parent wishes to designate another wholly-owned direct
or indirect Subsidiary to be a constituent corporation in lieu
of Merger Sub, then all references herein to Merger Sub shall be
deemed references to such other Subsidiary, except that all
representations and warranties made herein with respect to
Merger Sub as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other
Subsidiary as of the date of such designation.
Section 10.7 Amendments
and Waivers. This Agreement, and the terms
and provisions of this Agreement, may be modified, waived or
amended only by an instrument or instruments in writing signed
by the party against whom enforcement of any such modification
or amendment is sought (or, in the case of a waiver, by the
intended beneficiary of the waived term or provision). The
failure of any party hereto to enforce at any time any provision
of this Agreement shall not be construed to be a waiver of such
provision, nor in any way to affect the validity of this
Agreement or any part of this Agreement or the right of any
party thereafter to enforce each and every such provision. The
waiver by any party hereto of a breach of any term or provision
of this Agreement shall not be construed as a waiver of any
subsequent breach.
Section 10.8 No
Implied Representation;
Non-Survival. Notwithstanding anything
contained in Article III or IV or any other provision
of this Agreement, it is the explicit intent of each party
hereto that the Company is making no representation or warranty
whatsoever, express or implied, beyond those expressly given in
this Agreement, including any implied warranty or representation
as to condition, merchantability or suitability as to any of the
properties or assets of the business of the Company and its
Subsidiaries, and it is understood that Parent and Merger Sub
take the business of the Company and its Subsidiaries as is and
where is. It is understood that any estimates, projections or
other predictions contained or referred to in the Disclosure
Schedule or the Parent Disclosure Schedule or in the materials
that have been provided to Parent are not and shall not be
deemed to be representations or warranties of the Company. The
representations, warranties, and covenants (other than those
covenants which by their terms contemplate performance after the
Effective Time) in this Agreement and in any certificate
delivered pursuant hereto shall terminate at the Effective Time.
Section 10.9 Construction
of Certain Provisions. It is understood and
agreed that the specification of any dollar amount in the
representations and warranties contained in this Agreement or
the inclusion of any specific item in the Disclosure Schedule or
the Parent Disclosure Schedule is not intended to imply that
such amounts or higher or lower amounts, or the items so
included or other items, are or are not material, and no party
shall use the fact of the setting of such amounts or the fact of
the inclusion of any such item in the Disclosure Schedule or the
Parent Disclosure Schedule in any dispute or controversy between
the parties as to whether any obligation, item or matter not
described in this Agreement or included in the Disclosure
Schedule or the Parent Disclosure Schedule is or is not material
for purposes of this Agreement. Except as otherwise explicitly
specified to the contrary, (a) the word
including will be construed as including
without limitation, and (b) words in the singular or
plural form include the plural and singular form, respectively.
Section 10.10 Headings. The
Section and Article headings contained in this Agreement are
inserted for convenience of reference only and will not affect
the meaning or interpretation of this Agreement. All references
to Sections or Articles contained in this Agreement mean
Sections or Articles of this Agreement, unless otherwise stated.
Section 10.11 Knowledge. For
the purposes of this Agreement references to the Knowledge
of the Company in this Agreement, or words of similar
import, shall mean the actual knowledge after due inquiry of the
Companys executive officers listed in Section 10.11
of the Disclosure Schedule, and references to the
Knowledge of Parent in this Agreement, or words of
similar import, shall mean the actual knowledge after due
inquiry of Parents executive officers listed in
Section 10.11 of the Parent Disclosure Schedule.
Section 10.12 Third-Party
Beneficiaries. Section 5.7, insofar as
it relates to director and officer indemnification and
insurance, shall inure for the benefit of, and shall be
enforceable by, such directors and officers entitled to such
indemnification. Except as otherwise provided by the terms
hereof, this Agreement shall not confer upon any Person not a
party hereto (or their successors and assigns permitted by
Section 10.6) any rights or remedies hereunder.
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Section 10.13 Partial
Invalidity. Wherever possible, each provision
of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable Law, but in case any one or
more of the provisions contained in this Agreement shall, for
any reason, be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or
unenforceable provision or provisions had never been contained
in this Agreement, unless the deletion of such provision or
provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be
unreasonable.
Section 10.14 Waiver
of Jury Trial. EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT
IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES SUCH WAIVER
VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.14.
[REMAINDER
OF PAGE LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties as of the day first above written.
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PARENT:
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KCPC
Holdings,
Inc.
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By:
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/s/ Seth
H. Hollander
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Name: Seth H. Hollander
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Title: Vice President
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MERGER SUB:
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KCPC
Acquisition,
Inc.
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By:
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/s/ Seth
H. Hollander
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Name: Seth H. Hollander
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Title: Vice President
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COMPANY:
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CENTRAL PARKING
CORPORATION
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By:
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/s/ Emanuel
J. Eads
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Name: Emanuel J. Eads
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Title: President and Chief
Executive Officer
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A-43
February 20, 2007
To the Special Committee of the Board of Directors
Central Parking Corporation
2401 21st Avenue South
Suite 200
Nashville, Tennessee 37212
Members of the Special Committee of the Board of Directors:
Central Parking Corporation, a Tennessee corporation (the
Company), proposes to enter into an Agreement and
Plan of Merger, to be dated as of February 20, 2007 (the
Merger Agreement), with KCPC Holdings, Inc., a
Delaware corporation (Parent), and KCPC Acquisition,
Inc., a Tennessee corporation and wholly owned subsidiary of
Parent (Merger Sub). The actions referred to herein
as the Transaction are as follows: pursuant to the
Merger Agreement, Merger Sub would be merged with and into the
Company, with the Company continuing as the surviving
corporation in the merger (the Surviving
Corporation), and each outstanding share of common stock,
par value $0.01 per share, of the Company (Company
Common Stock) will be converting into a right to receive
$22.53 in cash (the Merger Consideration). The terms
and conditions of the Transaction are set forth in more detail
in the Merger Agreement.
You have asked us whether, in our opinion, the Merger
Consideration to be received by the holders of Company Common
Stock is fair to such holders from a financial point of view.
In arriving at the opinion set forth below, we have, among other
things:
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Reviewed certain publicly available information concerning the
business, financial condition and operations of the Company that
we believe to be relevant to our inquiry;
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Reviewed certain internal information concerning the business,
financial condition and operations of the Company that we
believe to be relevant to our inquiry;
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Reviewed certain internal financial analyses, budgets, estimates
and forecasts relating to the Company prepared by, and furnished
to us by, the management of the Company;
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Reviewed analyses relating to the Companys owned property
prepared by, and furnished to us by, the management of the
Company;
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Visited selected owned and leased properties of the Company;
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Reviewed the publicly reported historical prices and trading
activity for Company Common Stock;
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Reviewed the February 20, 2007 draft of the Merger
Agreement, the February 14, 2007 draft of the Voting
Agreement and the February 14, 2007 draft of the Limited
Guarantee;
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Reviewed the February 16, 2007 drafts of the debt financing
commitments to be entered into between Merger Sub and certain
lending institutions (the Debt Financing
Commitments);
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Reviewed the February 16, 2007 draft of the equity
financing commitment to be entered into between Parent and
Kohlberg Investors V, L.P., Lubert-Adler Real Estate
Fund V, L.P. and Chrysalis Capital Partners, LP (the
Equity Financing Commitment and together with the
Debt Financing Commitments, the Financing
Commitments);
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The Blackstone
Group®
L.P.
345 Park Avenue
New York, NY 10154
212 583-5000
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Held discussions with members of management of the Company
concerning the Companys business, operating environment,
financial condition, prospects and strategic objectives;
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Reviewed publicly available financial and stock market data with
respect to certain other companies in lines of businesses we
believe to be generally comparable to those of the Company;
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Reviewed the publicly available financial terms of certain
recent transactions in the parking industry;
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Reviewed the premia paid on certain recent acquisitions of
U.S. companies, the securities of which were publicly
traded;
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Performed discounted cash flow analyses utilizing pro forma
financial information prepared by, and furnished to us by,
management of the Company;
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Reviewed the results of our efforts to solicit indications of
interest and definitive proposals from third parties with
respect to an acquisition of the Company; and
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Participated in certain discussions and negotiations among
representatives of the Company and Parent and their financial
and legal advisors.
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In preparing this opinion, we have relied, without independent
verification, upon the accuracy and completeness of all
financial and other information that is available from public
sources and all projections and other information provided to us
by the Company or otherwise reviewed by or for us. We have
assumed that the financial and other projections and pro forma
financial information prepared by the Company and the
assumptions underlying those projections and such pro forma
information, including the amounts and the timing of all
financial and other performance data, were reasonably prepared
and represent managements best estimates and judgments as
of the date of their preparation. We have further relied upon
the assurances of the management of the Company that they are
not aware of any facts that would make the information and
projections provided by them inaccurate, incomplete or
misleading. We have also assumed that the definitive Merger
Agreement, the definitive Voting Agreement, the definitive
Limited Guarantee and the definitive Financing Commitments will
not differ in any respects material to our analysis from the
drafts thereof furnished to us.
We have not made any independent evaluation or appraisal of the
assets and liabilities (contingent, derivative, off-balance
sheet or otherwise) of the Company, nor have we obtained any
such appraisals.
We have assumed that the consummation of the Transaction will be
effected in accordance with the terms and conditions of the
Merger Agreement, including that Parent and Merger Sub will
obtain financing for the Transaction in accordance with the
terms set forth in the Financing Commitments, without waiver,
modification or amendment of any term, condition or agreement
material to our analyses and that, in the course of obtaining
the necessary regulatory or third party approvals, agreements or
consents for the Transaction, no delay, limitation, restriction
or condition will be imposed that would have an adverse effect
on the Company or the contemplated benefits of the Transaction
material to our analyses. We are not legal, tax or regulatory
advisors and have relied upon, without independent verification,
the assessments of the Company and its legal, tax and regulatory
advisors with respect to such matters.
Our opinion addresses only the fairness, from a financial point
of view, to the holders of Company Common Stock of the Merger
Consideration to be received by such stockholders in the
Transaction and does not address any other aspect or implication
of the Transaction, the Merger Agreement or any other agreement,
arrangement or understanding entered into in connection with the
Transaction or otherwise. We are not expressing any opinion as
to the impact of the Transaction on the solvency or viability of
the Surviving Corporation or the ability of the Surviving
Corporation to pay its obligations when they become due.
Our opinion does not address the relative merits of the
Transaction as compared to other business strategies or
transactions that might be available to the Company or the
Companys underlying business decision to effect the
Transaction nor does our opinion constitute a recommendation to
any stockholder of the Company as to how such shareholder should
vote or act with respect to the Transaction or any other matter.
In addition, you have not asked us to address, and this opinion
does not address, the fairness to, or any consideration of, the
holders of any class of securities, creditors or other
constituencies of the Company other than the holders of Company
Common Stock.
This opinion is necessarily based upon information made
available to us as of the date hereof and on market, economic,
financial and other conditions as they exist and can be
evaluated as of the date hereof only. We assume no
responsibility to update or revise our opinion based on
circumstances or events occurring after the date hereof.
This letter is provided to the Special Committee of the Board of
Directors (the Special Committee) in connection with
and for the purpose of its evaluation of the Transaction. It is
understood that this letter is for the information and
assistance of the Special Committee and, without our prior
written consent, is not to be quoted, summarized, paraphrased or
excerpted, in whole or in part, in any registration statement,
prospectus or proxy statement, or in any other report, document,
release or other written or oral communication prepared, issued
or transmitted by the Company or the Board of Directors of the
Company, including the Special Committee. However, The
Blackstone Group L.P. (Blackstone) understands that
the existence of any opinion may be disclosed by the Company in
a press release and a description of this opinion will be
contained in, and a copy of this opinion will be filed as an
exhibit to, the disclosure documents relating to the Transaction
and agrees to not unreasonably withhold its written approval for
such use following Blackstones review of, and reasonable
opportunity to comment on, any such document.
We have acted as financial advisor to the Special Committee with
respect to the Transaction and will receive a fee from the
Company for our services, a significant portion of which is
contingent upon the consummation of the Transaction. In
addition, the Company has agreed to reimburse us for
out-of-pocket
expenses and to indemnify us for certain liabilities arising out
of the performance of such services (including, the rendering of
this opinion). In the ordinary course of our and our
affiliates businesses, we and our affiliates may actively
trade or hold the securities of the Company for our own account
or for others and, accordingly, may at any time hold a long or
short position in such securities. We advise you that in the
past Blackstone provided financial advisory services to the
Company in connection with its acquisition of Allright Parking.
Based on the foregoing and subject to the qualifications set
forth herein, we are of the opinion that, as of the date hereof,
the Merger Consideration to be received by the holders of
Company Common Stock is fair, from a financial point of view, to
such holders.
Very truly yours,
/s/ The Blackstone Group L.P.
The Blackstone Group L.P.
CENTRAL PARKING CORPORATION
LOGO
2006 ANNUAL REPORT
Fellow Shareholders:
Fiscal 2006 was the first full year of implementation of
the strategic plan we introduced in August 2005. A key
component of the plan has been to reduce costs and increase
profitability by focusing on major high-growth markets and
divesting operations in smaller markets with limited growth
potential. We have now divested operations in a total of ten
domestic and four international markets. This initiative has
resulted in higher average revenues and profits at our
remaining locations.
Another important element in our strategy has been to
place more emphasis on national accounts and the specialty
parking market segments, including stadiums and arenas,
airports, municipal, and hospitality valet. In fiscal 2006, we
added or renewed a number of important contracts in each
of these market segments. Our increased emphasis on
national accounts received a significant boost when we were
awarded the Southern California portfolio of parking
facilities for Trizec Properties, bringing the total number of
facilities we manage for Trizec to 38 garages with nearly
30,000 spaces.
In the municipal segment, we were awarded contracts to
operate parking facilities for the Port of New Orleans cruise
terminal, which serves more than 700,000 passengers a
year, and two additional parking facilities for the Port of
San Francisco, bringing to four the number of facilities we
operate for this port authority. We also were selected to
manage the 3,300 space garage serving the Kodak Theater
and a large retail mall for the City of Los Angeles. In the
United Kingdom, we were selected to manage the City of
Westminsters off-street parking portfolio, which consists of
17 parking facilities containing 5,200 parking spaces in
Central London.
In the airport segment, the recent renewal of our contract
to manage parking services at Miami International Airport
brings to four the number of airport contracts renewed in
the past 12 months. These renewals, which include Dulles
International Airport, confirm our position as the operator
of choice for major airports. We now operate the on-site
parking facilities for a total of 26 airports. In the stadium
and arena segment, we entered into a new agreement with
the St. Louis Cardinals to provide parking for the New
Busch Stadium in St. Louis and were awarded a three-year
extension of our contract to operate the parking at Shea
Stadium. Our USA Parking subsidiary, which is focused on
the high-end hospitality valet market, had another
successful year with several significant additions to its
portfolio, including the St. Regis in Ft. Lauderdale, the
Fairmont Turnberry in Miami and the Intercontinental
Hotel in Puerto Rico.
Our Operational Excellence initiative has also helped
improve revenues and profits at the location level. Initially
introduced early last year in Philadelphia, the program is
being rolled out to all of our major markets. A National
Operational Excellence team, headed by a senior level
executive, visits each city, benchmarking individual location
performance, implementing new operational procedures
where needed, and training the local management team.
The national team also trains a local Operational Excellence
manager, who then remains in the host city to ensure that
the initial improvements in profitability are maintained. In
addition to Philadelphia, we introduced the program in
Atlanta, Los Angeles, and Washington D.C. in fiscal 2006
and have targeted a minimum of five additional cities for
operational excellence review in fiscal 2007. In October
2006, we initiated a jump-start program to introduce
Operational Excellence concepts companywide even before
the national team visits all the major markets. The results
to date have been very positive with substantial gains in
same-store sales.
Another key element of the strategic plan has been to
increase our investment in technology to improve efficiency
and reduce costs. We are adding more automated pay
stations at the lot level and automating more field and
corporate accounting processes. These investments are
designed to improve profitability while at the same time
streamlining payment processing and reporting.
As a result of our efforts in fiscal 2006, we are becoming a
leaner, more focused organization, and our operating results
continue to improve. For fiscal 2006, operating earnings,
before property-related gains, more than doubled to $36.0
million while earnings from continuing operations increased
to $33.4 million from $32.1 million in fiscal 2005. Net
earnings for fiscal 2006 increased to $27.9 million, or $0.86
per diluted share, compared with $14.3 million, or $0.39 per
diluted share.
On November 28, 2006, we announced that the Company
had retained The Blackstone Group, L.P. as its financial
advisor to assist us in exploring strategic alternatives to enhance
shareholder value. As stated in the press release, these
alternatives may include a complete or partial sale of the
Company, a merger, or a decision to take no action at this time.
Regardless of the outcome of our review of strategic
alternatives, we believe the Company is in a stronger
competitive position and fully capable of achieving its full
potential as a result of our on-going focus on executing our
strategic plan.
We appreciate your interest and investment in Central
Parking System and look forward to a bright future for the
Company.
/s/ Monroe J. Carell Jr.
Monroe J. Carell Jr.
Executive Chairman of the Board
/s/ Emanuel J. Eads
Emanuel J. Eads
President and Chief Executive Officer
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
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þ |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended September 30, 2006.
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-13950
CENTRAL PARKING CORPORATION
(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, |
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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:
Securities Registered Pursuant to Section 12(b) of the Act:
Securities Registered Pursuant to Section 12(g) of the Act:
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(615) 297-4255
None |
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Title of Each Class
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Name of each Exchange on which registered |
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Common Stock, $0.01 par value
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New York Stock Exchange |
Indicate by check mark if the regristrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES o NO þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. YES o NO þ
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act (Check one):
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
The aggregate market value of the Common Stock held by non-affiliates of the registrant, based on
the closing price of the Common Stock on the New York Stock Exchange on March 31, 2006 (the last
business day of the most recently completed second fiscal quarter) was $107,400,592. For purposes
of this response, the registrant has assumed that its directors, executive officers, and beneficial
owners of 5% or more of its Common Stock are the affiliates of the registrant.
Page 1 of 91
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 November 30, 2006 |
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Common Stock, $0.01 par value
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32,176,711 |
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrants definitive proxy statement for the Annual Meeting of Shareholders
to be held on February 20, 2007 are incorporated by reference into Part III, items 10, 11, 12, 13
and 14 of this Form 10-K.
Page 2 of 91
TABLE OF CONTENTS
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Part IV. |
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Page 3 of 91
IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Certain information discussed in this Annual Report on Form 10-K, including but not limited
to, information under the captions Business; Properties; Legal Proceedings; Managements
Discussion and Analysis of Financial Condition and Results of Operations; Quantitative and
Qualitative Disclosures About Market Risk; and the information incorporated herein by reference,
may constitute forward-looking statements for purposes of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are subject to risks and uncertainties, including, without limitation,
the factors set forth under the caption Risk Factors. Forward-looking statements include, but are
not limited to, discussions regarding the Companys strategic plan, 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 documents which are incorporated herein by reference, 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 release and other public statements by the Company and
incorporated by reference in this document:
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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 |
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increase cash flow by reducing operating costs, accounts receivable and indebtedness; |
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cover the fixed costs of its leased and owned facilities and
maintain adequate liquidity through its cash resources and credit facility; |
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integrate future acquisitions, in light of challenges in
retaining key employees, synchronizing business processes and efficiently
integrating facilities, marketing, and operations; |
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comply with the terms of its credit facility or obtain waivers of noncompliance; |
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reduce operating losses at unprofitable locations; |
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form and maintain strategic relationships with certain large real estate owners and operators; and |
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renew existing insurance coverage and to obtain performance and surety bonds on favorable terms; |
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successful implementation of the Companys strategic plan and other operating strategies; |
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interest rate fluctuations; |
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the loss, or renewal on less favorable terms, of existing management contracts and
leases and the failure to add new locations on favorable terms; |
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the timing of property-related gains and losses; |
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pre-opening, start-up and break-in costs of parking facilities; |
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player strikes or other events affecting major league sports;
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changes in economic and business conditions at the local, regional, national or international levels; |
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changes in patterns of air travel or automobile usage, including but not limited to,
the effects of weather and fuel prices on travel and transportation patterns; |
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the impact of litigation; |
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higher premium and claims costs relating to medical, liability, workers compensation and other insurance programs; |
Page 4 of 91
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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; |
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changes in current parking rates and pricing of services to clients; |
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extraordinary events affecting parking facilities that the Company manages, including
labor strikes, emergency safety measures, military or terrorist attacks and natural
disasters; |
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the loss of key employees; and |
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the other factors discussed under the heading Item 1A. Risk Factors included elsewhere in this Form 10-K. |
Page 5 of 91
PART I
Item 1. Business
General
Central Parking Corporation (Central Parking or the Company) is a leading provider of
parking and related services. As of September 30, 2006, Central Parking operated 3,055 parking
facilities containing 1,403,055 spaces in 37 states, the District of Columbia, Canada, Puerto Rico,
Chile, Colombia, Peru, the United Kingdom, the Republic of Ireland, Spain, Poland, Greece and
Switzerland.
Central Parking operates or manages multi-level parking facilities and surface lots. It also
provides ancillary services, including parking consulting, shuttle bus, valet, parking meter
collection and enforcement, and billing services. Central Parking operates parking facilities under
three general types of arrangements: management contracts, leases and fee ownership. As of
September 30, 2006, Central Parking operated 1,620 parking facilities under management contracts
and 1,296 parking facilities under leases. In addition, the Company owned 139 parking facilities
either independently or through joint ventures.
Parking Industry
The commercial parking services business is very fragmented, consisting of a few national
companies and numerous small, privately held local and regional operators. Central Parking
believes it has certain competitive advantages over many of these companies, including advantages
of scale, financial resources and technology.
During the 1980s, the high level of construction activity in the United States resulted in a
significant increase in the number of parking facilities. Since that time, construction activity
has slowed and the primary growth opportunity for parking companies has become take-aways or
competing with other parking operators for existing locations. Although some growth in revenues
from existing operations is possible through redesign, increased operational efficiency, or
increased facility use and prices, such growth is ultimately limited by the size of a facility and
market conditions.
Management believes that most commercial real estate developers and property owners view
services such as parking as potential profit centers rather than cost centers. Many of these
parties outsource parking operations to parking management companies in an effort to maximize
profits or leverage the original rental value to a third-party lender. Parking management companies
can increase profits by using managerial skills and experience, operating systems, and operating
controls unique to the parking industry.
Management 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
sector parking companies. In the United States, several cities have awarded on-street parking fee
collection and enforcement and parking meter service contracts to private sector parking companies
such as Central Parking.
Strategic Plan
In August 2005, the Company announced a strategic plan designed to streamline operations and
focus on core competencies and key markets with the greatest potential for growing profits. The
plan includes the following components:
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Exit marginal and low growth markets (cities and countries). The Company has
divested operations in 10 cities in the United States and 4 foreign countries. Most of the
operations divested in the United States are in small to medium-sized markets that
management believes have limited growth potential. The Company intends to maintain a strong
presence and focus its growth efforts in the major metropolitan areas throughout the United
States. Internationally, the operations divested are primarily in countries in which the
Company has a small market share and significant barriers to growth. The operations that
the Company has divested since August 2005 represent less than 4.0% of revenues. |
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Reduce the number of marginal and unprofitable operating agreements. In its
remaining markets, the Company is seeking to improve profit margins by reducing the number
of marginal and unprofitable operating agreements and focus on fewer but more profitable
locations. The Company plans to continue its program of seeking to eliminate unprofitable
leases through renegotiation, operational improvements and selective buyouts. Low-margin
management agreements and leases will be targeted for renegotiation or termination. |
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Target national accounts and other market segments with high growth potential.
The Company is placing more focus on national accounts and other specialized parking market
segments, including stadiums and arenas, airports, municipal and hospitality valet.
Additional resources have been dedicated to these specialized markets. A senior-level
manager has been named to focus on the stadium and arena market segment and a vice
president for national accounts also has been named. In addition, the Companys USA Parking
subsidiary, which is focused on the high-end hospitality industry, is expanding its |
Page 6 of 91
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marketing activities outside of its traditional home base of Florida. The Company will
continue its efforts to expand its share of the airport parking segment and will seek to
grow its on-street business. |
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Re-emphasize the importance of client relationships in retaining and growing the
management contract segment. The Company is re-emphasizing the importance of
developing and maintaining strong client relationships at the local, regional and national
levels with the primary goals of improving the Companys management contract retention
rates and increasing its share of the management contract business. |
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Expand the Operational Excellence initiative company-wide. Through its
Operational Excellence initiative, the Company seeks to improve revenues, margins and
profits at the location level. The Company is dedicating additional resources to its
Operational Excellence initiative to expand its operational audit and training programs and
is adding Operational Excellence managers in several key markets. |
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Increase investment in technology to reduce costs and improve operational
efficiencies. The Company plans to deploy additional technology at the lot level,
including automated pay stations and other revenue collection technology. In addition, the
Company plans to continue to automate more field and corporate accounting processes.
Management believes this investment will streamline payment processing, improve timeliness
of reporting and drive operational efficiencies. In addition, management believes that the
Companys application of technology to its operations represents a competitive advantage
over smaller operators with more limited resources. |
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Pursue opportunistic sales of real estate. The Company plans to continue its
previously announced strategy of pursuing opportunistic sales of real estate in situations
where the Company can achieve a purchase price that represents a substantial multiple to
earnings. The Company has a significant portfolio of real estate properties. In certain
situations, some of these properties have increased in value significantly such that the
best use for the property is something other than parking. In these situations, the
Company will consider selling the property for development. During fiscal year 2006, the
Company sold 39 properties for a total of $115.8 million and anticipates additional sales
during the next fiscal year. |
The strategic plan is designed to capitalize on Central Parkings brand, experience and
relationships to grow the profits of the Company.
Operating Strategy
In addition to the strategic plan described above, Central Parking seeks to increase the
revenues and profitability of its parking facilities through a variety of operating strategies,
including the following:
Manage Costs
To provide competitively priced services, the Company must contain costs. Managers analyze
staffing and cost control issues, and each is tracked on a monthly basis to determine whether
financial results are within budgeted ranges. Because of the substantial performance-based
components of their compensation, managers at the city level and above are motivated to contain the
costs of their operations.
Emphasize Sales and Marketing Efforts
Central Parkings management is actively involved in developing and maintaining business
relationships and in exploring opportunities for growth. Central Parkings marketing efforts are
designed to expand its operations by developing lasting relationships with major real estate
developers and asset managers, business and government leaders, and other clients. Central Parking
encourages its managers to pursue new opportunities at the local level while simultaneously
targeting key clients and projects at a national level. Management believes that Central Parkings
relative size, financial resources and systems give it a competitive advantage in winning new
business and make it an attractive partner for joint venture and other opportunities. In addition,
Central Parking believes that its performance-based compensation system, which is designed to
reward managers for increasing profitability in their respective areas of responsibility, is an
important element of this strategy.
Leverage Established Market Presence
Central Parking has an established presence in multiple markets, representing platforms from
which it can build. Because of the relatively fixed nature of certain overhead at the city level
and the resources that can be shared in specific markets, management believes it has the
opportunity to increase the Companys profit margins as it grows its presence in established
markets.
Page 7 of 91
Pursue Privatization Opportunities and Airports
The Company pursues privatization opportunities, including on-street parking fee collection
and enforcement, shuttle services and airport parking management. The Company currently has
contracts for parking meter collection and enforcement in 29 cities, including; Charlotte, North
Carolina; Daytona Beach, Florida; and Edinburgh, Scotland. The Company currently provides airport
parking management services to approximately 30 airports, including airports in Miami, New Orleans,
Houston, Detroit and Washington Dulles.
Empower Local Managers; Provide Corporate Support
The Companys strategy is to establish a successful balance between centralized and
decentralized management. Because its business is dependent, to some extent, on relationships with
clients, Central Parking provides its managers with a significant degree of autonomy in order to
encourage prompt and effective responses to local market demands. In conjunction with this local
operational authority, the Company provides, through its corporate office, services that may not be
readily available to independent operators such as management support, human resources management,
marketing and business expertise, training, and financial and information systems. Services
performed primarily at the corporate level include billing, quality improvement oversight, accounts
payable, financial and accounting functions, human resources, legal services, policy and procedure
development, systems design, real estate management and corporate acquisitions and development.
The Companys operations are managed based on segments administered by executive vice
presidents and senior vice presidents. These segments are generally organized geographically, with
exceptions depending on the needs of specific regions. See Note 18 to the Consolidated Financial
Statements for financial information regarding the Companys business segments.
Utilize Performance-Based Compensation
Central Parkings performance-based compensation system rewards managers at the general (city)
manager level and above for the profitability of their respective areas of responsibility.
Maintain Well-Defined Professional Management Organization
In order to ensure professionalism and consistency in Central Parkings operations, provide a
career path opportunity for its managers, and achieve a balance between autonomy and
accountability, Central Parking has established a structured management organization.
For its managerial positions, Central Parking seeks to recruit college graduates or people
with previous parking services or hospitality industry experience, and requires that they undergo a
training program. New managers typically are assigned to a particular facility where they are
supervised as they manage one to five employees. The Companys management trainee program teaches a
wide variety of skills, including organizational skills and basic management techniques. As
managers develop and gain experience, they have the opportunity to assume expanded responsibility,
be promoted to higher management levels and increase the performance-based component of their
compensation. This well-defined structure provides a career path that is designed to be an
attractive opportunity for prospective new hires. In addition, management believes the training and
advancement program has enabled Central Parking to instill a high level of professionalism in its
employees.
Offer Ancillary Services
Central Parking provides services that are complementary to parking facility management. These
services include consulting services (parking facility design, layout and utilization); on-street
parking fee collection and enforcement services; shuttle bus and van services; and, accounts
receivable billing systems and services. These ancillary services did not constitute a significant
portion of Central Parkings revenues in fiscal year 2006, but management believes that the
provision of ancillary services can be important in obtaining new business and preparing the
Company for future changes in the parking industry.
Focus on Retention of Patrons
For the Company to succeed, its parking patrons must have a positive experience at Company
facilities. Accordingly, the Company seeks to have well lit, clean facilities and cordial
employees. Each facility manager has primary responsibility for the
environment at the facility, and is evaluated on his or her ability to retain parking patrons.
The Company also monitors customer satisfaction through customer surveys.
Maintain Disciplined Facility Site Selection Analysis
In existing markets, the facility site selection process begins with identification of a
possible facility site and the analysis of projected revenues and costs at the site by general
managers and regional managers. The managers then typically conduct an examination of a locations
potential demand based on traffic patterns and counts, area demographics, and potential
competitors. Pro forma financial statements are then developed and a Company representative will
meet with the property owner to discuss the terms and structure of the agreement.
Page 8 of 91
The Company seeks to distinguish itself from its competitors by combining a reputation for
professionalism and quality management with operating strategies designed to increase the revenues
of parking operations for its clients. The Companys clients include some of the nations largest
owners, developers and managers of mixed-use projects, office buildings and hotels as well as
municipalities and other governmental agencies and airport authorities. Parking facilities operated
by the Company include, among others, certain terminals operated by BAA Heathrow International
Airport (London), Houston Airport, Detroit Airport, Strategic Rail Authority Parking (London), the
Prudential Center (Boston), Turner Field (Atlanta), Coors Field (Denver), and various parking
facilities owned by the Hyatt and Westin hotel chains, Faison Associates, May Department Stores,
Trizec Office Properties, Jones Lang LaSalle, Millenium Partners, Shorenstein and Crescent Real
Estate. None of these clients accounted for more than 5% of the Companys total revenues for fiscal
year 2006.
Acquisitions
The Companys acquisition strategy is selective and focuses primarily on acquisitions that the
Company believes will enable it to become a more efficient and cost-effective provider in selected
markets. The strategy also focuses on businesses that have the potential to enhance future cash
flows and can be acquired at reasonable valuations. Central Parking believes it has the
opportunity to recognize certain economies of scale by making acquisitions in markets where the
Company already has a presence. Management believes acquisitions also can be an effective means of
entering new markets, thereby quickly obtaining both operating presence and management personnel.
No acquisitions were completed in 2004, 2005 or 2006.
Sales and Marketing
Central Parkings sales and marketing efforts are designed to expand its operations by
developing and maintaining relationships with major real estate developers and asset managers,
business and government leaders, and other clients. Central Parking encourages its managers to
pursue new opportunities at the local level while selectively targeting key clients and projects at
a national level.
Local
At the local level, Central Parkings sales and marketing efforts are decentralized and
directed towards identifying new expansion opportunities within a particular city or region.
Managers are trained to develop the business contacts necessary to generate new opportunities and
monitor their local markets for take-away and outsourcing opportunities. Central Parking provides
its managers with a significant degree of autonomy in order to encourage prompt and effective
responses to local market demands, which is complemented by management support and marketing
training through Central Parkings corporate offices. By developing business contacts locally,
Central Parkings managers often get the opportunity to bid on projects when asset managers and
property owners are dissatisfied with other operators and also learn in advance of possible new
projects.
National
At the national level, Central Parkings marketing efforts are undertaken primarily by
upper-level management, which targets developers, governmental entities, the hospitality industry,
mixed-use projects, and medical facilities. These efforts are directed at operations that generally
have national name recognition, substantial demand for parking related services, and the potential
for nationwide growth. For example, Central Parkings current clients include, among other national
real estate companies and hotel chains, Millennium Partners, Faison Associates, Shorenstein, May
Department Stores, Crescent Real Estate, Trizec Office Properties, Jones Lang LaSalle, Westin
Hotels, Ritz Carlton Hotels and Hyatt Hotels. Management believes that providing high-quality,
efficient services to such companies can lead to additional opportunities as those clients expand
their operations. Management believes outsourcing by parking facility owners will continue to be a
source for additional facilities, and management believes the Companys global presence, experience
and reputation with large real estate asset managers give it a competitive advantage in this area.
International
Central Parkings international operations began in the early 1990s with the formation of an
international division. The Company generally has entered foreign markets either through consulting
projects or by forming joint ventures with established
local entities. Consulting projects allow Central Parking to establish a presence and evaluate
the prospects for growth in a given market without investing a significant amount of capital.
Likewise, forming joint ventures with local partners allows Central Parking to enter new foreign
markets with reduced operating and investment risks.
Operations in London began in 1991 with a single consulting agreement and, as of September 30,
2006, had grown to 113 locations in the United Kingdom including four airports, eight rail
operating companies and parking meter enforcement and ticketing services for thirteen local
governments that have privatized these services. Central Parking began operations in Mexico in July
1994 by forming a joint venture with G. Accion, (formerly Fondo Opcion), an established Mexican
developer. In Fiscal 2006, the Company sold its interest in Mexico and Germany. As of September
30, 2006, Central Parking also operated 142 facilities in Canada, 6 in Spain, 28 in
Chile, 23 in Colombia, 10 in Poland, 13 in Peru, 2 in Switzerland, 10 in the Republic of Ireland,
and 13 in Greece. The Company also operates on-street parking services in the United Kingdom and
the Republic of Ireland. In October 2006, the Company
Page 9 of 91
sold its operations in Poland. Poland has
been included in discontinued operations. The financial impact of the sale of Poland is not
significant to the Company. The Company received $0.3 million from the sale of Poland. To manage
its international expansion efforts, the Company has allocated responsibilities for international
operations to the President of International Operations.
Operating Arrangements
Central Parking operates parking facilities under three general types of arrangements:
management contracts, leases, and fee ownership. The following table sets forth certain information
regarding the number of managed, leased, or owned facilities as of the specified dates:
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September 30, |
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2006 |
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2005 |
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2004 |
Managed |
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1,620 |
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1,671 |
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1,615 |
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Leased |
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1,296 |
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1,548 |
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1,626 |
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Owned |
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139 |
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180 |
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192 |
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Total |
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3,055 |
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3,399 |
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3,433 |
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See Item 2. Properties for certain information regarding the Companys managed, leased and
owned facilities. The general terms and benefits of these types of arrangements are discussed
below. Financial information regarding these types of arrangements is set forth in Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations.
Management Contracts
Management contract revenues consist of management fees (both fixed and performance based) and
fees for ancillary services such as insurance, accounting, benefits administration, equipment
leasing, and consulting. The cost of management contracts includes insurance premiums and claims
and other indirect overhead. The Companys responsibilities under a management contract as a
facility manager generally include hiring, training, and staffing parking personnel, and providing
collections, accounting, record keeping and insurance. Most management contracts provide that the
Company is reimbursed for out-of-pocket expenses. Central Parking is not responsible under most of
its management contracts for structural, mechanical, or electrical maintenance or repairs, or for
providing security or guard services or for paying property taxes. In general, management contracts
are for terms of one to three years and are renewable for successive one-year terms, but are
typically cancelable by the property owner on 30 days notice. With respect to insurance, the
Companys clients have the option of obtaining liability insurance on their own or having Central
Parking provide insurance as part of the services provided under the management contract. Because
of the Companys size and claims experience, management believes it can purchase such insurance at
lower rates than the Companys clients can generally obtain on their own.
Leases
The Companys leases generally require the payment of a fixed amount of rent, regardless of
the amount of revenues or profitability generated by the parking facility. In addition, many
leases also require the payment of a percentage of gross revenues above specified threshold levels.
In general, leased facilities require a longer commitment, a larger capital investment for the
Company, and represent a greater risk than managed facilities due to the relatively fixed nature of
expenses. However, leased facilities often provide a greater opportunity for long-term growth in
revenues and profits. The cost of parking includes rent, payroll and related benefits,
depreciation, maintenance, insurance, and general operating expenses. Under its leases, the
Company is typically responsible for all facets of the parking operations, including pricing,
utilities, and routine maintenance. In short to medium term leases, the Company is generally not
responsible for structural, mechanical or electrical maintenance or repairs, or property taxes.
However, the Company does often have these responsibilities in longer-term leases. Lease
arrangements are typically for terms of three to twenty years, and generally provide for increases
in base rent that are either pre-determined and recognized on a straight-line basis or have contingent payments based on
changes in indices, such as the Consumer Price Index, and are recognized when incurred.
Fee Ownership
Ownership of parking facilities, either independently or through joint ventures, typically
requires a larger capital investment and greater risk than managed or leased facilities, but
provides maximum control over the operation of the parking facility and the greatest profit
potential of the three types of operating arrangements. All owned facility revenues flow directly
to the Company, and the Company has the potential to realize benefits of appreciation in the value
of the underlying real estate if the property is sold. The ownership of a parking facility brings
the Company complete responsibility for all aspects of the property, including all structural,
mechanical or electrical maintenance or repairs and property taxes.
Joint Ventures
The Company historically has sought joint venture partners who are established local or
regional real estate developers. Joint ventures typically involve a 50% interest in a development
where the parking facility is a part of a larger multi-use project, allowing
Page 10 of 91
the Companys joint
venture partners to benefit from a capital infusion to the project. Joint ventures offer the
revenue growth potential of owned lots with lower capital requirements. The Company has interests
in joint ventures that own or operate parking facilities located in the United States as well as
several other countries.
DBE Partnerships
Central Parking is a party to a number of disadvantaged business enterprise partnerships.
These are generally partnerships formed by Central Parking and a disadvantaged business person to
manage a facility. Central Parking generally owns 60% to 75% of the partnership interests in each
partnership and typically receives management fees before partnership distributions are made to the
partners.
Competition
The parking industry is fragmented and highly competitive with relatively low barriers to
entry. The Company competes with a variety of other companies to manage, lease and own parking
facilities, and faces competition for customers and employees to operate parking facilities.
Although there are relatively few large, national parking companies that compete with the Company,
numerous companies, including real estate developers, hotel and property management companies, and
national financial services companies either compete currently or have the potential to compete
with parking companies. Municipalities and other governmental entities also operate parking
facilities that compete with Central Parking. In addition, the Company faces competition from
numerous regional and local parking companies and from owner-operators of facilities who are
potential clients for the Companys management services. Construction of new parking facilities
near the Companys existing facilities increases the competition for customers and employees and
can adversely affect the Companys business.
Management believes that it competes for management clients based on a variety of factors,
including fees charged for services; ability to generate revenues and control expenses for clients;
accurate and timely reporting of operational results; quality of customer service; and ability to
anticipate and respond to industry changes. Factors that affect the Companys ability to compete
for leased and owned locations include the ability to make capital investments, pre-paid rent
payments and other financial commitments; long-term financial stability; and the ability to
generate revenues and control expenses. The Company competes for parking customers based primarily
on rates charged for parking; convenience (location) of the facility; and quality of customer
service. Factors affecting the Companys ability to compete for employees include wages, benefits
and working conditions.
Seasonality
The Companys business is subject to a modest amount of seasonality. Historically, the
Companys results have been higher during the quarters that end on December 31 and June 30. The
Company attributes the relative lower results of the quarters that end on March 31 and September 30
to, among other factors, winter weather and summer vacations. There can be no assurance that this
trend will continue in future years. For further discussion of this issue see Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations.
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 and liabilities relating to covered claims. The Company purchases
a workers compensation policy with a per
claim deductible of $250,000. The Company utilizes a third party administrator to process and
pay filed workers compensation claims. 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.
Because of the size of the operations covered and its claims experience, the Company purchases
liability insurance policies at prices that management believes represent a discount to the prices
that would typically be charged to parking facility owners on a stand-alone basis. Pursuant to its
management contracts, the Company charges its management clients for insurance at rates it believes
are competitive. In each case, the Companys management clients have the option of purchasing their
own policies, provided the Company is named as an additional insured. A reduction in the number of
clients that purchase insurance through the Company could have a material adverse effect on the
operating earnings of the Company. In addition, a material increase in insurance costs due to an
increase in the number of claims, higher claims costs or higher premiums paid by the Company could
have a material adverse effect on the operating earnings of the Company.
Regulation
The Companys business is subject to numerous federal, state and local laws and regulations,
and in some cases, municipal and state authorities directly regulate parking facilities. The
facilities in New York City are, for example, subject to extensive
Page 11 of 91
governmental restrictions
concerning numbers of cars, pricing, structural integrity and certain prohibited practices. Many
cities impose a tax or surcharge on parking services, which generally range from 10% to 50% of
revenues collected. Several state and local laws have been passed in recent years that encourage
car-pooling and the use of mass transit or impose certain restrictions on automobile usage. These
types of laws have adversely affected the Companys revenues and could continue to do so in the
future. An example was the restrictions imposed by the City of New York in the wake of the
September 11 terrorist attacks, which included street closures, traffic flow restrictions and a
requirement for passenger cars entering certain bridges and tunnels to have more than one occupant
during the morning rush hour. Although these restrictions have been eased, the City of New York
has considered other actions, including higher tolls, increased taxes and vehicle occupancy
requirements in certain circumstances, which could adversely impact the Company. The Company is
also affected by zoning and use restrictions, increases in real estate taxes, and other laws and
regulations that are common to any business that owns real estate.
The Company is subject to numerous federal, state and local employment and labor laws and
regulations, including Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act
of 1991, the Age Discrimination in Employment Act of 1967, the Family Medical Leave Act, wage and
hour laws, and various state and local employment discrimination and human rights laws. Several
cities in which the Company has operations either have adopted or are considering the adoption of
so-called living wage ordinances which could adversely impact the Companys profitability by
requiring companies that contract with local governmental authorities and other employers to
increase wages to levels substantially above the federal minimum wage. In addition, the Company is
subject to provisions of the Occupational Safety and Health Act of 1970, as amended (OSHA) and
related regulations. Various other governmental regulations affect the Companys operation of
parking facilities, both directly and indirectly, including the Americans with Disabilities Act
(ADA). Under the ADA, public accommodations, including many parking facilities, are required to
meet certain federal requirements related to access and use by disabled persons. For example, the
ADA generally requires garages to include handicapped spaces, headroom for wheelchair vans and
elevators that are operable by disabled persons.
Under various federal, state and local environmental laws, ordinances and regulations, a
current or previous owner or operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under or in such property. Such laws typically
impose liability without regard to whether the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. In connection with the ownership or operation
of parking facilities, the Company may be liable for any such costs. Although Central Parking is
currently not aware of any material environmental claims pending or threatened against it, there
can be no assurance that a material environmental claim will not be asserted against the Company.
The cost of defending against claims of liability, or remediating a contaminated property, could
have a material adverse effect on the Companys financial condition or results of operations.
The Company also is subject to various federal and state antitrust and consumer laws and
regulations including the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
HSR Act), which requires notification filings and waiting periods in connection with certain
mergers and acquisitions. In connection with the Companys merger with Allright Corporation
(Allright) in March 1999, the Antitrust Division of the United States Department of Justice filed
a complaint in U.S. District Court for the District of Columbia seeking to enjoin the merger on
antitrust grounds. In addition, the Company received notices from several states, including
Tennessee, Texas, Illinois and Maryland, that the attorneys general of those states were reviewing
the merger from an antitrust perspective. Several of these states also requested certain
information relating to the merger and the operations of Central Parking and Allright in the form
of civil investigative demands. Central Parking and
Allright entered into a settlement agreement with the Antitrust Division on March 16, 1999,
under which the two companies agreed to divest a total of 74 parking facilities in 18 cities,
representing approximately 18,000 parking spaces. The settlement agreement also prohibited Central
Parking and Allright from, among other things, operating any of the divested properties for a
period of two years following the divestiture of each facility. The two-year prohibition on
operating the divested properties has expired. None of the states that reviewed the transaction
from an antitrust perspective became a party to the settlement agreement with the Antitrust
Division and several of the states continued their investigation of the merger after the Allright
merger was consummated. The completion of any future mergers or acquisitions by the Company is
subject to the filing requirements described above and possible review by the Department of Justice
or the Federal Trade Commission and various state attorneys general. Certain of the Companys fee
collection activities are subject to federal and state consumer protection or debt collection laws
and regulations.
Employees
As of September 30, 2006, the Company employed 18,940 individuals, including 14,657 full-time
and 4,283 part-time employees. Approximately 3,817 U. S. employees are represented by labor unions.
Various union locals represent parking attendants and cashiers at the New York City facilities.
Other cities in which some of the Companys employees are represented by labor unions include
Washington, D.C., Miami, Detroit, Philadelphia, San Francisco, Jersey City, Newark, Atlantic City,
Pittsburgh, Los Angeles, St. Louis, Columbus, Chicago and San Juan, Puerto Rico. The Company
frequently is engaged in collective bargaining negotiations with various union locals. Management
believes that the Companys employee relations are good.
Page 12 of 91
Service Marks and Trademarks
The Company has registered the names CPC, Central Parking System and Central Parking
Corporation, and its logo with the United States Patent and Trademark Office and has the right to
use them throughout the United States except in certain areas, including the Chicago and Atlantic
City areas where two other companies have the exclusive right to use the name Central Parking.
The Company also owns registered trademarks for Square Industries, Kinney System, Allied Parking
and Allright Parking and operates various parking locations under those names. The Company uses the
name Chicago Parking System in Chicago and CPS Parking in Seattle and Milwaukee. The Company
has registered the name Control Plus and its symbol in London and has registered that name and
symbol in association with its on-street parking activities in Richmond, Virginia. The Company has
registered, or intends to register, its name and logo in various international locations where it
does business.
Foreign and Domestic Operations
For information about the Companys foreign and domestic operations refer to Note 18 to the
Consolidated Financial Statements.
Available Information
The Company files reports with the Securities and Exchange Commission (SEC), including
annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.
Copies of the Companys reports filed with the SEC may be obtained by the public at the SECs
Public Reference Room at 100 F Street, Washington, DC 20549. The public may obtain information
about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company
files such reports with the SEC electronically, and the SEC maintains an Internet site at
www.sec.gov that contains the Companys reports, proxy and information statements, and other
information filed electronically. The Companys website address is www.parking.com. The Company
also makes available, free of charge through the Companys website, its annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other materials filed with
the SEC as soon as reasonably practicable after such material is electronically filed with or
furnished to the SEC. The information provided on the Companys website is not part of this
report, and is therefore not incorporated by reference unless such information is otherwise
specifically referenced elsewhere in this report.
Item 1A. Risk Factors
You should carefully consider the following specific risk factors as well as the other
information contained or incorporated by reference in this report, as these are important factors,
among others, that could cause our actual results to differ from our expected or historical
results. It is not possible to predict or identify all such factors. Consequently, you should not
consider any such list to be a complete statement of all of our potential risks or uncertainties.
Our financial performance is sensitive to changes in economic conditions that may impact
employment and consumer spending and commercial office occupancy.
Economic slowdowns in the United States could adversely affect employment levels, consumer
spending and commercial office occupancy, which, in turn, could reduce the demand for parking. The
reduced demand for parking could negatively impact our revenues and net income. Future economic
conditions affecting disposable consumer income, employment levels, business conditions, fuel and
energy costs, interest rates, and tax rates, are also likely to adversely affect our business.
Our concentration of operations in the Northeastern and Mid-Atlantic regions of the United
States, particularly in New York City, increases the risk of negative financial fluctuations due to
events or factors that affect these areas.
Our operations in the Northeastern and Mid-Atlantic regions of the United States, which
includes the cities of New York, Newark, Boston, Philadelphia, Pittsburgh, Baltimore and
Washington, D.C. generated approximately 43.2% of our total revenues from continuing operations
(excluding reimbursement of management contract expenses) in fiscal year 2006. Revenues from our
operations in New York City and surrounding areas accounted for approximately 26.6% of our total
revenues from continuing operations (excluding reimbursement of management expenses) in fiscal
2006. The concentration of operations in these areas increases the risk that local or regional
events or factors that affect these cities or regions such as severe winter weather, labor strikes,
changes in local or state laws and regulations, economic conditions or acts of terrorism, can have
a disproportionate impact on our operating results and financial condition.
Compliance with and any failure to comply with current regulatory requirements will result in
additional expenses and may adversely affect us.
Keeping abreast of, and in compliance with, changing laws, regulations and standards relating
to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, Securities
and Exchange Commission regulations and NYSE Stock Market rules, has required an increased amount
of management attention. We remain committed to maintaining high standards of corporate governance
and public disclosure. As a result, we intend to invest all reasonably necessary resources to
Page 13 of 91
comply with evolving standards, and this investment has resulted in and we expect will continue to
result in increased general and administrative expenses and a diversion of management time and
attention from revenue-generating activities to compliance activities.
Changes in the insurance marketplace, including significantly higher premiums, higher
deductibles and coverage restrictions and increased claims costs, have negatively impacted our net
income in recent years and could have a material adverse effect on our results of operations and
financial condition in the future.
We purchase insurance covering certain types of claims that occur at parking facilities we
own, lease or manage. In addition, we purchase workers compensation, group health, directors and
officers liability and certain other insurance coverages. Due to changes in the insurance
marketplace, we have experienced in recent years a substantial increase in the premiums we pay for
most types of insurance coverage and an increase in the deductibles relating to such coverage. We
also have experienced an increase in certain claims costs, including workers compensation,
liability and group health. In addition, coverages of certain types of risk, such as terrorism
coverage, have been significantly restricted or are no longer available at a reasonable cost. The
changes in the insurance marketplace, including increased premium and claims costs, higher
deductibles and coverage restrictions, have negatively impacted our earnings in recent years and
could have a material adverse effect on our results of operations and financial condition in the
future.
Acts of terrorism, such as the September 11, 2001 attacks, can have a significant adverse
affect on our results of operations and financial condition.
We estimate that the terrorist attacks on September 11, 2001 reduced our revenues in the
fourth quarter of fiscal year 2001 by approximately $5 million and approximately $10 million in the
first half of fiscal year 2002. Not only did the attack cause physical damage to some of the
parking facilities operated by us, but the reduction in the number of commuters parking in the
areas affected, reduction in tourists and local consumers traveling to the area as well as the
broader reduction in airplane travel and lower attendance at sporting events, concerts and other
venues, also impacted our operations adversely. The closing of streets in the vicinity of the
World Trade Center and other areas of New York City and the imposition of certain restrictions on
traffic and other security measures in New York City and at the nations airports also had a
negative impact on our operations. Our operations are concentrated heavily in the downtown areas
of major U.S. cities and some are located near landmarks or other sites that have been mentioned as
potential targets of terrorists. In addition, we manage the parking operations at approximately 30
airports. Additional terrorist attacks or the imposition of additional security measures,
particularly in New York, Washington, D.C. or other major cities in which we have a significant
presence, or at airports, could have a material adverse effect on our results of operations and
financial condition.
The offer or sale of a substantial amount of our common stock by significant shareholders
could have an adverse impact on the market price of our common stock.
In February 2001, we filed a registration statement on Form S-3 covering 7,381,618 shares of
our common stock held by certain shareholders. These shares were registered pursuant to
registration rights previously granted to these shareholders. Although we believe a significant
portion of these shares has been sold, these shareholders may sell any remaining shares that were
registered on any stock exchange, market or trading facility on which the shares are traded, or in
private transactions. Other substantial shareholders, including the Chairman of Central Parking,
Monroe Carell, Jr., the Carell Childrens Trust, and other family members and related entities (the
Carell Family), are permitted to sell significant amounts of our common stock under Rule 144 and
other exemptions from registration under the federal securities laws. In addition, the Carell
Family has certain rights to register substantially all of the shares held by the family and
related entities. The offer or sale of substantial amounts of our common stock by these or other
significant shareholders, particularly if such offers or sales occur simultaneously or relatively
close in time, could have a significant negative impact on our stocks market price.
We are dependent on the continued availability of capital to support our business.
We have significant working capital requirements, including but not limited to, repair and
maintenance obligations for our parking facilities. We are dependant on the cash generated from
our operations and Credit Facility to meet our working capital requirements. The Credit Facility
contains covenants including those that require us 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 measured against
certain targets. Our inability to meet debt covenants and debt service payments under the Credit
Facility would have a material adverse effect on us.
We are subject to interest rate risk.
We are subject to market risk from exposure to changes in interest rates based upon our
financing, investing and cash management activities. The Credit Facility bears interest at LIBOR
plus a tier-based margin dependent upon certain financial ratios. There are separate tiers for the
revolving loan and term loan. The weighted average margin as of September 30, 2006, was 200 basis
points. The amount outstanding under our Credit Facility was $73.7 million with a weighted average
interest rate of
Page 14 of 91
3.7% as of September 30, 2006. We have reduced a portion of our interest rate risk
by executing two interest rate swap transactions whereby we have fixed $87.5 million of floating
rate debt. The term loan is required to be repaid in quarterly payments of $0.2 million through
March 2008 and quarterly payments of $9.1 million from June 2008 through March 2010. An increase
(decrease) in LIBOR of 1% would result in no increase (decrease) of annual interest expense since
the swaps, which converted the rates to fixed, totaled $87.5 million and the Credit Facility, which
was all floating interest, was $73.7 million on September 30, 2006. We expect to pay both
quarterly principal amortization and monthly interest payments out of operating cash flow.
Our large number of leased and owned facilities increases the risk that we may become
unprofitable and that we may not be able to cover the fixed costs of our leased and owned
facilities.
We leased or owned 1,435 facilities as of September 30, 2006. Although there is more potential
for income from leased and owned facilities than from management contracts, they also carry more
risk if there is a downturn in the economy, property performance or commercial real estate
occupancy rates because a significant part of the costs to operate such facilities typically is
fixed. For example, in the case of leases, there are typically minimum lease payments that must be
made regardless of the revenues or profitability of the facility. In particular, it is difficult
to forecast revenues of newly constructed parking facilities because these facilities do not have
an operating history. Start-up costs, the length of the breakin period during which parking
demand is built and economic conditions at the time the facility is opened, are very difficult to
predict at the time the lease is executed (and the base rent is agreed upon), which is often two or
more years prior to the opening of the facility.
In the case of owned facilities, there are the normal risks of ownership and costs of capital.
In addition, operating expenses for both leased and owned facilities are borne by us and are not
passed through to the owner, as is the case with management contracts. In the case of owned
facilities and generally in the case of longer-term leased facilities, we also are responsible for
property taxes and all maintenance and repair costs, including structural, mechanical and systems
repairs. Performance of our parking facilities depends, in part, on our ability to negotiate
favorable contract terms and control operating expenses, economic conditions prevailing generally
and in areas where parking facilities are located, the nature and extent of competitive parking
facilities in the area, weather conditions and the real estate market.
An increase in government regulation or taxation could have a negative effect on our
profitability.
Our business is subject to numerous federal, state and local laws and regulations, and in some
cases, municipal and state authorities directly regulate parking facilities. In addition, many
cities impose a substantial tax or surcharge on parking services,
which generally range from 10% to 50%. Substantial increases in the tax or surcharge on parking
such as occurred in recent years in Pittsburgh and Miami can have a significant negative effect on
profitability in a given city. The profitability of our business is also affected by increases in
property taxes because the Company is responsible for paying property taxes on its owned properties
and on many of its leased facilities. Several state and local laws have been passed in recent
years that are designed to encourage car-pooling or the use of mass transit or impose certain
restrictions on automobile usage. An example is the restrictions imposed by the City of New York in
the wake of the September 11 terrorist attacks, which included street closures and a requirement
for passenger cars entering certain bridges and tunnels to have more than one occupant during the
morning rush hour. We also are subject to federal, state and local employment and labor laws and
regulations, and several cities in which we have operations either have adopted or are considering
the adoption of so-called living wage ordinances. The adoption of such laws and regulations, the
imposition of additional parking taxes or surcharges and increases in property and other taxes
could adversely impact our profitability.
The sureties for our performance bond program may increase rates and require additional
collateral to issue or renew performance bonds in support of certain contracts.
Under substantially all of our contracts with municipalities and government entities and
airports, we are required to provide a performance bond to support our obligations under the
contract. We are also required to provide performance bonds under certain leases and other
contracts with non-governmental entities. In recent years, the sureties for our performance bond
program increased the rates we pay on these bonds and required us to collateralize a greater
percentage of our performance bonds with letters of credit. Although we believe our performance
bond program is adequate for its present needs, if we are unable to provide sufficient collateral
in the future, our sureties may not issue or renew performance bonds to support our obligations
under certain contracts.
As is customary in the industry, a surety provider can refuse to provide a bond principal with
new or renewal surety bonds. If any existing or future surety provider refuses to provide us with
surety bonds, there can be no assurance that we would be able to find alternate providers on
acceptable terms, or at all. Our inability to provide surety bonds could result in the loss of
existing contracts or future business, which could have a material adverse effect on our business
and financial condition.
Our net income could be adversely affected if accruals for future insurance losses are not
adequate.
We provide liability, medical and workers compensation insurance coverage. We are obligated
to pay for each loss incurred up to the amount of a deductible specified in our insurance policies.
Our financial statements reflect our anticipated costs based upon
Page 15 of 91
loss experience and guidance and
evaluation we have received from third party insurance professionals, such as actuaries. There can
be no assurance, however, that the ultimate amount of such costs will not exceed the amounts
presently accrued, in which case we would need to increase accruals and pay additional expenses.
The operation of our business is dependent on key personnel.
Our success is, and will continue to be, substantially dependent upon the continued services
of our management team. The loss of the services of one or more of the members of our senior
management team could have a material adverse effect on our financial condition and the results of
operations. Although we have entered into employment agreements with, and historically have been
successful in retaining the services of our senior management, there can be no assurance that we
will be able to retain these senior management people in the future. In addition, our future
growth depends on our ability to attract and retain skilled operating managers and employees.
We have foreign operations that may be adversely affected by foreign currency exchange rate
fluctuations.
We operate in the United Kingdom, the Republic of Ireland and other countries. For the year
ended September 30, 2006, revenues from foreign operations represented 6.1% of our total revenues,
excluding reimbursement of management contract expenses. Our United Kingdom operations accounted
for 24.9% of total revenues from foreign operations, excluding reimbursement of management contract
expense and excluding earnings from joint ventures. We receive revenues and incur expenses in
various foreign currencies in connection with our foreign operations and, as a result, we are
subject to currency exchange rate fluctuations. We intend to continue to invest in certain foreign
leased or owned parking facilities, either independently or through joint ventures, where
appropriate, and may become increasingly exposed to foreign currency fluctuations. We believe we
currently have limited exposure to foreign currency risk. We have entered into certain foreign
currency forward contracts to mitigate the foreign exchange risk related to
certain intercompany notes we have with our subsidiary in the United Kingdom. See note 1 to our
consolidated financial statements.
In connection with ownership or operation of parking facilities, we may be liable for
environmental problems.
Under various federal, state, and local environmental laws, ordinances, and regulations, a
current or previous owner or operator of real property may be liable for the cost of removal or
remediation of hazardous or toxic substances on, under, or in such property. Such laws typically
impose liability without regard to whether the owner or operator knew of, or was responsible
for, the presence of such hazardous or toxic substances. There can be no assurance that a
material environmental claim will not be asserted against us or against our owned or operated
parking facilities. The cost of defending against claims of liability, or of remediating a
contaminated property, could have a negative effect on our business and financial results.
If we cannot maintain positive relationships with labor unions representing our employees, a
work stoppage may adversely affect our business.
Approximately 3,907 employees are represented by labor unions. There can be no assurance that
we will be able to renew existing labor union contracts on acceptable terms. Employees could
exercise their rights under these labor union contracts, which could include a strike or walk-out.
In such cases, there are no assurances that we would be able to staff sufficient employees for its
short-term needs. Any such labor strike or our inability to negotiate a satisfactory contract upon
expiration of the current agreements could have a negative effect on our business and financial
results.
Item 2. Properties
The Companys facilities, as of September 30, 2006, are organized into seven segments which
are subdivided into 21 regions as detailed below. Each region is supervised by a regional manager
who reports directly to one of the executive vice presidents or senior vice presidents. Regional
managers oversee four to six general managers who each supervise the Companys operations in a
particular city. The following table summarizes certain information regarding the Companys
operating locations as of September 30, 2006.
|
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|
|
|
|
|
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|
|
|
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|
|
Percentage |
|
|
|
|
Number of |
|
|
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|
|
|
|
|
|
|
|
|
|
Total |
|
of Total |
Segment |
|
Cities |
|
Locations |
|
Managed |
|
Leased |
|
Owned |
|
Spaces |
|
Spaces |
Segment 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
Canada |
|
Calgary, Montreal, Ottawa, Toronto Pearson Airport,
Toronto, Vancouver |
|
|
142 |
|
|
|
71 |
|
|
|
69 |
|
|
|
2 |
|
|
|
62,462 |
|
|
|
4.45 |
% |
Cincinnati |
|
Columbus, Columbus Airport, Cleveland, Indianapolis
Lexington ,Detroit Airport, Detroit, Cincinnati, |
|
|
168 |
|
|
|
76 |
|
|
|
76 |
|
|
|
16 |
|
|
|
88,423 |
|
|
|
6.30 |
% |
Chicago |
|
Chicago, Milwaukee, General Mitchell Airport |
|
|
129 |
|
|
|
88 |
|
|
|
36 |
|
|
|
5 |
|
|
|
54,589 |
|
|
|
3.89 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment 1 |
|
|
439 |
|
|
|
235 |
|
|
|
181 |
|
|
|
23 |
|
|
|
205,474 |
|
|
|
14.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington DC |
|
Washington DC, Washington Dulles Airport, Baltimore,
Richmond, Richmond Airport |
|
|
203 |
|
|
|
106 |
|
|
|
92 |
|
|
|
5 |
|
|
|
95,053 |
|
|
|
6.78 |
% |
Upper New York |
|
Syracuse, Charleston, WV, Pittsburgh, Rochester |
|
|
58 |
|
|
|
30 |
|
|
|
23 |
|
|
|
5 |
|
|
|
21,652 |
|
|
|
1.54 |
% |
Philadelphia |
|
Philadelphia, Harrisburg Airport |
|
|
75 |
|
|
|
28 |
|
|
|
42 |
|
|
|
5 |
|
|
|
53,313 |
|
|
|
3.80 |
% |
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Page 16 of 91
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
Percentage |
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|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
of Total |
Segment |
|
Cities |
|
Locations |
|
Managed |
|
Leased |
|
Owned |
|
Spaces |
|
Spaces |
|
|
Total Segment 2 |
|
|
336 |
|
|
|
164 |
|
|
|
157 |
|
|
|
15 |
|
|
|
170,018 |
|
|
|
12.12 |
% |
|
|
|
|
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|
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|
|
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|
Segment 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nashville |
|
Nashville, Knoxville |
|
|
153 |
|
|
|
59 |
|
|
|
80 |
|
|
|
14 |
|
|
|
60,151 |
|
|
|
4.29 |
% |
Los Angeles |
|
Los Angeles, Costa Mesa, San Diego, Burbank Airport
Pheonix |
|
|
153 |
|
|
|
79 |
|
|
|
70 |
|
|
|
4 |
|
|
|
55,656 |
|
|
|
3.97 |
% |
San Francisco |
|
San Francisco, Sacramento, Oakland |
|
|
85 |
|
|
|
51 |
|
|
|
34 |
|
|
|
0 |
|
|
|
23,594 |
|
|
|
1.68 |
% |
Seattle |
|
Seattle |
|
|
26 |
|
|
|
24 |
|
|
|
2 |
|
|
|
0 |
|
|
|
8,555 |
|
|
|
0.61 |
% |
Denver |
|
Denver, Albuquerque, Minneapolis, St. Louis Airport,
Memphis, St. Louis, Omaha, Kansas city |
|
|
298 |
|
|
|
122 |
|
|
|
153 |
|
|
|
23 |
|
|
|
92,077 |
|
|
|
6.56 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment 3 |
|
|
715 |
|
|
|
335 |
|
|
|
339 |
|
|
|
41 |
|
|
|
240,033 |
|
|
|
17.11 |
% |
|
|
|
|
|
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Segment 4 |
|
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|
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|
|
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|
|
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|
|
|
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|
Boston |
|
Boston, Manchester, Providence, Hartford |
|
|
137 |
|
|
|
70 |
|
|
|
61 |
|
|
|
6 |
|
|
|
98,306 |
|
|
|
7.01 |
% |
New York |
|
Stamford, New Jersey, Poughkeepsie, New York |
|
|
408 |
|
|
|
209 |
|
|
|
187 |
|
|
|
12 |
|
|
|
162,255 |
|
|
|
11.56 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment 4 |
|
|
545 |
|
|
|
279 |
|
|
|
248 |
|
|
|
18 |
|
|
|
260,561 |
|
|
|
18.57 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment 5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida |
|
Atlanta, Jacksonville, Tampa, Orlando |
|
|
133 |
|
|
|
77 |
|
|
|
48 |
|
|
|
8 |
|
|
|
65,379 |
|
|
|
4.66 |
% |
Charlotte |
|
Birmingham, Charlotte, Knoxville |
|
|
105 |
|
|
|
71 |
|
|
|
33 |
|
|
|
1 |
|
|
|
39,151 |
|
|
|
2.79 |
% |
New Orleans |
|
New Orleans, New Orleans Airport, Baton Rouge
Jackson, Mobile |
|
|
146 |
|
|
|
53 |
|
|
|
88 |
|
|
|
5 |
|
|
|
44,001 |
|
|
|
3.14 |
% |
Houston |
|
Oklahoma City, Tulsa, Houston, Houston Airport,
Dallas, Austin, San Antonio, FT Worth, Dallas-
FT Worth Airport |
|
|
253 |
|
|
|
103 |
|
|
|
123 |
|
|
|
27 |
|
|
|
116,053 |
|
|
|
8.27 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment 5 |
|
|
637 |
|
|
|
304 |
|
|
|
292 |
|
|
|
41 |
|
|
|
264,584 |
|
|
|
18.86 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment 6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA Parking |
|
|
|
|
92 |
|
|
|
76 |
|
|
|
15 |
|
|
|
1 |
|
|
|
51,483 |
|
|
|
3.67 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment 6 |
|
|
92 |
|
|
|
76 |
|
|
|
15 |
|
|
|
1 |
|
|
|
51,483 |
|
|
|
3.67 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment 7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South America |
|
San Juan, Chile, Colombia, Peru |
|
|
91 |
|
|
|
59 |
|
|
|
32 |
|
|
|
0 |
|
|
|
33,112 |
|
|
|
2.36 |
% |
Europe |
|
London, Poland, Greece, Switzerland, Ireland
Spain |
|
|
154 |
|
|
|
134 |
|
|
|
20 |
|
|
|
0 |
|
|
|
148,464 |
|
|
|
10.58 |
% |
Miami |
|
Miami |
|
|
46 |
|
|
|
34 |
|
|
|
12 |
|
|
|
0 |
|
|
|
29,326 |
|
|
|
2.09 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment 7 |
|
|
291 |
|
|
|
227 |
|
|
|
64 |
|
|
|
0 |
|
|
|
210,902 |
|
|
|
15.03 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
3,055 |
|
|
|
1,620 |
|
|
|
1,296 |
|
|
|
139 |
|
|
|
1,403,055 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys facilities include both surface lots and structured parking facilities
(garages). Approximately 25% of the Companys owned parking properties are in structured parking
facilities, with the remainder in surface lots. Each year the Company expends significant funds to
repair and maintain parking facilities. Management believes the Companys owned facilities
generally are in good condition and are adequate for its present needs.
A summary of the facilities operated domestically and internationally by Central Parking as of
September 30, 2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent |
|
|
Managed |
|
Leased |
|
Owned |
|
Total |
|
Spaces |
|
of Total |
Total U.S. and Puerto Rico |
|
|
1,376 |
|
|
|
1,182 |
|
|
|
137 |
|
|
|
2,695 |
|
|
|
1,170,588 |
|
|
|
83.43 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom |
|
|
108 |
|
|
|
5 |
|
|
|
0 |
|
|
|
113 |
|
|
|
122,470 |
|
|
|
8.73 |
% |
Canada |
|
|
71 |
|
|
|
69 |
|
|
|
2 |
|
|
|
142 |
|
|
|
62,462 |
|
|
|
4.45 |
% |
Chile |
|
|
19 |
|
|
|
9 |
|
|
|
0 |
|
|
|
28 |
|
|
|
9,346 |
|
|
|
0.67 |
% |
Greece |
|
|
9 |
|
|
|
4 |
|
|
|
0 |
|
|
|
13 |
|
|
|
8,185 |
|
|
|
0.59 |
% |
Peru |
|
|
13 |
|
|
|
0 |
|
|
|
0 |
|
|
|
13 |
|
|
|
8,327 |
|
|
|
0.59 |
% |
Spain |
|
|
1 |
|
|
|
5 |
|
|
|
0 |
|
|
|
6 |
|
|
|
2,440 |
|
|
|
0.17 |
% |
Poland |
|
|
5 |
|
|
|
5 |
|
|
|
0 |
|
|
|
10 |
|
|
|
1,867 |
|
|
|
0.13 |
% |
Colombia |
|
|
7 |
|
|
|
16 |
|
|
|
0 |
|
|
|
23 |
|
|
|
3,868 |
|
|
|
0.28 |
% |
Ireland |
|
|
10 |
|
|
|
0 |
|
|
|
0 |
|
|
|
10 |
|
|
|
13,177 |
|
|
|
0.94 |
% |
Switzerland |
|
|
1 |
|
|
|
1 |
|
|
|
0 |
|
|
|
2 |
|
|
|
325 |
|
|
|
0.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total foreign |
|
|
244 |
|
|
|
114 |
|
|
|
2 |
|
|
|
360 |
|
|
|
232,467 |
|
|
|
16.57 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total facilities |
|
|
1,620 |
|
|
|
1,296 |
|
|
|
139 |
|
|
|
3,055 |
|
|
|
1,403,055 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 17 of 91
The table below sets forth certain information regarding the Companys managed, leased and owned
facilities in the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
2006 |
|
2005 |
|
2004 |
Managed Facilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year |
|
|
1,671 |
|
|
|
1,615 |
|
|
|
1,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired or merged during year |
|
|
|
|
|
|
|
|
|
|
|
|
Added during year |
|
|
279 |
|
|
|
354 |
|
|
|
225 |
|
Consolidated during year |
|
|
(15 |
) |
|
|
(52 |
) |
|
|
(18 |
) |
Deleted during year |
|
|
(315 |
) |
|
|
(246 |
) |
|
|
(306 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year |
|
|
1,620 |
|
|
|
1,671 |
|
|
|
1,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renewal Rate (1) |
|
|
83.9 |
% |
|
|
87.6 |
% |
|
|
84.2 |
% |
Leased Facilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year |
|
|
1,548 |
|
|
|
1,626 |
|
|
|
1,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired or merged during year |
|
|
|
|
|
|
|
|
|
|
|
|
Added during year |
|
|
118 |
|
|
|
159 |
|
|
|
108 |
|
Consolidated during year |
|
|
(49 |
) |
|
|
(18 |
) |
|
|
(59 |
) |
Deleted during year |
|
|
(321 |
) |
|
|
(219 |
) |
|
|
(221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year |
|
|
1,296 |
|
|
|
1,548 |
|
|
|
1,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned Facilities (2): |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year |
|
|
180 |
|
|
|
192 |
|
|
|
205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased during year |
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
Sold during year |
|
|
(42 |
) |
|
|
(14 |
) |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year |
|
|
139 |
|
|
|
180 |
|
|
|
192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total facilities (end of year) |
|
|
3,055 |
|
|
|
3,399 |
|
|
|
3,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase(reduction) in number of facilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Managed |
|
|
(3.1 |
)% |
|
|
3.5 |
% |
|
|
(5.8 |
)% |
Leased |
|
|
(16.3 |
)% |
|
|
(4.8 |
)% |
|
|
(9.6 |
)% |
Owned |
|
|
(22.8 |
)% |
|
|
(6.3 |
)% |
|
|
(6.3 |
)% |
Total facilities |
|
|
(10.1 |
)% |
|
|
(1.0 |
)% |
|
|
(7.6 |
)% |
|
|
|
(1) |
|
The renewal rate calculation is 100% minus deleted locations divided by the sum of the
beginning of the year, acquired and added during the year for management locations. |
|
(2) |
|
Includes the Companys corporate headquarters in Nashville, Tennessee. |
Item 3. Legal Proceedings
The ownership of property and provision of services to the public entails an inherent risk of
liability. Although the Company is engaged in routine litigation incidental to its business, there
is no legal proceeding to which the Company is a party which, in the opinion of management, is
likely to have a material adverse effect upon the Companys financial condition, results of
operations, or liquidity. The Company carries liability insurance against certain types of claims
such as bodily injury that management believes meets industry standards; however, there can be no
assurance that any legal proceedings (including any related judgments, settlements or costs) will
not have a material adverse effect on the Companys financial condition, liquidity or results of
operations.
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, but could have a material effect on the results of
operations in a given quarter.
Item 4. Submission of Matters to a Vote of Security-Holders
No matter was submitted to a vote of the Companys security-holders during the fourth quarter
of the fiscal year ended September 30, 2006.
Page 18 of 91
PART II
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
(a) The Registrants common stock is listed on the NYSE under the symbol CPC. The following
table sets forth, for the periods indicated, the high and low sales prices for the Companys common
stock as reported by the NYSE.
|
|
|
|
|
|
|
|
|
|
|
High |
|
Low |
FISCAL YEAR 2006 |
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
15.54 |
|
|
$ |
12.85 |
|
Second Quarter |
|
|
16.84 |
|
|
|
12.96 |
|
Third Quarter |
|
|
16.11 |
|
|
|
13.30 |
|
Fourth Quarter |
|
|
17.97 |
|
|
|
15.00 |
|
Twelve months |
|
|
17.97 |
|
|
|
12.85 |
|
|
FISCAL YEAR 2005 |
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
15.72 |
|
|
$ |
12.55 |
|
Second Quarter |
|
|
18.37 |
|
|
|
13.72 |
|
Third Quarter |
|
|
17.76 |
|
|
|
13.21 |
|
Fourth Quarter |
|
|
16.33 |
|
|
|
13.79 |
|
Twelve months |
|
|
18.37 |
|
|
|
12.55 |
|
(b) There were, as of September 30, 2006, approximately 4,500 shareholders of the Companys
common stock, based on the number of record holders of the Companys common stock and an estimate
of the number of individual participants represented by security position listings.
(c) Since April 1997, Central Parking has distributed a quarterly cash dividend of $0.015 per
share of Central Parking common stock. The Companys Board currently intends to declare a cash
dividend each quarter depending on Central Parkings profitability and future capital requirements.
Central Parking reserves the right, however, to retain all or a substantial portion of its earnings
to finance the operation and expansion of Central Parkings business. As a result, the future
payment of dividends will depend upon, among other things, the Companys profitability, capital
requirements, financial condition, growth, business opportunities, and other factors that the
Central Parking Board may deem relevant, including restrictions in any then-existing credit
agreement. The Companys existing credit facility contains certain covenants including those that
require the Company to maintain certain financial ratios, restrict further indebtedness, and limit
the amount of dividends payable; however, the Company does not believe these restrictions limit its
ability to pay currently anticipated cash dividends. In addition, Central Parking Finance Trust
(the Trust), a Delaware statutory business trust, of which all of the common securities are owned
by the Company, has issued preferred securities (the Trust Issued Preferred Securities) and has
invested the proceeds thereof in an equivalent amount of 5.25% Convertible Subordinated Debentures
(Convertible Debentures) of the Company. Pursuant to the Convertible Debentures, the Company is
prohibited from paying dividends on its common stock if the quarterly distributions on the Trust
Issued Preferred Securities are not made. See Note 10 to the Consolidated Financial Statements.
(d) The following table is for the presentation of securities authorized for issuance under equity compensation plans as of
September 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities remaining |
|
|
|
Number of securities to be |
|
|
Weighted-average exercise |
|
|
available for future issuance under |
|
|
|
issued upon exercise of |
|
|
price of outstanding |
|
|
equity compensation plans |
|
|
|
outstanding options, |
|
|
options, warrants and |
|
|
(excluding securities reflected in |
|
|
|
warrants and rights |
|
|
rights |
|
|
column (a)) |
|
Plan Category |
|
(a) |
|
|
(b) |
|
|
(c) |
|
Equity compensation plans
approved by securities holders |
|
|
3,684,895 |
|
|
$ |
17.83 |
|
|
|
1,440,969 |
|
|
Equity compensation plans not
approved by securities holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,684,895 |
|
|
$ |
17.83 |
|
|
|
1,440,969 |
|
|
|
|
|
|
|
|
|
|
|
Page 19 of 91
Item 6. Selected Financial Data
Selected financial data of the Company is set forth below for each of the periods indicated.
Certain of the statement of operations, per share, and balance sheet data were derived from the
audited consolidated financial statements of the Company. All of the information set forth below
should be read in conjunction with Item 8. Financial Statements and Supplementary Data and with
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
2006 vs. 2005 |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
|
Increase (Decrease) |
|
Amounts in thousands, except share and
employee data |
|
|
(5) |
|
|
(5) |
|
|
(5) |
|
|
(5) |
|
|
|
|
|
|
|
|
|
STATEMENT OF OPERATIONS DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parking |
|
$ |
522,547 |
|
|
$ |
537,712 |
|
|
$ |
560,925 |
|
|
$ |
564,294 |
|
|
$ |
554,143 |
|
|
$ |
(15,165 |
) |
|
|
(2.8 |
)% |
Management contract and other |
|
|
119,006 |
|
|
|
115,053 |
|
|
|
122,023 |
|
|
|
114,816 |
|
|
|
113,262 |
|
|
|
3,953 |
|
|
|
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
641,553 |
|
|
|
652,765 |
|
|
|
682,948 |
|
|
|
679,110 |
|
|
|
667,405 |
|
|
|
(11,212 |
) |
|
|
(1.7 |
) |
Reimbursement of management contract expenses |
|
|
467,882 |
|
|
|
452,287 |
|
|
|
516,515 |
|
|
|
482,938 |
|
|
|
449,513 |
|
|
|
15,595 |
|
|
|
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
1,109,435 |
|
|
|
1,105,052 |
|
|
|
1,199,463 |
|
|
|
1,162,048 |
|
|
|
1,116,918 |
|
|
|
4,383 |
|
|
|
0.4 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total before reimbursed management contract expenses |
|
|
605,514 |
|
|
|
634,995 |
|
|
|
639,528 |
|
|
|
675,447 |
|
|
|
608,497 |
|
|
|
(29,481 |
) |
|
|
(4.6 |
) |
Reimbursed management contract expenses |
|
|
467,882 |
|
|
|
452,287 |
|
|
|
516,515 |
|
|
|
482,938 |
|
|
|
449,513 |
|
|
|
15,595 |
|
|
|
3.4 |
|
Property-related gains (losses), net |
|
|
31,900 |
|
|
|
53,596 |
|
|
|
7,161 |
|
|
|
(7,150 |
) |
|
|
(4,329 |
) |
|
|
(21,696 |
) |
|
|
(40.5 |
) |
Impairment of goodwill |
|
|
|
|
|
|
(454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (losses) |
|
|
67,939 |
|
|
|
70,912 |
|
|
|
50,581 |
|
|
|
(3,487 |
) |
|
|
54,579 |
|
|
|
(2,973 |
) |
|
|
(4.2 |
) |
Percentage of operating earnings (losses) to total revenues,
excluding reimbursement of management contract expenses |
|
|
10.6 |
% |
|
|
10.9 |
% |
|
|
7.4 |
% |
|
|
0.5 |
% |
|
|
8.2 |
% |
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(14,470 |
) |
|
|
(13,152 |
) |
|
|
(15,396 |
) |
|
|
(16,988 |
) |
|
|
(10,011 |
) |
|
|
1,318 |
|
|
|
10.0 |
|
Gain on repurchase of subordinated convertible debentures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,245 |
|
|
|
|
|
|
|
|
|
Gain on sale of non-operating assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on derivative instruments |
|
|
(1,172 |
) |
|
|
3,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,178 |
) |
|
|
(139.0 |
) |
Equity in partnership and joint venture earnings (losses) |
|
|
1,234 |
|
|
|
(474 |
) |
|
|
(2,984 |
) |
|
|
2,212 |
|
|
|
2,702 |
|
|
|
1,708 |
|
|
|
(360.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before
income taxes, minority interest and
cumulative effect of accounting changes |
|
|
53,531 |
|
|
|
60,292 |
|
|
|
32,201 |
|
|
|
(14,984 |
) |
|
|
56,515 |
|
|
|
(6,761 |
) |
|
|
(11.2 |
) |
Minority interest |
|
|
(1,014 |
) |
|
|
(1,327 |
) |
|
|
(2,999 |
) |
|
|
(4,044 |
) |
|
|
(4,764 |
) |
|
|
313 |
|
|
|
(23.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before income
taxes and cumulative effect of accounting changes |
|
|
52,517 |
|
|
|
58,965 |
|
|
|
29,202 |
|
|
|
(19,028 |
) |
|
|
51,751 |
|
|
|
(6,448 |
) |
|
|
(10.9 |
) |
Income tax (expense) benefit |
|
|
(19,068 |
) |
|
|
(26,906 |
) |
|
|
(12,736 |
) |
|
|
7,231 |
|
|
|
(18,381 |
) |
|
|
7,838 |
|
|
|
(29.1 |
|
Income tax percentage of earnings (loss) from continuing
Operations before income taxes and cumulative effect of
accounting changes |
|
|
36.3 |
% |
|
|
45.6 |
% |
|
|
43.6 |
% |
|
|
38.0 |
% |
|
|
35.5 |
% |
|
|
N/A |
|
|
|
N/A |
|
Cumulative effect of accounting changes, net of tax (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,341 |
) |
|
|
|
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations |
|
|
33,449 |
|
|
|
32,059 |
|
|
|
16,466 |
|
|
|
(11,797 |
) |
|
|
24,029 |
|
|
|
1,390 |
|
|
|
4.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
|
(5,585 |
) |
|
|
(17,789 |
) |
|
|
527 |
|
|
|
7,270 |
|
|
|
9,739 |
|
|
|
12,204 |
|
|
|
(68.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
27,864 |
|
|
$ |
14,270 |
|
|
$ |
16,993 |
|
|
$ |
(4,527 |
) |
|
$ |
33,768 |
|
|
$ |
13,594 |
|
|
|
95.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of net earnings (loss) to total revenues,
excluding reimbursement of management contract expenses |
|
|
4.3 |
% |
|
|
2.2 |
% |
|
|
2.5 |
% |
|
|
(0.7 |
)% |
|
|
5.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
2006 vs. 2005 |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
|
Increase (Decrease) |
|
|
|
|
|
|
|
(5) |
|
|
(5) |
|
|
(5) |
|
|
(5) |
|
|
|
|
|
|
|
|
|
PER SHARE DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before
cumulative effect of accounting changes basic |
|
$ |
1.03 |
|
|
$ |
0.88 |
|
|
$ |
0.45 |
|
|
$ |
(0.33 |
) |
|
$ |
0.93 |
|
|
$ |
0.15 |
|
|
|
17.0 |
% |
Cumulative effect of accounting changes, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.26 |
) |
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
|
(0.17 |
) |
|
|
(0.49 |
) |
|
|
0.02 |
|
|
|
0.20 |
|
|
|
0.27 |
|
|
|
0.32 |
|
|
|
65.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) basic |
|
$ |
0.86 |
|
|
$ |
0.39 |
|
|
$ |
0.47 |
|
|
$ |
(0.13 |
) |
|
$ |
0.94 |
|
|
$ |
0.47 |
|
|
|
120.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before
cumulative effect of accounting changes diluted |
|
$ |
1.03 |
|
|
$ |
0.87 |
|
|
$ |
0.45 |
|
|
$ |
(0.33 |
) |
|
$ |
0.92 |
|
|
$ |
0.16 |
|
|
|
18.4 |
% |
Cumulative effect of accounting changes, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.26 |
) |
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
|
(0.17 |
) |
|
|
(0.48 |
) |
|
|
0.02 |
|
|
|
0.20 |
|
|
|
0.27 |
|
|
|
0.31 |
|
|
|
64.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) diluted |
|
$ |
0.86 |
|
|
$ |
0.39 |
|
|
$ |
0.47 |
|
|
$ |
(0.13 |
) |
|
$ |
0.93 |
|
|
$ |
0.47 |
|
|
|
120.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
|
32,258 |
|
|
|
36,626 |
|
|
|
36,346 |
|
|
|
36,034 |
|
|
|
35,849 |
|
|
|
(4,368 |
) |
|
|
(11.9 |
)% |
Diluted weighted average common shares outstanding |
|
|
32,499 |
|
|
|
36,762 |
|
|
|
36,555 |
|
|
|
36,034 |
|
|
|
36,211 |
|
|
|
(4,263 |
) |
|
|
(11.6 |
)% |
Dividends per common share |
|
$ |
0.06 |
|
|
$ |
0.06 |
|
|
$ |
0.06 |
|
|
$ |
0.06 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
Net book value per common share outstanding
at September 30 |
|
$ |
12.63 |
|
|
$ |
12.30 |
|
|
$ |
11.89 |
|
|
$ |
11.56 |
|
|
$ |
11.57 |
|
|
|
|
|
|
|
|
|
Page 20 of 91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, |
|
|
2006 vs. 2005 |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
|
Increase (Decrease) |
|
BALANCE SHEET DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
44,689 |
|
|
$ |
26,055 |
|
|
$ |
27,628 |
|
|
$ |
31,572 |
|
|
$ |
33,498 |
|
|
$ |
18,634 |
|
|
|
71.5 |
% |
Working capital |
|
|
(25,453 |
) |
|
|
870 |
|
|
|
(54,759 |
) |
|
|
11,882 |
|
|
|
(92,805 |
) |
|
|
(26,323 |
) |
|
|
(3025.6 |
) |
Goodwill |
|
|
232,056 |
|
|
|
232,443 |
|
|
|
232,562 |
|
|
|
230,312 |
|
|
|
242,141 |
|
|
|
(387 |
) |
|
|
(0.2 |
) |
Total assets |
|
|
788,370 |
|
|
|
867,814 |
|
|
|
929,628 |
|
|
|
1,001,177 |
|
|
|
998,884 |
|
|
|
(79,444 |
) |
|
|
(9.2 |
) |
Long-term debt and capital lease obligations,
less current portion |
|
|
87,625 |
|
|
|
98,212 |
|
|
|
159,188 |
|
|
|
266,961 |
|
|
|
207,098 |
|
|
|
(10,587 |
) |
|
|
(10.8 |
) |
Subordinated convertible debentures |
|
|
78,085 |
|
|
|
78,085 |
|
|
|
78,085 |
|
|
|
78,085 |
|
|
|
78,085 |
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
406,228 |
|
|
|
452,061 |
|
|
|
435,033 |
|
|
|
416,526 |
|
|
|
415,804 |
|
|
|
(45,833 |
) |
|
|
(10.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
2006 vs. 2005 |
|
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
|
Increase (Decrease) |
OTHER DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
$ |
30,278 |
|
|
$ |
29,497 |
|
|
$ |
32,635 |
|
|
$ |
35,173 |
|
|
$ |
34,500 |
|
|
$ |
781 |
|
|
|
2.6 |
% |
Employees (2) |
|
|
18,940 |
|
|
|
23,957 |
|
|
|
22,537 |
|
|
|
21,187 |
|
|
|
18,100 |
|
|
|
(5,017 |
) |
|
|
(20.9 |
) |
Number of shareholders (2) |
|
|
4,500 |
|
|
|
5,650 |
|
|
|
6,862 |
|
|
|
8,400 |
|
|
|
7,100 |
|
|
|
(1,150 |
) |
|
|
(20.4 |
) |
Market capitalization (in millions) (3) |
|
$ |
531,000 |
|
|
$ |
550,000 |
|
|
$ |
484,000 |
|
|
$ |
443,000 |
|
|
$ |
724,000 |
|
|
$ |
(19,000 |
) |
|
|
(3.5 |
) |
Return on average equity (4) |
|
|
6.5 |
% |
|
|
3.2 |
% |
|
|
4.0 |
% |
|
|
(1.1 |
)% |
|
|
8.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects the Companys adoption in 2002 of Statement of Financial Accounting Standards
(SFAS) No. 142 for the transitional impairment of goodwill of $9.3 million, net of tax of $28
thousand. |
|
(2) |
|
Reflects information as of September 30 of the respective fiscal year.
(3) Based on number of shares outstanding and closing market price as of September 30. |
|
(4) |
|
Reflects return on equity calculated using fiscal year net earnings (loss) divided by average
shareholders equity for the fiscal year. |
|
(5) |
|
The Companys prior period results were reclassified to reflect the operations of the
locations discontinued in fiscal year 2006 as well as the locations designated as
held-for-sale during fiscal year 2006 but not yet sold, as discontinued operations net of
related income taxes. |
|
NM |
|
Not meaningful |
|
N/A |
|
Not applicable |
Page 21 of 91
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
Overview
The Company operates parking facilities under three types of arrangements: leases, fee
ownership, and management contracts. Revenues from leased and owned properties are categorized in
the Companys financial statements as parking revenues. Cost of parking relates to both leased and
owned facilities and includes rent, payroll and related benefits, depreciation, maintenance,
insurance and general operating expenses. The Company experienced a net decline in the number of
leased and owned locations in 2006 of 293 locations (119 additional leased and owned locations
offset by 363 lost or sold locations and 49 locations that were converted to management agreements
or consolidated with existing locations). Management contract revenues consist of management fees
(both fixed and performance based) and fees for ancillary services such as insurance, accounting,
benefits administration, equipment leasing, and consulting. The cost of management contracts
includes insurance premiums and claims and other indirect overhead. The Company experienced a net
decline in the number of managed facilities in 2006 of 51 locations (279 additional managed
locations offset by 330 lost locations during the year). In addition to management fees, many of
the management agreements provide for the reimbursement of expenses incurred by the Company to
manage the locations. The reimbursement of expenses is presented as a component of revenue and
costs in accordance with EITF No. 01-14.
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 policies and 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.
The following 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 herein for the year ended September 30, 2006, the following involve a higher
degree of judgment and complexity:
Impairment of Long-Lived Assets and Goodwill
As of September 30, 2006, the Companys long-lived assets were comprised primarily of $295.9
million of property, equipment and leasehold improvements and $72.0 million of contract and lease
rights. In accounting for the Companys long-lived assets, other than goodwill and other
intangible assets, the Company applies the provisions of SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. As of September 30, 2006, the Company had $232.1
million of goodwill. The Company accounts for goodwill and other intangible assets 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 significant use of 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 loss of
approximately $3.6 million ($3.2 million in continuing operations and $0.4 million in discontinued
operations) during the fiscal year ended September 30, 2006. 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
changes in interest rates, which could 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. For the fiscal year ended September 30, 2005, the
Company recorded $6.6 million of impairment charges related to long-lived assets in continuing
operations and $7.0 million of impairment charges related to long-lived assets in discontinued
operations. The Company also recorded $0.5 million in impairment charges related to Goodwill in
continuing operations for fiscal year 2005.
Contract and Lease Rights
Page 22 of 91
As of September 30, 2006, the Company had $72.0 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 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 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 September 30, 2006, the Company had $64.0 million of trade receivables, including
management accounts receivable and accounts receivable other. Additionally, the Company had a
recorded allowance for doubtful accounts of $3.0 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, specifically
in the Northeast and Mid-Atlantic United States, could have an impact on the collection of existing
receivable balances or future allowance considerations.
Lease Termination Costs
The Company recognizes lease termination costs related to disposal activities in accordance
with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Lease
termination costs are based upon certain estimates of liabilities related to costs to exit an
activity. Liability estimates may change as a result of future events, such as the settlement of a
lease termination for an amount less than the amount contractually required.
Self-Insurance Liabilities
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. The Company applies the provisions of SFAS No. 5, Accounting for Contingencies,
in determining the timing and amount of expense recognition associated with claims against the
Company. The recognition of liabilities is based upon managements determination of an unfavorable
outcome of a claim being deemed as probable and reasonably estimable, as defined in SFAS No. 5.
This determination requires the use of judgment in both the estimation of probability and the
amount to be recognized as a liability. The Company engages an actuary to assist in determining
the estimated liabilities for customer injury, employee medical costs and workers compensation
claims. 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. Total discounted self-insurance liabilities at
September 30, 2006 and September 30, 2005 were $22.6 million and $24.6 million, respectively,
reflecting a 4.5% discount rate. The related undiscounted amounts at such dates were $25.0 million
and $27.7 million, respectively.
Classification as Continuing or Discontinuing Operations
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 Company 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 and EITF 03-13
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.
Income Taxes
The Company uses the asset and liability method of SFAS No. 109, Accounting for Income Taxes,
to account for income
Page 23 of 91
taxes. Under this method, deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or
settled. The Company has certain net operating loss carry forwards which expire between 2006 and
2025. The valuation allowance was established for certain net operating loss carry forwards where
their recoverability is deemed to be uncertain. The carrying value of the Companys net 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. The valuation allowance was increased during 2006 and 2005 to reflect net operating loss
carryforwards in foreign operations and in certain states where management has determined that it
is more likely than not that the deferred tax asset will not be realized.
Results of Operations
Unless otherwise indicated, the following discussion relates to continuing operations.
Year Ended September 30, 2006 Compared to Year Ended September 30, 2005
Parking revenues in fiscal year 2006 decreased to $522.5 million from $537.7 million in fiscal
year 2005, a decrease of $15.2 million, or 2.8%. The decrease of $15.2 million is due to decreases
of $57.3 million due to closed locations; partially offset by an increase of $11.9 million related
to contracts converted from leased to management deals, an increase of $8.5 million in new
locations and an increase in same store sales of $21.7 million.
Management contract and other revenues (excluding reimbursement of management contract
expenses) increased in fiscal year 2006 to $119.0 million from $115.1 million in fiscal year 2005,
an increase of $3.9 million, or 3.4%. The increase was primarily due to higher management fees.
Cost of parking in fiscal year 2006 decreased to $478.4 million or 91.5% of parking revenues
from $491.8 million or 91.5% of parking revenues in fiscal year 2005, a decrease of $13.4 million,
or 2.7%. The decrease was due primarily to a reduction in the number of operating locations,
including elimination of several unprofitable locations, and was composed of decreases of $10.2
million in rent expense, $1.9 million in repairs and maintenance, $1.4 million in insurance claims
expense, $1.3 million in snow removal; partially offset by a $0.9 million increase in professional
services and $0.5 million increase in other expenses.
Cost of management contracts in fiscal year 2006 decreased to $47.5 million from $60.3 million
in fiscal year 2005, a decrease of $12.8 million or 21.2%. The cost of management contracts, as a
percentage of management contract and other revenues, excluding reimbursement of management
contract expenses, was 39.9% in fiscal year 2006 compared to 52.4% in fiscal year 2005. The
decrease was primarily caused by decreases of $2.5 million in group insurance claims expense, $5.9
million in other insurance related costs and a reduction of $4.4 million in bad debt expense.
General and administrative expenses decreased to $79.6 million in 2006 from $83.0 million in
2005, a decrease of $3.3 million, or 4.0%. This decrease is due to decreases of $1.1 million in
deferred compensation, $0.7 million in payroll related expenses, $0.6 million in travel and
entertainment, $0.9 million in professional services, and $1.9 million in other expenses; partially
offset by an increase of $1.9 million in supplies. General and administrative expenses as a
percentage of total revenues (excluding reimbursement of management contract expenses) decreased to
12.4% for fiscal 2006 compared to 12.7% for fiscal 2005.
Net property-related gains for fiscal year 2006 were $31.9 million compared to $53.6 million
in fiscal year 2005. Net property-related gains for the fiscal year ended September 30, 2006 of
$31.9 million was comprised of gains on sale of property of $35.1 million ($12.0 million in
Houston, $ 9.1 million in Baltimore, $6.2 million in
Chicago, $2.4 million from the sale of our
interest in our Germany partnership, $1.8 million in Atlanta, $1.4 million in Denver, $1.4 million
in West Palm Beach, $1.3 million in Nashville, $0.9 million in Dallas, and $0.7 million in
miscellaneous property sales; partially offset by a loss of
$0.9 million in Pittsburgh and $1.2 million in London); offset by
$3.2 million of impairments of leasehold improvements, contract rights and other intangible
assets primarily in Segment Two, Segment Four, Segment Five, and Other. The $53.6 million gain in 2005 was
comprised of a gain on the sale of property of $60.2 million, comprised primarily of ($38.2 million
on the sale of a lease in New York, $9.1 million on the sale of property in New York, $5.5 million
in Missouri, $2.7 million in Denver, $1.9 million in Seattle, $1.9 million in Chicago, and $0.9
million related to other miscellaneous sales); offset by $6.6 million of impairments of leasehold
improvements, contract rights and other intangible assets primarily
in Segment One, Segment Two, Segment Three, Segment Four, Segment
Seven and Segment Other. The impairment charges recognized in fiscal year 2006 and 2005 were
based on estimated fair values using projected cash flows of the applicable parking facility
discounted at the Companys average cost of funds.
Page 24 of 91
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. To the extent that the net property-related gains have been classified in continuing
operations, management concluded that the individual disposal transactions did not meet the SFAS
No. 144 and EITF 03-13 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.
During 2005, the Company determined that $454,000 of the goodwill recorded in segment
seven was impaired based on an evaluation performed by a third party.
Interest income in fiscal year 2006 decreased to $1.2 million from $4.7 million in fiscal year
2005. Interest expense decreased in fiscal year 2006 to $11.5 million from $13.7 million in fiscal
year 2005 due primarily to a decrease in the average balance outstanding in 2006. The weighted
average balance outstanding for the Companys debt obligations and subordinated convertible
debentures was $222.8 million during the fiscal year ended September 30, 2006, at a weighted
average interest rate of 6.3% compared to a weighted average balance outstanding of $261.9 million
at a weighted average rate of 6.3% during the fiscal year ended September 30, 2005. Deferred
finance costs were included in the calculation of the weighted average interest rate.
The Company recognized a $1.2 million loss on derivative instruments equal to the fair market
value of both interest rate swaps at September 30, 2006. For September 30, 2005, the Company
recognized a $3.0 million gain on derivative instruments equal to the fair market value of both
interest rate swaps, of which $1.6 million represents the correction of 2004 and 2003 gains
previously recognized in accumulated other comprehensive income.
Equity in partnership and joint venture earnings (losses) was $1.2 million in fiscal year 2006
compared to a loss of $0.5 million in fiscal year 2005. The increase is primarily related to
improved operating results due to the sale of the Companys 50% owned, non-consolidated affiliate
in Mexico. During the fourth quarter of 2005, the Company signed a letter of intent to sell its
fifty percent interest in its joint venture in Mexico, for a cash payment at closing of $325,000
and a secured promissory note of approximately $3.7 million in repayment of the joint ventures
indebtedness to the Company. Based on the letter of intent, the Company recognized a $1.7 million
impairment charge on its investment in the joint venture during the fourth quarter of 2005. The
Company finalized the sale of its interest in Mexico in fiscal 2006.
The Companys effective income tax rate on earnings from continuing operations before income
taxes was 36.3% in fiscal year 2006 compared to 45.6% in fiscal year 2005. The decrease in the
effective tax rate is primarily attributable to the effect of a decrease in the deferred income tax
valuation allowance related to certain state operating losses. The Companys effective tax rate is
expected to be approximately 38.0% before discontinued operations for fiscal year 2007. See note
13 to the consolidated financial statements for further discussion.
Included in operating earnings from discontinued operations for fiscal 2006 is income of $2.3
million from the settlement agreement with Rotala. Net property-related gains (losses) related to
discontinued operations the year ended September 30, 2006, includes a charge of $12.3 million
related to the disposal of the United Kingdom transport division, which consists of $10.2 million
in contract and lease buyouts associated with buses, routes and the depot, and $2.1 million for
severance related costs. All obligations related to the charge were paid in fiscal 2006, except
for $2.4 million relating to contract and lease buyouts which will be paid in fiscal 2007. Also
included in net property-related gains (losses) related to discontinued operations for the fiscal
2006 are gains of $11.3 million from the sale of properties which had been classified as Assets
Held for Sale. The
$11.3 million gain primarily relates to the sale of properties of $2.6 million in Atlanta, $2.1
million in Nashville, $1.9 million in Miami, $1.8 million in Chicago, $0.6 million in Roanoke, $0.5
million in Pittsburgh, $0.5 million in Charleston, $0.4 million in Little Rock, $0.3 million in San
Antonio, $0.2 million in Minneapolis, $0.1 million in Houston, and $0.3 million in miscellaneous
properties. The Companys 2005 and 2004 consolidated statements of income and cash flows have been
reclassified to reflect the operations and cash flows related to discontinued operations through
September 30, 2006. Due to the nature of the Companys business and the nature of the
transactions, the Company is not able to estimate the disclosures required by Emerging Issues Task
Force (EITF) No. 03-13.
Page 25 of 91
Year Ended September 30, 2005 Compared to Year Ended September 30, 2004
Parking revenues in fiscal year 2005 decreased to $537.2 million from $560.9 million in fiscal
year 2004, a decrease of $23.2 million, or 4.1%. The decrease resulted from the conversion of
certain contracts from lease agreements to management agreements which totaled $12.6 million and
closed locations of $29.2 million, partially offset by $9.7 million in revenues from new locations.
The Company experienced an increase in same store sales of $8.9 million for fiscal year 2005
compared to fiscal year 2004.
Management contract and other revenues (excluding reimbursement of management contract
expenses) decreased in fiscal year 2005 to $115.1 million from $122.0 million in fiscal year 2004,
a decrease of $7.0 million, or 5.7%. The majority of the decrease is due to a decrease of $7.1
million for lots closed during the year, a decrease in same store sales of $3.4 million, offset by
new locations and other of $3.5 million.
Cost of parking in fiscal year 2005 decreased to $491.8 million or 91.5% of parking revenues
from $510.2 million or 91.0% of parking revenues in fiscal year 2004, a decrease of $18.4 million,
or 3.6%. The decrease is primarily due to a decrease of $6.7 million in payroll expense, a
decrease of $9.1 million in rent expense, a decrease of $2.0 million in depreciation expense and
$0.6 million in other expenses.
Cost of management contracts in fiscal year 2005 increased to $60.3 million from $57.8 million
in fiscal year 2004 an increase of $2.5 million or 4.3%. The cost of management contracts, as a
percentage of management contract and other revenues, excluding reimbursement of management
contract expenses, was 52.4% in fiscal year 2005 compared to 47.3% in fiscal year 2004. The
increase in cost was primarily caused by an increase of $2.9 million in bad debt expense, and an
increase of $2.1 million of liability insurance expense; offset by a $1.2 million decrease in group
insurance, a decrease of $0.6 million in consulting expenses and a decrease of $0.7 million in
other expenses.
General and administrative expenses increased to $83.0 million in 2005 from $71.5 million in
2004, an increase of $11.4 million, or 16.0%. This increase is due to an increase of $3.7 million
in severance expense and other payroll related expenses, and $6.0 million in professional fees
related primarily to Sarbanes-Oxley compliance efforts, $0.7 million in travel expenses and $1.0
million in other expenses. General and administrative expenses increased as a percentage of total
revenue (excluding reimbursement of management contract expenses) to 12.7% in 2005 from 10.5% in
2004.
Net property-related gains for fiscal year 2005 were $53.6 million compared to $7.2 million in
fiscal year 2004. The $53.6 million gain in 2005 was comprised of a gain on the sale of property
of $60.2 million, comprised primarily of ($38.2 million on the sale of a lease in New York, $9.1
million on the sale of property in New York, $5.5 million gain in Missouri, $2.7 million in Denver,
$1.9 million in Seattle, $1.9 million Chicago, and $0.9 million related to other miscellaneous
sales); offset by $6.6 million of impairments of leasehold improvements, contract rights and other
intangible assets primarily in Segment One, Segment Two, Segment
Three, Segment Four, Segment Seven, and Segment Other. The $7.2
million gain in 2004 was comprised of a gain on sale of property of
$9.6 million comprised of ($5.7 million
gain on sale of property in Providence, $1.8 million in New York, $1.1 million in London, $0.9
million in Dallas and $0.1 million in miscellaneous property sales); offset by $2.4 million of
impairments of leasehold improvements, contract rights and other
intangible assets primarily in Segment One, Segment Four, and Segment
Other. The loss on the impairment charges recognized in
fiscal year 2005 and 2004 were based on estimated fair values using projected cash flows of the
applicable parking facility discounted at the Companys average cost of funds. Management
determined that the projected cash flows for these locations would not be enough to recover the
remaining value of the assets.
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
and EITF 03-13 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.
During 2005, the Company determined that $454,000 of the goodwill recorded in
segment seven was impaired based on evaluation performed by a third party.
Interest income in fiscal year 2005 decreased to $4.7 million from $4.9 million in fiscal year
2004. Interest expense decreased in fiscal year 2005 to $17.9 million from $20.3 million in fiscal
year 2004 due primarily to a decrease in the average
Page 26 of 91
balance outstanding in 2005. The weighted
average balance outstanding for the Companys debt obligations and subordinated convertible
debentures was $261.9 million during the fiscal year ended September 30, 2005, at a weighted
average interest rate of 6.3% compared to a weighted average balance outstanding of $306.3 million
at a weighted average rate of 5.9% during the fiscal year ended September 30, 2004. Deferred
finance costs were included in the calculation of the weighted average interest rate.
The Company recognized a $3.0 million gain on derivative instruments equal to the fair market
value of both interest rate swaps at September 30, 2005 of which $1.6 million represents the
correction of 2004 and 2003 gains previously recognized in accumulated other comprehensive income.
Equity in partnership and joint venture earnings (losses) was a loss of $0.5 million in fiscal
year 2005 compared to a loss of $3.0 million in fiscal year 2004. The decrease is primarily
related to operating results for the Companys 50% owned, non-consolidated affiliate in Mexico.
During the second quarter of fiscal 2004, the Companys Mexican affiliate reported to the Company
that the affiliate would be taking certain impairments and losses as part of the year-end audit
performed by independent auditors. As the entity is a 50% owned, non-consolidated investment,
results are recorded on the equity method. The 2004 losses reported to us were mostly non-cash,
and totaled $2.6 million. $1.5 million of the losses was related to the second quarter of fiscal
year 2004 and $1.1 million related to prior periods. The $1.5 million second quarter 2004 impact
was the result of non-cash impairments, primarily related to notes receivable and other assets.
The $1.1 million prior-period impact was due to corrections in the recording of equipment leases,
and interest-expense accruals. Due to the immateriality of the effect on any one prior period and
the second quarter of 2004, the corrections were made in the second quarter of fiscal year 2004.
During the fourth quarter of 2005, the Company reached a tentative agreement to sell its fifty
percent interest in its joint venture in Mexico, for a cash payment at closing of $325,000 and a
secured promissory note of approximately $3.7 million in repayment of the joint ventures
indebtedness to the Company. Based on the tentative agreement, the Company recognized a $1.7
million impairment charge on its investment in the joint venture during the fourth quarter of 2005.
This transaction is subject to the negotiation and execution of a definitive agreement, and there
can be no assurance that the transaction will be completed or that it will be completed on the
terms described above.
The Companys effective income tax rate on earnings from continuing operations before income
taxes was 45.6% in fiscal year 2005 compared to 43.6% in fiscal year 2004. The decrease in the
effective tax rate is primarily attributable to an increase in jobs credit. See note 13 to the
consolidated financial statements for further discussion.
For fiscal year 2005, the Company either disposed of or designated as held-for-sale or
disposal certain locations, resulting in a loss from discontinued operations of $17.9 million.
Included in discontinued operations in 2005 is $1.4 million of losses from the sale of property and
$7.9 million of impairment charges related to certain properties held for sale and loss from
discontinued operations of $7.4 million.
Quarterly Results
The quarterly 2006 and 2005, as reported statement of operations data set forth below was
derived from unaudited financial statements of the Company and includes all adjustments (including
reclassifications between continuing and discontinuing operations) which the Company considers
necessary for a fair presentation thereof (amounts in thousands, except per share data).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Quarters |
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
December 31 |
|
|
March 31 |
|
|
June 30 |
|
|
September 30 |
|
Total revenues, excluding reimbursement
of management contract expenses |
|
$ |
160,384 |
|
|
$ |
158,152 |
|
|
$ |
162,449 |
|
|
$ |
160,568 |
|
Property related gains, net |
|
|
22,914 |
|
|
|
(1,159 |
) |
|
|
4,542 |
|
|
|
5,603 |
|
Operating earnings |
|
|
30,577 |
|
|
|
4,076 |
|
|
|
15,780 |
|
|
|
17,506 |
|
Earnings from continuing operations,
net of tax |
|
|
16,360 |
|
|
|
95 |
|
|
|
8,257 |
|
|
|
8,737 |
|
Discontinued operations, net of tax |
|
|
1,595 |
|
|
|
1,892 |
|
|
|
(9,361 |
) |
|
|
289 |
|
Net earnings |
|
|
17,955 |
|
|
|
1,987 |
|
|
|
(1,104 |
) |
|
|
9,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations, net of tax per share basic |
|
$ |
0.50 |
|
|
$ |
0.00 |
|
|
$ |
0.26 |
|
|
$ |
0.27 |
|
Discontinued operations, net of tax |
|
|
0.05 |
|
|
|
0.06 |
|
|
|
(0.29 |
) |
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings basic |
|
$ |
0.55 |
|
|
$ |
0.06 |
|
|
$ |
(0.03 |
) |
|
$ |
0.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations, net of tax per share dilutive |
|
$ |
0.50 |
|
|
$ |
0.00 |
|
|
$ |
0.26 |
|
|
$ |
0.27 |
|
Discontinued operations, net of tax |
|
|
0.05 |
|
|
|
0.06 |
|
|
|
(0.29 |
) |
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings dilutive |
|
$ |
0.55 |
|
|
$ |
0.06 |
|
|
$ |
(0.03 |
) |
|
$ |
0.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 27 of 91
The fluctuations in operating earnings by quarter for fiscal year 2006 are primarily
related to the normal seasonality and the property related gains (losses), net. During the fourth
quarter of fiscal year 2006, the property related gains were primarily related to $7.6 million gain
on the sale of properties, partially offset by impairments of $2.0 million.
Fourth quarter 2006 results from continuing operations, net of tax were lower than the fourth
quarter of 2005 due primarily to a $20.8 million gain, net of tax, on the sale of a lease right in
New York during the fourth quarter of 2005. During the fourth quarter of 2006, the Company
increased its parking margin by 1.1% over the fourth quarter of 2005. The Company also increased
the Management contract margin by 18.5% over the previous year, due to the increase in management
fees due to the divestiture of unprofitable locations and lower bad debt expense than the fourth
quarter of 2005. General and administrative expenses were lower due
to a reduction of $2.2 million of
professional fees as a result of fewer consultants and professionals and $0.5 million for travel
and entertainment needed for SOX and the investigation in the United Kingdom.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Quarters |
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
December 31 |
|
|
March 31 |
|
|
June 30 |
|
|
September 30 |
|
Total revenues, excluding reimbursement
of management contract expenses |
|
$ |
167,488 |
|
|
$ |
161,019 |
|
|
$ |
162,801 |
|
|
$ |
161,457 |
|
Property related gains, net |
|
|
1,881 |
|
|
|
14,755 |
|
|
|
(1,149 |
) |
|
|
37,655 |
|
Operating earnings |
|
|
12,605 |
|
|
|
15,199 |
|
|
|
4,260 |
|
|
|
38,849 |
|
Earnings from continuing operations, net of
tax |
|
|
6,097 |
|
|
|
7,437 |
|
|
|
393 |
|
|
|
18,132 |
|
Discontinued operations, net of tax |
|
|
(3,226 |
) |
|
|
113 |
|
|
|
(5,729 |
) |
|
|
(8,947 |
) |
Net earnings |
|
|
2,871 |
|
|
|
7,550 |
|
|
|
(5,336 |
) |
|
|
9,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations, net of tax per share basic |
|
$ |
0.17 |
|
|
$ |
0.20 |
|
|
$ |
0.01 |
|
|
$ |
0.50 |
|
Discontinued operations, net of tax |
|
|
(0.09 |
) |
|
|
0.01 |
|
|
|
(0.15 |
) |
|
|
(0.26 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings basic |
|
$ |
0.08 |
|
|
$ |
0.21 |
|
|
$ |
(0.14 |
) |
|
$ |
0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations, net of tax per share dilutive |
|
$ |
0.17 |
|
|
$ |
0.20 |
|
|
$ |
0.01 |
|
|
$ |
0.49 |
|
Discontinued operations, net of tax |
|
|
(0.09 |
) |
|
|
0.01 |
|
|
|
(0.15 |
) |
|
|
(0.25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings dilutive |
|
$ |
0.08 |
|
|
$ |
0.21 |
|
|
$ |
(0.14 |
) |
|
$ |
0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity and Capital Resources
At
September 30, 2006, the Company had a working capital deficit of
$25.5 million. The
Company does not believe that this is a liquidity issue due to the Company having $171.3 million in
unused lines of credit.
Net
cash used by operating activities for fiscal year 2006 was $2.1
million, a decrease of $5.3
million from net cash provided by operating activities of $3.2 million during fiscal year 2005. The
primary factor which contributed to this change was the decrease in
revenue in 2006 and changes in working capital components.
Net cash provided by investing activities was $105.8 million for fiscal year 2006 compared to
$101.7 million of net cash provided by investing activities in fiscal year 2005. This change was
primarily due to an increase in proceeds from notes receivable during
2006.
Net cash used by financing activities for fiscal year 2006 was $85.7 million compared to cash
used of $106.6 million in fiscal year 2005. Net cash used by financing activities in fiscal year
2006 primarily consisted of purchase of common stock of $75.3 million.
On February 28, 2003, the Company entered into a credit facility (the Credit Facility)
initially providing for an aggregate availability of up to $350 million consisting of a five-year
$175 million revolving loan, including a sub-limit of $60 million for standby letters of credit,
and a $175 million seven-year 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. Proceeds from the Credit Facility were used to refinance a
previous credit facility.
The Company amended the Credit Facility in June 2004. The amendment reduced the margin
applied to the term loan by 75 basis points, and increased the standby letters of credit sub-limit
by $30.0 million to $90.0 million. The Company uses its revolving loan to collateralize
outstanding letters of credit. All other terms and conditions remained the same.
On January 25, 2005, the Company completed an amendment to the Credit Facility. The amended
facility reduced the aggregate availability to $300 million consisting of a $225 million revolving
loan and a $75 million term loan. The maturity dates remained the same, February 28, 2008, for the
revolver and June 30, 2010, for the term loan. Additionally, the interest rate margins
Page 28 of 91
were
reduced for both the revolver and term loans. The quarterly amortization schedule was also
amended. The new schedule requires the term loan payments in the amount of $187,500 for the
quarters ended March 2005 through March 2008 and $9.1 million for the quarters ended June 2008
through March 2010. The revolving loan is required to be repaid in February 2008. The aggregate
availability under the Credit Facility was $171.3 million at September 30, 2006, which is a net of
$53.7 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 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 September 30, 2006 was 200 basis points. The amount outstanding under
the Companys Credit Facility was $73.7 million consisting of a $73.7 million term loan, with an
overall weighted average interest rate of 3.7% as of September 30, 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 $171.3 million at September 30,
2006, which is net of $53.7 million of stand-by letters of credit. During the first quarter of
2006, the Company repurchased a total of 4,859,674 shares for $75.3 million using the availability
under the Credit Facility.
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 September 30, 2006 was
3.7%. The 3.7% rate includes all outstanding LIBOR contracts and swap agreements at September 30,
2006. An increase (decrease) in LIBOR of 1% would result in no increase (decrease) of annual
interest expense since the swaps which converted the rates to fixed totaled $87.5 million and the
credit facility, which was all floating interest was $73.7 million at September 30, 2006.
Depending on the timing and magnitude of the Companys future investments (either in the form
of leased or purchased properties, joint ventures, or acquisitions), the working capital necessary
to satisfy current obligations is anticipated to be generated from operations and the Credit
Facility over the next twelve months. In the ordinary course of business, Central Parking is
required to maintain and, in some cases, make capital improvements to the parking facilities it
operates. If Central Parking identifies investment opportunities or has needs requiring cash in
excess of Central Parkings cash flows and the existing Credit Facility, Central Parking may seek
additional sources of capital, including seeking to amend the Credit Facility to obtain additional
debt capacity; however, there can be no assurance such additional capacity or sources of capital
could be obtained. The current market value of Central Parking common stock also could have an
impact on Central Parkings ability to complete significant acquisitions or raise additional
capital.
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 Credit Facilitys covenants at September 30, 2006.
Future Cash Commitments
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 nor lower than $14.50 per share. The
transaction was structured as a modified Dutch Auction tender offer. The company funded the
transaction with $75.3 million borrowed under the Credit Facility.
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 4,859,674 shares at a price of $15.50 per share, totaling $75.3 million in
cash payments. The company exercised its right to purchase an additional number of shares without
extending or modifying the offer.
The Company routinely makes capital expenditures to maintain or enhance parking facilities
under its control. The
Page 29 of 91
Company expects such capital expenditures for fiscal year 2007 to be
approximately $10 to $13 million.
Historically, the Company has paid dividends on its common stock and expects to pay dividends
in the future. Common stock dividends of $1.9 million were paid during fiscal year 2006.
The following tables summarize the Companys total contractual obligations and commercial
commitments as of September 30, 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 |
|
$ |
90,487 |
|
|
$ |
2,862 |
|
|
$ |
60,003 |
|
|
$ |
27,496 |
|
|
$ |
126 |
|
Subordinated debentures |
|
|
78,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,085 |
|
Operating leases |
|
|
958,503 |
|
|
|
199,360 |
|
|
|
266,451 |
|
|
|
163,539 |
|
|
|
329,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations |
|
$ |
1,127,075 |
|
|
$ |
202,222 |
|
|
$ |
326,454 |
|
|
$ |
191,035 |
|
|
$ |
407,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of commitment expiration per period |
|
|
|
|
|
|
|
Less than |
|
|
1-3 |
|
|
3-5 |
|
|
After 5 |
|
|
|
Total |
|
|
1 Year |
|
|
Years |
|
|
Years |
|
|
Years |
|
Unused lines of credit |
|
$ |
171,305 |
|
|
$ |
|
|
|
$ |
171,305 |
|
|
$ |
|
|
|
$ |
|
|
Unused lines of credit as of September 30, 2006 are reduced by $53.7 million of standby
letters of credit.
International Foreign Currency Exposure
The Company operates wholly-owned subsidiaries in the United Kingdom, Canada and Spain. Total
revenues from wholly-owned foreign operations amounted to 4.3%, 2.8% and 5.8% of total revenues
(excluding reimbursement of management contract expenses) for the years ended September 30, 2006,
2005 and 2004, respectively. For the year ended September 30, 2006, revenues from operations in the
United Kingdom and Canada represented 24.9% and 38.9%, respectively, of total revenues generated by
foreign operations, excluding reimbursement of management contract expenses. Additionally, as of
September 30, 2006, the Company operated through joint ventures in Poland, Greece, Colombia and
Peru. The Company intends to continue to invest in foreign leased or owned facilities, and may
become increasingly exposed to foreign currency fluctuations.
The Company has entered into certain foreign currency forward contracts to mitigate the
foreign exchange risk related to various intercompany notes receivable from the Companys
wholly-owned subsidiary in the United Kingdom. These forward contracts are expected to offset the
transactional gains and losses on the intercompany notes denominated in British pounds. The gains
and losses related to such contracts and the transactional gains and losses related to the
intercompany notes recognized during fiscal 2006 were not significant. The notional amount of the
open contracts at September 30, 2006 totaled approximately $20.2 million. The fair value of the foreign currency forward contracts at September 30, 2006
was a $390 thousand liability. See note 1 to our consolidated financial statements.
Impact of Inflation and Changing Prices
The primary sources of revenues to the Company are parking revenues from owned and leased
locations and management contract revenue on managed parking facilities. The Company believes that
inflation has had a limited impact on its overall operations for the fiscal years ended September
30, 2006, 2005 and 2004 and does not expect inflation to have a material effect on its overall
operations in fiscal year 2007.
Off Balance Sheet Arrangements
The Company has various ownership interests in certain unconsolidated
partnerships and joint ventures. See Notes 1 and 8 to the Consolidated Financial Statements for
information regarding the Companys investments in unconsolidated partnerships and joint ventures.
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
Page 30 of 91
of the award. SFAS 123R was effective for the
Company beginning October 1, 2005. See Note 14 to the Consolidated Financial Statements 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 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. The adoption of this pronouncement did not have a material effect on the
Companys consolidated financial statements for fiscal year 2006.
In June 2005, the Emerging Issues Task Force (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 determined that the impact of the
adoption of this pronouncement did not have a material effect on its consolidated financial
statements for fiscal year 2006.
In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109 (FIN No. 48). FIN No. 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprises financial statements in
accordance with FASB Statement No. 109, Accounting for Income Taxes. This Interpretation
prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax
position taken or expected to be taken in a tax return. This Interpretation also provides guidance
on derecognition, classification, interest and penalties, accounting in interim periods,
disclosure, and transition. This Interpretation is effective for fiscal years beginning after
December 15, 2006. The Company has not determined the impact, if any, that the adoption of this
pronouncement will have to its consolidated financial statements.
In June 2006, the EITF reached a consensus on Issue No. 06-03, How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement
(That Is, Gross versus Net Presentation) (EITF 06-03). EITF 06-03 concludes that (a) the scope of
this Issue includes any tax assessed by a governmental authority that is directly imposed on a
revenue-producing transaction between a seller and a customer and (b) that the presentation of
taxes within the scope on either a gross or a net basis is an accounting policy decision that
should be disclosed under Opinion 22. Furthermore, for taxes reported on a gross basis, a company
should disclose the amounts of those taxes in interim and annual financial statements for each
period for which an income statement is presented. The consensus is effective, through
retrospective application, for periods beginning after December 15, 2006. The Company has not
determined the impact, if any, that the adoption of this pronouncement will have to its
consolidated financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair
Value Measurements. This Standard defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosures about fair value
measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years. The Company has not
determined the impact, if any, that the adoption of this pronouncement will have to its
consolidated financial statements.
Page 31 of 91
In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108), Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements. SAB 108 provides guidance regarding the consideration given to prior year
misstatements when determining materiality in current financial statements, and is effective for
fiscal years ending after November 15, 2006. The Company has not determined the impact SAB 108
will have on its consolidated financial statements.
In November 2006, the Emerging Issues Task Force reached a consensus on Issue No. 06-04,
Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split of
Endorsement Split-Dollar Life Insurance Arrangements, (EITF 06-04). EITF 06-04 reached a
consensus that for a split-dollar life insurance arrangement that provides a benefit to an employee
that extends to postretirement periods, an employer should recognize a liability for future
benefits in accordance with FAS No. 106 or Opinion 12 (depending upon whether a substantive plan is
deemed to exist) based on the substantive agreement with the employee. This consensus is effective
for fiscal years beginning after December 15, 2006. The Company has not determined the impact, if
any, that the adoption of this pronouncement will have to its consolidated financial statements.
In November 2006, the Emerging Issues Task Force reached a consensus on Issue No.06-05,
Accounting for Purchases of Life Insurance-Determining the Amount That Could Be Realized in
Accordance with FASB Technical Bulletin No. 85-04, (EITF 06-05). EITF 06-05 reached a
consensus that a policyholder should consider any additional amounts included in the contractual
terms of the policy in determining the amount that could be realized under the insurance contract.
The Task Force agreed that contractual limitations should be considered when determining the
realizable amounts. Those amounts that are recoverable by the policyholder at the discretion of
the insurance company should be excluded from the amount that could be realized. The Task Force
also agreed that fixed amounts that are recoverable by the policyholder in future periods in excess
of one year from the surrender of the policy should be recognized at their present value. The Task
Force also reached a consensus that a policyholder should determine the amount that could be
realizable under the life insurance contract assuming the surrender of an individual-life by
individual policy (or certificate by certificate in a group policy). The Task Force also noted
that any amount that is ultimately realized by the policyholder upon the assumed surrender of the
final policy (or final certificate in a group policy) shall be included in the amount that could be
realized under the insurance contract. This consensus is effective for fiscal years beginning
after December 15, 2006. The Company has not determined the impact, if any, that the adoption of
this pronouncement will have to its consolidated financial statements.
In September 2006, FASB issued FASB Staff Position (FSP) No. AUG AIR -01, Accounting for
Planned Major Maintenance Activities, (FSP No. AUG AIR-01). FSP AUG AIR-01 prohibits the use of
the accrue-in-advance method of accounting for planned major maintenance activities in annual and
interim financial reporting periods. An entity shall apply the same method of accounting for
planned major maintenance activities in annual and interim financial reporting periods. The
guidance in this FSP shall be applied to the first fiscal year beginning after December 15, 2006.
The Company has not determined the impact, if any, that the adoption of this FSP will have to its
consolidated financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plans an amendment of
FASB Statements No. 87, 88, 106, and 132R. This Standard requires an employer to recognize the
overfunded or underfunded status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its statement of financial position and to
recognize changes in that funded status in the year in which the changes occur through
comprehensive income of a business entity. This statement requires an employer that is a business
entity and sponsors one or more single-employer defined benefit plans to (i) recognize the funded
status of a benefit plan; (ii) recognize as a component of other comprehensive income, net of tax,
the gains or losses and prior service costs or credits that arise during the period but are not
recognized as components of net periodic benefit cost pursuant to FASB Statement No. 87,
Employerss Accounting for Pensions, or No. 106, Employers Accounting for Postretiremnet Benefits
Other Than Pension; (iii) measure defined benefit plan assets and obligations as of the date of
the employers fiscal year-end statement of financial position; and (iv) disclose in the notes to
the financial statements additional information about certain effects on net periodic benefit cost
for the next fiscal year that arise from delayed recognition of the gains or losses, prior service
costs or credits, and transition asset or obligation. SFAS 158 is effective for financial
statements issued for fiscal years ending after December 15,
2006; except for the measurement date provisions, which shall be
effective for fiscal years ending after December 15, 2008. The Company has not determined the impact, if any, that the adoption of this
pronouncement will have to its consolidated financial statements.
Page 32 of 91
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Interest Rates
The Companys primary exposure to market risk consists of changes in interest rates on
variable rate borrowings. As of September 30, 2006, the Company had $73.7 million of variable rate
debt outstanding under the Credit Facility priced at LIBOR plus a weighted average margin of 200
basis points. 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. 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 combined notional
amount of $87.5 million. Both transactions swapped the Companys floating LIBOR interest rates for
fixed interest of 2.45% until June 30, 2007.
The weighted average interest rate on the Companys Credit Facility at September 30, 2006 was
3.7%. The 3.7% rate includes all outstanding LIBOR contracts and swap agreements at September 30,
2006. An increase (decrease) in LIBOR of 1% would not result in a significant increase (decrease)
of annual interest expense since the swaps, which converted the rates to fixed, totaled $87.5
million and the Credit Facility, which was all floating interest, was $73.7 million at September
30, 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 Exposure
As of September 30, 2006, the Company has approximately GBP 3.7 million (USD $7.0 million) of
cash and cash equivalents denominated in British pounds, EUR 2.7 million (USD $3.4 million)
denominated in euros, CAD 1.1 million (USD $1.0 million) denominated in Canadian dollars, and USD
$1.6 million denominated in various other foreign currencies.
The Company also has EUR 0.8 million (USD $1.0 million) of notes payable denominated in euros
and GBP 10.8 million (USD $20.2 million) of intercompany notes receivable and notes payable
denominated in British pounds at September 30, 2006. These intercompany notes bear interest at a
floating rate of 5.3% as of September 30, 2006, and require monthly principal and interest payments
through 2012. The Company has entered into certain foreign currency forward contracts to mitigate
the foreign exchange risk related to various intercompany notes receivable from the Companys
wholly-owned subsidiary in the United Kingdom. These forward contracts are expected to offset the
transactional gains and losses on the intercompany notes denominated in British pounds. The gains
and losses related to such contracts and the transactional gains and losses related to the
intercompany notes recognized during fiscal 2006 were not significant. The notional amount of the
open contracts at September 30, 2006 totaled approximately $20.2
million. See note 1 to our consolidated
financial statements. The fair value of the foreign currency forward contracts at September 30,
2006 was a $390 thousand liability.
Based on the Companys overall currency rate exposure as of September, 2006, management does
not believe a near-term change in currency rates, based on historical currency movements, would
materially affect the Companys consolidated financial statements.
Page 33 of 91
Item 8. Financial Statements and Supplementary Data
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
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|
|
PAGE |
|
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35 |
|
|
|
|
36 |
|
|
|
|
37 |
|
|
|
|
38 |
|
|
|
|
39 |
|
|
|
|
41 |
|
|
|
|
78 |
|
|
|
|
78 |
|
Page 34 of 91
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Central Parking Corporation:
We have audited the accompanying consolidated balance sheets of Central Parking Corporation
and subsidiaries as of September 30, 2006 and 2005, and the related consolidated statements of
operations, shareholders equity and comprehensive income, and cash flows for each of the years in
the three-year period ended September 30, 2006. In connection with our audits of the consolidated
financial statements, we also have audited financial statement Schedule II Valuation Qualifying
Accounts for each of the years in the three year period ended September 30, 2006, and financial
statement schedule IV Mortgage Loans on Real Estate as of September 30, 2006. These consolidated
financial statements and financial statement schedules are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated financial statements
and financial statement schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Central Parking Corporation and subsidiaries as of
September 30, 2006 and 2005, and the results of their operations and their cash flows for each of
the years in the three-year period ended September 30, 2006, in conformity with U.S. generally
accepted accounting principles. Also in our opinion, the related financial statement schedules,
when considered in relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
As discussed in note 14 to the consolidated financial statements, in fiscal 2006 the Company
changed its method of accounting for share-based payments.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Central Parking Corporation and subsidiaries
internal control over financial reporting as of September 30, 2006, based on criteria established
in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), and our report dated December 14, 2006 expressed an unqualified opinion
on managements assessment of, the effective operation of, internal control over financial
reporting as of September 30, 2006.
/s/ KPMG LLP
Nashville, Tennessee
December 14, 2006
Page 35 of 91
CENTRAL PARKING CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
Amounts in thousands, except share and per share data |
|
2006 |
|
|
2005 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
44,689 |
|
|
$ |
26,055 |
|
Management accounts receivable, net of allowance for doubtful accounts of
$1,618 and $7,090 at September 30, 2006 and 2005, respectively |
|
|
47,747 |
|
|
|
51,931 |
|
Accounts receivable other, net of allowance for doubtful accounts of $1,234
and $2,685 at September 30, 2006 and 2005, respectively |
|
|
13,406 |
|
|
|
15,537 |
|
Current portion of notes receivable (including amounts due
from related parties of $165 in 2006 and $937 in 2005) and net of allowance for
doubtful accounts of $59 and $493 at September 30, 2006 and 2005, respectively |
|
|
3,913 |
|
|
|
5,818 |
|
Prepaid expenses |
|
|
12,306 |
|
|
|
8,630 |
|
Assets available for sale |
|
|
6,682 |
|
|
|
49,048 |
|
Refundable income taxes |
|
|
3,817 |
|
|
|
|
|
Deferred income taxes |
|
|
10,003 |
|
|
|
19,949 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
142,563 |
|
|
|
176,968 |
|
Available for sale securities |
|
|
4,909 |
|
|
|
4,606 |
|
Notes receivable, less current portion |
|
|
10,569 |
|
|
|
10,480 |
|
Property, equipment, and leasehold improvements, net |
|
|
295,923 |
|
|
|
327,391 |
|
Contract and lease rights, net |
|
|
71,995 |
|
|
|
80,064 |
|
Goodwill, net |
|
|
232,056 |
|
|
|
232,443 |
|
Investment in and advances to partnerships and joint ventures |
|
|
3,851 |
|
|
|
4,443 |
|
Other assets |
|
|
26,504 |
|
|
|
31,419 |
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
788,370 |
|
|
$ |
867,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt and capital lease obligations |
|
$ |
2,862 |
|
|
$ |
1,764 |
|
Accounts payable |
|
|
88,672 |
|
|
|
83,604 |
|
Accrued payroll and related costs |
|
|
16,095 |
|
|
|
17,263 |
|
Accrued expenses |
|
|
33,937 |
|
|
|
35,546 |
|
Management accounts payable |
|
|
26,450 |
|
|
|
25,532 |
|
Income taxes payable |
|
|
|
|
|
|
12,389 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
168,016 |
|
|
|
176,098 |
|
Long-term debt and capital lease obligations, less current portion |
|
|
87,625 |
|
|
|
98,212 |
|
Subordinated convertible debentures |
|
|
78,085 |
|
|
|
78,085 |
|
Deferred rent |
|
|
21,547 |
|
|
|
22,113 |
|
Deferred income taxes |
|
|
6,184 |
|
|
|
19,565 |
|
Other liabilities |
|
|
20,388 |
|
|
|
21,152 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
381,845 |
|
|
|
415,225 |
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
297 |
|
|
|
528 |
|
|
|
|
|
|
|
|
|
|
Shareholders equity: |
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 50,000,000 shares authorized,
32,154,128 and 36,759,155 shares issued and outstanding at
September 30, 2006 and 2005, respectively |
|
|
322 |
|
|
|
368 |
|
Additional paid-in capital |
|
|
180,091 |
|
|
|
251,784 |
|
Accumulated other comprehensive income, net |
|
|
3,398 |
|
|
|
3,432 |
|
Retained earnings |
|
|
223,122 |
|
|
|
197,182 |
|
Other |
|
|
(705 |
) |
|
|
(705 |
) |
|
|
|
|
|
|
|
Total shareholders equity |
|
|
406,228 |
|
|
|
452,061 |
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
788,370 |
|
|
$ |
867,814 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Page 36 of 91
CENTRAL PARKING CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
Amounts in thousands, except per share data |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Parking |
|
$ |
522,547 |
|
|
$ |
537,712 |
|
|
$ |
560,925 |
|
Management contract and other |
|
|
119,006 |
|
|
|
115,053 |
|
|
|
122,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
641,553 |
|
|
|
652,765 |
|
|
|
682,948 |
|
Reimbursement of management contract expenses |
|
|
467,882 |
|
|
|
452,287 |
|
|
|
516,515 |
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
1,109,435 |
|
|
|
1,105,052 |
|
|
|
1,199,463 |
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of parking |
|
|
478,376 |
|
|
|
491,781 |
|
|
|
510,213 |
|
Cost of management contracts |
|
|
47,509 |
|
|
|
60,262 |
|
|
|
57,775 |
|
General and administrative |
|
|
79,629 |
|
|
|
82,952 |
|
|
|
71,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
605,514 |
|
|
|
634,995 |
|
|
|
639,528 |
|
Reimbursed management contract expenses |
|
|
467,882 |
|
|
|
452,287 |
|
|
|
516,515 |
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
1,073,396 |
|
|
|
1,087,282 |
|
|
|
1,156,043 |
|
|
|
|
|
|
|
|
|
|
|
Property-related gains, net |
|
|
31,900 |
|
|
|
53,596 |
|
|
|
7,161 |
|
Impairment of goodwill |
|
|
|
|
|
|
(454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings |
|
|
67,939 |
|
|
|
70,912 |
|
|
|
50,581 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
1,238 |
|
|
|
4,739 |
|
|
|
4,880 |
|
Interest expense |
|
|
(15,708 |
) |
|
|
(17,891 |
) |
|
|
(20,276 |
) |
Gain (loss) on derivative instruments |
|
|
(1,172 |
) |
|
|
3,006 |
|
|
|
|
|
Equity in partnership and joint venture earnings (losses) |
|
|
1,234 |
|
|
|
(474 |
) |
|
|
(2,984 |
) |
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before minority interest,
and income taxes |
|
|
53,531 |
|
|
|
60,292 |
|
|
|
32,201 |
|
Minority interest |
|
|
(1,014 |
) |
|
|
(1,327 |
) |
|
|
(2,999 |
) |
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before income taxes |
|
|
52,517 |
|
|
|
58,965 |
|
|
|
29,202 |
|
Income tax expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
(22,504 |
) |
|
|
(30,994 |
) |
|
|
(10,145 |
) |
Deferred |
|
|
3,436 |
|
|
|
4,088 |
|
|
|
(2,591 |
) |
|
|
|
|
|
|
|
|
|
|
Total income tax expense |
|
|
(19,068 |
) |
|
|
(26,906 |
) |
|
|
(12,736 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
|
33,449 |
|
|
|
32,059 |
|
|
|
16,466 |
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
|
(5,585 |
) |
|
|
(17,789 |
) |
|
|
527 |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
27,864 |
|
|
$ |
14,270 |
|
|
$ |
16,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
$ |
1.03 |
|
|
$ |
0.88 |
|
|
$ |
0.45 |
|
Discontinued operations, net of tax |
|
|
(0.17 |
) |
|
|
(0.49 |
) |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
0.86 |
|
|
$ |
0.39 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
$ |
1.03 |
|
|
$ |
0.87 |
|
|
$ |
0.45 |
|
Discontinued operations, net of tax |
|
|
(0.17 |
) |
|
|
(0.48 |
) |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
0.86 |
|
|
$ |
0.39 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Page 37 of 91
CENTRAL PARKING CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
and COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Other |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Number of |
|
|
Common |
|
|
Paid-in |
|
|
Comprehensive |
|
|
Retained |
|
|
Shareholders |
|
|
|
|
Amounts in thousands, except per share data |
|
Shares |
|
|
Stock |
|
|
Capital |
|
|
Income (Loss), net |
|
|
Earnings |
|
|
Equity |
|
|
Total |
|
Balance at September 30, 2003 |
|
|
36,170 |
|
|
|
362 |
|
|
|
246,559 |
|
|
|
78 |
|
|
|
170,232 |
|
|
|
(705 |
) |
|
$ |
416,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance under restricted stock
plan and employment agreements |
|
|
16 |
|
|
|
|
|
|
|
323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
323 |
|
Issuance under Employee Stock
Purchase Plan |
|
|
71 |
|
|
|
1 |
|
|
|
591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
592 |
|
Common stock dividends, $0.06 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,184 |
) |
|
|
|
|
|
|
(2,184 |
) |
Exercise of stock options and
related tax benefits |
|
|
130 |
|
|
|
1 |
|
|
|
1,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,613 |
|
Issuance of deferred stock units |
|
|
196 |
|
|
|
2 |
|
|
|
367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
369 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,993 |
|
|
|
|
|
|
|
16,993 |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(276 |
) |
|
|
|
|
|
|
|
|
|
|
(276 |
) |
Unrealized loss on available-for-sale
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
(5 |
) |
Unrealized gain on fair value of derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,082 |
|
|
|
|
|
|
|
|
|
|
|
1,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2004 |
|
|
36,583 |
|
|
|
366 |
|
|
|
249,452 |
|
|
|
879 |
|
|
|
185,041 |
|
|
|
(705 |
) |
|
$ |
435,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance under restricted stock
plan and employment agreements |
|
|
14 |
|
|
|
|
|
|
|
197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
197 |
|
Issuance under Employee Stock
Purchase Plan |
|
|
39 |
|
|
|
|
|
|
|
569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
569 |
|
Common stock dividends, $0.06 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,129 |
) |
|
|
|
|
|
|
(2,129 |
) |
Exercise of stock options and
related tax benefits |
|
|
123 |
|
|
|
2 |
|
|
|
1,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,568 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,270 |
|
|
|
|
|
|
|
14,270 |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,259 |
|
|
|
|
|
|
|
|
|
|
|
3,259 |
|
Unrealized gain on available-for-sale
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
54 |
|
Unrealized loss on fair value of derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(760 |
) |
|
|
|
|
|
|
|
|
|
|
(760 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2005 |
|
|
36,759 |
|
|
$ |
368 |
|
|
$ |
251,784 |
|
|
$ |
3,432 |
|
|
$ |
197,182 |
|
|
$ |
(705 |
) |
|
$ |
452,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance under restricted stock
plan and employment agreements |
|
|
14 |
|
|
|
1 |
|
|
|
1,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,999 |
|
Common stock dividends, $0.06 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,924 |
) |
|
|
|
|
|
|
(1,924 |
) |
Exercise of stock options and
related tax benefits |
|
|
234 |
|
|
|
1 |
|
|
|
656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
657 |
|
Stock-based compensation expense |
|
|
|
|
|
|
1 |
|
|
|
582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
583 |
|
Tax benefit related to stock option expense |
|
|
|
|
|
|
|
|
|
|
254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
254 |
|
Issuance of deferred stock units |
|
|
6 |
|
|
|
|
|
|
|
93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93 |
|
Repurchase of common stock |
|
|
(4,859 |
) |
|
|
(49 |
) |
|
|
(75,276 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75,325 |
) |
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,864 |
|
|
|
|
|
|
|
27,864 |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(140 |
) |
|
|
|
|
|
|
|
|
|
|
(140 |
) |
Unrealized gain on available-for-sale
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2006 |
|
|
32,154 |
|
|
$ |
322 |
|
|
$ |
180,091 |
|
|
$ |
3,398 |
|
|
$ |
223,122 |
|
|
$ |
(705 |
) |
|
$ |
406,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Page 38 of 91
CENTRAL PARKING CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
(Revised See |
|
|
(Revised See |
|
Amounts in thousands |
|
|
|
|
Note 2) |
|
|
Note 2) |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
27,864 |
|
|
$ |
14,270 |
|
|
$ |
16,993 |
|
(Earnings) loss from discontinued operations |
|
|
5,585 |
|
|
|
17,789 |
|
|
|
(527 |
) |
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
|
33,449 |
|
|
|
32,059 |
|
|
|
16,466 |
|
Adjustments to reconcile earnings from continuing operations to net cash provided
(used) by operating activities continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
30,278 |
|
|
|
29,497 |
|
|
|
32,635 |
|
Equity in partnership and joint venture losses (earnings) |
|
|
(1,234 |
) |
|
|
474 |
|
|
|
2,984 |
|
Distributions from partnerships and joint ventures |
|
|
1,404 |
|
|
|
2,092 |
|
|
|
1,412 |
|
Impairment of goodwill |
|
|
|
|
|
|
454 |
|
|
|
|
|
Property related gains, net |
|
|
(31,900 |
) |
|
|
(53,596 |
) |
|
|
(7,161 |
) |
Loss (gain) on derivative instruments |
|
|
1,172 |
|
|
|
(3,006 |
) |
|
|
|
|
Stock-based compensation |
|
|
582 |
|
|
|
|
|
|
|
|
|
Excess tax benefit related to stock option exercises |
|
|
(254 |
) |
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
(3,434 |
) |
|
|
(4,088 |
) |
|
|
2,591 |
|
Minority interest |
|
|
1,014 |
|
|
|
1,327 |
|
|
|
2,999 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Management accounts receivable |
|
|
5,052 |
|
|
|
(8,368 |
) |
|
|
(6,605 |
) |
Accounts receivable other |
|
|
2,336 |
|
|
|
(955 |
) |
|
|
6,105 |
|
Prepaid expenses |
|
|
(3,510 |
) |
|
|
4,402 |
|
|
|
(1,621 |
) |
Other assets |
|
|
(4,295 |
) |
|
|
(9,313 |
) |
|
|
(7,211 |
) |
Accounts payable, accrued expenses and other liabilities |
|
|
(551 |
) |
|
|
13,634 |
|
|
|
(6,096 |
) |
Management accounts payable |
|
|
613 |
|
|
|
884 |
|
|
|
(749 |
) |
Deferred rent |
|
|
(566 |
) |
|
|
(2,337 |
) |
|
|
(3,119 |
) |
Refundable income taxes |
|
|
(3,815 |
) |
|
|
1,461 |
|
|
|
4,022 |
|
Income taxes payable |
|
|
(12,313 |
) |
|
|
12,527 |
|
|
|
273 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities continuing operations |
|
|
14,028 |
|
|
|
17,148 |
|
|
|
36,925 |
|
Net cash (used) provided by operating activities discontinued
operations |
|
|
(16,091 |
) |
|
|
(13,914 |
) |
|
|
4,714 |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used) provided by operating activities |
|
|
(2,063 |
) |
|
|
3,234 |
|
|
|
41,639 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from disposition of property and equipment |
|
|
75,181 |
|
|
|
80,799 |
|
|
|
62,390 |
|
Purchase of equipment and leasehold improvements |
|
|
(12,018 |
) |
|
|
(12,279 |
) |
|
|
(13,274 |
) |
Purchase of property |
|
|
|
|
|
|
|
|
|
|
(1,725 |
) |
Purchase of lease rights |
|
|
|
|
|
|
|
|
|
|
(4,530 |
) |
Incentive payment for USA Parking |
|
|
|
|
|
|
|
|
|
|
2,250 |
|
Proceeds from notes receivable |
|
|
1,195 |
|
|
|
32,484 |
|
|
|
227 |
|
Distributions from partnerships and joint ventures |
|
|
885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities continuing operations |
|
|
65,243 |
|
|
|
101,004 |
|
|
|
45,338 |
|
Net cash provided by investing activities discontinued operations |
|
|
40,570 |
|
|
|
742 |
|
|
|
7,018 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
|
105,813 |
|
|
|
101,746 |
|
|
|
52,356 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
(1,924 |
) |
|
|
(2,129 |
) |
|
|
(2,184 |
) |
Net (repayments) borrowings under revolving credit agreement |
|
|
(4,334 |
) |
|
|
7,062 |
|
|
|
(59,000 |
) |
Proceeds from issuance of notes payable, net of issuance costs |
|
|
910 |
|
|
|
8,417 |
|
|
|
2,933 |
|
Principal repayments on long-term debt and capital lease obligations |
|
|
(7,381 |
) |
|
|
(121,367 |
) |
|
|
(39,065 |
) |
Payment to minority interest partners |
|
|
(909 |
) |
|
|
(937 |
) |
|
|
(3,244 |
) |
Repurchase of common stock |
|
|
(75,325 |
) |
|
|
|
|
|
|
|
|
Excess tax benefit related to stock option exercises |
|
|
254 |
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and exercise of stock options |
|
|
3,004 |
|
|
|
2,334 |
|
|
|
2,897 |
|
|
|
|
|
|
|
|
|
|
|
Net cash used by financing activities continuing operations |
|
|
(85,705 |
) |
|
|
(106,620 |
) |
|
|
(97,663 |
) |
Net cash used by financing activities discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by financing activities |
|
|
(85,705 |
) |
|
|
(106,620 |
) |
|
|
(97,663 |
) |
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
589 |
|
|
|
67 |
|
|
|
(276 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
18,634 |
|
|
|
(1,573 |
) |
|
|
(3,944 |
) |
Cash and cash equivalents at beginning of year |
|
|
26,055 |
|
|
|
27,628 |
|
|
|
31,572 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ |
44,689 |
|
|
$ |
26,055 |
|
|
$ |
27,628 |
|
|
|
|
|
|
|
|
|
|
|
(continued)
Page 39 of 91
Consolidated Statements of Cash Flows, continued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain on fair value of derivatives and available-
for-sale securities, net of tax |
|
$ |
106 |
|
|
$ |
(706 |
) |
|
$ |
1,077 |
|
Note receivable for consideration for sale of CPS Mexico, Inc. |
|
$ |
3,867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
13,226 |
|
|
$ |
16,983 |
|
|
$ |
19,160 |
|
Income taxes |
|
$ |
43,404 |
|
|
$ |
16,355 |
|
|
$ |
6,725 |
|
See accompanying notes to consolidated financial statements.
Page 40 of 91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
A summary of the significant accounting policies applied in the preparation of the
accompanying consolidated financial statements is as follows:
(a) Organization and Basis of Presentation
Central Parking Corporation (CPC) is a United States company incorporated in the State of
Tennessee. The consolidated financial statements include the accounts of Central Parking
Corporation and its subsidiaries (the Company or Central Parking) including Central Parking
System, Inc. (CPS) and its subsidiaries; Kinney System Holdings, Inc. and its subsidiaries
(Kinney); Central Parking System of the United Kingdom, Ltd. and its subsidiary (CPS-UK);
Central Parking System Realty, Inc. and its subsidiaries (Realty); and Allright Holdings, Inc.
and its subsidiaries (Allright), including through June 30, 2004, Edison Parking Management, L.P.
(Edison), a 50% owned partnership whereby Allright was the general partner and had effective
control of the partnership based on the terms of the partnership agreement. The results of
operations of the remaining 50% of Edison were eliminated as a minority interest. All significant
intercompany transactions have been eliminated in consolidation.
The Company owns, operates and manages parking facilities and provides parking consulting
services throughout the world, primarily in the United States, Canada, and the United Kingdom. The
Company manages and operates owned or leased parking facilities, manages and operates parking
facilities owned or leased by third parties, and provides financial and other advisory services to
clients.
(b) Revenues
Parking revenues include the parking revenues from leased and owned locations. Management
contract revenues represent revenues (both fixed and performance-based fees) from facilities
managed for other parties and miscellaneous fees for accounting, insurance and other ancillary
services such as consulting and transportation management services. Parking revenues from transient
parking are recognized as cash is received. Parking revenues from monthly parking customers, fixed
fee management contract revenues and miscellaneous management fees are recognized on a monthly
basis based on the terms of the underlying contracts. Management contract revenues related to
performance-based arrangements are recognized when the performance measures have been met.
In accordance with Emerging Issues Task Force (EITF) Issue No. 01-14, Income Statement
Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred, the Company
recognizes as both revenues and expenses, in equal amounts, costs directly reimbursed from its
management clients.
(c) Cash and Cash Equivalents
The Company considers cash and cash equivalents to include cash on hand, in banks, and
short-term, highly liquid investments with original maturities of three months or less. Book
overdraft balances resulting from zero balance type accounts at September 30, 2006 and 2005 totaled
$14.3 million and $15.8 million, respectively, and are reflected in accounts payable on the
accompanying consolidated balance sheets. The Company accounts for the change in book overdraft
positions as operating cash flows in the accompanying consolidated statements of cash flows.
(d) Management Accounts Receivable
Management accounts receivable are recorded at the amount invoiced to third parties for
management contract revenues. 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, specifically in the Northeast and
Mid-Atlantic United States, could have an impact on the collection of existing receivable balances
or future allowance considerations.
(e) Available for sale securities
Investment securities primarily consist of debt obligations of states and political
subdivisions. As of September 30, 2006, the balance of investment securities was $4.9 million, and
are recorded at fair value. Unrealized holding gains and losses, net of related tax effects, are
excluded from earnings and are reported as a separate component of accumulated other comprehensive
income until realized. Realized gains and losses from the sale of available-for-sale securities
are determined on a specific-identification basis. A decline in the market value of any
available-for-sale or held-to-maturity security below cost that is deemed to be
other-than-temporary results in a reduction in carrying amount to fair value and a charge to
earnings. To determine whether an impairment is other-than-
Page 41 of 91
temporary, the Company considers whether it has the ability and intent to hold the investment until
a market price recovery and considers whether evidence indicating the cost of the investment is
recoverable outweighs evidence to the contrary.
(f) Property, Equipment, and Leasehold Improvements
Property, equipment and leasehold improvements, including computer hardware and software, are
recorded at cost. Depreciation is provided principally on a straight-line basis over the estimated
useful life of the asset, which is generally one to fifteen years for furniture, fixtures, and
equipment, three years for computer software, five years for computer hardware, and thirty to forty
years for buildings and garages. Leasehold improvements are amortized over the original lease term,
excluding optional renewal periods, or the estimated useful life of the asset, whichever is
shorter. Additions and improvements to property and equipment that extend their economic life are
capitalized. Repair and maintenance costs are charged to operating expense as incurred.
(g) Investment in and Advances to Partnerships and Joint Ventures
The Company has a number of joint ventures to operate and develop parking garages through
either corporate joint ventures, general partnerships, limited liability companies, or limited
partnerships. The financial results of the Companys joint ventures are generally accounted for
under the equity method and are included in equity in partnership and joint venture earnings in the
accompanying consolidated statements of operations with the exception of the Companys investment
in Edison Parking Management, L.P. (Edison), which was consolidated, through June 30, 2004, into
the Companys financial statements due to the Companys control of Edison, with the remaining 50%
recorded as minority interest. Effective July 1, 2004, the Companys general partnership interest
in Edison was redeemed by Edison in exchange for cash of $570,251, a note receivable and certain
parking management agreements. As a result of the redemption, the Company no longer consolidates
Edison and reversed minority interest of $30.6 million.
Amounts due from unconsolidated partnerships and joint ventures under notes receivable are
classified in the consolidated balance sheets as investments in and advances to partnerships and
joint ventures until amounts due become payable in the next twelve months. When these amounts
become due within the next twelve months, such amounts are presented as current portion of notes
receivable from related parties in the consolidated balance sheets.
(h) Contract and Lease Rights
Contract and lease rights consist of capitalized payments made to third parties which provide
the Company the opportunity to manage or lease facilities. Contract and lease rights are allocated
among respective locations and are amortized principally on a straight-line basis over the terms of
the related agreements, which range from five to thirty years or an estimated term considering
anticipated terminations and renewals. 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).
(i) Goodwill
Goodwill, which represents the excess of purchase price over the fair value of net assets
acquired and liabilities assumed in a business combination, is not amortized, but is tested for
impairment at least annually and whenever events or circumstances occur indicating that goodwill
may be impaired. The Companys annual impairment testing date is August 31.
(j) Other Assets
Other assets is comprised of a combination of the cash surrender value of life insurance
policies, security deposits, key money, deferred debt issuance costs and non-compete agreements.
Key money represents lease prepayments tendered to lessors at the inception of long-term lease
relationships and is amortized over the original term of the lease, excluding optional renewal
periods. Non-compete agreements are amortized over the contractual term of the agreement or the
economic useful life, whichever is shorter. Deferred debt issuance costs are amortized over the
contractual term of the related debt, generally using the interest method.
(k) Lease Transactions and Related Balances
The Company accounts for operating lease obligations and sublease income on a straight-line
basis. Contingent or percentage rent obligations of the Company are recognized when operations
indicate such amounts will be paid. Contingent sublease income is recognized when the performance
measures have been met. Lease obligations paid in advance are included in prepaid rent. The
difference between actual lease payments and straight-line lease expense over the original lease
term, excluding optional renewal periods, is included in deferred rent. Rent expense for all
operating leases and rental income from subleases are reflected in cost of parking or general and
administrative expenses.
In connection with certain acquisitions, the Company revalued certain leases to estimated fair
value at the time of the respective acquisition. Favorable operating leases of entities acquired
represent the present value of the excess of the then current market rental over the contractual
lease payments. Unfavorable operating leases of entities acquired represent the present value of
the excess of the contractual lease payments over the then current market rental. Such adjustments
are amortized on a straight-line basis
Page 42 of 91
over the remaining original term of the underlying lease, or 30 years, whichever is shorter.
Favorable and unfavorable lease rights are reflected on the accompanying consolidated balance
sheets in contract and lease rights and other liabilities, respectively.
In the event the Company ceases to control the right to use a property the Company leases
under an operating lease, it determines whether it has a loss to record related to its operating
lease obligations pursuant to SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. If the cease-use date criteria of such standard have not been met, no loss is
recognized by the Company unless it has entered into a sublease on such property and the Company
has determined it has a loss on such sublease pursuant to the criteria set forth in FTB 79-15,
Accounting for a Loss on a Sublease Not Involving the Disposal of a Segment.
(l) Property-Related Gains (Losses), Net
Net property-related gains and losses on the accompanying consolidated statements of
operations include (i) realized gains and losses on the sale of operating property and equipment,
(ii) impairment of long-lived assets, and (iii) costs incurred to terminate existing parking
facility leases prior to their contractual termination date.
(m) Impairment of Long-Lived Assets
Long-lived assets, such as property, equipment and leasehold improvements and purchased
intangibles subject to amortization are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to
estimated undiscounted future cash flows expected to be generated by the asset. If the carrying
amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by
the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets
to be disposed of are separately presented in the consolidated balance sheet and reported at the
lower of carrying amount or fair value less costs to sell, and are no longer depreciated. The
assets and liabilities of a disposed group classified as held for sale are presented separately in
the appropriate asset and liability sections of the consolidated balance sheet.
Goodwill is tested annually for impairment, and is tested for impairment more frequently if
events and circumstances indicate that the assets might be impaired. An impairment loss is
recognized to the extent that the carrying amount of goodwill exceeds its implied fair value. This
determination is made at the reporting unit level and consists of two steps. First, the Company
determines the fair value of a reporting unit and compares it to its carrying amount. Second, if
the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized
for any excess of the carrying amount of the reporting units goodwill over the implied fair value
of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of
the reporting unit in a manner similar to a purchase price allocation, in accordance with SFAS No.
141, Business Combinations. The residual fair value after this allocation is the implied fair
value of the reporting unit goodwill.
(n) Income Taxes
The Company files a consolidated federal income tax return. The Company uses the asset and
liability method to account for income taxes. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date. The Company does not provide for federal income taxes on the accumulated earnings
considered indefinitely reinvested in foreign subsidiaries.
(o) Pre-opening Expense
The direct and incremental costs of hiring and training personnel associated with the opening
of new parking facilities, and the associated internal development costs, are expensed as incurred.
(p) Earnings (Loss) Per Share Data
Basic net earnings (loss) 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 net earnings (loss) per share reflects the potential dilution that could occur
if securities or other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the earnings of the Company.
(q) Foreign Currency Translation
The financial position and results of operations of the Companys foreign subsidiaries and
equity method joint ventures are measured using local currency as the functional currency.
Translation adjustments arising from the differences in exchange rates from period to period are
generally included in the currency translation adjustment as a component of accumulated other
comprehensive income (loss), net of income taxes in shareholders equity. Accumulated other
comprehensive income at September 30, 2006, includes
Page 43 of 91
$3.1 million related to foreign currency translation adjustments which have not been tax
affected due to managements intention that the accumulated earnings of such entities are
indefinitely reinvested.
(r) Fair Value of Financial Instruments
The Company discloses the fair values of financial instruments for which it is practicable to
estimate the value. Fair value disclosures exclude certain financial instruments such as trade
receivables and payables when carrying values approximate the fair value. The fair values of the
financial instruments are estimates based upon current market conditions and quoted market prices
for the same or similar instruments as of September 30. At September 30, 2006 and 2005, book value
approximates fair value for substantially all of the Companys assets, liabilities, debt and
derivatives that are subject to the fair value disclosure requirements.
(s) Stock Option Plan
On October 1, 2005, the Company adopted SFAS No. 123R, Share-Based Payment, that addresses the
accounting for share-based payment transactions in which a company receives employee services in
exchange for equity instruments. SFAS No. 123R eliminates the ability to account for share-based
compensation transactions, as the Company formerly did, using the intrinsic value method as
prescribed by Accounting Principles Board, (APB), Opinion No. 25, Accounting for Stock Issued to
Employees, and generally requires that such transactions be accounted for using a fair-value-based
method and recognized as expense in the accompanying consolidated statements of operations.
The Company adopted SFAS No. 123R using the modified prospective method which requires the
application of the accounting standard as of October 1, 2005. The accompanying consolidated
financial statements for fiscal 2006 reflect the impact of adopting SFAS No. 123R. See Note 14 for
further details.
Stock-based compensation expense recognized during the period is based on the value of the
portion of stock-based payment awards that is ultimately expected to vest. Stock-based
compensation expense recognized in the accompanying consolidated statement of operations for the
fiscal year ended September 30, 2006, included compensation expense for stock-based payment awards
granted prior to, but not yet vested, as of October 1, 2005 and for the stock-based awards granted
after such date, based on the grant date fair value estimated in accordance with SFAS No. 123R. As
stock-based compensation expense recognized in the accompanying statement of income for fiscal 2006
is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.
SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary,
in subsequent periods if actual forfeitures differ from those estimates. In the pro forma
information for periods prior to fiscal 2006, which is also detailed in Note 14, we accounted for
forfeitures as they occurred.
(t) Business Concentrations
Approximately 43%, 44% and 43% of the Companys total revenues from continuing operations
(excluding reimbursement of management expenses) for fiscal year 2006, 2005 and 2004, respectively,
excluding reimbursement of management contract expenses, were attributable to parking and
management contract operations geographically located in the Northeastern area of the United
States. Revenues from our operations in New York City and surrounding areas accounted for
approximately 26.6% of our total revenues from continuing operations (excluding reimbursement of
management expenses) in fiscal 2006. See also Note 18.
(u) Risk Management
The Company utilizes a combination of indemnity and self-insurance coverages, up to certain
maximum losses for liability, health and workers compensation claims. The accompanying
consolidated balance sheets reflect the estimated losses related to such risks. The primary amount
of liability coverage is $1 million per occurrence and $2 million in the aggregate per facility.
The Companys various liability insurance policies have deductibles of up to $350,000 per
occurrence, which must be met before the insurance companies are required to reimburse the Company
for costs related 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. The Company applies the
provisions of SFAS No. 5, Accounting for Contingencies, in determining the timing and amount of
liability recognition associated with claims against the Company. The recognition of liabilities
is based upon managements determination of an unfavorable outcome of a claim being deemed as
probable and reasonably estimable, as defined in SFAS No. 5. This determination requires the use
of judgment in both the estimation of probability and the amount to be recognized as a liability.
The Company engages an actuary to assist in determining the estimated liabilities for customer
injury, employee medical costs and workers compensation claims. 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. Total discounted self-insurance liabilities at September 30, 2006 and September 30, 2005
were $22.6 million and $24.6 million, respectively, reflecting a 4.5% discount rate. The related
undiscounted amounts at such dates were $25.0 million and $27.7 million, respectively.
Page 44 of 91
(v) Derivative financial instrument
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 September 30, 2006, the Company had two interest rate swaps with a combined notional amount
of $87.5 million. These derivative financial instruments are reported at their fair value and are
included as other assets on the consolidated balance sheets. The fair values of these swaps at
September 30, 2006 and 2005 were $1.9 million and $3.0 million, respectively. The interest rate
swaps do not qualify as cash flow hedges for accounting purposes. As such, any changes in the fair
value of these derivative instruments are included in the consolidated statements 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%. The fair value of this contract at September 30,
2006 was not significant.
The Company has entered into certain foreign currency forward contracts to mitigate the
foreign exchange risk related to various intercompany notes receivable from the Companys
wholly-owned subsidiary in the United Kingdom. These forward contracts are expected to offset the
transactional gains and losses on the intercompany notes denominated in British pounds. The gains
and losses related to such contracts and the transactional gains and losses related to the
intercompany notes recognized during fiscal 2006 were not significant. The notional amount of the
open contracts at September 30, 2006 totaled approximately $20.2 million. The fair value of the
foreign currency forward contracts at September 30, 2006 was a liability of $390 thousand.
(w) Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. generally
accepted accounting principles requires management to make a number of estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ from those
estimates.
(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 accompanying consolidated cash flow statements for fiscal 2005 and 2004 have been labeled as
revised.
(3) Common 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.
(4) Notes Receivable
In connection with the acquisition of Kinney in February 1998, the Company acquired a note
receivable from the City of New York (the City) related to two parking garages which were built
on behalf of the City. The Company also has a long-term management agreement to operate the parking
garages. Amounts advanced for the construction of the garages were recorded as a note receivable
and are being repaid by the City in monthly installments of $156 thousand, including interest at a
fixed rate of 8.0%, through December 2007. At September 30, 2006, the balance of the note
receivable was $2.5 million.
In June 1997, Allright loaned the limited partner of Edison $16.5 million in connection with
Allrights acquisition of its general partnership interest in Edison. In conjunction with the
merger of Allright and Central Parking, the partnership agreement was
Page 45 of 91
restructured and an additional $9.9 million was advanced to the limited partner. The amended
note receivable totaled $26.4 million and bore interest at a fixed rate of 10%. The note
receivable was paid in full in September 2005.
In connection with the Allright merger, the Company acquired a mortgage note of $2.5 million,
bearing interest at a fixed rate of 7.7%, from a partnership which is secured by a parking garage
and rental assignments. The loan is a balloon note which matures in August 2010.
In connection with the acquisition of Allied Parking in October 1998, the Company obtained
notes receivable totaling $4.9 million, secured by an assignment of rents from the properties being
leased. The notes are payable monthly and bear interest at a fixed rate of 7.0%. The balance at
September 30, 2006 was $ 3.6 million.
In
connection with the sale of the Companys 50% interest in its joint venture in Mexico in January
2006, the Company obtained notes receivable totaling $3.7 million. The note is payable monthly and
bears interest at a fixed rate of 8%. The balance at September 30, 2006 was $ 3.1 million.
The remainder of the notes receivable consist of notes ranging from $3 thousand to $2.5
million at the end of fiscal year 2006, and notes ranging from $1 thousand to $3.0 million at the
end of fiscal year 2005. The notes bear interest at fixed rates ranging from 0% to 12.0% at the end
of fiscal year 2006 and are due between 2007 and 2017.
(5) Property, Equipment and Leasehold Improvements
A summary of property, equipment and leasehold improvements and related accumulated
depreciation and amortization is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2006 |
|
|
2005 |
|
Leasehold improvements |
|
$ |
42,597 |
|
|
$ |
42,611 |
|
Buildings and garages |
|
|
82,418 |
|
|
|
83,593 |
|
Operating equipment |
|
|
73,735 |
|
|
|
75,072 |
|
Furniture and fixtures |
|
|
6,102 |
|
|
|
9,480 |
|
Equipment operated under capital leases |
|
|
5,450 |
|
|
|
1,164 |
|
|
|
|
|
|
|
|
|
|
|
210,302 |
|
|
|
211,920 |
|
Less accumulated depreciation and amortization |
|
|
108,549 |
|
|
|
100,339 |
|
|
|
|
|
|
|
|
|
|
|
101,753 |
|
|
|
111,581 |
|
Land |
|
|
194,170 |
|
|
|
215,810 |
|
|
|
|
|
|
|
|
Property, equipment and leasehold improvements, net |
|
$ |
295,923 |
|
|
$ |
327,391 |
|
|
|
|
|
|
|
|
Depreciation expense of property, equipment and leasehold improvements was $18.7 million,
$18.6 million and $20.4 million, respectively, for the fiscal years ended September 30, 2006, 2005
and 2004 for continuing operations. Depreciation expense included in discontinued operations for
such periods was $0.3 million, $0.4 million and $0.7 million, respectively. Depreciation expense
included in cost of parking was $13.9 million, $13.7 million and $14.6 million, depreciation
expense included in cost of management contracts was $0.2 million, $0.2 million and $0.5 million,
and depreciation expense included in general and administrative expenses was $4.6 million, $4.7
million and $5.3 million for the fiscal years ended September 30, 2006, 2005 and 2004,
respectively.
(6) Goodwill and Amortizable Intangible Assets
As of September 30, 2006, the Company had the following amortizable intangible assets (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Carrying |
|
Accumulated |
|
|
|
|
Amount |
|
Amortization |
|
Net |
Contract and lease rights |
|
$ |
129,018 |
|
|
$ |
57,023 |
|
|
$ |
71,995 |
|
Page 46 of 91
The following table shows the changes in contract and lease rights for fiscal years 2006
and 2005 (in thousands):
|
|
|
|
|
As of September 30, 2004 |
|
$ |
89,015 |
|
Additions |
|
|
740 |
|
Amortization |
|
|
(7,779 |
) |
Deletions |
|
|
(1,912 |
) |
Impairments |
|
|
|
|
|
|
|
|
As of September 30, 2005 |
|
|
80,064 |
|
Additions |
|
|
|
|
Amortization |
|
|
(7,871 |
) |
Deletions |
|
|
110 |
|
Impairments |
|
|
(308 |
) |
|
|
|
|
As of September 30, 2006 |
|
$ |
71,995 |
|
|
|
|
|
The expected future amortization of contract and lease rights are as follows (in
thousands):
|
|
|
|
|
|
|
Year Ending |
|
|
|
September 30, |
|
2007 |
|
$ |
7,613 |
|
2008 |
|
|
7,272 |
|
2009 |
|
|
4,968 |
|
2010 |
|
|
4,535 |
|
2011 |
|
|
4,501 |
|
Thereafter |
|
|
43,106 |
|
|
|
|
|
|
|
$ |
71,995 |
|
|
|
|
|
Amortization expense related to the contract and lease rights was $7.9 million, $7.7 million
and $8.5 million, respectively, for the years ended September 30, 2006, 2005 and 2004, in
continuing operations. Amortization expense in discontinued operations related to the contract
and lease rights was not significant.
The Company has assigned its goodwill to its various reporting units. The following table
reflects the changes in the carrying amounts of goodwill by reported segment for the years ended
September 30, 2006 and 2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One |
|
|
Two |
|
|
Three |
|
|
Four |
|
|
Five |
|
|
Six |
|
|
Seven |
|
|
Total |
|
Balance as of September 30, 2004 |
|
$ |
3,172 |
|
|
$ |
32,462 |
|
|
$ |
3,604 |
|
|
$ |
181,340 |
|
|
$ |
8,884 |
|
|
$ |
2,350 |
|
|
$ |
750 |
|
|
$ |
232,562 |
|
Acquired during the period |
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104 |
|
|
|
|
|
|
|
50 |
|
|
|
184 |
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
69 |
|
|
|
73 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
151 |
|
Impairment |
|
|
|
|
|
|
(454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2005 |
|
$ |
3,202 |
|
|
$ |
32,008 |
|
|
$ |
3,673 |
|
|
$ |
181,413 |
|
|
$ |
8,997 |
|
|
$ |
2,350 |
|
|
$ |
800 |
|
|
$ |
232,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(387 |
) |
|
|
(387 |
) |
Impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2006 |
|
$ |
3,202 |
|
|
$ |
32,008 |
|
|
$ |
3,673 |
|
|
$ |
181,413 |
|
|
$ |
8,997 |
|
|
$ |
2,350 |
|
|
$ |
413 |
|
|
$ |
232,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2005, the Company determined that $454,000 of the goodwill recorded in segment two was impaired.
(7) Assets Held for Sale, Property-Related Gains, Net and Discontinued Operations
|
|
In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
long-lived assets are classified as held for sale are presented separately in the asset section of
the balance sheet. Assets classified as held for sale are comprised almost exclusively of real
property and are included in the Segment-Other in the identifiable asset segment table included in
Note 18. |
Page 47 of 91
(b) |
|
Property-Related Gains (Losses), Net |
|
|
The Company periodically 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 is a follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Net gains on sale of property |
|
$ |
35,063 |
|
|
$ |
60,229 |
|
|
$ |
9,586 |
|
Impairment charges for property, equipment and leasehold improvements |
|
|
(2,643 |
) |
|
|
(1,766 |
) |
|
|
(1,614 |
) |
Impairment charges for intangible assets |
|
|
(520 |
) |
|
|
(4,867 |
) |
|
|
(811 |
) |
|
|
|
|
|
|
|
|
|
|
Total property related gains, net |
|
$ |
31,900 |
|
|
$ |
53,596 |
|
|
$ |
7,161 |
|
|
|
|
|
|
|
|
|
|
|
Net property-related gains for the fiscal year ended September 30, 2006 of $31.9 million was
comprised of gains on sale of property of $35.1 comprised of $12.0 million in Houston, $ 9.1
Million in Baltimore, $6.2 million in Chicago, $2.4 million from the sale of our equity-method
investment in our Germany subsidiary, $1.8 million in Atlanta, $1.4 million in Denver, $1.4 million
in West Palm Beach, $1.3 Million in Nashville, $0.9 million in Dallas, and $0.7 million in
miscellaneous property sales; offset by a loss of $0.9 million
in Pittsburgh and $1.2 million in London; offset by $3.2
million of impairments of leasehold improvements, contract rights and other intangible assets
primarily in Segment-Two, Segment-Four, Segment-Five and Segment-Other. 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 book value of the assets.
The $53.6 million gain in 2005 was comprised of a gain on the sale of property of $60.2
million, comprised primarily of $38.2 million on the sale of a lease in New York, $9.1 million on
the sale of property in New York, $5.5 million gain in Missouri, $2.7 million in Denver, $1.9
million in Seattle, $1.9 million Chicago, and $0.9 million related to other miscellaneous sales;
offset by $6.6 million of impairments of leasehold improvements, contract rights and other
intangible assets primarily in Segment-One, Segment-Two, Segment-Three, Segment-Four,
Segment-Seven, and Segment-Other. Based on the current operating results and the Companys recent
forecast for the next fiscal year, management determined that the projected cash flows for these
locations would not be enough to recover the remaining value of the assets. Impairment charges
recognized in fiscal 2005 were based on estimated fair values using projected cash flows of the
applicable parking facility discounted at the Companys average cost of funds.
The $7.2 million gain in 2004 was comprised of a gain on sale of property of $9.6 comprised of
$5.7 million gain on sale of property in Providence, $1.8 million in New York, $1.1 million in
London, $0.9 million in Dallas and $0.1 million in miscellaneous property sales; offset by $2.4
million of impairments of leasehold improvements, contract rights and other intangible assets
primarily in Segment-One, Segment-Four, and Segment-Other. Based on the current operating results
and the Companys recent forecast for the next fiscal year, management determined that the
projected cash flows for these locations would not be enough to recover the remaining value of the
assets. Impairment charges recognized in fiscal 2004 were based on estimated fair values using
projected cash flows of the applicable parking facility discounted at the Companys average cost of
funds.
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 are 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 Company 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 and EITF 03-13, Applying the Conditions in
Paragraph 42 of SFAS No. 144 in Determining Whether to Report Discontinued Operations, criteria for
classification as discontinued operations, primarily due to the expected retention of certain cash
flows from assets disposed. These expected continuing cash flows result from arrangements whereby
the Company continues to operate the parking facilities under an operating lease or a management
contract, or expects to do so in the future under the Companys right of first refusal agreements
with the purchaser of the properties. It is not practicable to quantify the specific amount of
such continuing cash flows or the period of time over which they will be generated. 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.
Page 48 of 91
(c) Discontinued Operations
The Company has either disposed of, or designated as held-for-sale, certain locations which
meet the aforementioned criteria for classification as discontinued operations. The components of
discontinued operations reflected on the accompanying consolidated statements of income are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Discontinued Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
$ |
39,676 |
|
|
$ |
65,323 |
|
|
$ |
75,673 |
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) before property-
related gains (losses), net |
|
|
51 |
|
|
|
(11,464 |
) |
|
|
4,057 |
|
Property-related losses, net |
|
|
(402 |
) |
|
|
(9,384 |
) |
|
|
(3,626 |
) |
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, before
taxes |
|
|
(320 |
) |
|
|
(20,961 |
) |
|
|
511 |
|
Income tax benefit (expense) |
|
|
(5,265 |
) |
|
|
3,172 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
$ |
(5,585 |
) |
|
$ |
(17,789 |
) |
|
$ |
527 |
|
|
|
|
|
|
|
|
|
|
|
Included in operating earnings from discontinued operations for fiscal 2006 is income of $2.3
million from the settlement agreement with Rotala. Net property-related gains (losses) related to
discontinued operations the year ended September 30, 2006, includes a charge of $12.3 million
related to the disposal of the United Kingdom transport division, which consists of $10.2 million
in contract and lease buyouts associated with buses, routes and the depot, and $2.1 million for
severance related costs. All obligations related to the charge were paid in fiscal 2006, except
for $2.4 million relating to contract and lease buyouts which will be paid in fiscal 2007. Also
included in net property-related gains (losses) related to discontinued operations for fiscal 2006
are gains of $11.3 million from the sale of properties which had been classified as Assets Held for
Sale. The $11.3 million gain primarily relates to the sale of properties of $2.6 million in
Atlanta, $2.1 million in Nashville, $1.9 million in Miami, $1.8 million in Chicago, $0.6 million in
Roanoke, $0.5 million in Pittsburgh, $0.5 million in Charleston, $0.4 million in Little Rock, $0.3
million in San Antonio, $0.2 million in Minneapolis, $0.1 million in Houston, and $0.3 million in
miscellaneous properties. The Companys consolidated statements of operations and cash flows for
fiscal 2005 and 2004 have been reclassified to reflect the operations and cash flows related to
these discontinued operations.
(8) Investment in and Advances to Partnerships and Joint Ventures
The following tables reflect the financial position and results of operations for the
partnerships and joint ventures as of September 30, 2006 and 2005, and for each of the years in the
three-year period ended September 30, 2006 (in thousands). Aggregate fair value of investments is
not disclosed as quoted market prices are not available.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment |
|
|
Advances to |
|
|
|
in Partnerships and |
|
|
Partnerships |
|
|
|
Joint Ventures |
|
|
and Joint Ventures |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Commerce Street Joint Venture |
|
$ |
193 |
|
|
$ |
(149 |
) |
|
$ |
165 |
|
|
$ |
149 |
|
Larimer Square Parking Associates |
|
|
1,972 |
|
|
|
1,126 |
|
|
|
|
|
|
|
788 |
|
Lodo Parking Garage, LLC |
|
|
1,023 |
|
|
|
1,055 |
|
|
|
|
|
|
|
|
|
CPS Mexico, Inc. |
|
|
|
|
|
|
325 |
|
|
|
|
|
|
|
|
|
Other |
|
|
663 |
|
|
|
2,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,851 |
|
|
$ |
4,443 |
|
|
$ |
165 |
|
|
$ |
937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Partnership and |
|
|
Joint Venture |
|
|
|
Joint Venture Earnings (Losses) |
|
|
Debt |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2006 |
|
|
2005 |
|
Commerce Street Joint Venture |
|
$ |
762 |
|
|
$ |
739 |
|
|
$ |
606 |
|
|
$ |
4,212 |
|
|
$ |
4,793 |
|
Larimer Square Parking Associates |
|
|
389 |
|
|
|
389 |
|
|
|
312 |
|
|
|
|
|
|
|
831 |
|
Lodo Parking Garage, LLC |
|
|
182 |
|
|
|
158 |
|
|
|
94 |
|
|
|
|
|
|
|
|
|
CPS Mexico, Inc. |
|
|
|
|
|
|
(1,499 |
) |
|
|
(4,036 |
) |
|
|
|
|
|
|
17,470 |
|
Other |
|
|
(99 |
) |
|
|
(261 |
) |
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,234 |
|
|
$ |
(474 |
) |
|
$ |
(2,984 |
) |
|
$ |
4,212 |
|
|
$ |
23,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 49 of 91
(a) Commerce Street Joint Venture
The Company has a 50% interest in a joint venture that owns a parking complex in
Nashville, Tennessee. The complex consists of the original parking garage and retail space
(the Original Facility) and an addition to the parking garage (the Addition) constructed
several years after the completion of the Original Facility.
The joint venture financed the Original Facility with industrial development bonds in
the original principal amount of $8.6 million (the 1984 Bonds) issued by The Industrial
Development Board of the Metropolitan Government of Nashville and Davidson County (the Metro
IDB or Issuer) in 1984. The Metro IDB holds title to the Original Facility, which it
leases to the joint venture under a lease expiring in 2014. The lease of the Original
Facility obligates the venture to make lease payments corresponding to principal and interest
payable on Series A Bonds and provides the venture with an option to purchase the Original
Facility at any time by paying the amount due under the Series A Bonds and making a nominal
purchase payment to the Metro IDB. In 1994, the Issuer, at the request of the Company,
issued additional bonds (the Series 1994 Bonds) in the amount of $6.7 million and applied
the proceeds to refunding of the 1984 Bonds.
In June 2002, the Issuer, at the request of the Company issued $4.8 million of Series
2002A variable rate revenue refunding bonds and $0.3 million of Series 2002B
Federally-taxable revenue refunding bonds (collectively the Bonds). The series 2002A Bonds
mature on January 1, 2014. The Bonds require monthly interest payments. The proceeds of the
Bonds were used to repay the 1994 Bonds. As of September 30, 2005, the Series 2002A Bonds
had a variable rate of 2.95%. The 2002A Bonds are subject to a mandatory sinking fund
redemption beginning January 1, 2004 and on each January 1 thereafter. The 2002B Bonds were
repaid in full in January 2003.
(b) Larimer Square Parking Associates
The Company owns a 50% interest in a joint venture that owns a parking complex in
Denver, Colorado. The complex, which was completed in February 1996, was constructed and
financed by the joint venture partners. The Company invested $991 thousand in the joint
venture and loaned the joint venture $1.1 million in the form of a construction note, bearing
interest at a fixed rate of 9.5%, which was converted to a term note in August 1996,
following completion of the project. An additional $1.1 million was loaned by the Company
which will be repaid through sales tax and property tax revenues by the Denver Urban Renewal
Authority at a fixed interest rate of 10%. At September 30, 2006, all loans from the joint
venture have been repaid. The Company manages the parking facility for the venture.
(c) Lodo Parking Garage, LLC
In March 1995, the Company acquired a 50% interest in a joint venture which owns a
parking complex in Denver, Colorado. The Company invested $1.4 million in the joint venture
and manages the parking facility for the joint venture. The remaining 50% is owned by the
Companys Chairman of the Board of Directors. See Note 16.
(d) CPS Mexico, Inc.
The Company held a 50% interest in a Mexican joint venture which managed and leased
various parking structures in Mexico. During the fourth quarter of 2005, the Company
reached a tentative agreement to sell its fifty percent interest in its joint venture in
Mexico, which resulted in a non-cash loss on the sale of approximately $1.7 million. The
Company received a cash payment at closing of $325,000 and a secured promissory note of
approximately $3.7 million in repayment of the joint ventures indebtedness to the Company.
The Company recognized an impairment charge on its recorded investment in the Mexican joint
venture of $1.7 million during the fourth quarter of 2005 based on the expected proceeds of
the sale. Central Parking finalized the transaction in fiscal 2006.
(9) Long-Term Debt and Capital Lease Obligations
Long-term debt and capital lease obligations consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of September 30, |
|
|
|
2006 |
|
|
2005 |
|
Credit Facility |
|
|
|
|
|
|
|
|
Term note payable |
|
$ |
73,687 |
|
|
$ |
74,437 |
|
Revolving credit facility |
|
|
|
|
|
|
7,062 |
|
Other notes payable |
|
|
14,934 |
|
|
|
15,539 |
|
Capital lease obligations |
|
|
1,866 |
|
|
|
2,938 |
|
|
|
|
|
|
|
|
Total |
|
|
90,487 |
|
|
|
99,976 |
|
Less: current maturities of long-term obligations |
|
|
(2,862 |
) |
|
|
(1,764 |
) |
|
|
|
|
|
|
|
Total long-term obligations |
|
$ |
87,625 |
|
|
$ |
98,212 |
|
|
|
|
|
|
|
|
Page 50 of 91
On February 28, 2003, the Company entered into a credit facility (the Credit Facility)
initially providing for an aggregate availability of up to $350 million consisting of a five-year
$175 million revolving loan, including a sub-limit of $60 million for standby letters of credit,
and a $175 million seven-year 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. Proceeds from the Credit Facility were used to refinance a
previous credit facility.
The Company amended the Credit Facility in June 2004. The amendment reduced the margin
applied to the term loan by 75 basis points, and increased the standby letters of credit sub-limit
by $30.0 million to $90.0 million. The Company uses its revolving loan to collateralize
outstanding letters of credit. All other terms and conditions remained the same.
On January 25, 2005, the Company completed an amendment to the Credit Facility. The amended
facility reduced the aggregate availability to $300 million consisting of a $225 million revolving
loan and a $75 million term loan. The maturity dates remained the same, February 28, 2008, for the
revolver and June 30, 2010, for the term loan. Additionally, the interest rate margins were
reduced for both the revolver and term loans. The quarterly amortization schedule was also
amended. The new schedule requires the term loan payments in the amount of $187,500 for the
quarters ended March 2005 through March 2008 and $9.1 million for the quarters ended June 2008
through March 2010. The revolving loan is required to be repaid in February 2008.
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 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 September 30, 2006 was 200 basis points. The amount outstanding under
the Companys Credit Facility was $73.7 million, all of which related to the term loan, with an
overall weighted average interest rate of 3.7% as of September 30, 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 $171.3 million at September 30,
2006, which is net of $53.7 million of stand-by letters of credit. During the first quarter of
2006, the Company repurchased a total of 4,859,674 shares for $75.3 million using the availability
under the Credit Facility.
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 notional
value of $87.5 million. Both transactions swapped the Companys floating LIBOR interest rates for
fixed interest of 2.45% until June 30, 2007. The derivatives do not qualify as cash flow hedges.
The weighted average interest rate on the Companys Credit Facility at September 30, 2006 was
3.7%. The 3.7% rate includes all outstanding LIBOR contracts and swap agreements at September 30,
2006.
On March 15, 2000, a limited liability company (LLC) of which the Company is the sole
shareholder purchased the Black Angus Garage, a multi-level structure with 300 parking stalls,
located in New York City, for $19.6 million. $13.3 million of the purchase was financed through a
five-year note bearing interest at one month floating LIBOR plus 162.5 basis points. The note is
collateralized by the parking facility. 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 on a floating basis based on LIBOR plus 162.5 basis
points. On November 16, 2005, the Company entered into a cap agreement to comply with the interest
rate protection requirement of the loan. This interest rate cap will prevent the floating rate
LIBOR rate from exceeding 5.5% during the remaining term of the note.
The Company also has several notes payable outstanding totaling $2.3 million at September 30,
2006. These notes are secured by real estate and equipment and bear interest at fixed rates
ranging from 4.5% to 13.9%.
Page 51 of 91
Future maturities under long-term debt arrangements, including capital lease obligations, are
as follows (in thousands):
|
|
|
|
|
|
|
Year Ending |
|
|
|
September 30, |
|
2007 |
|
$ |
2,862 |
|
2008 |
|
|
24,150 |
|
2009 |
|
|
35,853 |
|
2010 |
|
|
27,357 |
|
2011 |
|
|
67 |
|
Thereafter |
|
|
198 |
|
|
|
|
|
|
|
$ |
90,487 |
|
|
|
|
|
(10) Subordinated Convertible Debentures
On March 18, 1998, the Company created Central Parking Finance Trust (Trust) which completed
a private placement of 4,400,000 shares at $25.00 per share of 5.25% convertible trust issued
preferred securities (Preferred Securities) pursuant to an exemption from registration under the
Securities Act of 1933, as amended. The Preferred Securities represent preferred undivided
beneficial interests in the assets of Central Parking Finance Trust, a statutory business trust
formed under the laws of the State of Delaware. The Company owns all of the common securities of
the Trust. The Trust exists for the sole purpose of issuing the Preferred Securities and investing
the proceeds thereof in an equivalent amount of 5.25% Convertible Subordinated Debentures
(Convertible Debentures) of the Company due 2028. The net proceeds to the Company from the
Preferred Securities private placement were $106.5 million. Each Preferred Security is entitled to
receive cumulative cash distributions at an annual rate of 5.25% (or $1.312 per share) and will be
convertible at the option of the holder thereof into shares of Company common stock at a conversion
rate of 0.4545 shares of Company common stock for each Preferred Security (equivalent to $55.00 per
share of Company common stock), subject to adjustment in certain circumstances. The Preferred
Securities prohibit the payment of dividends on Central Parking common stock if the quarterly
distributions on the Preferred Securities are not made for any reason. The Preferred Securities do
not have a stated maturity date but are subject to mandatory redemption upon the repayment of the
Convertible Debentures at their stated maturity (April 1, 2028) or upon acceleration or earlier
repayment of the Convertible Debentures.
In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003) (FIN
46R), Consolidation of Variable Interest Entities, which addresses how a business enterprise
should evaluate whether it has a controlling financial interest in an entity through means other
than voting rights and accordingly should consolidate the entity. FIN 46R replaced FASB
Interpretation No. 46, Consolidation of Variable Interest Entities, which was issued in January
2003.
FIN 46Rs transition guidance required the application of either FIN 46 or FIN 46R to all
Special Purpose Entities (SPEs) in which the Company holds a variable interest no later than the
end of the first reporting period ending after December 15, 2003. Under the provisions of both FIN
46 and FIN 46R, the Trust is considered an SPE in which the Company holds a variable interest
because the Trusts activities are generally so restricted and predetermined that the holders of
the Preferred Securities lack the direct or indirect ability to make decisions about the Trusts
activities through voting rights or similar rights. During the quarter ended December 31, 2003,
the Company adopted the provisions of FIN 46R to account for its variable interest in the Trust.
Since a majority of the Preferred Securities issued by the Trust are owned by a few investors, the
Company is not deemed to be the primary beneficiary under FIN 46R. Additionally, the Trusts
common stock equity held by the Company would not be considered at risk and therefore, the common
stock equity would not absorb any expected losses of the Trust. Accordingly, under the provisions
of FIN 46R, the Company does not have a significant variable interest in the Trust. Therefore, the
Company deconsolidated the Trust upon adoption of FIN 46R by removing, on the consolidated balance
sheets, the amount previously recorded as Company-obligated mandatorily redeemable securities of a
subsidiary trust and recorded, as a component of long-term liabilities, subordinated convertible
debentures. Additionally, the amounts previously reported as dividends on Company-obligated
mandatorily redeemable securities of a subsidiary trust, were included as interest expense on the
consolidated statements of operations.
Page 52 of 91
(11) Shareholders Equity
The following tables set forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
September 30, 2006 |
|
|
September 30, 2005 |
|
|
September 30, 2004 |
|
|
|
Income |
|
|
Common |
|
|
Per |
|
|
Income |
|
|
Common |
|
|
Per |
|
|
Income |
|
|
Common |
|
|
Per |
|
|
|
Available |
|
|
Shares |
|
|
Share |
|
|
Available |
|
|
Shares |
|
|
Share |
|
|
Available |
|
|
Shares |
|
|
Share |
|
|
|
($000s) |
|
|
(000s) |
|
|
Amount |
|
|
($000s) |
|
|
(000s) |
|
|
Amount |
|
|
($000s) |
|
|
(000s) |
|
|
Amount |
|
Basic earnings from continuing
Operations per share |
|
$ |
33,449 |
|
|
|
32,258 |
|
|
$ |
1.03 |
|
|
$ |
32,059 |
|
|
|
36,626 |
|
|
$ |
0.88 |
|
|
$ |
16,466 |
|
|
|
36,346 |
|
|
$ |
0.45 |
|
Effects of dilutive stock options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option plan |
|
|
|
|
|
|
241 |
|
|
|
|
|
|
|
|
|
|
|
136 |
|
|
|
|
|
|
|
|
|
|
|
209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) from continuing
Operations per share |
|
$ |
33,449 |
|
|
|
32,499 |
|
|
$ |
1.03 |
|
|
$ |
32,059 |
|
|
|
36,762 |
|
|
$ |
0.87 |
|
|
$ |
16,466 |
|
|
|
36,555 |
|
|
$ |
0.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares used for the computation of basic earnings (loss) per
share excludes certain common shares issued pursuant to the Companys restricted stock plan and
deferred compensation agreement, because under the related agreements the holders of restricted
stock will forfeit such shares if certain employment or service requirements are not met. The
effect of the conversion of the subordinated convertible debentures has not been included in the
diluted earnings per share calculation since such securities were anti-dilutive for all periods.
At September 30, 2006, 2005 and 2004, such securities were convertible into 1,419,588 shares of
common stock. Options to acquire 2,304,586, 2,453,586, and 2,851,723 shares of common stock were
excluded from the 2006, 2005 and 2004 diluted earnings per share calculations because they were
anti-dilutive.
(12) Operating Leases
The Company and its subsidiaries conduct a significant portion of their operations on leased
premises under operating leases expiring at various dates through 2101. Lease agreements provide
for minimum payments or contingent payments based upon a percentage of revenue or, in some cases, a
combination of both types of arrangements. Certain locations additionally require the Company and
its subsidiaries to pay real estate taxes and other occupancy expenses.
Future minimum rental commitments under operating leases and subleases are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending |
|
Fixed |
|
|
Sub-rental |
|
|
Net |
|
September 30, |
|
Rent |
|
|
Income |
|
|
Rent |
|
2007 |
|
$ |
199,360 |
|
|
$ |
1,653 |
|
|
$ |
197,708 |
|
2008 |
|
|
151,111 |
|
|
|
1,367 |
|
|
|
149,745 |
|
2009 |
|
|
115,339 |
|
|
|
1,190 |
|
|
|
114,149 |
|
2010 |
|
|
92,719 |
|
|
|
1,216 |
|
|
|
91,503 |
|
2011 |
|
|
70,821 |
|
|
|
1,227 |
|
|
|
69,594 |
|
Thereafter |
|
|
329,153 |
|
|
|
18,678 |
|
|
|
310,473 |
|
|
|
|
|
|
|
|
|
|
|
Total future operating lease commitments |
|
$ |
958,503 |
|
|
$ |
25,331 |
|
|
$ |
933,172 |
|
|
|
|
|
|
|
|
|
|
|
Rental expense for all operating leases, along with offsetting rental income from subleases were as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Rentals: |
|
|
|
|
|
|
|
|
|
|
|
|
Minimum |
|
$ |
256,661 |
|
|
$ |
244,776 |
|
|
$ |
254,378 |
|
Contingent |
|
|
56,873 |
|
|
|
60,359 |
|
|
|
66,104 |
|
|
|
|
|
|
|
|
|
|
|
Total rent expense |
|
|
313,534 |
|
|
|
305,135 |
|
|
|
320,482 |
|
Less sub-lease income |
|
|
(16,970 |
) |
|
|
(16,305 |
) |
|
|
(16,570 |
) |
|
|
|
|
|
|
|
|
|
|
Total rent expense, net |
|
$ |
296,564 |
|
|
$ |
288,830 |
|
|
$ |
303,912 |
|
|
|
|
|
|
|
|
|
|
|
In 1992 the Company entered into an agreement to lease and operate certain locations in New
York City. The 1992 agreement, terminated in August 2004, initially covered approximately 80
locations; however, all but seven of these locations had been renegotiated with extended terms or
terminated as of September 30, 2003. The Company was entitled to receive a termination fee, as
defined in the agreement, as the landlord disposes of certain properties or renegotiates the lease
agreements. The termination fee was based on the earnings of the location over the remaining
duration of the agreement. The termination amounts have been recorded as deferred rent and were
fully amortized through August 2004 to offset the rent payments due under the 1992 agreement. The
Company reached an agreement to continue to operate six of the seven locations when the existing
Page 53 of 91
agreement expired in August 2004. These locations were converted from leased to managed. The seventh
location has been sold and the Company is operating the location for the new owner under a lease.
In October 2002, the Company executed an agreement with Connex South Eastern Limited, a
private rail company headquartered in the United Kingdom, to lease 82 parking facilities throughout
the United Kingdom. Connex was responsible for operating certain rail lines for the Strategic Rail
Authority, a United Kingdom government agency. Under the terms of the lease agreement, the Company
paid an upfront payment of $6.4 million for the right to lease these facilities and agreed to
invest approximately $5 million in property improvements at these locations. The $6.4 million of
upfront payments and $5 million in property improvements were to be amortized over the nine-year
term of the lease. During the third quarter of 2003, the Company was informed that Connex would
be removed as the private operator by the Strategic Rail Authority. Under the lease agreement
Connex was required to reimburse the Company for the unamortized upfront payments. In November
2003, the Company entered into a management agreement with the Strategic Rail Authority to operate
the same 82 parking facilities covered by the Connex lease, for a five year term. In accordance
with the management agreement, the Strategic Rail Authority agreed to acquire the Companys
property improvements under the former Connex agreement. In November 2003, Connex made a
settlement payment to the Company to reimburse the Company for the upfront and property improvement
payments of $11.4 million and for $19.2 million for other capital expenditures. The Company
realized a gain of $0.4 million in fiscal 2004 related to the settlement of the agreement.
(13) Income Taxes
Income tax expense (benefit) from continuing operations consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
19,713 |
|
|
$ |
27,558 |
|
|
$ |
5,491 |
|
Jobs credit, net of federal tax benefit |
|
|
(952 |
) |
|
|
(961 |
) |
|
|
(305 |
) |
|
|
|
|
|
|
|
|
|
|
Net federal current tax expense |
|
|
18,761 |
|
|
|
26,597 |
|
|
|
5,186 |
|
State |
|
|
2,871 |
|
|
|
2,669 |
|
|
|
1,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S |
|
|
872 |
|
|
|
1,728 |
|
|
|
3,545 |
|
|
|
|
|
|
|
|
|
|
|
Total current tax expense |
|
|
22,504 |
|
|
|
30,994 |
|
|
|
10,145 |
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
(2,640 |
) |
|
|
(5,414 |
) |
|
|
2,203 |
|
State |
|
|
172 |
|
|
|
804 |
|
|
|
388 |
|
Non-U.S. |
|
|
(968 |
) |
|
|
522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax (benefit) expense |
|
|
(3,436 |
) |
|
|
(4,088 |
) |
|
|
2,591 |
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense from continuing operations |
|
$ |
19,068 |
|
|
$ |
26,906 |
|
|
$ |
12,736 |
|
|
|
|
|
|
|
|
|
|
|
Total income taxes are allocated as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Income tax expense from continuing operations |
|
$ |
19,068 |
|
|
$ |
26,906 |
|
|
$ |
12,736 |
|
Income tax (benefit) expense from discontinued operations |
|
|
5,265 |
|
|
|
(3,172 |
) |
|
|
(16 |
) |
Shareholders equity for unrealized gain on fair value of
derivatives for financial reporting purposes |
|
|
|
|
|
|
|
|
|
|
721 |
|
Shareholders equity for compensation expense for tax
purposes different
from amounts recognized for financial reporting purposes |
|
|
(254 |
) |
|
|
(508 |
) |
|
|
(205 |
) |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income tax expense (benefit) |
|
$ |
24,079 |
|
|
$ |
23,226 |
|
|
$ |
13,236 |
|
|
|
|
|
|
|
|
|
|
|
Provision has not been made for U.S. or additional foreign taxes on approximately $19.3
million, $17.9 million and $33.6 million at September 30, 2006, 2005 and 2004, respectively, of
undistributed earnings of foreign subsidiaries, as those earnings are intended to be permanently
reinvested.
A reconciliation between actual income taxes and amounts computed by applying the federal
statutory rate to earnings (loss) from continuing operations before income taxes is summarized as
follows (in thousands):
Page 54 of 91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
U.S. Federal statutory rate on (loss) earnings from
continuing operations before income taxes |
|
$ |
18,380 |
|
|
|
35.0 |
% |
|
$ |
20,638 |
|
|
|
35.0 |
% |
|
$ |
10,221 |
|
|
|
35.0 |
% |
State and city income taxes, including changes in
valuation allowance, net of federal tax effect |
|
|
1,978 |
|
|
|
3.8 |
|
|
|
2,257 |
|
|
|
3.8 |
|
|
|
1,172 |
|
|
|
4.0 |
|
Jobs credits |
|
|
(952 |
) |
|
|
(1.8 |
) |
|
|
(961 |
) |
|
|
(1.6 |
) |
|
|
(305 |
) |
|
|
(1.0 |
) |
Foreign versus US rate difference, including changes in
valuation allowance |
|
|
(84 |
) |
|
|
(0.2 |
) |
|
|
3,549 |
|
|
|
6.0 |
|
|
|
(163 |
) |
|
|
(0.6 |
) |
Equity in unconsolidated subsidiaries |
|
|
|
|
|
|
|
|
|
|
1,097 |
|
|
|
1.9 |
|
|
|
1,428 |
|
|
|
4.9 |
|
Other |
|
|
(254 |
) |
|
|
(0.5 |
) |
|
|
326 |
|
|
|
0.5 |
|
|
|
383 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense from continuing operations |
|
$ |
19,068 |
|
|
|
36.3 |
% |
|
$ |
26,906 |
|
|
|
45.6 |
% |
|
$ |
12,736 |
|
|
|
43.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources of deferred tax assets and deferred tax liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2006 |
|
|
2005 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Intangible assets |
|
$ |
6,729 |
|
|
$ |
5,662 |
|
Accrued expenses |
|
|
9,859 |
|
|
|
13,323 |
|
Allowance for doubtful accounts |
|
|
771 |
|
|
|
143 |
|
Partnership interest |
|
|
1,018 |
|
|
|
262 |
|
Deferred income |
|
|
10,245 |
|
|
|
9,339 |
|
Deferred compensation expense |
|
|
5,829 |
|
|
|
6,269 |
|
Net operating losses |
|
|
18,821 |
|
|
|
14,201 |
|
Tax credits |
|
|
387 |
|
|
|
528 |
|
Other |
|
|
256 |
|
|
|
213 |
|
|
|
|
|
|
|
|
Total gross deferred tax assets |
|
|
53,915 |
|
|
|
49,940 |
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Property, equipment and leasehold improvements |
|
|
(32,679 |
) |
|
|
(35,548 |
) |
Unrecognized gain on fair value of derivative instruments |
|
|
(733 |
) |
|
|
(1,202 |
) |
Deferred liability on discontinued foreign operations |
|
|
(6 |
) |
|
|
(712 |
) |
|
|
|
|
|
|
|
Total gross deferred tax liabilities |
|
|
(33,418 |
) |
|
|
(37,462 |
) |
Valuation allowance on deferred tax assets |
|
|
(16,678 |
) |
|
|
(12,094 |
) |
|
|
|
|
|
|
|
Net deferred tax assets (liabilities) |
|
$ |
3,819 |
|
|
$ |
384 |
|
|
|
|
|
|
|
|
As of September 30, 2006, the Company has foreign, state and city net operating loss carry
forwards of approximately $216.7 million which expire between 2007 and 2025. Based on prior taxable
income, and expected future taxable income, management believes that it is more likely than not
that the Company will generate sufficient taxable income to realize deferred tax assets after
giving consideration to the valuation allowance. The valuation allowance has been provided for net
operating loss carry forwards for which recoverability is deemed to be uncertain. The valuation
allowance increase of $4.6 million during the year ended September 30, 2006 was to reflect net
operating loss carryforwards in foreign operations and in certain states where management has
determined that it is more likely than not that the deferred tax asset will not be realized.
(14) Stock-Based Compensation
(a) Stock Option 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 3,307,395 shares are outstanding
under the stock option plan at September 30, 2006. 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 issued 300,000 options and 14,000 restricted shares under the new plan as
of September 30, 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.
Page 55 of 91
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 options will be granted under this plan. Options to purchase
77,500 shares are outstanding under this plan at September 30, 2006.
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 are based on the estimated fair value of the respective options and the proportion vesting
in the period. Stock-based employee compensation expense for the year ended September 30, 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.
The following table illustrates the effect on net earnings (loss) if the fair-value-based
method had been applied to record stock-based compensation.
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
September 30, |
|
|
|
2005 |
|
|
2004 |
|
Net earnings, as reported |
|
$ |
14,270 |
|
|
$ |
16,993 |
|
Add stock-based employee compensation expense
included in reported net earnings (loss), net of tax |
|
|
|
|
|
|
|
|
Deduct total stock-based employee compensation expense
determined under fair-value-based method for all awards,
net of tax |
|
|
(9,006 |
) |
|
|
(2,765 |
) |
|
|
|
|
|
|
|
Pro forma net earnings |
|
$ |
5,264 |
|
|
$ |
14,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share: |
|
|
|
|
|
|
|
|
Basic-as reported |
|
$ |
0.39 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
|
Basic-pro forma |
|
$ |
0.14 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted-as reported |
|
$ |
0.39 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
|
Diluted-pro forma |
|
$ |
0.14 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
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.
The Company accelerated the vesting of approximately 1.2 million out-of-the-money stock options at
a weighted average exercise price of $18.85 per share during fiscal 2005 to reduce compensation
expense in future years. During fiscal 2005, the Company did not recognize any compensation cost
due to the decision to accelerate the vesting of the options. By accelerating the vesting of the
out-of-the-money stock options, the Company reduced future compensation cost by $7.7 million over
the next ten years.
There was one option grant during the year ended September 30, 2006 for 300,000 options. Such
options vest ratably over four years. The estimated weighted average fair value of options granted
during 2006 was $4.35 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 29% for fiscal year 2006, weighted average risk free interest based on the
treasury bill rate of 10-year instruments at the date of grant (5.0%), and a weighted average
expected term of 4.5 years for 2006.
The adoption of SFAS No.123(R) using the modified prospective method resulted in the Company
recognizing compensation expense of $582 thousand for fiscal 2006. The Company recognized an
income tax benefit of $254 thousand during the fiscal year ended September 30, 2006 related to the
exercise of non-qualified stock options. As of September 30, 2006, there were approximately $1.1
million of total unrecognized compensation expense related to unvested options granted under the
option plans. The Company used a 7.5% forfeiture to arrive at this expense. This cost is expected
to be fully recognized by the end of fiscal Year 2010. During the year ended September 30, 2006,
the aggregate intrinsic value of options exercised under our stock plan was $887 thousand
determined as of the date of option exercise.
A summary for the Companys stock option activity as of September 30, 2006, and changes during
fiscal 2006 is presented in the following table:
Page 56 of 91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
Aggregate |
|
|
|
Number |
|
|
Weighted Average |
|
Average Remaining |
|
Intrinsic Value |
|
|
|
of Shares |
|
|
Exercise Price |
|
Contractual Term |
|
as of 9/30/06 |
|
Outstanding at September 30, 2005 |
|
|
4,153,206 |
|
|
$ |
17.96 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
300,000 |
|
|
$ |
14.41 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(234,469 |
) |
|
$ |
13.03 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(12,750 |
) |
|
$ |
12.73 |
|
|
|
|
|
|
|
|
|
Expired |
|
|
(521,092 |
) |
|
$ |
19.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2006 |
|
|
3,684,895 |
|
|
$ |
17.83 |
|
|
|
5.68 |
|
|
$ |
4,883,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested or expected to vest at
September 30, 2006 |
|
|
3,629,372 |
|
|
$ |
17.89 |
|
|
|
5.58 |
|
|
$ |
4,752,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2006 |
|
|
3,261,770 |
|
|
$ |
18.34 |
|
|
|
5.54 |
|
|
$ |
3,792,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated weighted average fair value of the options granted was $5.65 for 2005 option
grants and $3.16 for 2004 option grants using the Black-Scholes option pricing model with the
following assumptions: weighted average dividend yield based on historic dividend rates at the date
of grant, weighted average volatility of 33% for fiscal year 2005 and 42% for fiscal year 2004;
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 and 2.0 years for 2004.
The estimated weighted average fair value of options granted during 2006 was $4.35 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 29% for
fiscal year 2006, weighted average risk free interest based on the treasury bill rate of 10-year
instruments at the date of grant (5.0%), and a weighted average expected term of 4.5 years for
2006.
The following table summarizes the transactions pursuant to the Companys stock option plans
for the last three fiscal years:
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
Weighted Average |
|
|
of Shares |
|
|
Exercise Price |
Outstanding at September 30, 2003 |
|
|
5,008,646 |
|
|
$ |
18.33 |
|
Granted |
|
|
654,750 |
|
|
$ |
14.14 |
|
Exercised |
|
|
(129,905 |
) |
|
$ |
14.01 |
|
Canceled |
|
|
(825,584 |
) |
|
$ |
19.32 |
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2004 |
|
|
4,707,907 |
|
|
$ |
17.70 |
|
Granted |
|
|
5,000 |
|
|
$ |
15.00 |
|
Exercised |
|
|
(123,334 |
) |
|
$ |
11.33 |
|
Canceled |
|
|
(436,367 |
) |
|
$ |
15.92 |
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2005 |
|
|
4,153,206 |
|
|
$ |
17.96 |
|
Granted |
|
|
300,000 |
|
|
$ |
14.41 |
|
Exercised |
|
|
(234,469 |
) |
|
$ |
13.03 |
|
Canceled |
|
|
(533,842 |
) |
|
$ |
19.27 |
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2006 |
|
|
3,684,895 |
|
|
$ |
17.83 |
|
|
|
|
|
|
|
|
|
At September 30, 2006, 2005 and 2004, options to purchase 3,261,770, 3,836, and 2,144,778 shares of
common stock, respectively, were exercisable at weighted average exercise prices of $18.34, $18.37
and $19.68, respectively.
(b)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. This plan expired in August
2005.
The Company measures compensation cost related to restricted shares using the quoted market
price on the grant date. During fiscal year ended 2006, the Company recognized compensation
expense of $193 thousand related to restricted shares and expects to recognize $91 thousand during
fiscal Year 2007.
Page 57 of 91
A summary for the Companys restricted stock activity as of September 30, 2006, and changes
during fiscal 2006 is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
Weighted Average |
|
|
of Shares |
|
|
Grant Date Fair Value |
Outstanding at September 30, 2005 |
|
|
28,660 |
|
|
$ |
16.76 |
|
Granted |
|
|
14,000 |
|
|
$ |
15.56 |
|
Vested |
|
|
(14,001 |
) |
|
$ |
17.24 |
|
Forfeited |
|
|
|
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2006 |
|
|
28,659 |
|
|
$ |
15.94 |
|
|
|
|
|
|
|
|
|
(c) Stock Purchase Plan
The Company also has an Employee Stock Purchase Plan which began on April 1, 1996, under which
850,000 shares of common stock have been reserved for issuance. The plan allows participants to
contribute up to 10% of their normal pay (as defined in the Plan) to a custodial account for
purchase of the Companys common stock. Participants may enroll or make changes to their enrollment
annually, and they may withdraw from the plan at any time by giving the Company written notice.
Employees purchase stock annually following the end of the plan year at a price per share equal to
the lesser of 85% of the closing market price of the Companys common stock on the first or the
last trading day of the plan year. At September 30, 2006, employees had purchased 595,032 shares
under this plan. Beginning April 1, 2005, the Company suspended contributions into the plan.
(d) Deferred Stock Unit Plan
On December 19, 1996, the Board of Directors approved the adoption of the Companys Deferred
Stock Unit Plan. Under the plan, certain key employees have the opportunity to defer the receipt of
certain portions of their cash compensation, instead receiving shares of common stock following
certain periods of deferral. The plan is administered by a committee, appointed by the Board of
Directors of the Company consisting of at least two non-employee outside directors of the
Company. The Company reserved 375,000 shares of common stock for issuance under the 1996 Deferred
Stock Unit Plan. Participants may defer up to 50% of their salary. As of September 30, 2006, $2.7
million of compensation remained deferred under this plan. Beginning on October 1, 2005, the
Company has suspended deferrals into the plan.
(15) Employee Benefit Plans
The Company has a Profit-Sharing and 401(k) Savings Plan that allows eligible participants to
make pretax contributions, receive Company 401(k) match contributions and participate in
discretionary Company profit-sharing contributions. Employees 20 years or older may participate in
the Plan after one year of continuous service, if the employee was employed prior to reaching age
65. Participants contributions, Company 401(k) match contributions and earnings thereon
immediately vest. Company profit-sharing contributions are 100% vested after five years of
continuous service. Company expense associated with this plan was $2.2 million, $2.4 million and
$2.1 million in years 2006, 2005 and 2004, respectively.
The Company has incentive compensation agreements with certain key employees. Participating
employees receive an annual bonus based on profitability of the operations and other factors for
which they are responsible. Incentive compensation expense is accrued during the year based upon
managements estimate of amounts earned under the related agreements. Incentive compensation under
all such agreements was approximately $6.3 million, $5.4 million and $5.3 million in years 2006,
2005 and 2004, respectively.
The Company has an employment agreement with its President of International Operations in
which the officer is entitled to receive upon retirement 267,750 shares of common stock which were
issued in 1995 under the Companys restricted stock plan. The Company recorded $705 thousand of
deferred compensation expense in its shareholders equity in fiscal year 1995, which was being
amortized ratably over the remaining expected term of the officers employment. During fiscal year
2001 the agreement was amended to allow the officer to receive all of the shares if he were to
leave the Company prior to his normal retirement date. The Company transferred 267,750 shares of
restricted common stock into a Rabbi Trust (the Trust) owned by the Company. The officer has no
authority over the administration of the Trust. Transfer of these shares resulted in an increase
in liabilities and a decrease in equity of $705 thousand.
The Company has a deferred compensation agreement that entitles the Chairman to receive annual
payments of $500 thousand following his termination, for any reason until his death, in exchange
for a covenant not to compete. In the event his wife survives him, she is entitled to annual
payments of $500 thousand until her death. The Company recognizes annual compensation expense
pursuant to this agreement equivalent to the change in the actuarially determined future obligation
under the agreement.
Page 58 of 91
Compensation (benefit) expense associated with this agreement was
approximately $41 thousand, $861 thousand and $199 thousand in fiscal years 2006, 2005 and 2004,
respectively. At September 30, 2006, the Company had recorded a liability of $4.5 million
associated with this agreement.
Agreements with certain former key executives of Allright provide for aggregate annual
payments ranging from $20 thousand to $144 thousand per year for periods ranging from 10 years to
life, beginning when the executive retires or upon death or disability. Under certain conditions,
the amount of deferred benefits can be reduced. Life insurance contracts with a face value of
approximately $8.3 million have been purchased to fund, as necessary, the benefits under these
agreements. The cash surrender value of the life insurance contracts is approximately $1.7 million
and $1.7 million at September 30, 2006 and 2005, respectively, and is included in other non-current
assets. The plan is a nonqualified plan and is not subject to ERISA funding requirements. Deferred
compensation costs for 2006, 2005 and 2004 were $370 thousand, $721 thousand and $774 thousand,
respectively. At September 30, 2006, the Company had recorded a liability of $5.5 million
associated with these agreements.
(16) Related Parties
In fiscal 2005, the Company leased two properties from an entity 50% owned by Monroe Carell,
Jr., the Companys chairman, for a combined base rent of $725 thousand plus percentage rent over
specified thresholds. Total rent expense, including percentage rent, was $875 thousand, $321
thousand and $296 thousand in 2006, 2005 and 2004, respectively. Management believes that such
transactions have been on terms no less favorable to the Company than those that could have been
obtained from unaffiliated persons. A company owned by Mr. Carell, owns a 50% interest in a
limited liability company that owns the Lodo Garage in Denver, Colorado. The entity owned by Mr.
Carell purchased the interest in the garage from a third party. The Company owns the remaining
50%.
In connection with the acquisition of Kinney, the Company entered into an agreement with Lewis
Katz, a director of the Company whereby the director has agreed to seek new business opportunities
in the form of leases and management contracts and renewals of existing leases and contracts as
requested by the Company. During the fiscal years ended September 30, 2006, 2005 and 2004, the
Company recognized expense of $591 thousand, $649 thousand and $339 thousand, respectively, in
connection with this agreement.
Lewis Katz, a director of the Company, has an ownership interest in Foley Parking Affiliate,
LLC (Foley Parking). Foley Parking and the Company each own 50% of a company that leases a
parking garage in New York City. The lease has a term of 20 years and the base rent is $1.3
million per year. This location incurred earnings of approximately $460 thousand in fiscal 2006
and losses of approximately $ 80 thousand and $636 thousand, in fiscal years 2005 and 2004,
respectively.
(17) Contingencies
The Company is subject to various legal proceedings and claims, which arise in the ordinary
course of its business. In the opinion of management, the ultimate liability with respect to those
proceedings and claims will not have a material adverse effect on the financial position or
liquidity of the Company, but could have a material effect on the results of operations in a given
reporting period. Where the Company believes that a loss is both probable and estimable, such
amounts have been recorded in the consolidated financial statements. For other pending or
threatened lawsuits, due to the early stage of the litigation management has not yet concluded
whether it is at least reasonably possible that the Company will incur a loss upon resolution.
The Company has employment and severance agreements with certain employees which require
payments by the Company upon the occurrence of certain events.
(18) Business Segments
The Companys business activities consist of domestic and foreign operations. Foreign
operations are conducted in the United Kingdom, Canada, Spain, the Republic of Ireland, Puerto
Rico, Chile, Colombia, Peru, Greece, Poland, and Switzerland. Revenues attributable to foreign
operations were less than 10% of consolidated revenues for each of fiscal years 2006, 2005 and
2004. In 2006, the United Kingdom and Canada account for 24.9% and 38.9% of total foreign
revenues, respectively.
Page 59 of 91
A summary of information about the Companys foreign and domestic continuing operations is as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Total revenues, excluding reimbursement of
management contract expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
602,668 |
|
|
$ |
626,054 |
|
|
$ |
634,807 |
|
Foreign |
|
|
38,885 |
|
|
|
26,711 |
|
|
|
48,141 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
641,553 |
|
|
$ |
652,765 |
|
|
$ |
682,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
80,355 |
|
|
$ |
90,955 |
|
|
$ |
42,937 |
|
Foreign |
|
|
(12,416 |
) |
|
|
(20,043 |
) |
|
|
7,644 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
67,939 |
|
|
$ |
70,912 |
|
|
$ |
50,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before
minority interest, and income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
67,111 |
|
|
$ |
81,864 |
|
|
$ |
28,350 |
|
Foreign |
|
|
(13,580 |
) |
|
|
(21,572 |
) |
|
|
3,851 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
53,531 |
|
|
$ |
60,292 |
|
|
$ |
32,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
744,074 |
|
|
$ |
821,663 |
|
|
|
|
|
Foreign |
|
|
44,296 |
|
|
|
46,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
788,370 |
|
|
$ |
867,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 is a summary of revenues (excluding reimbursement of management contract
expenses) and operating earnings (loss) by segment for the years ended September 30, 2006, 2005 and
2004 (in thousands) and identifiable assets as of September 30, 2006 and 2005. During fiscal year
2006, the Company realigned certain locations among segments. All prior years segment data has
been reclassified to conform to the new segment alignment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Revenues (a): |
|
|
|
|
|
|
|
|
|
|
|
|
Segment One |
|
$ |
62,439 |
|
|
$ |
65,716 |
|
|
$ |
70,703 |
|
Segment Two |
|
|
97,493 |
|
|
|
98,585 |
|
|
|
104,462 |
|
Segment Three |
|
|
107,855 |
|
|
|
107,818 |
|
|
|
107,095 |
|
Segment Four |
|
|
235,186 |
|
|
|
241,857 |
|
|
|
243,489 |
|
Segment Five |
|
|
71,388 |
|
|
|
74,092 |
|
|
|
76,633 |
|
Segment Six |
|
|
17,633 |
|
|
|
17,707 |
|
|
|
17,382 |
|
Segment Seven |
|
|
40,549 |
|
|
|
37,816 |
|
|
|
43,552 |
|
Other |
|
|
9,010 |
|
|
|
9,174 |
|
|
|
19,632 |
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
641,553 |
|
|
$ |
652,765 |
|
|
$ |
682,948 |
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Segment One |
|
$ |
5,032 |
|
|
$ |
2,800 |
|
|
$ |
5,045 |
|
Segment Two |
|
|
6,496 |
|
|
|
3,010 |
|
|
|
2,671 |
|
Segment Three |
|
|
13,536 |
|
|
|
4,697 |
|
|
|
4,455 |
|
Segment Four |
|
|
13,637 |
|
|
|
51,464 |
|
|
|
3,276 |
|
Segment Five |
|
|
11,508 |
|
|
|
10,254 |
|
|
|
10,411 |
|
Segment Six |
|
|
3,811 |
|
|
|
3,517 |
|
|
|
3,246 |
|
Segment Seven |
|
|
37 |
|
|
|
(7,534 |
) |
|
|
5,439 |
|
Other |
|
|
13,882 |
|
|
|
2,704 |
|
|
|
16,038 |
|
|
|
|
|
|
|
|
|
|
|
Total operating earnings (loss) |
|
$ |
67,939 |
|
|
$ |
70,912 |
|
|
$ |
50,581 |
|
|
|
|
|
|
|
|
|
|
|
Page 60 of 91
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2006 |
|
|
2005 |
|
Identifiable assets: |
|
|
|
|
|
|
|
|
Segment One |
|
$ |
20,878 |
|
|
$ |
18,666 |
|
Segment Two |
|
|
42,533 |
|
|
|
45,626 |
|
Segment Three |
|
|
74,218 |
|
|
|
56,120 |
|
Segment Four |
|
|
305,061 |
|
|
|
312,329 |
|
Segment Five |
|
|
27,566 |
|
|
|
29,961 |
|
Segment Six |
|
|
12,221 |
|
|
|
13,707 |
|
Segment Seven |
|
|
43,129 |
|
|
|
49,095 |
|
Other |
|
|
262,764 |
|
|
|
342,310 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
788,370 |
|
|
$ |
867,814 |
|
|
|
|
|
|
|
|
(a) Excludes reimbursement of management contract expenses.
Segment One encompasses the Midwestern region of the United States. It also includes Canada.
Segment Two encompasses the southeastern region of the United States to include Washington DC and Baltimore.
It also includes the Mid Atlantic region including Pennsylvania and Western New York.
Segment Three encompasses Nashville, TN, Noxville, TN, Memphis, TN, Nebraska, Colorado, Missouri, and the western region of the
United States.
Segment Four encompasses the northeastern region of the United States to include New York City, New Jersey, and Boston.
Segment Five encompasses Florida, Alabama, parts of Tennessee and the southeastern region of the United States to include
the Gulf Coast region and Texas.
Segment Six encompasses the USA Parking acquisition.
Segment Seven encompasses Miami, FL, Europe, Puerto Rico, Central and South America.
Other encompasses the home office, eliminations, owned real estate and certain partnerships.
(19) Subsequent Event
In October 2006, the Company sold its operations in Poland, which has been included in
discontinued operations. The financial impact of the sale of Poland is not significant to the
Company. The Company received $0.3 million from the sale of Poland.
On November 28, 2006, the Company announced that it has retained The Blackstone Group L.P. as
its financial advisor to assist the Company in exploring strategic alternatives to enhance
stockholder value.
Page 61 of 91
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the
effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of the end of the period covered by this annual report. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures effectively and timely provide them with material information
relating to us and our consolidated subsidiaries required to be disclosed in the reports we file or
submit under the Exchange Act.
(b) Managements Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control
over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange
Act of 1934. The Companys internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally accepted accounting
principles. The Companys internal control over financial reporting included those policies and
procedures that:
|
(i) |
|
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the Company; |
|
|
(ii) |
|
provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and |
|
|
(iii) |
|
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Companys assets that could have a
material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Companys internal control over financial reporting as
of September 30, 2006. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework.
Based on managements assessment and those criteria, management believes that, as of September 30,
2006, the Companys internal control over financial reporting was effective.
The Companys independent registered public accounting firm, KPMG LLP, has issued an attestation
report on managements assessment of the Companys internal control over financial reporting. That
report begins below.
(c) Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during our fiscal quarter
ended September 30, 2006 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Central Parking Corporation:
We have audited managements assessment, included in the accompanying Managements Report on
Internal Control Over Financial Reporting (Item 9A(b)) that Central Parking Corporation and
subsidiaries (the Company) maintained effective internal control over financial reporting as of
September 30, 2006, based on criteria established in Internal Control-Integrated Framework, issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys
management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on managements assessment and an opinion on the
effectiveness of the Companys internal control over financial reporting based on our audit.
Page 62 of 91
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that the Company maintained effective internal control over
financial reporting as of September 30, 2006, is fairly stated, in all material respects, based on
criteria established in Internal ControlIntegrated Framework, issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of
September 30, 2006, based on criteria established in Internal ControlIntegrated Framework,
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of the Company as of September 30, 2006 and
2005, and the related consolidated statements of operations, shareholders equity and comprehensive
income, and cash flows for each of the years in the three-year period ended September 30, 2006, and
our report dated December 14, 2006 expressed an unqualified opinion on those consolidated financial
statements. Our report refers to a change in accounting for share-based payments in fiscal 2006.
/s/ KPMG LLP
Nashville, Tennessee
December 14, 2006
Page 63 of 91
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth, as of December 31, 2006, the Companys directors:
|
|
|
|
|
|
|
|
|
Director |
|
Positions with Company, Directorships and Business |
Name and Age |
|
Since |
|
Experience for Last Five Years |
Monroe J. Carell, Jr., 75
|
|
|
1979 |
|
|
Executive Chairman of the Board of Directors of
the Company since August 2005. Mr. Carell served
as Chairman of the Board of Directors from 1979
until being named Executive Chairman in August
2005. Mr. Carell also served as Chief Executive
Officer from 1979 until April 2001 and from May
2003 to August 2005. Mr. Carell has served as a
trustee of Vanderbilt University since 1991 and
is a life member of the Urban Land Institute. |
|
|
|
|
|
|
|
Raymond T. Baker, 57
|
|
|
2004 |
|
|
Partner, Gold Crown Management Company, a real
estate asset management company, from 1974 to
present. Mr. Baker is the founder and has served
as Co-Director of the Gold Crown Foundation since
1986. He is a member of the Board of Directors of
Alpine Banks of Colorado. Mr. Baker also serves
on the Steele Street Bank Board of Directors and
Land Title Guarantee Board of Directors. Mr.
Baker is currently serving as Chairman of the
Board of the Denver Metropolitan Major League
Baseball Stadium District; Chairman of the Board
of the Metropolitan Football Stadium District
(Denver); Chairman of the Colorado Commission on
Higher Education and the Colorado Commission on
Higher Education Capital Development Committee. |
|
|
|
|
|
|
|
Claude Blankenship, 66
|
|
|
2006 |
|
|
Executive Managing Partner, Blankenship CPA
Group, a firm that provides audit, tax,
accounting and business consulting services,
since September 1992. Mr. Blankenship is a member
of the American Institute of Certified Public
Accountants (AICPA) and serves on the AICPA
Executive Committee for Private Companies
Practice Section. He is also a member and past
president of the Tennessee Society of Certified
Public Accountants. Mr. Blankenship currently
serves on the Board of Directors of Faith Family
Clinic and the Family Foundation. |
|
|
|
|
|
|
|
Kathryn Carell Brown, 44
|
|
|
2004 |
|
|
Mrs. Brown was employed in various corporate
staff positions with the Company from 1985
through 1996. She served as Project Manager for
Herbert and Company, a residential construction
company, from February 1998 until December 2000.
Mrs. Brown currently serves as Vice Chairman of
the Tennessee Repertory Theater and a member of
the Board of Trustees of The Ensworth School.
Mrs. Brown is the daughter of Monroe J. Carell,
Jr., Executive Chairman of the Board of Directors
of the Company. |
|
|
|
|
|
|
|
Emanuel J. Eads, 55
|
|
|
2006 |
|
|
President and Chief Executive Officer since
August 2005. Mr. Eads served as President and
Chief Operating Officer from May 2003 to August
2005. He served as President Business
Development from October 2001 until his
appointment as President and Chief Operating
Officer. Prior to October 2001, Mr. Eads served
as Executive Vice President, a position he
assumed in August 1998. Employed by the Company
since 1974, Mr. Eads previously served in a
variety of positions of increasing responsibility
including Senior Vice President, Regional Manager
and General Manager. |
|
|
|
|
|
|
|
Lewis Katz, 65
|
|
|
1998 |
|
|
Mr. Katz serves as Governor of the New Jersey
Nets, a National Basketball Association
franchise. He served as the Chief Executive
Officer of Kinney System Holding Corp., a parking
services company, from November 1990 until the
Company acquired Kinney in February 1998. |
Page 64 of 91
|
|
|
|
|
|
|
|
|
Director |
|
Positions with Company, Directorships and Business |
Name and Age |
|
Since |
|
Experience for Last Five Years |
Edward G. Nelson, 75
|
|
|
1993 |
|
|
Mr. Nelson formed Nelson Capital Corp., a
merchant banking firm, in 1985, and has served as
Chairman and President since its organization.
Mr. Nelson serves as a director of Bucyrus
International, Inc., a manufacturer of surface
mining equipment, Ohio Steel Forge, a subsidiary
of Daido Steel of Japan and Evolved Digital
Solutions, a radiology management company. Mr.
Nelson also serves as a trustee of Vanderbilt
University and is Honorary Consul General of
Japan. |
|
|
|
|
|
|
|
Owen G. Shell, Jr., 70
|
|
|
2004 |
|
|
Mr. Shell is a private investor. He served as
President of the Asset Management Group of Bank
of America Corporation from November 1996 until
June 2001. From 1986 until 1996, Mr. Shell served
as President of Bank of America/Tennessee and
Chairman of the Commercial Corporate Forum for
Bank of America Corporation. He has served as a
director of LifePoint Hospitals, Inc. since
December 2002 and currently serves as Chairman of
the Board. |
|
|
|
|
|
|
|
William B. Smith, 63
|
|
|
2004 |
|
|
Mr. Smith has served as an Advisory Director of
Morgan Stanley & Co. Incorporated, a financial
services firm, since July 2000. From May 1997
until July 2000, Mr. Smith served as Managing
Director of Morgan Stanley, head of Morgan
Stanley Realty and a member of the Investment
Banking Department. He joined Dean Witter
Discover, which merged with Morgan Stanley in May
1997, in 1982. Mr. Smith has served as a director
of Pulte Homes, Inc., a real estate home building
company, since March 2001. |
The following table sets forth, as of December 31, 2006, the Companys Executive Officers:
|
|
|
|
|
|
|
|
|
Year of |
|
Positions With The Company And Business |
Name & Age |
|
Employment |
|
Experience For The Last Five Years |
Monroe J. Carell, Jr., 75
|
|
|
1967 |
|
|
See description above. |
|
|
|
|
|
|
|
Emanuel J. Eads, 55
|
|
|
1974 |
|
|
See description above. |
|
|
|
|
|
|
|
James H. Bond, 64
|
|
|
1971 |
|
|
President International Operations
since October 2001. Mr. Bond was also
named Executive Vice President
Strategic Initiatives in April 2006.
Mr. Bond has been employed by the
Company since 1971 in a variety of
positions and served as President and
Chief Operating Officer until October
2001. |
|
|
|
|
|
|
|
William H. Bodenhamer, 54
|
|
|
2001 |
|
|
President of the Companys USA Parking
subsidiary, which was acquired by the
Company in October 2001. Mr.
Bodenhamer founded USA Parking in 1980
and has served as its president since
that time. USA Parking provides valet
parking and transportation services
primarily to the hospitality industry. |
|
|
|
|
|
|
|
Robert Cizek, 42
|
|
|
1990 |
|
|
Senior Vice President since May 2000.
Mr. Cizek is responsible for the
Companys operations in the Southeast
and Texas. He served as a regional
manager for the Company from March
1995 until his appointment as Senior
Vice President. Prior to March 1995,
Mr. Cizek served as a general manager
and operations manager for the
Company. |
|
|
|
|
|
|
|
Jeff Heavrin, 45
|
|
|
2002 |
|
|
Senior Vice President and Chief
Financial Officer since June 2005. Mr.
Heavrin served as Vice President and
Controller of the Company from
December 2002 to June 2005 and served
as |
Page 65 of 91
|
|
|
|
|
|
|
|
|
Year of |
|
Positions With The Company And Business |
Name & Age |
|
Employment |
|
Experience For The Last Five Years |
|
|
|
|
|
|
interim Chief Financial Officer
from March to June 2005. Prior to
joining the Company, Mr. Heavrin
served as Controller of Service
Merchandise, a retailer, from December
1998 to December 2002. Prior to
December 1998, he held positions of
increasing responsibility with
Deloitte Touche. Mr. Heavrin is a
Certified Public Accountant. |
|
|
|
|
|
|
|
Donald N. Holmes, 56
|
|
|
2002 |
|
|
Senior Vice President Human
Resources since January 2002. From
1990 to 2001, Mr. Holmes held
positions of increasing responsibility
in human resources with CSX
Transportation, including Assistant
Vice President, Human Resources
Operations. He previously held various
human resources positions with
SmithKline Beecham Corporation. |
|
|
|
|
|
|
|
Alan J. Kahn, 46
|
|
|
1982 |
|
|
Senior Vice President responsible for
the Companys operations in the
Midwest and Canada. Mr. Kahn was
named Senior Vice President in April
1996 and served as Executive Vice
President from August 2005 to August
2006. He previously served in
various other positions with the
Company, including general and
regional manager. Mr. Kahn serves on
the Executive Committee of the
National Parking Association and is
Secretary of the association. |
|
|
|
|
|
|
|
Gregory D. Maxey, 49
|
|
|
1979 |
|
|
Senior Vice President responsible for
the Companys operations in the
Mid-Atlantic region and portions of
the Southeast since December 2002. Mr.
Maxey served as Managing Director of
the Companys European operations from
1999 until appointed to his current
position. From 1995 to 1999, he served
as International Marketing Director
for the Company. He previously served
in a variety of other positions with
the Company including regional and
general manager. |
|
|
|
|
|
|
|
Benjamin F. Parrish, Jr., 50
|
|
|
1998 |
|
|
Senior Vice President and General
Counsel since August 1998. From 1993
to 1998, Mr. Parrish served as Senior
Vice President and General Counsel of
Smith & Nephew, Inc., a medical
products company. |
|
|
|
|
|
|
|
William R. Porter, 52
|
|
|
1996 |
|
|
Senior Vice President Acquisitions
since November 1996. From 1991 to
1996, Mr. Porter served as Executive
Vice President Marketing for Ace
Parking, a parking management company. |
|
|
|
|
|
|
|
Gregory J. Stormberg, 44
|
|
|
1996 |
|
|
Executive Vice President since August
2005. Mr. Stormberg served as Senior
Vice President from October 2002 to
August 2005. He is responsible for the
Companys operations in the Northeast,
Southwest, Southeast and the West
Coast. From February 1997 until his
appointment as Senior Vice President,
Mr. Stormberg served as Vice
President/Regional Manager of the
Companys operations in Texas and
portions of the Southwest. |
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Companys executive officers
and directors, and persons who own more than 10% of the registered class of the Companys equity
securities, to file reports of ownership and changes in ownership with the Securities and Exchange
Commission (SEC). Such executive officers, directors and greater
Page 66 of 91
than 10% shareholders are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. The SEC requires public companies to disclose in their proxy
statements whether persons required to make such filings missed or made late filings. During fiscal
2006, all such filings and disclosure requirements were met within the time allowed for all persons
subject to Section 16(a) except that Mr. Porter was late in filing one Form 4.
Code Of Ethics
The Company has adopted a code of ethics as part of its corporate compliance program. The code
of ethics applies to all of the Companys officers and employees, including its chief executive
officer, chief financial officer and controller. The code is posted on the investors page of the
Companys website at www.parking.com. In addition, copies of the Companys code of ethics may be
obtained without charge upon request to Kate Leahy, Central Parking Corporation Human Resources
Department, 2401 21st Avenue South, Nashville, Tennessee 37212; (615) 297-4255; or via e-mail to
kleahy@parking.com. Any amendments to, or waivers from, this code of ethics will be posted on our
website.
Board of Directors and Corporate Governance
During Central Parkings fiscal year ended September 30, 2006 (fiscal 2006), the Board held
four meetings. The Board frequently meets in Executive Session, from which all employees of the
Company, except the Executive Chairman, are excluded. Matters relating to compensation, succession
planning and other more sensitive areas are discussed at these sessions. The Board also meets
regularly in Executive Session without the Executive Chairman. The presiding director solicits
topics for discussion from the other directors and provides feedback from the Executive Session to
the Chief Executive Officer and the General Counsel. The presiding director is chosen annually by a
majority vote of the non-executive directors. The current presiding director is Ed Nelson. The
Board has adopted Corporate Governance Guidelines, a current copy of which is available on the
Companys website, www.parking.com. In addition, copies of the Corporate Governance Guidelines may
be obtained without charge upon request to Kate Leahy, Central Parking Corporation Human Resources
Department, 2401 21st Avenue South, Nashville, Tennessee 37212; (615) 297-4255; or via e-mail to
kleahy@parking.com.
Committees of the Board of Directors
The Board has the following committees: Audit, Compensation and Nominating/Corporate
Governance. During fiscal 2006, the Audit Committee held 11 meetings, the Compensation Committee
held three meetings and the Nominating/Corporate Governance Committee held two meetings. During
fiscal 2006, all of the current directors of Central Parking attended at least 75% of the aggregate
number of meetings of the Board and the respective committees of the Board on which they served.
The Compensation Committee, which is comprised of Messrs. Baker, Blankenship and Shell, is
responsible for reviewing and recommending the appropriate compensation and benefits of officers of
Central Parking, administering Central Parkings 2006 Long-Term Incentive Plan and overseeing
Central Parkings various other compensation and benefit plans. The Compensation Committee has a
written charter, a current copy of which is available on the Companys website,
www.parking.com. In addition, copies of the Compensation Committee Charter may be obtained without charge upon request to Kate Leahy,
Central Parking Corporation Human Resources Department, 2401 21st Avenue South, Nashville,
Tennessee 37212; (615) 297-4255; or via e-mail to kleahy@parking.com.
The Audit Committee, which is comprised of Messrs. Nelson, Blankenship and Smith, is
responsible for overseeing the auditing procedures and financial reporting of Central Parking,
reviewing the scope of Central Parkings annual audit and the fees charged by Central Parkings
independent registered public accounting firm, receiving, reviewing and accepting the reports of
Central Parkings independent registered public accounting firm, and overseeing Central Parkings
systems of internal accounting and management controls. The Audit Committee has a written charter,
a current copy of which is available on the Companys website,
www.parking.com. In
addition, copies of the Audit Committee Charter may be obtained without charge upon request to Kate
Leahy, Central Parking Corporation Human Resources Department, 2401 21st Avenue South, Nashville,
Tennessee 37212; (615) 297-4255; or via e-mail to
kleahy@parking.com. The Board of Directors, in
its business judgment, has determined that all members of the Audit Committee are independent
directors, qualified to serve on the Audit Committee pursuant to Sections 303.01(B)(2)(a) and (3)
of the New York Stock Exchanges listing standards. Claude Blankenship has been designated as the
financial expert within the meaning of the New York Stock Exchanges listing standards.
The Nominating/Corporate Governance Committee, which is responsible for identifying and
recommending to the Board nominees for director and for providing guidance to the Board on
corporate governance issues, is comprised of Messrs. Shell, Baker and Nelson. The
Nominating/Corporate Governance Committee will solicit recommendations for nominees from persons
whom the committee believes are likely to be familiar with qualified candidates, including members
of the Board and senior management. The Nominating/Corporate Governance Committee may also engage a
search firm to assist in identifying qualified candidates. The Nominating/Corporate Governance
Committee evaluates potential nominees by examining, among other things, their qualifications,
background information, references and relevant experience and selects individuals who have the
highest personal and professional integrity, have demonstrated exceptional ability and judgment
throughout their careers and who will be
Page 67 of 91
most effective, in conjunction with the other nominees to
the Board, in collectively serving the long-term interests of the shareholders.
The Nominating/Corporate Governance Committee will consider nominees for director recommended
by shareholders if they are submitted in writing to the Corporate Secretary not later than the
120th calendar day before the date the Companys proxy statement was released to shareholders in
connection with the previous years annual meeting. Such written recommendation from shareholders
must set forth the names of such nominees and all supporting information relating to such persons,
including their qualifications for service as a director of the Company (including, without
limitation, such persons written consent to being named in the proxy statement as a nominee and to
serve as a director if elected). All nominees properly submitted to the Secretary will be evaluated
and considered by the members of the Nominating/Corporate Governance Committee using the same
criteria as nominees identified by the Nominating/Corporate Governance Committee itself. The Board
has determined that each member of the Nominating/Corporate
Governance Committee is independent as defined in the New York Stock Exchange listing standards. The
Nominating/Corporate Governance Committee has a written charter, a current copy of which is
available on the Companys website, www.parking.com. In addition, copies of the
Nominating/Corporate Governance Committee Charter may be obtained without charge upon request to
Kate Leahy, Central Parking Corporation Human Resources Department, 2401 21st Avenue South,
Nashville, Tennessee 37212; (615) 297-4255; or via e-mail to kleahy@parking.com
Shareholder Communication with the Board
Shareholders and other constituencies may communicate with the Board or individual members of
the Board by addressing written correspondence to Central Parking Corporation, 2401 21st Avenue
South, Suite 200, Nashville, Tennessee 37212, attention: Senior Vice President and General Counsel,
or by sending an e-mail to bparrish@parking.com. Inquiries sent by mail will be reviewed by the
Companys General Counsel and if they are relevant to, and consistent with, the Companys
operations, policies and philosophies, they will be forwarded to the Audit Committee. This
committee will monitor the correspondence and bring any significant issues to the attention of the
appropriate members of the Board.
Director Attendance at Annual Meeting
Central Parking strongly encourages, but does not require, its board members to attend the
Annual Shareholders Meeting. Last year, all of our directors attended the 2006 Annual Shareholders
Meeting.
Item 11. Executive Compensation
The following table summarizes information concerning cash and non-cash compensation paid to
or accrued for the benefit of the person who served as Central Parkings Chief Executive Officer
and the persons who were the four other most highly compensated executive officers during fiscal
2006 (the Named Executive Officers) for all services rendered in all capacities to Central
Parking for the fiscal years indicated.
Summary Compensation Table
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation |
|
Long-Term Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual |
|
Restricted |
|
Underlying |
|
All Other |
Name and |
|
|
|
|
|
|
|
|
|
|
|
|
|
Compen- |
|
Stock |
|
Options/ |
|
Compen- |
Principal Position |
|
Year |
|
Salary($)(1) |
|
Bonus($)(1) |
|
sation($)(2) |
|
Awards($) |
|
SARs(#)(3) |
|
sation($)(4) |
Emanuel J. Eads |
|
|
2006 |
|
|
|
559,138 |
|
|
|
435,236 |
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
|
|
8,800 |
|
President and Chief |
|
|
2005 |
|
|
|
466,795 |
|
|
|
150,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,200 |
|
Executive Officer (5) |
|
|
2004 |
|
|
|
448,767 |
|
|
|
125,000 |
|
|
|
|
|
|
|
|
|
|
|
23,000 |
|
|
|
8,200 |
|
Monroe J. Carell, Jr. |
|
|
2006 |
|
|
|
693,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,054 |
(7) |
Executive Chairman (6) |
|
|
2005 |
|
|
|
525,591 |
|
|
|
123,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,619 |
(8) |
|
|
|
2004 |
|
|
|
543,906 |
|
|
|
137,500 |
|
|
|
33,994 |
|
|
|
|
|
|
|
23,000 |
|
|
|
21,202 |
(9) |
Gregory J. Stormberg |
|
|
2006 |
|
|
|
381,865 |
|
|
|
360,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,867 |
|
Executive Vice |
|
|
2005 |
|
|
|
300,329 |
|
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,219 |
(10) |
President |
|
|
2004 |
|
|
|
299,178 |
|
|
|
225,000 |
|
|
|
|
|
|
|
|
|
|
|
23,000 |
|
|
|
8,200 |
|
James H. Bond |
|
|
2006 |
|
|
|
448,768 |
|
|
|
243,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,800 |
|
President |
|
|
2005 |
|
|
|
448,768 |
|
|
|
41,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,200 |
|
International |
|
|
2004 |
|
|
|
448,768 |
|
|
|
118,500 |
|
|
|
|
|
|
|
|
|
|
|
23,000 |
|
|
|
8,000 |
|
Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan Kahn |
|
|
2006 |
|
|
|
361,634 |
|
|
|
277,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,800 |
|
Senior Vice |
|
|
2005 |
|
|
|
310,685 |
|
|
|
142,642 |
|
|
|
7,132 |
|
|
|
|
|
|
|
|
|
|
|
8,200 |
|
President |
|
|
2004 |
|
|
|
299,178 |
|
|
|
211,368 |
|
|
|
10,568 |
|
|
|
|
|
|
|
23,000 |
|
|
|
8,200 |
|
Page 68 of 91
|
|
|
(1) |
|
Includes amounts deferred under the Companys Profit Sharing and 401(k) Savings Plan
and Deferred Stock Unit Plan. |
|
(2) |
|
Except as otherwise noted, these amounts represent the dollar value as of the end of
each fiscal year of premium shares awarded each year under the Companys Deferred Stock
Unit Plan. The premium units vest ratably over a four-year period from the date of grant. |
|
(3) |
|
These amounts represent the number of shares subject to options granted each year
under the Companys 1995 Incentive and Nonqualified Stock Option Plan for Key Personnel.
No stock appreciation rights were granted under this plan. |
|
(4) |
|
These amounts include contributions by the Company to the Companys Profit Sharing
and 401(k) Savings Plan, and miscellaneous compensation. |
|
(5) |
|
Named President and Chief Executive Officer on August 2, 2005. Served as President
and Chief Operating Officer from May 2003 to August 2, 2005. |
|
(6) |
|
Named Executive Chairman on August 2, 2005. Served as Chairman and Chief Executive
Officer from May 2003 to August 2, 2005. |
|
(7) |
|
Includes $8,254 in insurance premiums. |
|
(8) |
|
Includes $7,419 in insurance premiums. |
|
(9) |
|
Includes $13,002 in insurance premiums. |
|
(10) |
|
Includes relocation expenses of $74,019. |
Option Grants
The following table reflects certain information with respect to options to acquire shares of
Central Parkings Common Stock granted under Central Parkings 2006 Long-Term Incentive Plan to the
Named Executive Officers during the fiscal year ended September 30, 2006. No stock appreciation
rights were granted.
Option/SAR Grants in Last Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential |
|
|
Individual Grants |
|
Realizable |
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
|
|
|
Value at Assumed |
|
|
Number of |
|
Total |
|
|
|
|
|
|
|
|
|
Annual Rates of |
|
|
Securities |
|
Options/SARS |
|
Exercise |
|
|
|
|
|
Stock Price |
|
|
Underlying |
|
Granted to |
|
Base |
|
|
|
|
|
Appreciation for |
|
|
Options/SARs |
|
Employees in |
|
Price |
|
Expiration |
|
Option Term(1) |
Name |
|
Granted(#) |
|
Fiscal Year |
|
($/sh) |
|
Date |
|
5%($) |
|
10%($) |
Monroe J. Carell, Jr. |
|
|
|
|
|
|
0.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emanuel J. Eads |
|
|
75,000 |
|
|
|
25 |
% |
|
|
14.405 |
|
|
|
6/12/2009 |
|
|
|
170,294 |
|
|
|
357,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
25 |
% |
|
|
14.405 |
|
|
|
6/12/2012 |
|
|
|
367,431 |
|
|
|
833,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
25 |
% |
|
|
14.405 |
|
|
|
6/12/2015 |
|
|
|
595,641 |
|
|
|
1,467,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
25 |
% |
|
|
14.405 |
|
|
|
6/12/2016 |
|
|
|
679,442 |
|
|
|
1,721,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Eads |
|
|
300,000 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory J. Stormberg |
|
|
|
|
|
|
0.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James H. Bond |
|
|
|
|
|
|
0.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William H. Bodenhamer |
|
|
|
|
|
|
0.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan Kahn |
|
|
|
|
|
|
0.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The dollar amounts under these columns result from calculations assuming 5% and 10% annual
growth rates as set by the Securities and Exchange Commission and are not intended to forecast
future appreciation of Central Parking Common Stock. |
Page 69 of 91
Option Exercises and Values
The table below provides information with respect to exercises of options by the Named
Executive Officers during the fiscal year ended September 30, 2006 under Central Parkings Key
Personnel Plan and the year-end value of unexercised options. Central Parking has granted no stock
appreciation rights.
Aggregated Option/SAR Exercises in the Last Fiscal Year
and Period-End Option/SAR Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Unexercised |
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
In-the-Money |
|
|
|
|
|
|
|
|
|
|
Underlying Unexercised |
|
Options/SARs at |
|
|
|
|
|
|
|
|
|
|
Options/SARs at |
|
Fiscal Year- |
|
|
Shares |
|
|
|
|
|
Fiscal Year-End(#) |
|
End($)(1) |
|
|
Acquired |
|
Value |
|
Exercisable/ |
|
Exercisable/ |
Name |
|
on Exercise(#) |
|
Realized($) |
|
Unexercisable |
|
Unexercisable |
Monroe J. Carell, Jr. |
|
|
|
|
|
|
|
|
|
|
224,457/6,250 |
|
|
|
376,658/23,563 |
|
Emanuel J. Eads |
|
|
|
|
|
|
|
|
|
|
256,000/306,250 |
|
|
|
188,408/652,063 |
|
James H. Bond |
|
|
|
|
|
|
|
|
|
|
270,750/6,250 |
|
|
|
188,408/23,563 |
|
Gregory J. Stormberg |
|
|
|
|
|
|
|
|
|
|
93,875/6,250 |
|
|
|
131,353/23,563 |
|
William H. Bodenhamer |
|
|
|
|
|
|
|
|
|
|
121,750/6,250 |
|
|
|
163,308/23,563 |
|
Alan Kahn |
|
|
9,000 |
|
|
$ |
58,500 |
|
|
|
186,000/6,250 |
|
|
|
150,758/23,563 |
|
|
|
|
(1) |
|
This amount represents the aggregate number of options multiplied by the difference
between $16.50 the fair market value of Central Parking Common Stock at September 30,
2006, and the exercise price for each option. |
Equity Compensation Plan Information
The following table provides information about the Companys equity compensation plans in
effect at September 30, 2006, aggregated for two categories of plans: those approved by
shareholders and those not approved by shareholders.
Equity Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities |
|
|
|
|
|
|
|
|
|
|
remaining available for |
|
|
Number of Securities to |
|
Weighted-average |
|
future issuance under equity |
|
|
be issued upon exercise |
|
exercise price of |
|
compensation plans |
|
|
of outstanding options, |
|
outstanding options, |
|
(excluding securities |
|
|
warrants and rights |
|
warrants and rights |
|
reflected in column (a)) |
Plan category |
|
(a) |
|
(b) |
|
(c) |
Employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
254,969 |
|
Stock option plan key/ Restricted stock
plan (1) |
|
|
3,307,395 |
|
|
|
17.86 |
|
|
|
|
|
Stock option plan directors (1) |
|
|
77,500 |
|
|
|
29.79 |
|
|
|
|
|
Deferred stock unit plan |
|
|
147,488 |
|
|
|
18.65 |
|
|
|
217,818 |
|
2006 omnibus plan |
|
|
300,000 |
|
|
|
14.41 |
|
|
|
1,186,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total-Plans approved by security holders |
|
|
3,832,383 |
|
|
|
17.86 |
|
|
|
1,658,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total-Plans not approved by security holders |
|
none |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total all plans |
|
|
3,832,383 |
|
|
|
17.86 |
|
|
|
1,658,787 |
|
|
|
|
|
|
|
(1) |
|
Plan has expired, so no securities remain available under this plan. |
Employment Agreements
Central Parking has entered into employment agreements with Messrs. Carell, Eads, Stormberg,
Bond, Kahn and other senior executives that provide for base salary and annual performance-based
bonus payments (see Summary Compensation Table for base salaries and amounts of bonus payments).
These employment agreements generally are for a term of one year but automatically renew for
additional one-year periods unless notice is provided at least thirty days prior to the end of the
term. The agreements may
Page 70 of 91
be terminated by the executive upon 30 days written notice or may be
terminated by the Company by complying with the severance provisions provided in the agreement
except in the case of a termination for cause, in which case the executive is not entitled to
severance. These agreements provide that in the event an executive is terminated without cause (and
such termination does not occur within two years following a change in control) or the executive
terminates his employment due to a constructive termination, the executive would receive one year
of base salary, bonus and welfare benefits, except in the case of Messrs. Carell and Eads, who
would receive two years of base salary, bonus and welfare benefits. Terminated executives would
also receive outplacement assistance with a value of up to $25,000. These agreements, other than
Mr. Carells agreement (Mr. Carells non-compete obligations are described below), provide that the
executive is subject to a non-competition covenant for 12 months following termination of
employment and non-solicitation covenants for 24 months following termination except in the case of
a termination following a change in control, in which case the non-competition and non-solicitation
covenants are waived.
These employment agreements further provide generally that in the event of a termination
without cause or a termination by the executive for good reason within two years following a change
in control, most senior executives (except as set forth below) would receive severance equal to two
times base and bonus plus two years of benefits. Messrs. Carell, Eads and Bond, and certain
corporate staff executives, would receive three times base and bonus plus three years of benefits
in the event of a termination without cause or a constructive discharge
within two years following a change in control. Unvested stock options and deferred stock
units would vest immediately upon a change in control. The arrangements also include an excise tax
gross-up provision. A change in control is defined to include (i) the acquisition of 30% or more of
the outstanding stock of the Company other than through acquisitions by the Company, a subsidiary,
an employee benefit plan of the Company, or Monroe Carell or family members or related entities;
(ii) a change in the majority of the Board; (iii) consummation of a merger, consolidation, or
reorganization, unless following such transaction the shareholders prior to the transaction
continue to own more than 70% of the outstanding shares, Board members prior to the transaction
continue to constitute a majority of the Board and no person or control group owns more than 30% of
the stock (other than Mr. Carell, family members or related entities); or (iv) consummation of the
sale of all or substantially all of the Companys assets or the adoption of a plan of liquidation.
The employment agreements generally define Termination for Cause as (i) executives
embezzlement, intentional mishandling of Company funds or theft or fraud with respect to the
business or affairs of the Company; (ii) executives conviction of a felony or other crime
involving moral turpitude which adversely affects executives job-related responsibilities; (iii) a
violation by executive of the non-competition and non-solicitation covenants in the agreement; and
(iv) executives deliberate and willful continuing refusal to substantially perform the duties and
obligations of his position. Constructive Discharge is defined as termination of executives
employment due to a failure of the Company to fulfill its obligations under the agreement in any
respect, including (i) any reduction in executives base salary or annual incentive award or any
other Company incentive plan target other than reductions not to exceed 25% applicable to all
executive officers of the Company; (ii) substantial reduction of benefits or (iii) the reduction in
the title, authority and/or duties of the executive.
On December 14, 2004, the Company entered into an Employment Agreement and a Revised Deferred
Compensation Agreement with Monroe Carell. The Employment Agreement and the Revised Deferred
Compensation Agreement were negotiated in connection with Mr. Carells return to the Company as
chief executive officer. The Employment Agreement is described above. The Revised Deferred
Compensation Agreement replaced the prior deferred compensation agreement between Mr. Carell and
the Company dated October 1, 1988, as amended. The Revised Deferred Compensation agreement provides
that Mr. Carell is subject to non-competition and non-solicitation covenants during any period
payments are made under the agreement, including periods following termination of employment, and
for 12 months following the acceleration of amounts payable to Mr. Carell under the agreement upon
a change in control (as described below). Following the termination of his employment, for any
reason other than death, the Revised Deferred Compensation Agreement entitles Mr. Carell to annual
payments of $500,000 until his death and, in the event his wife survives him, she is entitled to
annual payments of $500,000 until her death. The agreement further provides that in the event of a
change in control the annual payments shall cease, and the Company shall make a lump sum payment to
Mr. Carell equal to the then actuarial value of the foregoing annual payments payable under this
agreement. Mr. Carell also agrees to provide consulting services to the Company following the
termination of his employment. In addition, the agreement provides that if Mr. Carell ceases to
serve as the chief executive officer, he shall be entitled to annual payments of $300,000 until the
later of (i) the date he ceases to serve as non-employee chairman of the Companys board of
directors or (ii) the date five years following the first
payment; provided such payments shall cease if Mr. Carell breaches the non-competition or
non-solicitation provisions. The arrangements also include an excise tax gross-up provision. On
October 26, 2006, the Company entered into an amendment to the Employment Agreement with Mr.
Carell. The purpose of the amendment was to avoid the imposition of taxes on certain payments to
Mr. Carell pursuant to Section 409A of the Internal Revenue Code.
The Revised Deferred Compensation Agreement was amended on October 27, 2005, to clarify the
Companys obligations under the agreement to provide health insurance coverage following
termination of employment for Mr. Carell and his wife. Under the amended agreement, Mr. Carell
agreed to procure Medicare supplemental insurance coverage that provides substantially the same
Page 71 of 91
level of benefits as the Companys plan. The Company will reimburse Mr. Carell for the costs of
such coverage for Mr. Carell and his wife. In the event of a change in control, the Company will
pay Mr. Carell or his widow a lump sum payment equal to the actuarial value of the amounts payable
by the Company for such coverage. On May 30, 2006, the Revised Deferred Compensation Agreement was
amended to provide that all payments required to be paid to Mr. Carell on or after January 1, 2007
under Section 2.1 and 2.2 of the agreement (which include the annual payments of $500,000 to Mr.
Carell or his wife described above), shall be paid in a lump sum equal to the then actuarial value
of the payments. This amendment also provides that the Companys obligation under Section 3 of the
agreement to pay annual payments of $300,000 ($25,000 per month) following Mr. Carells cessation
to serve as chief executive officer are currently being satisfied through the payment from the
Company for his services as Executive Chairman. These payments of $25,000 per month will resume on
the first day of the month immediately following the last month in which Monroe is an employee of
the Company and continue for the remaining period he is entitled to receive such payments under
Section 3. In addition, the amendment provides that the actuarial value of the cost of the
insurance coverage for Mr. Carell and his wife described above will be paid in a lump sum on the
date that the payment is made under Section 2.1 and 2.2 of the agreement.
Under the terms of a Performance Unit Agreement dated as of June 26, 1986, as amended, between
Mr. Bond and the Company, Mr. Bond was issued 267,750 shares of Common Stock under the Companys
1995 Restricted Stock Plan, together with the right to receive additional shares of restricted
Common Stock in an amount determined by a formula based upon the Companys performance. Pursuant to
amendments to the Performance Unit Agreement effective May 31, 2001, and September 30, 2001, the
restricted shares were placed in an irrevocable trust and are distributable to Mr. Bond upon
termination of his employment with the Company for any reason. The market value of the restricted
shares was $4,417,875 on September 30, 2006.
Director Compensation
Non-employee directors of Central Parking receive an annual retainer of $20,000, a meeting fee
of $4,000 for each Board of Directors meeting attended, a meeting fee of $2,500 for each committee
meeting attended in person, $1,500 for each committee meeting attended by phone and an annual grant
of 2,000 shares of restricted stock. Committee chairpersons also receive an annual retainer of
$5,000. Directors who are employees of Central Parking or its affiliates do not receive additional
compensation for services as a director of Central Parking. All directors are reimbursed for actual
expenses incurred in connection with attending meetings.
Compensation Pursuant to Plans
1995 Incentive and Nonqualified Stock Option Plan for Key Personnel
Under the 1995 Incentive and Nonqualified Stock Option Plan for Key Personnel (the Key
Personnel Plan), options to purchase an aggregate of 7,317,500 shares of Common Stock were
authorized for grant to directors, officers, and other key employees, consultants and advisors of
Central Parking and its subsidiaries. The Key Personnel Plan is administered by the Board of
Directors, which determines the vesting period and other terms of the options granted under the
plan. Options granted under the plan have various vesting periods, generally ranging from one year
to nine years after the date of the grant and expire on the tenth anniversary of their grant. The
vesting of certain options may be accelerated if the Company achieves certain earnings targets or
stock price targets. The plan provides that the exercise price of an option must not be less than
the fair market value of the Common Stock on the trading day next preceding the date of grant.
Vested options generally are exercisable for a period of three months after termination of
employment. In the event of a merger or consolidation in which the Company is not the surviving
corporation and the options are not assumed or substituted by the surviving corporation, all
options will become exercisable immediately prior to such merger or consolidation. As of September
30, 2006, 12 executive officers (two of whom are directors) and approximately 295 key employees
held options to purchase a total of 3,307,395 shares under the Key Personnel Plan. No new grants
may be made under the Key Personnel Plan after August 2005.
1995 Restricted Stock Plan
In August 1995, Central Parkings Board of Directors and shareholders adopted the Restricted
Stock Plan under which restricted shares of Common Stock were available for grant to directors,
officers and other key employees and consultants of Central Parking and its subsidiaries. The plan
is administered by the Board of Directors or a committee designated by the Board, which has the
authority to select participants, make stock awards, determine the size and terms of stock awards
(subject to the terms of the plan) and to make other determinations with respect to the plan. A
participant vests in shares awarded under the plan in accordance with the vesting schedule
determined by the Board (or the committee designated by the Board to administer the plan), except
that a participant vests fully in any shares awarded under the plan in the event of a change of
control, as defined in the plan. As of September 30, 2006, one executive officer and ten
non-employee directors held a total of 282,409 shares issued under the Restricted Stock Plan. The
Restricted Stock Plan allows for the issuance of up to 7,317,500 shares of Common Stock, in the
Page 72 of 91
aggregate, when taken together with shares available for grant under the Key Personnel Plan. A
total of 330,463 shares have been issued under the Restricted Stock Plan since inception of the
plan. No new grants may be made under the Restricted Stock Plan after August 2005.
1996 Employee Stock Purchase Plan
The Company maintains an employee stock purchase plan that qualifies under Section 423 of the
Internal Revenue Code and permits substantially all of the Companys domestic employees (including
executive officers) to purchase shares of the Companys common stock. The plan authorizes the
issuance of up to 850,000 shares of Common Stock. As of September 30, 2006, 595,032 shares had been
issued under this plan. Participating employees may purchase common stock at a purchase price equal
to 85% of the lower of the fair market value of the common stock at the beginning or end of the
purchase period. Participation periods are annual and begin on April 1 of each year. Employees may
designate up to 10% of their annual salary (up to a maximum of $25,000) for the purchase of common
stock under the plan. A total of 39,012 shares were issued at a purchase price of $14.60 per share
to 516 employees in the most recent plan year, which ended on March 31, 2005. The Company suspended
contributions into the Plan effective April 1, 2005.
1995 Nonqualified Stock Option Plan for Directors
In August 1995, Central Parkings Board of Directors and shareholders adopted the 1995
Nonqualified Stock Option Plan for Directors under which nonqualified options to purchase an
aggregate of 475,000 shares of Common Stock were authorized for grant to non-employee directors of
Central Parking. Vested options generally are exercisable for a period of three months following
termination of service as a director. In the event of a merger or consolidation in which the
Company is not the surviving corporation and the options are not assumed or substituted by the
surviving corporation, all options will become exercisable immediately prior to such merger or
consolidation. As of September 30, 2006, directors held options to purchase an aggregate of 77,500
shares of Common Stock. No new grants may be made under the Directors Plan after August 2005.
Profit Sharing and 401(k) Savings Plan
Under the Central Parking System Profit Sharing and 401(k) Savings Plan, the Company matches
100% of each participants pre-tax contributions up to 3% of compensation and matches 50% of the
next 2% of compensation. All matching contributions are 100% vested when made. Substantially all of
Central Parkings full-time domestic employees (including all executive officers) are eligible to
participate in the plan. The plan also allows profit sharing contributions to be made by the
Company. The Company determines the amount of profit sharing contributions, if any, it will
contribute to the plan each year. Profit sharing contributions are allocated among participants
based on years of service and total compensation (up to $170,000). Profit sharing contributions
generally vest over a five-year period. Company contributions to the plan were approximately $2.2
million for fiscal 2006, comprised entirely of company matching contributions to participants in
the 401(k) plan. No profit-sharing contributions were made for fiscal 2006.
Deferred Stock Unit Plan
The Deferred Stock Unit Plan provides for the issuance of up to 375,000 shares of Common
Stock. Under the plan, key employees designated to participate in the plan can defer from 5% to 50%
of total cash compensation. Amounts deferred under the plan are converted into stock units. The
Company matches participants deferrals as follows: the first 20% of total compensation deferred is
matched at a rate of 25% and deferrals in excess of 20% of total compensation are matched at a rate
of 50%. Company matches are in the form of additional stock units, which vest on a pro rata basis over a four-year period. For
deferrals during the fiscal year, stock units are credited monthly based on the closing price of
the Companys Common Stock on the last trading day in the month. For deferrals from the annual
bonus paid following the end of the fiscal year, stock units are credited based on the average of
the twelve monthly closing prices used to credit stock units during the fiscal year. A
participants stock unit account is distributed in shares of Common Stock to the participant or his
designee upon the participants retirement, death, termination of employment, commencement date
selected by the participant at the time the participant elects to make the deferral, or a change in
control (as defined in the plan) of the Company. As of September 30, 2006, ten executive officers
were participants in the plan with an aggregate balance of 147,488 stock units. The Company
suspended contributions to the Deferred Stock Unit Plan effective October 1, 2005.
2006 Long-Term Incentive Plan
In February 2006, the Companys shareholders approved the Central Parking Corporation 2006
Long-Term Incentive Plan. The plan is designed to give the Company additional flexibility to
address changing accounting rules and corporate governance
Page 73 of 91
practices by utilizing stock options,
restricted stock, restricted stock units and stock appreciation rights as well as cash-based
awards. The maximum number of shares of Company common stock which may be awarded and delivered
under the plan is 1.5 million shares. The plan is administered by the Compensation Committee of
the Board of Directors, which has the discretion, subject to the provisions of the plan, to select
the employees and other service providers to receive awards under the plan and to determine the
type, size and terms of the awards to be granted to each individual selected. The Compensation
Committee also determines the time when the awards will be granted and the duration of any
applicable exercise and vesting period, including the criteria for excercisability and vesting.
Except as otherwise provided in the Plan, the Compensation Committee may specify in an award
agreement that upon the occurrence of a change in control (as defined in the plan), such award will
immediately vest and become fully exercisable, the restrictions as to transferability of shares
subject to the award will be waived, and any and all forfeiture risks or other contingencies will
lapse. As of September 30, 2006, one employee held options to purchase a total of 300,000 shares
under the plan. In fiscal 2006, 14,000 restricted shares were issued under the 2006 plan.
Compensation Committee Interlocks And Insider Participation
Messrs. Baker, Blankenship and Shell served as members of the Compensation Committee of the
Companys Board of Directors during fiscal 2006. No interlocking relationship exists between the
members of the Companys Board of Directors or Compensation Committee and the board of directors or
compensation committee of any other company.
|
|
|
Item 12. |
|
Security Ownership of Certain Beneficial Owners, Management and Related Stockholder
Matters |
The table below sets forth certain information regarding the beneficial ownership of the Common
Stock as of December 31, 2006, of (i) each person known to the Company to beneficially own 5% or
more of the Common Stock, (ii) each director, nominee and Named Executive Officer, and (iii) all
directors, nominees and executive officers of the Company as a group. On that date, 32,192,211
shares were outstanding. Unless otherwise indicated, the persons listed below have sole voting and
investment power over the shares of the Common Stock indicated.
|
|
|
|
|
|
|
|
|
|
|
Amount and |
|
|
|
|
Nature of |
|
|
|
|
Beneficial |
|
|
Beneficial Owner |
|
Ownership(1) |
|
Percent(1) |
Monroe J. Carell, Jr. |
|
|
6,294,900 |
(2) |
|
|
19.4 |
% |
2401 21st Avenue South, Suite 200, |
|
|
|
|
|
|
|
|
Nashville, Tennessee 37212 |
|
|
|
|
|
|
|
|
The Carell Childrens Trust (3) |
|
|
6,696,153 |
|
|
|
20.8 |
% |
One Belle Meade Place, Suite 310, 4400 Harding Road, |
|
|
|
|
|
|
|
|
Nashville, Tennessee 37205 |
|
|
|
|
|
|
|
|
Dimensional Fund Advisors |
|
|
3,068,006 |
(4) |
|
|
9.5 |
% |
1299 Ocean Avenue, 11th Floor |
|
|
|
|
|
|
|
|
Santa Monica, California 90401 |
|
|
|
|
|
|
|
|
Columbia Wanger Asset Management |
|
|
2,424,000 |
(5) |
|
|
7.5 |
% |
227 West Monroe Street, Suite 3000 |
|
|
|
|
|
|
|
|
Chicago, Illinois 60606 |
|
|
|
|
|
|
|
|
Raymond T. Baker |
|
|
8,333 |
(6) |
|
|
* |
|
William H. Bodenhamer |
|
|
67,419 |
(7) |
|
|
* |
|
James H. Bond |
|
|
548,930 |
(8) |
|
|
1.7 |
% |
Kathryn Carell Brown |
|
|
2,208,271 |
(9) |
|
|
6.9 |
% |
Claude Blankenship |
|
|
2,000 |
(10) |
|
|
* |
|
Edward G. Nelson |
|
|
46,192 |
(11) |
|
|
* |
|
Emanuel J. Eads |
|
|
284,227 |
(12) |
|
|
* |
|
Jeff Heavrin |
|
|
14,125 |
(13) |
|
|
* |
|
Alan Kahn |
|
|
204,620 |
(14) |
|
|
* |
|
Lewis Katz |
|
|
701,685 |
(15) |
|
|
2.2 |
% |
Owen G. Shell |
|
|
9,333 |
(16) |
|
|
* |
|
William B. Smith |
|
|
7,333 |
(17) |
|
|
* |
|
Gregory J. Stormberg |
|
|
93,125 |
(18) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
Directors and executive officers as a group (19 persons) |
|
|
11,373,658 |
(19) |
|
|
33.2 |
% |
|
|
|
* |
|
Indicates less than 1%. |
Page 74 of 91
|
|
|
(1) |
|
For purposes of this table, a person or group of persons is deemed to have beneficial
ownership of any shares that such person or group has the right to acquire within 60 days
after the date set forth above, or with respect to which such person otherwise has or shares
voting or investment power. For purposes of computing beneficial ownership and the percentages
of outstanding shares held by each person or group of persons on a given date, shares which
such person or group has the right to acquire within 60 days after such date are shares for
which such person has beneficial ownership and are deemed to be outstanding for purposes of
computing the percentage for such person, but are not deemed to be outstanding for the purpose
of computing the percentage of any other person. |
|
(2) |
|
Includes options to purchase 215,044 shares of Common Stock granted pursuant to the Key
Personnel Plan, 23,377deferred stock units, and 124,999 shares held by the Monroe Carell, Jr.
Foundation. Excludes 6,696,153 shares held by The Carell Childrens Trust. See footnote 3. |
|
(3) |
|
The Carell Childrens Trust is a trust created by Mr. Carell in 1987 for the benefit of his
children. The trustee is Equitable Trust Company. |
|
(4) |
|
Based on Schedule 13G filed by Dimensional Fund Advisors with the Securities and Exchange
Commission on February 6, 2006. |
|
(5) |
|
Based on Schedule 13G filed by Columbia Wanger Asset Management with the Securities and
Exchange Commission on January 9, 2007. |
|
(6) |
|
Includes 4,334 directly owned shares and 3,999 shares of restricted stock. |
|
(7) |
|
Includes 67,419 deferred stock units and options to purchase 121,750 shares of Common Stock. |
|
(8) |
|
Includes 267,750 shares of stock held in an irrevocable trust that were granted under the
Companys 1995 Restricted Stock Plan in connection with Mr. Bonds Performance Unit Agreement,
2,250 shares held by his spouse, 11,806 shares directly owned, 5,374 deferred stock units, and
options to purchase 261,750 shares of Common Stock granted pursuant to the Companys Key
Personnel Plan. This amount excludes 700 shares held by the Andrew Bond Trust with respect to
which Mr. Bond disclaims beneficial ownership. |
|
(9) |
|
Includes 81,630 shares held by the 1996 Carell Grandchildrens Trusts with respect to which
Mrs. Brown is a co-trustee, 20,000 shares held by the Kathryn Carell Brown Foundation with
respect to which Mrs. Brown serves on the Board of Trustees, 79,303 shares held by the 2002
Katheryn Carell Brown Charitable Trust, 2,021,887 shares held by various trusts of which Mrs.
Brown serves on the committee which has investment power with respect to Central Parking
Common Stock held by such trusts and 3,999 restricted shares. This amount excludes 6,696,153
shares held by The Carell Childrens Trust with respect to which Mrs. Brown is a beneficiary.
See footnote 3. This amount also excludes 61,823 shares held by her spouse and trusts for the
benefit of Mrs. Browns children of which Mrs. Brown disclaims beneficial ownership. |
|
(10) |
|
Includes 2,000 restricted shares. |
|
(11) |
|
Includes 4,500 shares held by Mr. Nelsons spouse, of which Mr. Nelson disclaims beneficial
ownership, and options to purchase 23,000 shares of Common Stock, restricted shares of 3,999
and directly owned shares of 14,693. |
|
(12) |
|
Includes 18,601 deferred stock units, options to purchase 249,250 shares of Common Stock and
16,376 shares directly owned by Mr. Eads. |
|
(13) |
|
Includes options to purchase 14,125 shares of common stock. |
|
(14) |
|
Includes 13,879 deferred stock units, options to purchase 179,250 shares of common stock and
11,491 shares directly owned by Mr. Kahn. |
|
(15) |
|
Includes 667,779 shares of Common Stock owned by a partnership of which Mr. Katz is a general
partner, options to purchase 25,250 shares of the Companys Common Stock, 3,999 restricted
shares and 4,657 shares directly owned by Mr. Katz. |
|
(16) |
|
Includes 5,334 shares directly owned and 3,999 restricted shares. |
|
(17) |
|
Includes 3,334 directly owned shares and 3,999 restricted shares of stock. |
|
(18) |
|
Includes options to purchase 93125 shares of common stock. |
|
(19) |
|
Includes options to purchase 1,947,794 shares of the Companys Common Stock, 150,603 deferred
stock units and 293,744 shares of restricted stock. |
Item 13. Certain Relationships and Related Transactions
The Company leases two properties from an entity 50% owned by Monroe Carell, Jr., the
Companys Executive Chairman, and 50% owned by Mr. Carells three daughters, including Kathryn
Carell Brown, a director. The leases, which were entered into in 1995 for a term of ten years, were
amended in fiscal 2005. The amended leases have terms of two and three years respectively, Total
rent expense for the two locations in fiscal 2006, including percentage rent, was $875,000.
Management believes such transactions have been on terms no less favorable to the Company than
those that could have been obtained from unaffiliated persons
The Company owns a 50% interest in a limited liability company (LLC) that owns the Lodo
Garage in Denver, Colorado. The Company manages the garage under a long-term management agreement.
An offer to purchase the entire LLC was received from an unrelated third party and the owner of the
other 50% interest informed the Company of its desire to sell its interest. The Company
Page 75 of 91
declined to
sell its interest in the LLC and the third party buyer was not interested in purchasing a 50%
interest. The Company elected not to exercise its option to purchase the remaining 50% interest and
another buyer was sought by the parties. A company owned by Mr. Carell and his three daughters
including Kathryn Carell Brown, a director, purchased the remaining 50% interest in the LLC at the
price offered by the unrelated third party. The purchase was completed in February 2004. As a
result, the entity owned by Mr. Carell and his daughters now owns 50% of the LLC and the Company
owns the remaining 50% of the LLC.
In connection with the Companys acquisition of Kinney System Holding Corp. (Kinney) in
February 1998, the Company entered into a consulting agreement with Lewis Katz, one of the
principal shareholders of Kinney and a director of the Company since May 1998. Under this
agreement, Mr. Katz is entitled to receive a base consulting fee of $200,000 a year beginning in
February 1999 and continuing for a period of four years. The agreement has been extended on a
year-to-year basis and is cancelable upon 60 days notice. The agreement also provides certain
incentives to Mr. Katz to seek new business opportunities for the Company. In this regard, Mr. Katz
is entitled to receive a participating consulting fee equal to 10% of adjusted operating
income, as defined in the agreement, from the operation of any new leased or managed parking
facilities that Mr. Katz secures for the Company. This participating consulting fee, which is to be
paid for a period of five years from the commencement date of the parking facility, is to be paid
only to the extent adjusted operating income from these new locations exceeds $200,000. In fiscal
2006, Mr. Katz received $200,000 under the consulting agreement.
A subsidiary of the Company entered into a limited partnership agreement with Arizin Ventures,
L.L.C. (Arizin), a company owned by Lewis Katz, in the fiscal year ended September 30, 1999. The
Company serves as the general partner of the partnership and Arizin serves as the limited partner.
Under the partnership agreement, Mr. Katz has agreed to seek new business opportunities in the form
of leases and management contracts to operate parking facilities as well as renewals of existing
leases and contracts as requested by the Company. The Company operates all of the partnerships
parking facilities. The Company owns 70% of the partnership and Arizin owns 30%. The partnership
agreement provides that the net profit or loss of the partnership equals the combined lot level
profit of each of the parking facilities operated by the partnership. Mr. Katz receives an
administrative fee of $50,000 per quarter as long as he remains active in seeking new contracts or
renewals for the partnership. Cash flow, after expenses, is distributed to the partners
semi-annually. Mr. Katz is not entitled to receive the participating consulting fee under his
consulting agreement (described above) for any opportunities presented to the partnership. The
partnership agreement provides that the Company has the right to purchase Mr. Katz interest in the
partnership at fair market value in certain circumstances, including Mr. Katz death or incapacity.
Fair market value will be determined by independent appraisal. Arizin received $591,000 from the
partnership in fiscal 2006.
Item 14. Principal Accounting Fees and Services
The firm of KPMG LLP has served as the Companys independent registered public accounting firm
since September 30, 1991, and has been selected to serve in such capacity for the fiscal year ended
September 30, 2007.
AUDITORS FEES
The following table summarizes fees for professional services provided to the Company by KPMG
LLP for fiscal years ended September 30, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
Audit Fees (1) |
|
$ |
1,944,178 |
|
|
$ |
2,246,752 |
|
|
Audit-Related Fees (2) |
|
|
439,509 |
|
|
|
294,660 |
|
|
Tax Fees (3) |
|
|
10,150 |
|
|
|
11,200 |
|
|
All Other Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees for Services Provided |
|
$ |
2,393,837 |
|
|
$ |
2,552,612 |
|
|
|
|
(1) |
|
Audit Fees include fees for professional services rendered in connection with the
audit of the Companys consolidated annual financial statements and internal controls over
financial reporting for the years ended September 30, 2006 and 2005, and the limited
reviews of the condensed financial statements included in the Companys Quarterly Reports
on Form 10-Q filed with the Securities and Exchange Commission during fiscal 2006 and
2005. |
|
(2) |
|
In fiscal 2006 and 2005, audit-related fees consisted of fees paid for professional
services rendered in connection with internal control reports; statutorily or
contractually required audits of individual parking facilities; and audits of employee
benefit plans. |
Page 76 of 91
|
|
|
(3) |
|
Tax Fees for tax related services, principally consist of tax compliance services,
rendered to the Company by KPMG LLP. |
All the services described above were approved by our Audit Committee. In accordance with
the charter of our Audit Committee and consistent with the policies of the Securities and Exchange
Commission, all auditing services and all non-audit services to be provided by any independent
registered public accounting firm of the Company shall be pre-approved by the Audit Committee. In
assessing requests for services by the independent registered public accounting firm, the Audit
Committee considers whether such services are consistent with the registered public accounting firm
independence, and whether the independent registered public accounting firm is likely to provide
the most effective and efficient service based upon their familiarity with the Company.
The Audit Committee has considered whether the provision of services by KPMG LLP is compatible
with maintaining KPMG LLPs independence from the Company.
Item 15. Exhibits and Financial Statement Schedules
|
(a) |
|
(1) and (2) Financial Statements and Financial Statement Schedules |
Financial statements and schedules of the Company and its subsidiaries required to be
included in Part II, Item 8, are listed in the Index to Consolidated Financial Statements.
The exhibits are listed in the Index to Exhibits which appears immediately following the
signature page.
Page 77 of 91
CENTRAL PARKING CORPORATION and SUBSIDIARIES
Schedule II Valuation and Qualifying Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in thousands |
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
Balance at |
|
Charged (Credited) to |
|
Charged to |
|
|
|
|
|
Balance at |
|
|
Beginning of |
|
Costs and |
|
Other |
|
(Deductions) |
|
End of |
Description |
|
Period |
|
Expenses |
|
Accounts |
|
Recoveries |
|
Period |
Allowance for Doubtful
Accounts and Notes Receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended September 30, 2004 |
|
$ |
3,720 |
|
|
|
959 |
|
|
|
|
|
|
|
(1,473 |
) |
|
$ |
3,206 |
|
Year ended September 30, 2005 |
|
|
3,206 |
|
|
|
8,854 |
|
|
|
|
|
|
|
(1,792 |
) |
|
|
10,268 |
|
Year ended September 30, 2006 |
|
|
10,268 |
|
|
|
(1,951 |
) |
|
|
|
|
|
|
(5,406 |
) |
|
|
2,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Valuation Account |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended September 30, 2004 |
|
$ |
5,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,497 |
|
Year ended September 30, 2005 |
|
|
5,497 |
|
|
|
6,597 |
|
|
|
|
|
|
|
|
|
|
|
12,094 |
|
Year ended September 30, 2006 |
|
|
12,094 |
|
|
|
4,584 |
|
|
|
|
|
|
|
|
|
|
|
16,678 |
|
See accompanying report of Independent Registered Public Accounting Firm.
CENTRAL PARKING CORPORATION and SUBSIDIARIES
Schedule IV Mortgage Loans on Real Estate
September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Amount |
|
|
|
|
Final |
|
Periodic |
|
|
|
Face |
|
Carrying |
|
of Loans Subject |
|
|
Interest |
|
Maturity |
|
Payment |
|
Prior |
|
Amount of |
|
Amount of |
|
to Delinquent |
Description |
|
Rate |
|
Date |
|
Terms |
|
Liens |
|
Mortgage |
|
Mortgage |
|
Principal or Interest |
Mortgage note
secured by parking
garages
|
|
1-month LIBOR +
1.625%
|
|
2/28/08
|
|
Monthly interest
only with balance
of $12,681,698 due
at maturity
|
|
None
|
|
$ |
12,681,698 |
|
|
$12,681,698 at
September 30, 2006
|
|
None |
See accompanying report of Independent Registered Public Accounting Firm.
Page 78 of 91
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
|
|
|
|
|
CENTRAL PARKING CORPORATION
|
|
Date: December 14, 2006 |
By: |
/s/ Jeff Heavrin
|
|
|
|
Jeff Heavrin |
|
|
|
Senior Vice President and Chief Financial Officer |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant in the capacities and on the
dates indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
/s/ Monroe J. Carell, Jr.
Monroe J. Carell, Jr. |
|
Chairman, Director
|
|
December 14, 2006 |
/s/ Emanuel Eads
Emanuel Eads |
|
President and Chief Executive Officer, Director
|
|
December 14, 2006 |
/s/ Jeff Heavrin
Jeff Heavrin |
|
Senior Vice President and
Chief Financial Officer (Principal Financial Officer)
|
|
December 14, 2006 |
/s/ Claude Blankenship
Claude Blankenship |
|
Director
|
|
December 14, 2006 |
/s/ Lewis Katz
Lewis Katz |
|
Director
|
|
December 14, 2006 |
/s/ Edward G. Nelson
Edward G. Nelson |
|
Director
|
|
December 14, 2006 |
/s/ Owen Shell, Jr
Owen Shell, Jr. |
|
Director
|
|
December 14, 2006 |
/s/ William Smith
William Smith |
|
Director
|
|
December 14, 2006 |
/s/ Ray Baker
Ray Baker |
|
Director
|
|
December 14, 2006 |
/s/ Kathryn Brown
Kathryn Brown |
|
Director
|
|
December 14, 2006 |
Page 79 of 91
Exhibit Index
|
|
|
Exhibit |
|
|
Number |
|
Document |
2
|
|
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). |
|
|
|
2.1
|
|
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). |
|
|
|
2.2
|
|
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). |
|
|
|
3.1
|
|
(a) 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). |
|
|
|
|
|
(b) 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). |
|
|
|
3.2
|
|
Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 4.1 to the
Companys Registration Statement No. 333-23869 on Form S-3). |
|
|
|
4.1
|
|
Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Companys
Registration Statement No. 33-95640 on Form S-1). |
|
|
|
4.2
|
|
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). |
|
|
|
4.3
|
|
Amendment dated January 5, 1999 to the 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 4.4.1
to the Companys Registration Statement No. 333-66081 filed on October 21, 1998, as
amended). |
|
|
|
4.4
|
|
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). |
Page 80 of 91
|
|
|
Exhibit |
|
|
Number |
|
Document |
4.5
|
|
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). |
|
|
|
4.6
|
|
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). |
|
|
|
4.7
|
|
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). |
|
|
|
10.1
|
|
Executive Compensation Plans and Arrangements |
|
|
|
|
|
(a) 1995 Incentive and Nonqualified Stock Option Plan for Key Personnel
(Incorporated by reference to Exhibit 10.1 to the Companys Registration
Statement No. 33-95640 on Form S-1). |
|
|
|
|
|
(b) Amendment to the 1995 Incentive and Nonqualified Stock Option Plan for Key
Personnel increasing the number of shares licensed for issuance under the plan
to 3,817,500 (Incorporated by reference to Exhibit 10.1 (b) of the Companys
Annual Report on Form 10-K for the year ended September 30, 2000). |
|
|
|
|
|
(c) Form of Option Agreement under Key Personnel Plan (Incorporated by
reference to Exhibit 10.2 to the Companys Registration Statement No. 33-95640
on Form S-1). |
|
|
|
|
|
(d) 1995 Restricted Stock Plan (Incorporated by reference to Exhibit 10.5.1 to
the Companys Registration Statement No. 33-95640 on Form S-1). |
|
|
|
|
|
(e) Form of Restricted Stock Agreement (Incorporated by reference to Exhibit
10.5.2 to the Companys Registration Statement No.33-95640 on Form S-1). |
|
|
|
|
|
(f) Monroe J. Carell, Jr. Employment Agreement (Incorporated by reference to
Exhibit 10.1(f) to the Companys Annual Report on Form 10-K/A filed on December
17, 2004) |
|
|
|
|
|
(g) Monroe J. Carell, Jr. Revised Deferred Compensation Agreement, as amended
(Incorporated by reference to Exhibit 10.1(g) to the Companys Annual Report on
Form 10-K/A filed on December 17, 2004) |
|
|
|
|
|
(h) Performance Unit Agreement between Central Parking Corporation and James H.
Bond (Incorporated by reference to Exhibit 10.11.1 to the Companys
Registration Statement No. 33-95640 on Form S-1.) |
|
|
|
|
|
(i) Modification of Performance Unit Agreement of James H. Bond (Incorporated
by reference to Exhibit 10.1 (j) to the Companys Annual Report on Form 10-K
filed on December 27, 1997). |
|
|
|
|
|
(j) Second modification of Performance Unit Agreement of James H. Bond
(Incorporated by reference to Exhibit 10.1 (k) to the Companys Report on Form
10-Q for the period ended March 31, 2001). |
|
|
|
|
|
(k) Deferred Stock Unit Plan (Incorporated by reference to Exhibit 10.1(n) to
the Companys Annual Report on Form 10-K filed on December 21, 2001). |
|
|
|
|
|
(l) James H. Bond Employment Agreement dated as of May 31, 2001 (Incorporated
by reference to Exhibit 10.1 (p) to the companys Report on Form 10-Q for the
period ended June 30, 2001). |
|
|
|
|
|
(m) Emanuel J. Eads Employment Agreement dated as of October 1, 2000
(Incorporated by reference to Exhibit 10.1 (q) to the companys Report on Form
10-Q for the period ended June 30, 2001). |
Page 81 of 91
|
|
|
Exhibit |
|
|
Number |
|
Document |
|
|
(n) Gregory A. Susick Employment Agreement dated as of October 1, 2000
(Incorporated by reference to Exhibit 10.1 (r) to the companys Report on Form
10-Q for the period ended June 30, 2001). |
|
|
|
|
|
(o) Jeff L. Wolfe Employment Agreement dated as of October 1, 2000
(Incorporated by reference to
Exhibit 10.1 (s) to the companys Report on Form 10-Q for the period ended June
30, 2001). |
|
|
|
|
|
(p) Amendment No. 1 effective June 1, 2005, to the 2003 Employment Agreement
between the Company and Jeff Heavrin. (Incorporated by reference to Exhibit
10.1 (p) to the Companys Report on
form 10-K for year ended Septebmer 2005) |
|
|
|
|
|
(q) Emanuel Eads Employment Agreement dated as of August 2, 2005 (Incorporated
by reference to Exhibit 10.2 to the Companys Report on Form 10-Q for period
ended December 31, 2005) |
|
|
|
|
|
(r) Form of Senior Executive Employment Agreement (Incorporated by reference to
Exhibit 10.1(t) to the Companys Annual Report on Form 10-K filed on December
24, 2003) |
|
|
|
10.2
|
|
(a) 1995 Nonqualified Stock Option Plan for Directors (Incorporated by reference to
Exhibit 10.3 to the Companys Registration Statement No. 33-95640 on Form S-1). |
|
|
|
|
|
(b) Amendment to the 1995 Nonqualified Stock Option Plan for Directors
increasing the number of shares reserved for issuance under the plan to 475,000
(Incorporated by reference to Exhibit 10.2 to the Companys Annual Report on
Form 10-K filed on December 21, 2001). |
|
|
|
10.3
|
|
Form of Option Agreement under Directors plan (Incorporated by reference to Exhibit
10.4 to the Companys Registration Statement No. 33-95640 on Form S-1). |
|
|
|
10.4
|
|
Form of Indemnification Agreement for Directors (Incorporated by reference to Exhibit
10.12 to the Companys Registration Statement No. 33-95640 on Form S-1). |
|
|
|
10.5
|
|
Indemnification Agreement for Monroe J. Carell, Jr. (Incorporated by reference to
Exhibit 10.13 to the Companys Registration Statement No. 33-95640 on Form S-1). |
|
|
|
10.6
|
|
Form of Management Contract (Incorporated by reference to Exhibit 10.6 to the
Companys Annual Report on Form 10-K filed on December 21, 2001). |
|
|
|
10.7
|
|
Form of Lease (Incorporated by reference to Exhibit 10.7 to the Companys Annual
Report on Form 10-K filed on December 21, 2001). |
|
|
|
10.8
|
|
1998 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.16 to the
Companys Registration Statement No. 33-95640 on Form S-1). |
|
|
|
10.9
|
|
Exchange Agreement between the Company and Monroe J. Carell, Jr. (Incorporated by
reference to Exhibit 10.18 to the Companys Registration Statement No. 33-95640 on Form
S-1). |
|
|
|
10.10
|
|
Consulting Agreement dated as of February 12, 1998, by and between Central Parking
Corporation and Lewis Katz (Incorporated by reference to Exhibit 10.20 of the Companys
Report on Form 10-K for the period ended September 30, 1999). |
|
|
|
10.11
|
|
Limited Partnership Agreement dated as of August 11, 1999, by and between CPS of the
Northeast, Inc. and Arizin Ventures, L.L.C. (Incorporated by reference to Exhibit
10.21 of the Companys Report on Form 10-K for the period ended September 30, 1999). |
|
|
|
10.12
|
|
Shareholders Agreement and Agreement Not to Compete by and among Central Parking
Corporation, Monroe J. Carell, Jr., Lewis Katz and Saul Schwartz dated as of February
12, 1998 (Incorporated by reference to Exhibit 10.23 of the Companys Report on Form
10-K for the period ended September 30, 1999). |
|
|
|
10.13
|
|
Lease Agreement dated as of October 6, 1995, by and between The Carell Family LLC and
Central Parking |
Page 82 of 91
|
|
|
Exhibit |
|
|
Number |
|
Document |
|
|
System of Tennessee, Inc. (Alloway Parking Lot) (Incorporated by reference to
Exhibit 10.24 of the Companys Report on Form 10-K for the period ended September 30, 1999). |
|
|
|
10.14
|
|
First Amendment to Lease Agreement dated as of July 29, 1997, by and between The
Carell Family LLC and Central Parking System of Tennessee, Inc. (Alloway Parking Lot)
(Incorporated by reference to Exhibit 10.25 of the Companys Report on Form 10-K for
the period ended September 30, 1999). |
|
|
|
10.15
|
|
Lease Agreement dated as of October 6, 1995 by and between The Carell Family LLC and
Central Parking System of Tennessee, Inc. (Second and Church Parking Lot) (Incorporated
by reference to Exhibit 10.26 of the Companys Report on Form 10-K for the period ended
September 30, 1999). |
|
|
|
10.16
|
|
First Amendment to Lease Agreement dated as of October 6, 1995, by and between The
Carell Family LLC and Central Parking System of Tennessee, Inc. (Second and Church
Parking Lot) (Incorporated by reference to Exhibit 10.27 of the Companys Report on
Form 10-K for the period ended September 30, 1999). |
|
|
|
10.17
|
|
Revolving Credit Note dated November 1, 2002, by Suntrust Bank and Central Parking
Corporation. (Incorporated by reference to Exhibit 10.1 on Form 10-Q filed on February
18, 2003). |
|
|
|
10.18
|
|
Promissory Note dated January 8, 2003 by Bank of America, N.A. and Central Parking
Corporation. (Incorporated by reference to Exhibit 10.2 on Form 10-Q filed on February
18, 2003). |
|
|
|
10.19
|
|
Credit Agreement dated February 28, 2003, among Central Parking Corporation, et. al
and Bank of America, N.A., et al. (Incorporated by reference to Exhibit 99.2 on Form
8-K filed on March 4, 2003) |
|
|
|
10.20
|
|
Waiver Agreement dated May 14, 2003, by Bank of America, N.A. and
Central Parking Corporation. (Incorporated by reference to Exhibit
10.3 on Form 10-Q filed on May 15, 2003). |
|
|
|
10.21
|
|
Employment Agreement dated March 3, 2003, by William J. Vareschi, Jr. and Central Parking Corporation.
(Incorporated by reference to Exhibit 10.4 on Form 10-Q filed on May 15, 2003). |
|
|
|
10.22
|
|
First Amendment to Credit Agreement dated August 12, 2003, by Bank of America, N.A.
and Central Parking Corporation. (Incorporated by reference to Exhibit 10.3 on Form 10-Q filed on August 14, 2003). |
|
|
|
10.23
|
|
Second Amendment to the Credit Facility dated June 4, 2004 by Bank of America, N.A.
and Central Parking Corporation (Incorporated by reference to Exhibit 10.1 on Form
10-Q filed on August 13, 2004) |
|
|
|
10.24
|
|
Third Amendment to the Credit Facility dated January 25, 2005 by Bank of America,
N.A. and Central Parking Corporation (Incorporated by reference to Exhibit 10.1 on Form
10-Q filed on February 9, 2005). |
|
|
|
10.25
|
|
Fourth Amendment to Credit Agreement dated August 11, 2005, among Central Parking
Corporation, et. al and Bank of America, N.A., et. al. (Incorporated by reference to
Exhibit 10.1 on Form 8-K filed on August 12, 2005). |
|
|
|
10.26
|
|
International Swap Dealers Association, Inc. Master Agreement dated as of June 9,
2003, by JP Morgan Chase Bank and Central Parking Corporation. (Incorporated by
reference to Exhibit 10.4 on Form 10-Q filed on August 14, 2003). |
|
|
|
10.27
|
|
International Swap Dealers Association, Inc. Master Agreement dated as of May 23,
2003, by SunTrust Bank and Central Parking Corporation. (Incorporated by reference to
Exhibit 10.5 on Form 10-Q filed on August 14, 2003). |
Page 83 of 91
|
|
|
Exhibit |
|
|
Number |
|
Document |
10.28
|
|
Waiver Agreement dated October 12, 2005 by and between the Company and Central
Parking System, Inc., Allright Corporation, Kinney System Inc., CPS
Finance, Inc., and Central Parking System of Tennessee, Inc., and
certain subsidiaries of the Company and a group of lenders having
Bank of America, N.A. as their administrative agent (the "Lenders").
(Incorporated by reference to Exhibit 10.28 of the Company's Report
on Form 10-K for the period ended September 30, 2005) |
|
|
|
10.29
|
|
Fifth Amendment to Credit Agreement dated as of April 7, 2006, by Bank of America, N.
A. and Central Parking Corporation (Incorporated by reference to Exhibit 10.1 on Form
10-Q filed on May 10,2006) |
|
|
|
21
|
|
Subsidiaries of the Registrant (filed herewith). |
|
|
|
23
|
|
Consent of KPMG LLP (filed herewith). |
|
|
|
31.1
|
|
Certification of Emanuel Eads pursuant to Rule 13a-14(a). |
|
|
|
31.2
|
|
Certification of Jeff Heavrin pursuant to Rule 13a-14(a). |
|
|
|
32.1
|
|
Certification of Emanuel Eads pursuant to Section 1350. |
|
|
|
32.2
|
|
Certification of Jeff Heavrin pursuant to Section 1350. |
Page 84 of 91
Exhibit 21
CENTRAL PARKING CORPORATION & SUBSIDIARIES
ENTITY LIST
|
|
|
|
|
|
|
STATE/COUNTRY |
|
|
|
|
OF INCORPORATION |
|
COMPANY NAME |
1
|
|
AL
|
|
CENTRAL PARKING SYSTEM OF ALABAMA, INC. |
2
|
|
AR
|
|
CENTRAL PARKING SYSTEM OF ARKANSAS, INC. |
3
|
|
AZ
|
|
UNIVERSAL PARKING, INC. (AZ) |
4
|
|
CA
|
|
UNIVERSAL PARKING, INC. CA |
5
|
|
DC
|
|
CENTRAL PARKING SYSTEM OF VIRGINIA, INC. |
6
|
|
DE
|
|
ALLRIGHT CORPORATION |
7
|
|
DE
|
|
ALLRIGHT PARKING MANAGEMENT, INC. |
8
|
|
DE
|
|
APARKCO FINANCE, INC. |
9
|
|
DE
|
|
APARKCO, INC. |
10
|
|
DE
|
|
CENTRAL PARKING FINANCE TRUST |
11
|
|
DE
|
|
CPS FINANCE, INC. |
12
|
|
DE
|
|
KINNEY PARKING, INC. |
13
|
|
DE
|
|
KINNEY SYSTEM, INC. |
14
|
|
IL
|
|
SPRINGFIELD DOWNTOWN PARKING, INC. |
15
|
|
IN
|
|
CENTRAL PARKING SYSTEM OF INDIANA, INC. |
16
|
|
MI
|
|
NATIONAL GARAGES, INCORPORATED |
17
|
|
MO
|
|
ALLRIGHT CARPARK, INC. |
18
|
|
NE
|
|
CENTRAL PARKING SYSTEM OF NEBRASKA, INC. |
19
|
|
NJ
|
|
CENTRAL PARKING SYSTEM OF NEW JERSEY, INC. |
20
|
|
NV
|
|
CENTRAL PARKING SYSTEM OF NEVADA, INC. |
21
|
|
NV
|
|
UNIVERSAL PARK HOLDINGS, INC. |
22
|
|
NY
|
|
ALLRIGHT NEW YORK PARKING, INC. |
23
|
|
NY
|
|
BLACK ANGUS, LLC |
24
|
|
NY
|
|
KINNEY 9TH STREET, INC. |
25
|
|
NY
|
|
KINNEY CIVIC CENTER, INC. |
26
|
|
NY
|
|
KINNEY OF BROOKLYN, INC. |
27
|
|
NY
|
|
KINNEY PARKING OF THE BRONX, INC. |
28
|
|
NY
|
|
KINNEY PARKING SYSTEM, INC. |
29
|
|
NY
|
|
KINNEY SYSTEM EASTSIDE PARKING, INC. |
30
|
|
NY
|
|
KINNEY SYSTEM MANAGEMENT, INC. |
31
|
|
NY
|
|
KINNEY WEST 83RD ST., INC. |
32
|
|
NY
|
|
SLATE PARKING CORP. |
33
|
|
NY
|
|
STOP PARK GARAGE CORP. |
34
|
|
TN
|
|
CENTRAL PARKING SYSTEM AIRPORT SERVICES, INC. |
35
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF ASIA, INC. |
36
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF CONNECTICUT, INC. |
37
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF FLORIDA, INC. |
38
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF GEORGIA, INC. |
39
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF KENTUCKY, INC. |
40
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF LOUISIANA, INC. |
41
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF MARYLAND, INC. |
42
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF MISSISSIPPI, INC. |
43
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF MISSOURI, INC. |
44
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF NEW YORK, INC. |
45
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF NORTH CAROLINA, INC. |
46
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF OHIO, INC. |
47
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF OKLAHOMA, INC. |
48
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF PENNSYLVANIA, INC. |
49
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF PUERTO RICO, INC. |
50
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF RHODE ISLAND, INC. |
51
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF SOUTH CAROLINA, INC. |
52
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF TENNESSEE, INC. |
53
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF WASHINGTON, INC. |
54
|
|
TN
|
|
CENTRAL PARKING SYSTEM OF WISCONSIN, INC. |
55
|
|
TN
|
|
CENTRAL PARKING SYSTEM REALTY OF MISSOURI, INC. |
56
|
|
TN
|
|
CENTRAL PARKING SYSTEM REALTY OF NEW YORK, INC. |
57
|
|
TN
|
|
CENTRAL PARKING SYSTEM, INC. |
58
|
|
TN
|
|
CPS OF THE NORTHEAST, INC. |
59
|
|
TN
|
|
PARKING FACILITY SYSTEM, INC. |
60
|
|
TN
|
|
USA PARKING SYSTEM, INC. |
61
|
|
TN
|
|
USA TRANSPORTATION SERVICES, INC. |
62
|
|
TX
|
|
CENTRAL PARKING SYSTEM OF TEXAS, INC. |
63
|
|
BAHAMAS
|
|
USA PARKING SYSTEM OF THE BAHAMAS, INC. |
64
|
|
BRAZIL
|
|
CENTRAL PARKING SYSTEM BRASIL, LIMITADA |
Page 85 of 91
|
|
|
|
|
|
|
STATE/COUNTRY |
|
|
|
|
OF INCORPORATION |
|
COMPANY NAME |
65
|
|
BRITISH COLUMBIA
|
|
ALLRIGHT PARK VANCOUVER, LTD. |
66
|
|
BRITISH COLUMBIA
|
|
LEXIS SYSTEMS, INC. |
67
|
|
BRITISH COLUMBIA
|
|
UNIVERSAL PARK HOLDINGS, INC. |
68
|
|
BRITISH COLUMBIA
|
|
UNIVERSAL PARKING, INC. |
69
|
|
CANADA
|
|
157166 CANADA, INC. |
70
|
|
CANADA
|
|
811462 ONTARIO, INC. |
71
|
|
CANADA
|
|
ALLRIGHT AUTO PARKS CANADA, LTD. |
72
|
|
CANADA
|
|
IDEAL PARKING, INC. |
73
|
|
CANADA
|
|
STERLING PARKING, LTD. |
74
|
|
CHILE
|
|
ESTACIONAMIENTOS CENTRAL PARKING SYSTEM CHILE LIMTADA |
75
|
|
CHILE
|
|
INVERSIONES CENTRAL PARKING SYSTEM LIMITADA |
76
|
|
COLOMBIA
|
|
CENTRAL PARKING SYSTEM COLOMBIA, LIMITADA |
77
|
|
CZECH REPUBLIC
|
|
CENTRAL PARKING SYSTEM OF THE CZECH REPUBLIC, SRO |
78
|
|
DOMINICAN REPUBLIC
|
|
CPS PARKING, S.A. |
79
|
|
DOMINICAN REPUBLIC
|
|
CPS PARKING SERVICES, S.A. |
80
|
|
GERMANY
|
|
CENTRAL PARKING SYSTEM DEUTSCHLAND, GMBH |
81
|
|
GREECE
|
|
CENTRAL PARKING SYSTEM ATHENS, A.E. |
82
|
|
GREECE
|
|
CENTRAL PARKING SYSTEM HELLAS, E.P.E. |
83
|
|
HUNGARY
|
|
CENTRAL PARKING SYSTEM KFT |
84
|
|
IRELAND
|
|
CENTRAL PARKING SYSTEM IRELAND, LTD. |
85
|
|
IRELAND
|
|
CONTROL PLUS LIMITED |
86
|
|
MEXICO
|
|
CENTRAL PARKING SYSTEM OF MEXICO, SA De CV |
87
|
|
MEXICO
|
|
SERVICIOS CORPORATIVOS PARA ESTACIONAMIENTOS, SA De CV |
88
|
|
PERU
|
|
CENTRAL PARKING SYSTEM OF PERU, S.A. |
89
|
|
POLAND
|
|
CENTRAL PARKING SYSTEM POLAND, LTD |
90
|
|
POLAND
|
|
CENTRAL PARKING SYSTEM WROCLAW SP ZOO |
91
|
|
PUERTO RICO
|
|
USA PARKING SYSTEM OF PUERTO RICO, INC. |
92
|
|
SPAIN
|
|
CENTRAL PARKING SYSTEM ESPANA, S.A. |
93
|
|
SPAIN
|
|
CENTRAL PARKING SYSTEM MADRID, S.A. |
94
|
|
SWITZERLAND
|
|
CENTRAL PARKING SYSTEM OF SWITZERLAND, AG |
95
|
|
UK
|
|
CENTRAL PARKING SYSTEM BIRMINGHAM, LTD. |
96
|
|
UK
|
|
CENTRAL PARKING SYSTEM LUTON, LTD. |
97
|
|
UK
|
|
CENTRAL PARKING SYSTEM OF THE U.K., LTD |
98
|
|
UK
|
|
CENTRAL PARKING TRANSPORTATION MANAGEMENT, LTD |
99
|
|
UK
|
|
CONTROL PLUS PARKING SYSTEM OF UK, LTD. |
100
|
|
UK
|
|
PARK AND FLY (HEATHROW), LTD |
101
|
|
VENEZUELA
|
|
CENTRAL PARKING SYSTEM OF VENEZUELA, S.A. |
Page 86 of 91
Exhibit 31.1
CERTIFICATION
I, Emanuel Eads, certify that:
1. I have reviewed this annual report on Form 10-K of Central Parking Corporation;
2. Based on my knowledge, this annual report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included
in this annual report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this annual
report;
4. The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15
(f))for the registrant and have:
a) designed such disclosure controls and procedures or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrants
ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrants internal control over financial reporting.
|
|
|
|
|
|
|
|
Date: December 14, 2006 |
By: |
/s/ EMANUEL EADS
|
|
|
|
Emanuel Eads |
|
|
|
Chief Executive Officer |
|
Page 87 of 91
Exhibit 31.2
CERTIFICATION
I, Jeff Heavrin, certify that:
1. I have reviewed this annual report on Form 10-K of Central Parking Corporation;
2. Based on my knowledge, this annual report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included
in this annual report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this annual
report;
4. The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15
(f))for the registrant and have:
a) designed such disclosure controls and procedures or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrants
ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrants internal control over financial reporting.
|
|
|
|
|
|
|
|
Date: December 14, 2006 |
By: |
/s/ JEFF HEAVRIN
|
|
|
|
Jeff Heavrin |
|
|
|
Senior Vice President and Chief Financial Officer |
|
Page 88 of 91
Exhibit 32.1
SECTION 1350 CERTIFICATION
In connection with the Annual Report of Central Parking Corporation (the Company) on Form
10-K for the year ending September 30, 2006 as filed with the Securities and Exchange Commission on
December 14, 2006 (the Report), I, Emanuel Eads, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
|
(1) |
|
The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
(b) |
|
The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company. |
|
|
|
|
|
|
|
|
|
/s/ EMANUEL EADS
|
|
|
Emanuel Eads |
|
|
Chief Executive Officer |
|
|
A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO
CENTRAL PARKING CORPORATION AND WILL BE RETAINED BY CENTRAL PARKING CORPORATION AND FURNISHED TO
THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.
The foregoing certification is being furnished solely to accompany the Report pursuant to 18
U.S.C. section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company,
whether made before or after the date hereof, regardless of any general incorporation language in
such filing. This certification is executed as of December 14, 2006.
Page 89 of 91
Exhibit 32.2
SECTION 1350 CERTIFICATION
In connection with the Annual Report of Central Parking Corporation (the Company) on Form
10-K for the year ended September 30, 2006 as filed with the Securities and Exchange Commission on
December 14, 2006 (the Report), I, Jeff Heavrin, Senior Vice President and Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
|
(1) |
|
The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
(b) |
|
The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company. |
|
|
|
|
|
|
|
|
|
/s/ JEFF HEAVRIN
|
|
|
Jeff Heavrin |
|
|
Senior Vice President and Chief Financial Officer |
|
|
A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO
CENTRAL PARKING CORPORATION AND WILL BE RETAINED BY CENTRAL PARKING CORPORATION AND FURNISHED TO
THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.
The foregoing certification is being furnished solely to accompany the Report pursuant to 18
U.S.C. section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company,
whether made before or after the date hereof, regardless of any general incorporation language in
such filing. This certification is executed as of December 14, 2006.
Page 90 of 91
Exhibit 23
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Central Parking Corporation
We consent to the incorporation by reference in the registration statements (Nos. 33-98118,
33-98120, 33-98122, 333-37909 and 333-74837) on Form S-8 and the registration statements (Nos.
333-52497 and 333-54914) on Form S-3 of Central Parking Corporation of our report dated December
14, 2006 with respect to the consolidated balance sheets of Central Parking Corporation and
subsidiaries as of September 30, 2006 and 2005, and the related consolidated statements of
operations, shareholders equity and comprehensive income, and cash flows for each of the years in
the three-year period ended September 30, 2006, and all related financial statement schedules, and
managements assessment of the effectiveness of internal control over financial reporting as of
September 30, 2006 and the effectiveness of internal controls over financial reporting as of
September 30, 2006, which reports appear in the September 30, 2006 annual report on Form 10-K of
Central Parking Corporation.
Our report dated December 14, 2006, on the Companys consolidated financial statements refers
to a change in accounting for share-based payments in fiscal 2006.
/s/ KPMG LLP
Nashville, Tennessee
December 14, 2006
Page 91 of 91
Shareholder Information
Corporate Office
Central Parking Corporation
2401 21st Avenue South
Nashville, TN 37212
Telephone: (615) 297-4255
Registrar and Transfer Agent
Computershare Investor Services, LLC
Atlanta, Georgia
Independent Auditors
KPMG LLP
Nashville, Tennessee
Legal Counsel
Harwell, Howard, Hyne, Gabbert &
Manner, P.C.
Nashville, Tennessee
Form 10-K and Quarterly
Reports/Investor Contact
A copy of the Central Parking
Corporation Form 10-K Report for
fiscal 2006, filed with the Securities
and Exchange Commission, is
included with this report.
Additional copies of the report are
available from the Company.
Requests for these items and other
investor contacts should be directed
to Kate Leahy, Human Resources, at
the Companys corporate office or on
the Internet at kleahy@parking.com.
The Companys Chief Executive
Officer and Chief Financial Officer
have provided certifications to the
SEC as required by Section 302 of
the Sarbanes Oxley Act of 2002 and
these certifications are included in
the Companys Annual Report on
Form 10-K for the year ended
September 30, 2006. In addition, as
required by Section 303A.12(a) of
the New York Stock Exchange
(''NYSE) Listed Company Manual,
the Companys Chief Executive
Officer submitted to the NYSE on
April 11, 2006, the annual CEO cer-
tification stating that he was not
aware of any violations by the
Company of the NYSE corporate
governance listing standards.
Common Stock and Dividend
Information
The common stock of Central
Parking Corporation is traded on the
New York Stock Exchange under the
symbol CPC. The prices in the table
below represent the high and low
sales prices for the stock as reported
by the New York Stock Exchange.
At September 30, 2006, there were
approximately 4,270 shareholders
based on the number of record hold
ers of the Companys common stock
and an estimate of the number of
individual participants represented
by security position listings. On
December 18, 1995, the Company
declared an initial quarterly cash
dividend and has paid a dividend fol-
lowing the end of each subsequent
quarter. The quarterly rate since
March 1997 has been $0.015 per
share. The Board of Directors
intent is to continue declaring a cash
dividend each quarter depending on
the Companys profitability and cap-
ital necessary to finance operations
and expansion.
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
High |
|
Low |
|
First Quarter |
|
$ |
15.54 |
|
|
$ |
12.85 |
|
Second Quarter |
|
|
16.84 |
|
|
|
12.96 |
|
Third Quarter |
|
|
16.11 |
|
|
|
13.30 |
|
Fourth Quarter |
|
|
17.97 |
|
|
|
15.00 |
|
Twelve Months |
|
$ |
17.97 |
|
|
$ |
12.85 |
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
High |
|
Low |
|
First Quarter |
|
$ |
15.72 |
|
|
$ |
12.55 |
|
Second Quarter |
|
|
18.37 |
|
|
|
13.72 |
|
Third Quarter |
|
|
17.76 |
|
|
|
13.21 |
|
Fourth Quarter |
|
|
16.33 |
|
|
|
13.79 |
|
Twelve Months |
|
$ |
18.37 |
|
|
$ |
12.55 |
|
Forward Looking Statements
This report contains historical and forward-
Looking information. The words strategy,
believe, potential, looking ahead, plan,
expect, guidance, assumptions, estimates,
anticipates, goal, outlook, intend, continue
to expect, should, project, objective, outlook,
forecast, will likely result, or will continue
and similar expressions identify forward-looking
statements. The forward-looking statements are
made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of
1995. The Company believes the assumptions
underlying these forward-looking statements are
reasonable; however, any of the assumptions
could be inaccurate, and therefore, actual results
may differ materially from those projected in the
forward-looking statements. The factors that
may result in actual results differing from such
forward-looking information include, but are not
limited to: the Companys ability to achieve the
goals described in this report and other commu-
nications, including but not limited to, the
Companys ability to implement its strategic
plan, maintain reduced operating costs, reduce
indebtedness and sell real estate at projected
values as well as continued improvement in
same store sales, which is dependent on
improvements in general economic conditions
and office occupancy rates; the loss or renewal
on less favorable terms, of management contracts
and leases; the timing of pre-opening,
start-up and break-in costs of parking facilities;
the Companys ability to cover the fixed costs of
its leased and owned facilities and its overall
ability to maintain adequate liquidity through
its cash resources and credit facilities; the
Companys ability to comply with the terms of
the Companys credit facilities (or obtain waivers
for non-compliance); interest rate fluctuations;
acts of war or terrorism; changes in demand due
to weather patterns and special events including
sports events and strikes; higher premium and
claims costs relating to the Companys insurance
programs, including medical, liability and
workers compensation; the Companys ability to
renew and obtain performance and surety bonds
on favorable terms; the impact of claims and liti-
gation; and increased regulation or taxation of
parking operations and real estate.
Readers are cautioned not to place undue
reliance on these forward-looking statements,
which speak only as of the date of this report.
The Company undertakes no obligation to pub-
Licly update or revise any forward-looking state-
ments contained herein to reflect events or cir-
cumstances occurring after the date of this
report or to reflect the occurrence of unanticipat-
ed events. We have provided additional informa-
tion in our Annual Report on Form 10-K for our
fiscal year ended September 30, 2006, filed with
the Securities and Exchange Commission and
other filings with the Securities and Exchange
Commission, which readers are encouraged to
review, concerning other factors that could cause
actual results to differ materially from those
indicated in the forward-looking statements.
CENTRAL PARKING CORPORATION
LOGO
2401 21st Avenue South
Nashville, Tennessee 37212
www.parking.com
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 December 31, 2006
Commission file number 001-13950
CENTRAL PARKING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
|
|
|
Tennessee
|
|
62-1052916 |
|
|
|
(State or Other Jurisdiction of Incorporation
or Organization)
|
|
(I.R.S. Employer Identification No.) |
|
|
|
2401 21st Avenue South,
Suite 200, Nashville, Tennessee
|
|
37212 |
|
|
|
(Address of Principal Executive Offices) |
|
(Zip Code) |
|
Registrants Telephone Number, Including Area Code: (615) 297-4255
|
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.
|
|
|
Class
|
|
Outstanding at February 2, 2007 |
|
|
|
Common Stock, $0.01 par value
|
|
32,240,497 |
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 and per share data
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
September 30, |
|
|
|
2006 |
|
|
2006 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
42,848 |
|
|
$ |
44,689 |
|
Management accounts receivable, net of allowance for doubtful accounts of $1,279 and $1,618
at December 31, 2006 and September 30, 2006, respectively |
|
|
50,221 |
|
|
|
47,747 |
|
Accounts receivable other, net of allowance for doubtful accounts of $1,371 and $1,234 at
December 31, 2006 and September 30, 2006, respectively |
|
|
15,567 |
|
|
|
13,406 |
|
Current portion of notes receivable (including amounts due from related parties of $148 at
December 31, 2006 and $165 at September 30, 2006) and net of allowance for doubtful
accounts of $65 and $59 at December 31, 2006 and September 30, 2006, respectively |
|
|
4,240 |
|
|
|
3,913 |
|
Prepaid Expenses |
|
|
14,756 |
|
|
|
12,306 |
|
Assets held for sale |
|
|
420 |
|
|
|
6,682 |
|
Refundable income taxes |
|
|
3,536 |
|
|
|
3,817 |
|
Deferred income taxes |
|
|
10,788 |
|
|
|
10,003 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
142,376 |
|
|
|
142,563 |
|
Available for sale securities |
|
|
4,933 |
|
|
|
4,909 |
|
Notes receivable, less current portion |
|
|
9,607 |
|
|
|
10,569 |
|
Property, equipment, and leasehold improvements, net |
|
|
300,816 |
|
|
|
295,923 |
|
Contracts and lease rights, net |
|
|
70,011 |
|
|
|
71,995 |
|
Goodwill, net |
|
|
232,056 |
|
|
|
232,056 |
|
Investment in and advances to partnerships and joint ventures |
|
|
3,855 |
|
|
|
3,851 |
|
Other assets |
|
|
25,385 |
|
|
|
26,504 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
789,039 |
|
|
$ |
788,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt and capital lease obligations |
|
$ |
2,217 |
|
|
$ |
2,862 |
|
Accounts payable |
|
|
85,605 |
|
|
|
88,672 |
|
Accrued payroll and related costs |
|
|
12,324 |
|
|
|
16,095 |
|
Accrued expenses |
|
|
32,949 |
|
|
|
33,937 |
|
Management accounts payable |
|
|
24,041 |
|
|
|
26,450 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
157,136 |
|
|
|
168,016 |
|
Long-term debt and capital lease obligations, less current portion |
|
|
89,505 |
|
|
|
87,625 |
|
Subordinated convertible debentures |
|
|
78,085 |
|
|
|
78,085 |
|
Deferred rent |
|
|
21,369 |
|
|
|
21,547 |
|
Deferred income taxes |
|
|
6,952 |
|
|
|
6,184 |
|
Other liabilities |
|
|
20,077 |
|
|
|
20,388 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
373,124 |
|
|
|
381,845 |
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
367 |
|
|
|
297 |
|
|
|
|
|
|
|
|
|
|
Shareholders equity: |
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 50,000,000 shares authorized, 32,196,033
and 32,154,128 shares issued and outstanding at December 31, 2006 and
September 30, 2006, respectively |
|
|
322 |
|
|
|
322 |
|
Additional paid-in capital |
|
|
180,661 |
|
|
|
180,091 |
|
Accumulated other comprehensive income, net |
|
|
3,366 |
|
|
|
3,398 |
|
Retained earnings |
|
|
231,904 |
|
|
|
223,122 |
|
Other |
|
|
(705 |
) |
|
|
(705 |
) |
|
|
|
|
|
|
|
Total shareholders equity |
|
|
415,548 |
|
|
|
406,228 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
789,039 |
|
|
$ |
788,370 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Page 3 of 31
CENTRAL PARKING CORPORATION and SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
UNAUDITED
Amounts in thousands, except per share data
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
Revenues: |
|
|
|
|
|
|
|
|
Parking |
|
$ |
131,660 |
|
|
$ |
132,147 |
|
Management contracts and other |
|
|
29,119 |
|
|
|
27,886 |
|
|
|
|
|
|
|
|
|
|
|
160,779 |
|
|
|
160,033 |
|
Reimbursement of management contract expenses |
|
|
120,945 |
|
|
|
112,445 |
|
|
|
|
|
|
|
|
Total revenues |
|
|
281,724 |
|
|
|
272,478 |
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Cost of parking |
|
|
116,645 |
|
|
|
120,596 |
|
Cost of management contracts |
|
|
11,069 |
|
|
|
10,804 |
|
General and administrative |
|
|
17,639 |
|
|
|
20,922 |
|
|
|
|
|
|
|
|
|
|
|
145,353 |
|
|
|
152,322 |
|
Reimbursed management contract expenses |
|
|
120,945 |
|
|
|
112,445 |
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
266,298 |
|
|
|
264,767 |
|
Property-related gains, net |
|
|
402 |
|
|
|
22,914 |
|
|
|
|
|
|
|
|
Operating earnings |
|
|
15,828 |
|
|
|
30,625 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
Interest income |
|
|
132 |
|
|
|
302 |
|
Interest expense |
|
|
(2,877 |
) |
|
|
(3,945 |
) |
Loss on derivative instruments |
|
|
(578 |
) |
|
|
(71 |
) |
Equity in partnership and joint venture earnings |
|
|
366 |
|
|
|
421 |
|
|
|
|
|
|
|
|
Earnings from continuing operations before minority interest and income taxes |
|
|
12,871 |
|
|
|
27,332 |
|
Minority interest |
|
|
(204 |
) |
|
|
(355 |
) |
|
|
|
|
|
|
|
Earnings from continuing operations before income taxes |
|
|
12,667 |
|
|
|
26,977 |
|
Income tax expense |
|
|
(4,230 |
) |
|
|
(10,566 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
|
8,437 |
|
|
|
16,411 |
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
|
828 |
|
|
|
1,544 |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
9,265 |
|
|
$ |
17,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
$ |
0.26 |
|
|
$ |
0.50 |
|
Discontinued operations, net of tax |
|
|
0.03 |
|
|
|
0.05 |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
0.29 |
|
|
$ |
0.55 |
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
$ |
0.26 |
|
|
$ |
0.50 |
|
Discontinued operations, net of tax |
|
|
0.02 |
|
|
|
0.04 |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
0.28 |
|
|
$ |
0.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used for basic per share data |
|
|
32,141 |
|
|
|
32,908 |
|
Effect of dilutive common stock options |
|
|
382 |
|
|
|
62 |
|
|
|
|
|
|
|
|
Weighted average shares used for dilutive per share data |
|
|
32,523 |
|
|
|
32,970 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Page 4 of 31
CENTRAL PARKING CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Amounts in thousands
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
(revised See
Note 3) |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
9,265 |
|
|
$ |
17,955 |
|
Earnings from discontinued operations |
|
|
(828 |
) |
|
|
(1,544 |
) |
|
|
|
|
|
|
|
Earnings from continuing operations |
|
|
8,437 |
|
|
|
16,411 |
|
Adjustments to reconcile earnings from continuing operations to net cash provided (used) by
operating activities continuing
operations: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
6,929 |
|
|
|
7,754 |
|
Equity in partnership and joint venture earnings |
|
|
(366 |
) |
|
|
(421 |
) |
Distributions from partnerships and joint ventures |
|
|
345 |
|
|
|
1,111 |
|
Property-related gains, net |
|
|
(402 |
) |
|
|
(22,914 |
) |
Loss on derivative instruments |
|
|
578 |
|
|
|
71 |
|
Stock-based compensation |
|
|
180 |
|
|
|
111 |
|
Excess tax benefit related to stock option exercises |
|
|
(72 |
) |
|
|
(44 |
) |
Deferred income taxes |
|
|
(17 |
) |
|
|
(1,054 |
) |
Minority interest |
|
|
204 |
|
|
|
355 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Management accounts receivable |
|
|
(2,048 |
) |
|
|
2,440 |
|
Accounts receivable other |
|
|
(2,047 |
) |
|
|
(2,496 |
) |
Prepaid expenses |
|
|
(2,392 |
) |
|
|
(3,830 |
) |
Other assets |
|
|
(617 |
) |
|
|
1,652 |
|
Accounts payable, accrued expenses and other liabilities |
|
|
(8,557 |
) |
|
|
1,874 |
|
Management accounts payable |
|
|
(2,427 |
) |
|
|
(953 |
) |
Deferred rent |
|
|
(178 |
) |
|
|
(339 |
) |
Refundable income taxes |
|
|
280 |
|
|
|
|
|
Income taxes payable |
|
|
37 |
|
|
|
(3,042 |
) |
|
|
|
|
|
|
|
Net cash used by operating activities continuing operations |
|
|
(2,133 |
) |
|
|
(3,314 |
) |
Net cash provided (used) by operating activities discontinued operations |
|
|
124 |
|
|
|
(95 |
) |
|
|
|
|
|
|
|
Net cash used by operating activities |
|
|
(2,009 |
) |
|
|
(3,409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Proceeds from disposition of property and equipment |
|
|
3,048 |
|
|
|
39,070 |
|
Purchases equipment and leasehold improvements |
|
|
(3,303 |
) |
|
|
(3,890 |
) |
Other investing activities |
|
|
662 |
|
|
|
46 |
|
|
|
|
|
|
|
|
Net cash
provided by investing activities continuing operations |
|
|
407 |
|
|
|
35,226 |
|
Net cash provided by operating activities discontinued operations |
|
|
1,680 |
|
|
|
1,660 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
2,087 |
|
|
|
36,886 |
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Dividends paid |
|
|
(483 |
) |
|
|
(479 |
) |
Net borrowings under revolving credit agreement |
|
|
|
|
|
|
49,438 |
|
Proceeds from issuance of notes payable, net of issuance costs |
|
|
244 |
|
|
|
433 |
|
Principal repayments on long-term debt and capital lease obligations |
|
|
(1,890 |
) |
|
|
(360 |
) |
Payment to minority interest partners |
|
|
(381 |
) |
|
|
(95 |
) |
Repurchase of common stock |
|
|
|
|
|
|
(75,324 |
) |
Tax benefit related to stock option exercises |
|
|
72 |
|
|
|
44 |
|
Proceeds from issuance of common stock and exercise of stock options |
|
|
390 |
|
|
|
504 |
|
|
|
|
|
|
|
|
Net cash
used by financing activities continuing operations |
|
|
(2,048 |
) |
|
|
(25,839 |
) |
|
|
|
|
|
|
|
Net cash used by operating activities discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
used by operating activities |
|
|
(2,048 |
) |
|
|
(25,839 |
) |
|
|
|
|
|
|
|
Foreign currency translation |
|
|
129 |
|
|
|
(132 |
) |
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(1,841 |
) |
|
|
7,506 |
|
Cash and cash equivalents at beginning of period |
|
|
44,689 |
|
|
|
26,055 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
42,848 |
|
|
$ |
33,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
Change in unrealized gain on fair value of derivatives and available-for-sale securities, net of tax |
|
$ |
24 |
|
|
$ |
10 |
|
Purchases of fixed assets from capital leases |
|
$ |
2,112 |
|
|
$ |
|
|
Cash payments for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
2,419 |
|
|
$ |
2,943 |
|
Income taxes |
|
$ |
4,061 |
|
|
$ |
15,311 |
|
See accompanying notes to consolidated financial statements.
Page 5 of 31
CENTRAL PARKING CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(1) Basis of Presentation
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 months ended December 31, 2006 are not necessarily indicative of the results
that may be expected
for the fiscal year ending September 30, 2007. For further information, refer to the
consolidated financial
statements and footnotes thereto for the year ended September 30, 2006 (included in the
Companys Annual
Report on Form 10-K).
(2) Stock Based Compensation
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 first quarter of 2007 is based on the estimated fair value of the
respective options and the proportion vesting in the period. Stock-based employee compensation
expense is calculated using the Black-Scholes option-pricing model. The Company utilizes both the
single option and multiple option valuation approaches. Allocation of compensation expense is 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 quarter ended December 31, 2006. The estimated
weighted average fair value of the options granted during fiscal 2006 was $4.35 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 29% for
fiscal year 2006, 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 4.5 years for 2006.
The Company recognized $180 thousand and $111 thousand of stock based compensation expense in
the quarter ended December 31, 2006 and 2005, respectively. As of December 31, 2006, there were
approximately $0.9 million of total unrecognized compensation expense related to unvested options
granted under the option plans. The Company used a 7.5% forfeiture to arrive at this expense.
This cost is expected to be fully recognized by the end of Fiscal Year 2010. During the first
three months ended December 31, 2006, the aggregate intrinsic value of options exercised under our
stock plan was $153,003 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 3,180,524 shares are outstanding
under the stock option plan at December 31, 2006. 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 issued 300,000 options under the new plan as of December 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 options will be granted under this plan. Options to purchase
77,500 shares are outstanding under this plan at December 31, 2006.
Page 6 of 31
Restricted Stock
As of December 31, 2006, 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.
This plan expired in August 2005 and no new shares will be granted under the plan. The new stock
plan approved by shareholders in February 2006 is an omnibus plan under which restricted shares may
be issued. The Company has granted 14,000 shares under this plan as of December 31, 2006.
The Company measures compensation cost related to restricted shares using the quoted market
price on the grant date. During the first three months of fiscal year ended 2007, the Company
recognized compensation expense of $54 thousand related to restricted shares and expects to
recognize $91 thousand during fiscal year 2007.
(3) 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.
(4) Earnings Per Share
Basic earnings per share excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock, or 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 December 31, 2006 and 2005. For the three months ended
December 31, 2006 and 2005, options to purchase
1,878,358 and 2,830,710 shares, respectively are excluded from the calculation of diluted common
shares since they are anti-dilutive.
(5) Assets Held For Sale, Property-Related Gains, Net and Discontinued Operations
(a) |
|
Assets Held For Sale |
|
|
|
In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
long-lived assets that are classified as held for sale are presented separately in the asset
section of the balance sheet. Assets classified as held for sale are comprised almost
exclusively of real property and are included in the Segment-Other in the identifiable asset
segment table included in note 12. During the quarter ended December 2006, a location in Dallas
with a net book value of $3.5 million was reclassified from Assets Held for Sale because there
is no current contract outstanding and the Company has no current prospective buyers able to
complete negotiations within the ensuing twelve-month period. |
|
(b) |
|
Property-Related Gains (losses), Net |
|
|
|
The Company periodically 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 ended December 31, 2006 and December 31, 2005 is as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Net gains on sale of property |
|
$ |
594 |
|
|
$ |
23,619 |
|
Impairment charges for property,
equipment and leasehold improvements |
|
|
(89 |
) |
|
|
(697 |
) |
Impairment charges for intangible assets |
|
|
(103 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
|
Property-related gains, net |
|
$ |
402 |
|
|
$ |
22,914 |
|
|
|
|
|
|
|
|
|
|
Net property-related gains for the three months ended December 31, 2006 of $0.4 million was
comprised of gains on sale of property of $0.6 million in Segment-Two; offset by $0.2 million of
impairments of leasehold improvements, contract rights and other intangible assets primarily in Segment-Seven. In
assessing impairment, management considered current operating results, the Companys recent
forecast for the next |
Page 7 of 31
|
|
fiscal year and required capital improvements, management determined that
the projected cash flows for these locations would not be enough to recover the book value of
the assets. The Companys property-related gain for the three months ended December 31, 2005
was $22.9 million. |
|
|
|
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 Company 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 and
EITF 03-13, Applying the Conditions in Paragraph 42 of FASB
Statement No. 144 in Determining Whether to Report Discontinued
Operations, criteria for classification as discontinued operations primarily due to the expected
retention of certain cash flows from assets disposed or the Companys continuing involvement as
arising from contracts to manage the parking properties. 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. |
|
(c) |
|
The Company has either disposed of, or designated as held-for-sale, certain locations which
meet the
aforementioned criteria for classification as discontinued operations. The components of
discontinued
operations reflected on the accompanying consolidated statements of income are as follows: |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Discontinued Operations: |
|
|
|
|
|
|
|
|
Total Revenues |
|
$ |
947 |
|
|
$ |
13,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings before property-
related gains, net |
|
|
145 |
|
|
|
627 |
|
Property-related gains, net |
|
|
699 |
|
|
|
1,636 |
|
|
|
|
|
|
|
|
Earnings from discontinued operations,
before taxes |
|
|
844 |
|
|
|
2,263 |
|
Income tax expense |
|
|
16 |
|
|
|
719 |
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
$ |
828 |
|
|
$ |
1,544 |
|
|
|
|
|
|
|
|
For the three months ended December 31, 2006, the Company had either disposed of or designated
as held-for-sale or disposal certain locations, resulting in a gain from discontinued operations of
$0.8 million, net of tax. The gain was primarily related to revenues of $0.9 million less expenses
of $0.7 million, which includes a recovery of bad debt in the amount of $0.7 million from the
transport division in London. Property related gains of $0.7 million consists of a $0.5 million
gain on the sale of the Companys interest in its Polish subsidiary and a $0.2 million gain on the
sale of properties. The Companys prior period results were reclassified to reflect those
locations classified as discontinued operations through December 31, 2006.
(6) Intangible Assets
As of December 31, 2006, the Company had the following amortizable intangible assets (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
Carrying |
|
|
Accumulated |
|
|
|
|
|
|
Amount |
|
|
Amortization |
|
|
Net |
|
|
Contract and lease rights |
|
$ |
128,919 |
|
|
$ |
58,908 |
|
|
$ |
70,011 |
|
|
|
|
|
|
|
|
|
|
|
Amortization expense related to the contract and lease rights was $1.9 million for the three
months ended December 31, 2006, and $2.0 million for the three months ended December 31, 2005.
(7) Long-Term Debt
The Companys Credit Facility provides for aggregate availability of up to $300 million
consisting of a $225
million revolving loan and a $75 million term loan. The Credit Facility requires term loan
payments in the amount of $187,500 for the quarters
Page 8 of 31
ended March 2005 through March 2008 and $9.1
million for the quarters ended June 2008 through March 2010, with the remaining term loan balance
due June 2010. The revolving loan is required to be repaid in February 2008. 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 December 31, 2006 was 200 basis points. The amount outstanding under
the Companys Credit Facility was $73.5 million, all of which related to the term loan, with an
overall weighted average interest rate of 3.9% at December 31, 2006. The aggregate availability
under the Credit Facility was $171.4 million at December 31, 2006, which is net of $53.6 million of
stand-by letters of credit. During the first quarter of fiscal 2006, the Company repurchased a
total of 4,859,674 shares for $75.3 million using the availability under the Credit Facility.
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 notional
value of $87.5 million. Both transactions swapped the Companys floating LIBOR interest rates for
fixed interest of 2.45% until June 30, 2007. The derivatives do not qualify as cash flow hedges.
The weighted average interest rate on the Companys Credit Facility at December 31, 2006 was
3.9%, which includes all outstanding LIBOR contracts and swap agreements at December 31, 2006.
(8) 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.
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 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%.
The Company has entered into certain foreign currency forward contracts to mitigate the
foreign exchange risk related to various intercompany notes receivable from the Companys
wholly-owned subsidiary in the United Kingdom. These forward contracts are expected to offset the
transactional gains and losses on the intercompany notes denominated in British pounds. The gains
and losses related to such contracts and the transactional gains and losses related to the
intercompany notes recognized during fiscal 2006 and for the first quarter of fiscal 2007 were not
significant. The notional amount of the open contracts at December 31, 2006 totaled approximately
$20.9 million. The fair value of the foreign currency forward contracts at December 31, 2006 was a
liability of $1.1 million.
(9) Commitments and Contingencies
The Company is subject to various legal proceedings and claims, which arise in the ordinary
course of its business. In the opinion of management, the ultimate liability with respect to those
proceedings and claims will not have a material adverse effect on the financial position or
liquidity of the Company, but could have a material effect on the results of operations in a given
reporting period. Where the Company believes that a loss is both probable and estimable, such
amounts have been recorded in the consolidated financial statements. For other pending or
threatened lawsuits, due to the early stage of the litigation, management has not yet concluded
whether it is at least reasonably possible that the Company will incur a loss upon resolution.
The Company has employment and severance agreements with certain employees which require
payments by the Company upon the occurrence of certain events.
Page 9 of 31
(10) Comprehensive Income
Comprehensive income for the three months ended December 31, 2006 and 2005 was as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Net earnings |
|
$ |
9,265 |
|
|
$ |
17,955 |
|
Change in fair value of investment securities, net of tax |
|
|
24 |
|
|
|
10 |
|
Change in foreign currency cumulative translation adjustment |
|
|
(56 |
) |
|
|
(868 |
) |
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
9,233 |
|
|
$ |
17,097 |
|
|
|
|
|
|
|
|
(11) 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.
(12) Business Segments
The Companys business activities consist of domestic and foreign operations. Foreign
operations are conducted in the United Kingdom, Canada, Spain, the Republic of Ireland, Puerto
Rico, Chile, Colombia, Peru, Greece, Poland, and Switzerland. Revenues attributable to foreign
operations were less than 10% of consolidated revenues for the quarters ended December 31, 2006 and
2005. For the quarter ended December 31 2006, the United Kingdom and Canada account for 53.2% and
40.1% of total foreign revenues, respectively.
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) from continuing
operations of each segment for the three months ended December 31, 2006 and 2005, as well as
identifiable assets for each segment as of December 31, 2006 and September 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
Three months Ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
Revenues (a): |
|
|
|
|
|
|
|
|
Segment One |
|
$ |
16,850 |
|
|
$ |
15,033 |
|
Segment Two |
|
|
23,186 |
|
|
|
24,540 |
|
Segment Three |
|
|
25,533 |
|
|
|
25,932 |
|
Segment Four |
|
|
60,056 |
|
|
|
61,164 |
|
Segment Five |
|
|
18,953 |
|
|
|
16,517 |
|
Segment Six |
|
|
4,565 |
|
|
|
4,092 |
|
Segment Seven |
|
|
9,144 |
|
|
|
10,629 |
|
Other |
|
|
2,492 |
|
|
|
2,126 |
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
160,779 |
|
|
$ |
160,033 |
|
|
|
|
|
|
|
|
Operating earnings (loss): |
|
|
|
|
|
|
|
|
Segment One |
|
$ |
270 |
|
|
$ |
1,333 |
|
Segment Two |
|
|
(379 |
) |
|
|
2,459 |
|
Segment Three |
|
|
1,651 |
|
|
|
3,690 |
|
Segment Four |
|
|
1,432 |
|
|
|
3,509 |
|
Segment Five |
|
|
1,373 |
|
|
|
2,169 |
|
Segment Six |
|
|
204 |
|
|
|
883 |
|
Segment Seven |
|
|
264 |
|
|
|
(2,872 |
) |
Other |
|
|
11,013 |
|
|
|
19,454 |
|
|
|
|
|
|
|
|
Total operating earnings (loss) |
|
$ |
15,828 |
|
|
$ |
30,625 |
|
|
|
|
|
|
|
|
Page 10 of 31
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
September 30, |
|
|
|
2006 |
|
|
2006 |
|
Identifiable assets: |
|
|
|
|
|
|
|
|
Segment One |
|
$ |
18,510 |
|
|
$ |
20,878 |
|
Segment Two |
|
|
41,610 |
|
|
|
42,533 |
|
Segment Three |
|
|
76,812 |
|
|
|
74,218 |
|
Segment Four |
|
|
304,339 |
|
|
|
305,061 |
|
Segment Five |
|
|
28,186 |
|
|
|
27,566 |
|
Segment Six |
|
|
13,386 |
|
|
|
12,221 |
|
Segment Seven |
|
|
46,879 |
|
|
|
43,129 |
|
Other |
|
|
259,317 |
|
|
|
262,764 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
789,039 |
|
|
$ |
788,370 |
|
|
|
|
|
|
|
|
(a) Excludes reimbursement of management contract expenses.
Segment One encompasses the Midwestern region of the United States. It also includes Canada.
Segment Two encompasses the southeastern region of the United States and includes Washington DC and Baltimore.
It also includes the Mid Atlantic region including Pennsylvania and Western New York.
Segment
Three encompasses Tennessee, Nebraska, Colorado, Missouri, and
the western region of the United States.
Segment Four encompasses the northeastern region of the United States and includes New York City, New Jersey, and Boston.
Segment Five encompasses Florida, Alabama, and the southeastern region of the United States and includes
the Gulf Coast region and Texas.
Segment Six encompasses the USA Parking acquisition.
Segment Seven encompasses Miami, FL, Europe, Puerto Rico, Central and South America.
Other encompasses the home office, eliminations, owned real estate and certain partnerships.
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, 2006. 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; |
|
|
- |
|
comply with the terms of its credit facility or obtain waivers of noncompliance; |
Page 11 of 31
|
- |
|
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, 2006. |
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, Colombia,
Peru, the United Kingdom, the Republic of Ireland, Spain, 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
December 31, 2006, Central Parking operated 1,599 parking facilities through management contracts,
leased 1,279 parking facilities, and owned 134 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 12 of 31
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 policies and 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.
The following 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 for the year ended September 30, 2006, the following involve a higher degree of judgment
and complexity:
Impairment of Long-Lived Assets and Goodwill
As of December 31, 2006, the Companys long-lived assets were comprised primarily of $300.8
million of property, equipment and leasehold improvements and $70.0 million of contract and lease
rights. In accounting for the Companys long-lived assets, other than goodwill and other
intangible assets, the Company applies the provisions of SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. As of December 31, 2006, the Company had $232.1
million of goodwill. The Company accounts for goodwill and other intangible assets 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 significant use of 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 loss of
approximately $0.2 million in continuing operations during the quarter ended December 31, 2006. There
were no impairments in discontinued operations. 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 changes in
interest rates, which could 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. For the quarter ended December 31, 2005, the Company recorded
$0.7 million of impairment charges related to long-lived assets in continuing operations and $0.1
million of impairment charges related to long-lived assets in discontinued operations.
Contract and Lease Rights
As of December 31, 2006, the Company had $70.0 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 rights and management contract rights which are purchased individually are amortized on
a straight-line
Page 13 of 31
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 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 December 31, 2006, the Company had $68.4 million of trade receivables, including
management accounts receivable and accounts receivable other. Additionally, the Company had a
recorded allowance for doubtful accounts of $2.7 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, specifically
in the Northeast and Mid-Atlantic United States, could have an impact on the collection of existing
receivable balances or future allowance considerations.
Lease Termination Costs
The Company recognizes lease termination costs related to disposal activities in accordance
with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Lease
termination costs are based upon certain estimates of liabilities related to costs to exit an
activity. Liability estimates may change as a result of future events, such as the settlement of a
lease termination for an amount less than the amount contractually required.
Self-Insurance Liabilities
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. The Company applies the provisions of SFAS No. 5, Accounting for Contingencies,
in determining the timing and amount of expense recognition associated with claims against the
Company. The recognition of liabilities is based upon managements determination of an unfavorable
outcome of a claim being deemed as probable and reasonably estimable, as defined in SFAS No. 5.
This determination requires the use of judgment in both the estimation of probability and the
amount to be recognized as a liability. The Company engages an actuary to assist in determining
the estimated liabilities for customer injury, employee medical costs and workers compensation
claims. 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. Total discounted self-insurance liabilities at
December 31, 2006 and December 31, 2005 were $22.2 million and $24.3 million, respectively,
reflecting a 4.5% discount rate. The related undiscounted amounts at such dates were $25.0 million
and $28.8 million, respectively.
Classification as Continuing or Discontinuing Operations
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 Company 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 and EITF 03-13
criteria for classification as discontinued operations primarily due to the expected retention of
certain cash flows from assets disposed or the Companys continuing involvement as arising from
contracts to manage the parking properties. If managements assumptions regarding the timing and
amount of such retained cash flows change in the future, the net property gain (loss)
recognized in
Page 14 of 31
continuing operations, along with the results of operations related to such assets, may need
to be reclassified to discontinued operations.
Income Taxes
The Company uses the asset and liability method of SFAS No. 109, Accounting for Income Taxes,
to account for income taxes. Under this method, deferred income 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 basis.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or
settled. The Company has certain net operating loss carry forwards
which expire between 2007 and
2025. The valuation allowance was established for certain net operating loss carry forwards where
their recoverability is deemed to be uncertain. The carrying value of the Companys net 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 June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109 (FIN No. 48). FIN No. 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprises financial statements in
accordance with FASB Statement No. 109, Accounting for Income Taxes. This Interpretation
prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. This
Interpretation also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. This Interpretation is effective for
fiscal years beginning after December 15, 2006. The Company has not determined the impact, if any,
that the adoption of this pronouncement will have to its consolidated financial statements.
In June 2006, the EITF reached a consensus on Issue No. 06-03, How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement
(That Is, Gross versus Net Presentation) (EITF 06-03). EITF 06-03 concludes that (a) the scope of
this Issue includes any tax assessed by a governmental authority that is directly imposed on a
revenue-producing transaction between a seller and a customer and (b) that the presentation of
taxes within the scope on either a gross or a net basis is an accounting policy decision that
should be disclosed under Opinion 22. Furthermore, for taxes reported on a gross basis, a company
should disclose the amounts of those taxes in interim and annual financial statements for each
period for which an income statement is presented. The consensus is effective, through
retrospective application, for periods beginning after December 15, 2006. The Company has not
determined the impact, if any, that the adoption of this pronouncement will have to its
consolidated financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair
Value Measurements. This Standard defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosures about fair value
measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years. The Company has not
determined the impact, if any, that the adoption of this pronouncement will have to its
consolidated financial statements.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108), Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements. SAB 108 provides guidance regarding the consideration given to prior year
misstatements when determining materiality in current financial statements, and is effective for
fiscal years ending after November 15, 2006. The Company has not determined the impact, if any,
that the adoption of this pronouncement will have to its consolidated financial statements.
In November 2006, the Emerging Issues Task Force reached a consensus on Issue No. 06-04,
Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split of
Endorsement Split-Dollar Life Insurance Arrangements, (EITF 06-04). EITF 06-04 reached a
consensus that for a split-dollar life insurance arrangement that provides a benefit to an employee
that extends to postretirement periods, an employer should recognize a liability for future
benefits in accordance with FAS No. 106 or Opinion 12 (depending upon whether a substantive plan is
deemed to exist) based on the substantive agreement with the employee. This
Page 15 of 31
consensus is effective for fiscal years beginning after December 15, 2006. The Company has not
determined the impact, if any, that the adoption of this pronouncement will have to its
consolidated financial statements.
In November 2006, the Emerging Issues Task Force reached a consensus on Issue No.06-05,
Accounting
for Purchases of Life Insurance-Determining the Amount That Could Be Realized in Accordance
with FASB Technical Bulletin No. 85-04, (EITF 06-05). EITF 06-05 reached a consensus
that a policyholder should consider any additional amounts included in the contractual terms of the
policy in determining the amount that could be realized under the insurance contract. The Task
Force agreed that contractual limitations should be considered when determining the realizable
amounts. Those amounts that are recoverable by the policyholder at the discretion of the insurance
company should be excluded from the amount that could be realized. The Task Force also agreed that
fixed amounts that are recoverable by the policyholder in future periods in excess of one year from
the surrender of the policy should be recognized at their present value. The Task Force also
reached a consensus that a policyholder should determine the amount that could be realizable under
the life insurance contract assuming the surrender of an individual-life by individual policy (or
certificate by certificate in a group policy). The Task Force also noted that any amount that is
ultimately realized by the policyholder upon the assumed surrender of the final policy (or final
certificate in a group policy) shall be included in the amount that could be realized under the
insurance contract. This consensus is effective for fiscal years beginning after December 15, 2006.
The Company has not determined the impact, if any, that the adoption of this pronouncement will
have to its consolidated financial statements.
In September 2006, FASB issued FASB Staff Position (FSP) No. AUG AIR -01, Accounting for
Planned Major Maintenance Activities, (FSP No. AUG AIR-01). FSP AUG AIR-01 prohibits the use of
the accrue-in-advance method of accounting for planned major maintenance activities in annual and
interim financial reporting periods. An entity shall apply the same method of accounting for
planned major maintenance activities in annual and interim financial reporting periods. The
guidance in this FSP shall be applied to the first fiscal year beginning after December 15, 2006.
The Company has not determined the impact, if any, that the adoption of this FSP will have to its
consolidated financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plans an amendment of
FASB Statements No. 87, 88, 106, and 132R. This Standard requires an employer to recognize the
overfunded or underfunded status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its statement of financial position and to
recognize changes in that funded status in the year in which the changes occur through
comprehensive income of a business entity. This statement requires an employer that is a business
entity and sponsors one or more single-employer defined benefit plans to (i) recognize the funded
status of a benefit plan; (ii) recognize as a component of other comprehensive income, net of tax,
the gains or losses and prior service costs or credits that arise during the period but are not
recognized as components of net periodic benefit cost pursuant to FASB Statement No. 87,
Employerss Accounting for Pensions, or No. 106, Employers Accounting for Postretiremnet Benefits
Other Than Pension; (iii) measure defined benefit plan assets and obligations as of the date of
the employers fiscal year-end statement of financial position; and (iv) disclose in the notes to
the financial statements additional information about certain effects on net periodic benefit cost
for the next fiscal year that arise from delayed recognition of the gains or losses, prior service
costs or credits, and transition asset or obligation. SFAS 158 is effective for financial
statements issued for fiscal years ending after December 15, 2006; except for the measurement date
provisions, which shall be effective for fiscal years ending after December 15, 2008. The Company
has not determined the impact, if any, that the adoption of this pronouncement will have to its
consolidated financial statements.
Results of Operations
Unless otherwise indicated, the following discussion relates to continuing operations.
Three Months Ended December 31, 2006 Compared to Three Months Ended December 31, 2005
Parking revenues for the first quarter of fiscal year 2007 decreased to $131.7 million from
$132.1 million for the first quarter of fiscal year 2006, a decrease of $0.5 million, or 0.4%. The
decrease of $0.5 million is due to a decrease of $9.0 million due to closed locations and a
decrease of $4.3 million related to contracts converted from leased to management deals; partially
offset by an increase of $6.3 million in new locations and an increase of same store sales of $6.5
million.
Page 16 of 31
Management contract revenues for the first quarter of fiscal 2007 increased to $29.1 million
from $27.9 million for the first quarter of fiscal year 2006, an increase of $1.2 million or 4.4%.
The increase was primarily due to an increase in other fees.
Cost of parking for the first quarter of fiscal 2007 decreased to $116.6 million from $120.6
million for the first quarter of fiscal 2006, a decrease of $4.0 million or 3.3%. The decrease was
due primarily to $1.4 million decline in rent expense, $0.4 million in depreciation expense, $0.1
million decline in snow removal, $0.1 million decline in utilities, $0.1 million in payroll
expense, $0.2 million in liability insurance expense and $1.7 million in other. Rent expense as a
percentage of parking revenues decreased to 50.3% during the quarter ended December 31, 2006, from
51.2% in the quarter ended December 31, 2005. Payroll and benefit expenses as a percent of parking
revenues were 18.8% of parking revenues for the first quarter of fiscal 2007 and fiscal 2006. Cost
of parking as a percentage of parking revenues decreased to 88.6% for the first quarter of fiscal
2007 compared to 91.3% for the first quarter of fiscal 2006.
Cost of management contracts for the first quarter of fiscal 2007 increased to $11.1 million
from $10.8 million in the comparable period in 2006, an increase of $0.3 million or 2.5%. The
increase was primarily caused by an increase of $0.7 million in liability insurance expense and an
increase of $0.2 million in bad debt expense; offset by a decrease of $0.6 million in other
insurance related costs. Cost of management contracts as a percentage of management contract
revenue decreased to 38.0% for the first fiscal quarter of 2007 from 38.7% for the same period in
2006.
General and administrative expenses decreased to $17.6 million for the first quarter of fiscal
2007 from $20.9 million for the first quarter of fiscal 2006, a decrease of $3.3 million or 15.7%.
This decrease is due to a decrease of $3.0 million in professional fees, $0.3 million in
depreciation expense, $0.1 million in travel and entertainment and $0.9 million in other expenses;
offset by a $1.0 million increase in payroll expenses. General and administrative expenses as a
percentage of total revenues (excluding reimbursement of management contract expenses) decreased to
11.0% for the first quarter of fiscal 2007 from 13.1% for the first quarter of fiscal 2006.
Net property-related gains for the three months ended December 31, 2006 of $0.4 million was
comprised of gains on sale of property of $0.6 million in Segment-Two; offset by $0.2 million of
impairments of leasehold improvements, contract rights and other intangible assets primarily in
Segment-Seven. In assessing impairment, management considered current operating results, the
Companys recent forecast for the fiscal year and required
capital improvements. Management
determined that the projected cash flows for these locations would not be enough to recover the
book value of the assets. The Companys property-related gain for the three months ended December
31, 2005 was $22.9 million.
Interest expense decreased to $2.9 million for the first quarter of fiscal 2007 compared to
$3.9 million for first quarter of fiscal 2006, a decrease of $1.1 million or 27.1%. The increase
was primarily attributed to a decrease in debt outstanding under the Credit Facility.
The weighted average balance outstanding for the Companys debt obligations and subordinated
convertible debentures was $198.4 million during the quarter ended December 31, 2006, at a weighted
average interest rate of 5.3% compared to a weighted average balance outstanding of $234.1 million
at a weighted average rate of 5.2% during the quarter ended December 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 $4.2 million
for the first quarter of fiscal 2007 as compared to $10.6 million for the first quarter of fiscal
2006, a change of $6.3 million. The effective tax rate on earnings from continuing operations
before income taxes for the first quarter of fiscal 2007 was 33.4% compared to 39.2% for the first
quarter of fiscal 2006. The lower effective tax rate in fiscal 2007 is due primarily to a decrease
in 2007 of valuation allowances related to certain state and foreign
tax loss carryforwards.
For the three months ended December 31, 2006, the Company had either disposed of or designated
as held-for-sale or disposal certain locations, resulting in a gain from discontinued operations of
$0.8 million, net of tax. The gain was primarily related to revenues of $0.9 million less expenses
of $0.7 million, which includes a recovery of bad debt in the amount of $0.7 million from the
transport division in London. Property related gains of $0.7 million consists of a $0.5 million
gain on the sale of the Companys interest in its Polish subsidiary and a $0.2 million gain on the
sale of properties. The Companys prior period results were reclassified to reflect those
Page 17 of 31
locations classified as discontinued operations through December 31, 2006.
Liquidity and Capital Resources
Net cash used by operating activities for the first quarter of fiscal year 2007 was $2.0
million, a decrease of $1.4 million from net cash used by operating activities of $3.4 million
during the first quarter of fiscal year 2006. The primary factor which contributed to this change was
the increase in revenue in the first quarter of fiscal year 2007 and changes in working capital components.
Net cash provided by investing activities for the first quarter fiscal year 2007 was $2.1
million compared to $36.9 million of net cash provided by investing activities in the first quarter
of fiscal year 2006. This change was primarily due to a decrease in proceeds from sale of properties
and purchase of property, equipment and leasehold improvements in the
first quarter of fiscal year 2007.
Net
cash used by financing activities for the first quarter of fiscal year 2007 was $2.0 million
compared to cash used of $25.8 million in the first quarter of fiscal year 2006. Net cash used by
financing activities in the first quarter of fiscal year 2007 primarily consisted of capital leases obtained
during the first quarter of fiscal year 2007.
The Companys Credit Facility provides for aggregate availability of up to $300 million
consisting of a $225 million revolving loan and a $75 million term loan. The Credit Facility
requires term loan payments in the amount of $187,500 for the quarters ended March 2005 through
March 2008 and $9.1 million for the quarters ended June 2008 through March 2010, with the remaining
term loan balance due June 2010. The revolving loan is required to be repaid in February 2008.
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 December 31, 2006 was 200 basis points. The amount outstanding under
the Companys Credit Facility was $73.5 million, all of which related to the term loan, with an
overall weighted average interest rate of 3.9% at December 31, 2006. The aggregate availability
under the Credit Facility was $171.4 million at December 31, 2006, which is net of $53.6 million of
stand-by letters of credit. During the first quarter of fiscal 2006, the Company repurchased a
total of 4,859,674 shares for $75.3 million using the availability under the Credit Facility.
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 notional
value of $87.5 million. Both transactions swapped the Companys floating LIBOR interest rates for
fixed interest of 2.45% until June 30, 2007. The derivatives do not qualify as cash flow hedges.
The weighted average interest rate on the Companys Credit Facility at December 31, 2006 was
3.9%, which includes all outstanding LIBOR contracts and swap agreements at December 31, 2006.
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 2007 to be approximately
$10 to $13 million, of which the Company has spent $5.4 million during the first three months of
fiscal 2007, including $2.1 million acquired through capital leases.
The following tables summarize the Companys total contracted obligations and commercial
commitments as of December 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 |
|
$ |
91,722 |
|
|
$ |
2,217 |
|
|
$ |
60,832 |
|
|
$ |
28,547 |
|
|
$ |
126 |
|
Subordinated convertible debentures |
|
|
78,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,085 |
|
Operating leases |
|
|
989,577 |
|
|
|
209,594 |
|
|
|
279,410 |
|
|
|
168,813 |
|
|
|
331,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations |
|
$ |
1,159,384 |
|
|
$ |
211,811 |
|
|
$ |
340,242 |
|
|
$ |
197,360 |
|
|
$ |
409,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 18 of 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of commitment expiration per period |
|
|
|
|
|
|
Less than |
|
1-3 |
|
3-5 |
|
After 5 |
|
|
Total |
|
1 Year |
|
Years |
|
Years |
|
Years |
Unused lines of credit |
|
$ |
171,391 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
171,391 |
|
|
$ |
|
|
Unused lines of credit as of December 31, 2006 are reduced by $53.6 million of standby letters
of credit.
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
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%.
The Companys primary exposure to market risk consists of changes in interest rates on
variable rate borrowings. As of December 31, 2006, the Company had $73.5 million of variable rate
debt outstanding under the Credit Facility priced at LIBOR plus a weighted average margin of 200
basis points. 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. The Company
anticipates paying the scheduled quarterly payments from operating cash flows through March 2008.
The Company is evaluating options for the required payments for the period beginning June 2008.
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 combined notional
amount of $87.5 million. Both transactions swapped the Companys floating LIBOR interest rates for
fixed interest of 2.45% until June 30, 2007.
The weighted average interest rate on the Companys Credit Facility at December 31, 2006 was
3.9%, which includes all outstanding LIBOR contracts and swap agreements at December 31, 2006. An
increase (decrease) in LIBOR of 1% would not result in a significant increase (decrease) of annual
interest expense since the swaps, which converted the rates to fixed, totaled $87.5 million and the
Credit Facility, which was all floating interest, was $73.5 million at December 31, 2006.
Foreign Currency Exposure
As of December 31, 2006, the Company has approximately GBP 2.4 million (USD $4.8 million) of
cash and cash equivalents denominated in British pounds, EUR 2.3 million (USD $3.1 million)
denominated in euros, CAD 3.2 million (USD $2.7 million) denominated in Canadian dollars, and USD
$1.9 million denominated in various other foreign currencies.
The Company also has EUR 1.6 million (USD $2.1 million) of notes payable denominated in euros
and GBP 10.3 million (USD $20.2 million) of intercompany notes receivable and notes payable
denominated in British pounds at December 31, 2006. These intercompany notes bear interest at a
floating rate of 5.6% as of December
Page 19 of 31
31, 2006, and require monthly principal and interest payments through 2012. The Company has
entered into certain foreign currency forward contracts to mitigate the foreign exchange risk
related to various intercompany notes receivable from the Companys wholly-owned subsidiary in the
United Kingdom. These forward contracts are expected to offset the transactional gains and losses
on the intercompany notes denominated in British pounds. The gains and losses related to such
contracts and the transactional gains and losses related to the intercompany notes recognized
during fiscal 2006 and the first quarter of fiscal 2007 were not significant. The notional amount
of the open contracts at December 31, 2006 totaled approximately $20.9 million. The fair value of
the foreign currency forward contracts at December 31, 2006 was a $1.1 million liability.
Based on the Companys overall currency rate exposure as of December 31, 2006, management does
not believe a near-term change in currency rates, based on historical currency movements, would
materially affect the Companys consolidated financial statements.
Page 20 of 31
ITEM 4. Controls and Procedures
(a) Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the
effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of the end of the period covered by this quarterly report. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures effectively and timely provide them with material information
relating to us and our consolidated subsidiaries required to be disclosed in the reports we file or
submit under the Exchange Act.
(b) Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during our first quarter
ended December 31, 2006 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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 or
liquidity of the Company, but could have a material effect on the results of operations in a given
reporting period. Where the Company believes that a loss is both probable and estimable, such
amounts have been recorded in the consolidated financial statements. For other pending or
threatened lawsuits, due to the early stage of the litigation management has not yet concluded
whether it is at least reasonably possible that the Company will incur a loss upon resolution.
Item 1A. Risk Factors
You should carefully consider the following specific risk factors as well as the other
information contained or incorporated by reference in this report, as these are important factors,
among others, that could cause our actual results to differ from our expected or historical
results. It is not possible to predict or identify all such factors. Consequently, you should not
consider any such list to be a complete statement of all of our potential risks or uncertainties.
Our financial performance is sensitive to changes in economic conditions that may impact
employment and consumer spending and commercial office occupancy.
Economic slowdowns in the United States could adversely affect employment levels, consumer
spending and commercial office occupancy, which, in turn, could reduce the demand for parking. The
reduced demand for parking could negatively impact our revenues and net income. Future economic
conditions affecting disposable consumer income, employment levels, business conditions, fuel and
energy costs, interest rates, and tax rates, are also likely to adversely affect our business.
Our concentration of operations in the Northeastern and Mid-Atlantic regions of the United
States, particularly in New York City, increases the risk of negative financial fluctuations due to
events or factors that affect these areas.
Our operations in the Northeastern and Mid-Atlantic regions of the United States, which
includes the cities of New York, Newark, Boston, Philadelphia, Pittsburgh, Baltimore and
Washington, D.C. generated approximately 43.4% of our total revenues from continuing operations
(excluding reimbursement of management contract expenses) in first quarter of fiscal 2007.
Revenues from our operations in New York City and surrounding areas accounted for approximately
26.3% of our total revenues from continuing operations (excluding reimbursement of management
expenses) in the first quarter of fiscal 2007. The concentration of operations in these areas
increases the risk that local or regional events or factors that affect these cities or regions
such as severe winter weather, labor strikes, and changes in local or state laws and regulations,
economic conditions or acts of terrorism, can have a disproportionate impact on our operating
results and financial condition.
Page 21 of 31
Compliance with and any failure to comply with current regulatory requirements will result in
additional expenses and may adversely affect us.
Keeping abreast of, and in compliance with, changing laws, regulations and standards relating
to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, Securities
and Exchange Commission regulations and NYSE Stock Market rules, has required an increased amount
of management attention. We remain committed to maintaining high standards of corporate governance
and public disclosure. As a result, we intend to invest all reasonably necessary resources to
comply with evolving standards, and this investment has resulted in, and we expect will continue to
result in, increased general and administrative expenses and a diversion of management time and
attention from revenue-generating activities to compliance activities.
Changes in the insurance marketplace, including significantly higher premiums, higher
deductibles and coverage restrictions and increased claims costs, have negatively impacted our net
income in recent years and could have a material adverse effect on our results of operations and
financial condition in the future.
We purchase insurance covering certain types of claims that occur at parking facilities we
own, lease or manage. In addition, we purchase workers compensation, group health, directors and
officers liability and certain other insurance coverages. Due to changes in the insurance
marketplace, we have experienced in recent years a substantial increase in the premiums we pay for
most types of insurance coverage and an increase in the deductibles relating to such coverage. We
also have experienced an increase in certain claims costs, including workers compensation,
liability and group health. In addition, coverages of certain types of risk, such as terrorism
coverage, have been significantly restricted or are no longer available at a reasonable cost. The
changes in the insurance marketplace, including increased premium and claims costs, higher
deductibles and coverage restrictions, have negatively impacted our earnings in recent years and
could have a material adverse effect on our results of operations and financial condition in the
future.
Acts of terrorism, such as the September 11, 2001 attacks, can have a significant adverse
affect on our results of operations and financial condition.
We estimate that the terrorist attacks on September 11, 2001 reduced our revenues in the
fourth quarter of fiscal year 2001 by approximately $5 million and approximately $10 million in the
first half of fiscal year 2002. Not only did the attack cause physical damage to some of the
parking facilities operated by us, but the reduction in the number of commuters parking in the
areas affected, reduction in tourists and local consumers traveling to the area as well as the
broader reduction in airplane travel and lower attendance at sporting events, concerts and other
venues, also impacted our operations adversely. The closing of streets in the vicinity of the
World Trade Center and other areas of New York City and the imposition of certain restrictions on
traffic and other security measures in New York City and at the nations airports also had a
negative impact on our operations. Our operations are concentrated heavily in the downtown areas
of major U.S. cities and some are located near landmarks or other sites that have been mentioned as
potential targets of terrorists. In addition, we manage the parking operations at approximately 30
airports. Additional terrorist attacks or the imposition of additional security measures,
particularly in New York, Washington, D.C. or other major cities in which we have a significant
presence, or at airports, could have a material adverse effect on our results of operations and
financial condition.
The offer or sale of a substantial amount of our common stock by significant shareholders
could have an adverse impact on the market price of our common stock.
In February 2001, we filed a registration statement on Form S-3 covering 7,381,618 shares of
our common stock held by certain shareholders. These shares were registered pursuant to
registration rights previously granted to these shareholders. Although we believe a significant
portion of these shares has been sold, these shareholders may sell any remaining shares that were
registered on any stock exchange, market or trading facility on which the shares are traded, or in
private transactions. Other substantial shareholders, including the
Executive Chairman of Central Parking,
Monroe Carell, Jr., the Carell Childrens Trust, and other family members and related entities (the
Carell Family), are permitted to sell significant amounts of our common stock under Rule 144 and
other exemptions from registration under the federal securities laws. In addition, the Carell
Family has certain rights to register substantially all of the shares held by the family and
related entities. The offer or sale of substantial amounts of our common stock by these or other
significant shareholders, particularly if such offers or sales occur simultaneously or relatively
close in time, could have a significant negative impact on our stocks market price.
We are dependent on the continued availability of capital to support our business.
We have significant working capital requirements, including but not limited to, repair and
maintenance obligations for our parking facilities. We are dependant on the cash generated from
our operations and Credit Facility to meet our working capital requirements. The Credit Facility
contains covenants including those that
Page 22 of 31
require us 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 measured against certain targets. Our inability to
meet debt covenants and debt service payments under the Credit Facility would have a material
adverse effect on us.
We are subject to interest rate risk.
We are subject to market risk from exposure to changes in interest rates based upon our
financing, investing and cash management activities. The Credit Facility bears interest at LIBOR
plus a tier-based margin dependent upon certain financial ratios. There are separate tiers for the
revolving loan and term loan. The weighted average margin as of December 31, 2006, was 200 basis
points. The amount outstanding under our Credit Facility was $73.5 million with a weighted average
interest rate of 3.9% as of December 31, 2006. We have reduced a portion of our interest rate risk
by executing two interest rate swap transactions whereby we have fixed $87.5 million of floating
rate debt. The term loan is required to be repaid in quarterly payments of $0.2 million through
March 2008 and quarterly payments of $9.1 million from June 2008 through March 2010. An increase
(decrease) in LIBOR of 1% would result in no increase (decrease) of annual interest expense since
the swaps, which converted the rates to fixed, totaled $87.5 million and the Credit Facility, which
was all floating interest, was $73.5 million on December 31, 2006. We expect to pay both quarterly
principal amortization and monthly interest payments out of operating cash flow.
Our large number of leased and owned facilities increases the risk that we may become
unprofitable and that we may not be able to cover the fixed costs of our leased and owned
facilities.
We leased or owned 1,413 facilities as of December 31, 2006. Although there is more potential
for income from leased and owned facilities than from management contracts, they also carry more
risk if there is a downturn in the economy, property performance or commercial real estate
occupancy rates because a significant part of the costs to operate such facilities typically is
fixed. For example, in the case of leases, there are typically minimum lease payments that must be
made regardless of the revenues or profitability of the facility. In particular, it is difficult
to forecast revenues of newly constructed parking facilities because these facilities do not have
an operating history. Start-up costs, the length of the breakin period during which parking
demand is built and economic conditions at the time the facility is opened, are very difficult to
predict at the time the lease is executed (and the base rent is agreed upon), which is often two or
more years prior to the opening of the facility.
In the case of owned facilities, there are the normal risks of ownership and costs of capital.
In addition, operating expenses for both leased and owned facilities are borne by us and are not
passed through to the owner, as is the case with management contracts. In the case of owned
facilities and generally in the case of longer-term leased facilities, we also are responsible for
property taxes and all maintenance and repair costs, including structural, mechanical and systems
repairs. Performance of our parking facilities depends, in part, on our ability to negotiate
favorable contract terms and control operating expenses, economic conditions prevailing generally
and in areas where parking facilities are located, the nature and extent of competitive parking
facilities in the area, weather conditions and the real estate market.
An increase in government regulation or taxation could have a negative effect on our
profitability.
Our business is subject to numerous federal, state and local laws and regulations, and in some
cases, municipal and state authorities directly regulate parking facilities. In addition, many
cities impose a substantial tax or surcharge on parking services, which generally range from 10% to
50%. Substantial increases in the tax or surcharge on parking such as occurred in recent years in
Pittsburgh and Miami can have a significant negative effect on profitability in a given city. The
profitability of our business is also affected by increases in property taxes because the Company
is responsible for paying property taxes on its owned properties and on many of its leased
facilities. Several state and local laws have been passed in recent years that are designed to
encourage car-pooling or the use of mass transit or impose certain restrictions on automobile
usage. An example is the restrictions imposed by the City of New York in the wake of the September
11 terrorist attacks, which included street closures and a requirement for passenger cars entering
certain bridges and tunnels to have more than one occupant during the morning rush hour. We also
are subject to federal, state and local employment and labor laws and regulations, and several
cities in which we have operations either have adopted or are considering the adoption of so-called
living wage ordinances. The adoption of such laws and regulations, the imposition of additional
parking taxes or surcharges and increases in property and other taxes could adversely impact our
profitability.
Page 23 of 31
The sureties for our performance bond program may increase rates and require additional
collateral to issue or renew performance bonds in support of certain contracts.
Under substantially all of our contracts with municipalities and government entities and
airports, we are required to provide a performance bond to support our obligations under the
contract. We are also required to provide performance bonds under certain leases and other
contracts with non-governmental entities. In recent years, the sureties for our performance bond
program increased the rates we pay on these bonds and required us to collateralize a greater
percentage of our performance bonds with letters of credit. Although we believe our performance
bond program is adequate for its present needs, if we are unable to provide sufficient collateral
in the future, our sureties may not issue or renew performance bonds to support our obligations
under certain contracts.
As is customary in the industry, a surety provider can refuse to provide a bond principal with
new or renewal surety bonds. If any existing or future surety provider refuses to provide us with
surety bonds, there can be no assurance that we would be able to find alternate providers on
acceptable terms, or at all. Our inability to provide surety bonds could result in the loss of
existing contracts or future business, which could have a material adverse effect on our business
and financial condition.
Our net income could be adversely affected if accruals for future insurance losses are not
adequate.
We provide liability, medical and workers compensation insurance coverage. We are obligated
to pay for each loss incurred up to the amount of a deductible specified in our insurance policies.
Our financial statements reflect our anticipated costs based upon loss experience and guidance and
evaluation we have received from third party insurance professionals, such as actuaries. There can
be no assurance, however, that the ultimate amount of such costs will not exceed the amounts
presently accrued, in which case we would need to increase accruals and pay additional expenses.
The operation of our business is dependent on key personnel.
Our success is, and will continue to be, substantially dependent upon the continued services
of our management team. The loss of the services of one or more of the members of our senior
management team could have a material adverse effect on our financial condition and the results of
operations. Although we have entered into employment agreements with, and historically have been
successful in retaining the services of our senior management, there can be no assurance that we
will be able to retain these senior management people in the future. In addition, our future
growth depends on our ability to attract and retain skilled operating managers and employees.
We have foreign operations that may be adversely affected by foreign currency exchange rate
fluctuations.
We operate in the United Kingdom, the Republic of Ireland and other countries. For the
quarter ended December 31, 2006, revenues from foreign operations represented 6.3% of our total
revenues, excluding reimbursement of management contract expenses. Our United Kingdom operations
accounted for 53.2% of total revenues from foreign operations, excluding reimbursement of
management contract expense and excluding earnings from joint ventures. We receive revenues and
incur expenses in various foreign currencies in connection with our foreign operations and, as a
result, we are subject to currency exchange rate fluctuations. We intend to continue to invest in
certain foreign leased or owned parking facilities, either independently or through joint ventures,
where appropriate, and may become increasingly exposed to foreign currency fluctuations. We believe
we currently have limited exposure to foreign currency risk. We have entered into certain foreign
currency forward contracts to mitigate the foreign exchange risk related to certain intercompany
notes we have with our subsidiary in the United Kingdom. See note 1 to our consolidated financial
statements.
In connection with ownership or operation of parking facilities, we may be liable for
environmental problems.
Under various federal, state, and local environmental laws, ordinances, and regulations, a
current or previous owner or operator of real property may be liable for the cost of removal or
remediation of hazardous or toxic substances on, under, or in such property. Such laws typically
impose liability without regard to whether the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. There can be no assurance that a material
environmental claim will not be asserted against us or against our owned or operated parking
facilities. The cost of defending against claims of liability, or of remediating a contaminated
property, could have a negative effect on our business and financial results.
If we cannot maintain positive relationships with labor unions representing our employees, a
work stoppage may adversely affect our business.
Approximately 3,907 employees are represented by labor unions. There can be no assurance that
we will be able to renew existing labor union contracts on acceptable terms. Employees could
exercise their rights under these labor union contracts, which could include a strike or walk-out.
In such cases, there are no assurances that
Page 24 of 31
we would be able to staff sufficient employees for its short-term needs. Any such labor strike
or our inability to negotiate a satisfactory contract upon expiration of the current agreements
could have a negative effect on our business and financial results.
Item
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
4.1 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). |
Page 25 of 31
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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). |
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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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Waiver Agreement dated October 12, 2005 among Central Parking Corporation et. al. and
Bank Of America N. A. et. al. (Incorporated by reference to Exhibit 10.28 to the
Companys Form 10-K for the year ended September 30, 2005) |
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10.2
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Emanuel J. Eads Employment Agreement dated August 2, 2005. (Incorporated
by reference to Exhibit 10.2 to the Companys Report on Form 10-Q for period
ended December 31, 2005) |
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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 31
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: February 9, 2007 |
By: |
/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: February 9, 2007 |
By: |
/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 31
Exhibit 31.1
CERTIFICATION
I, Emanuel Eads, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Central Parking Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included
in this quarterly report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15
(f))for the registrant and have:
a) designed such disclosure controls and procedures or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrants
ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrants internal control over financial reporting.
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Date: February 9, 2007
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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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28 of 31
Exhibit 31.2
CERTIFICATION
I, Jeff Heavrin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Central Parking Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included
in this quarterly report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15
(f))for the registrant and have:
a) designed such disclosure controls and procedures or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrants
ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrants internal control over financial reporting.
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Date: February 9, 2007
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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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29 of 31
Exhibit 32.1
SECTION 1350 CERTIFICATION
In connection with the Quarterly Report of Central Parking Corporation (the Company) on Form
10-Q for the Quarter ending December 31, 2006 as filed with the Securities and Exchange Commission
on February 9, 2007 (the Report), I, Emanuel Eads, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
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The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company. |
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/s/ EMANUEL EADS
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Emanuel Eads |
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Chief Executive Officer |
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A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO
CENTRAL PARKING CORPORATION AND WILL BE RETAINED BY CENTRAL PARKING CORPORATION AND FURNISHED TO
THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.
The foregoing certification is being furnished solely to accompany the Report pursuant to 18
U.S.C. section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company,
whether made before or after the date hereof, regardless of any general incorporation language in
such filing. This certification is executed as of February 9, 2007.
30 of 31
Exhibit 32.2
SECTION 1350 CERTIFICATION
In connection with the Quarterly Report of Central Parking Corporation (the Company) on Form
10-Q for the Quarter ending December 31, 2006 as filed with the Securities and Exchange Commission
on February 9, 2007 (the Report), I, Emanuel Eads, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
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The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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The information contained in the Report fairly presents, in
all material respects, the financial condition and results of operations of the Company. |
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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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A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO
CENTRAL PARKING CORPORATION AND WILL BE RETAINED BY CENTRAL PARKING CORPORATION AND FURNISHED TO
THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.
The foregoing certification is being furnished solely to accompany the Report pursuant to 18
U.S.C. section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company,
whether made before or after the date hereof, regardless of any general incorporation language in
such filing. This certification is executed as of February 9, 2007.
31 of 31
CENTRAL
PARKING CORPORATION
NASHVILLE TENNESSEE
FORM OF PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON
MAY 21, 2007
The undersigned hereby appoints Edward G. Nelson and Benjamin F.
Parrish, Jr., and each of them, with full power of
substitution, attorneys and proxies of the undersigned, to
represent the undersigned and to vote the Common Stock as
specified below at the Special Meeting of Stockholders of
Central Parking Corporation to be held
on Monday, May 21, 2007
at 9:00 a.m., local time, at
Central Parkings principal executive offices, 2401
21st Avenue South, Third Floor, Nashville, Tennessee, and
at any postponement or adjournment thereof, upon the following
matters and in their discretion with respect to any other
matters which may properly come before the meeting.
The undersigned acknowledges receipt of notice of said meeting
and accompanying Proxy Statement and of the accompanying
materials and ratifies and confirms all acts that any of the
said proxy holders or their substitutes may lawfully do or cause
to be done by virtue hereof.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
PROPOSAL TO ADOPT THE MERGER AGREEMENT AND APPROVE THE
MERGER, FOR THE PROPOSAL TO APPROVE THE ADJOURNMENT OR
POSTPONEMENT OF THE SPECIAL MEETING, IF NECESSARY OR
APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES AND IN THE DISCRETION
OF THE DESIGNATED INDIVIDUALS WITH RESPECT TO MATTERS INCIDENTAL
TO THE CONDUCT OF THE MEETING OR WHICH MAY OTHERWISE PROPERLY
COME BEFORE THE MEETING.
CENTRAL PARKING CORPORATION
2401 21st Avenue South
Nashville, Tennessee 37212
(Continued and to be dated and signed on the reverse side.)
CENTRAL PARKING
CORPORATION
VOTE BY MAIL
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Mark, sign and date your proxy card.
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Detach your proxy card.
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Return your proxy card in the postage-paid envelope provided.
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DETACH
PROXY CARD HERE IF YOU ARE RETURNING YOUR PROXY CARD BY
MAIL
Sign, Date and Return this Proxy Card Promptly Using the
Enclosed Envelope.
þ
Votes must be
indicated
(x) in Black or
Blue ink.
CENTRAL
PARKING CORPORATION
2401 21st Avenue South
Nashville, Tennessee 37212
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
FOLLOWING:
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1.
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The proposal to approve and adopt the Agreement and Plan of
Merger, dated as of February 20, 2007, by and among Central
Parking Corporation, KCPC Holdings, Inc., a Delaware
corporation, and KCPC Acquisition, Inc., a Tennessee corporation
and a wholly-owned subsidiary of KCPC Holdings.
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FOR
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AGAINST
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ABSTAIN
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2.
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The proposal to approve the adjournment or postponement of the
special meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time
of the meeting to, approve and adopt the Agreement and Plan of
Merger.
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FOR
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AGAINST
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ABSTAIN
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In their discretion, the Proxy Holders are authorized to vote
upon such other matter(s) which may properly come before the
special meeting and any adjournment or postponement thereof.
Change of Address Mark Here o
Note: Please date and sign this Proxy exactly as name
appears. When signing as attorney, trustee, administrator,
executor or guardian, please give your title as such. In the
case of joint tenants, each joint owner should sign.
Dated: _
_
Share Owner sign here:
Co-Owner sign here: