SP Plus Corporation
STANDARD PARKING CORP (Form: 10-Q/A, Received: 11/19/2013 06:13:00)

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 10-Q/A

 

(Amendment No. 1)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2013

 

Commission file number: 000-50796

 


 

STANDARD PARKING CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

16-1171179

(State or Other Jurisdiction of

 

(I.R.S. Employer Identification No.)

Incorporation or Organization)

 

 

 

200 E Randolph Street, Suite 7700
Chicago, Illinois 60601-7702

(Address of Principal Executive Offices, Including Zip Code)

 

(312) 274-2000

(Registrant’s Telephone Number, Including Area Code)

 

900 N Michigan Avenue, Suite 1600
Chicago, Illinois 60611-1542
(Former Name, Former Address and
Former Fiscal Year, if changed Since Last Report)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES  x   NO  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES  x   NO  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  o

 

Accelerated filer  x

 

 

 

Non-accelerated filer  o

 

Smaller reporting company  o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  o   NO  x

 

As of August 1, 2013, there were 21,913,346 shares of common stock of the registrant outstanding.

 

 

 



Table of Contents

 

STANDARD PARKING CORPORATION

 

FORM 10-Q/A INDEX

 

Part I. Financial Information

5

Item 1. Financial Statements:

5

Condensed Consolidated Balance Sheets as of June 30, 2013 (Unaudited) and December 31, 2012

5

Condensed Consolidated Statements of Income (Unaudited) for the three and six months ended June 30, 2013 and 2012

6

Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months ended June 30, 2013 and 2012

7

Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2013 and 2012

8

Notes to Condensed Consolidated Interim Financial Statements

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3. Quantitative and Qualitative Disclosures about Market Risk

41

Item 4. Controls and Procedures

42

Part II. Other Information

44

Item 1. Legal Proceedings

44

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 6. Exhibits

45

Signatures

46

 

2



Table of Contents

 

Explanatory Note

 

This Quarterly Report on Form 10-Q/A of Standard Parking Corporation (the “Company,” “Standard,” “we,” or “us”) for the quarterly period ended June 30, 2013 includes restated consolidated balance sheets as of December 31, 2012 and June 30, 2013, consolidated statements of income, consolidated statements of comprehensive income, and consolidated statements of cash flows for the three and six months ended June 30, 2012 and 2013 and restated notes to such consolidated financial statements. We will not file an amended Quarterly Report on Form 10-Q/A for the quarterly period ended June 30, 2012. This restatement is to reflect a correction in the manner in which the Company has accounted for deficiency payments under the Company’s agreement with the State of Connecticut (the “State”) under which the Company operates the surface parking and 3,500 garage parking spaces at Bradley International Airport located in the Hartford, Connecticut metropolitan area (the “Bradley Agreement”).  Cumulative deficiency payments under the Bradley Agreement, net of reimbursements, had previously been recorded as a receivable by the Company.

 

At the time of the Company’s initial accounting for the Bradley Agreement in 2000, the Company’s revenue projections as well as the projections included in the Bradley Agreement and in the feasibility study prepared by the State’s parking consultant showed that there would be sufficient funds available to repay deficiency payments, if any, over the term of the Bradley Agreement.  The Company continues to believe that the State will ultimately repay the deficiency payments made by the Company under the Bradley Agreement. However, it has now been determined that the recovery of the deficiency payment represents a contingency and, accordingly, (i) the deficiency payments made by the Company under the Bradley Agreement should have been, and should continue to be, recorded as cost of parking services in the reporting periods in which such payments were made, and (ii) the payments to the Company of the principal, interest and premium related to deficiency payments should have been, and should continue to be, recognized as a reduction of cost of parking services in the reporting periods in which such repayments were received. This approach is different from the Company’s historical practice of reporting such deficiency payments as accounts receivable and interest and premium received as interest income.   The restatement of the Company’s historical consolidated financial statements to reflect its correction in accounting for deficiency payments under the Bradley Agreement is referred to herein as the “Restatement.”

 

In addition, during September 2013, the Company finalized the purchase price allocation for its acquisition of KCPC Holdings, Inc. (“KCPC”) on October 2, 2012.  As required by generally accepted accounting principles, the Company has recast the previously issued consolidated financial statements for the three and six months ended June 30, 2013 included in this Quarterly Report on Form 10-Q/A to reflect the impact of the final purchase allocation as if it were completed at the date of acquisition (referred to herein as the “Purchase Allocation Recast”).

 

For further information regarding the Restatement, see the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on November 18, 2013 (the “Restatement 8-K”), and for detailed financial information with respect to the Restatement and the Purchase Allocation Recast, see Note 2 of the notes to consolidated financial statements included in this Quarterly Report on Form 10-Q/A.

 

3



Table of Contents

 

The following items of the Form 10 - Q have been modified or revised in this Form 10-Q/A to reflect the Restatement and the Purchase Allocation Recast:

 

Part I.  Item 1.  Financial Statements;

Part I.  Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations; and

Part I.  Item 4.  Controls and Procedures.

 

The Company’s principal executive officer, principal financial officer and principal accounting officer have provided currently dated certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 in connection with this Amendment on Form 10-Q/A; the certifications are filed as Exhibits 31.1, 31.2, 31.3 and 32.

 

This amended Quarterly Report on Form 10 - Q/A sets forth the original Quarterly Report on Form 10 - Q in its entirety, except as required to reflect the effects of the Restatement and the Purchase Allocation Recast. Except for disclosures affected by the Restatement and the Purchase Allocation Recast, this amended Quarterly Report on Form 10 - Q/A speaks as of the original filing date of August 9, 2013 and does not modify or update disclosures in the Form 10 - Q, including the nature and character of such disclosures, to reflect events occurring or items discovered after the original filing date of the Form 10 - Q.

 

This amended Quarterly Report on Form 10 - Q/A should be read in conjunction with the Company’s other filings, as amended, made with the Securities and Exchange Commission subsequent to December 31, 2012, including the Restatement 8-K, the Company’s amended Annual Report on Form 10-K/A for the year ended December 31, 2012, as filed with the SEC on November 18, 2013 and the Company’s amended Form 10-Q/A for the quarterly period ended March 31, 2013, as filed with the SEC on November 18, 2013.

 

4



Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

STANDARD PARKING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for share and per share data)

 

 

 

June 30,
2013

 

December 31,
2012

 

 

 

(Unaudited)

 

(See Note)

 

 

 

(Restated)

 

(Restated)

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

20,457

 

$

28,450

 

Notes and accounts receivable, net

 

119,980

 

111,498

 

Prepaid expenses and supplies

 

18,524

 

27,823

 

Deferred taxes

 

15,265

 

15,265

 

Total current assets

 

174,226

 

183,036

 

Leasehold improvements, equipment, land and construction in progress, net

 

41,897

 

40,402

 

Other assets:

 

 

 

 

 

Advances and deposits

 

7,863

 

8,540

 

Intangible assets, net

 

180,725

 

197,344

 

Other assets, net

 

23,277

 

22,260

 

Cost of contracts, net

 

12,412

 

14,215

 

Goodwill

 

439,295

 

439,486

 

 

 

663,572

 

681,845

 

Total assets

 

$

879,695

 

$

905,283

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

120,857

 

$

129,034

 

Accrued and other current liabilities

 

94,698

 

109,300

 

Current portion of unfavorable lease contracts

 

15,856

 

17,467

 

Current portion of long-term debt obligations

 

21,559

 

21,837

 

Total current liabilities

 

252,970

 

277,638

 

Deferred taxes

 

18,661

 

19,079

 

Long-term borrowings, excluding current portion:

 

 

 

 

 

Obligations under senior credit facility

 

282,914

 

286,727

 

Other long-term debt obligations

 

1,914

 

1,995

 

 

 

284,828

 

288,722

 

Unfavorable lease contracts

 

66,726

 

74,758

 

Other long-term liabilities

 

63,312

 

58,086

 

Stockholders’ equity:

 

 

 

 

 

Preferred Stock, par value $0.01 per share; 5,000,000 shares authorized as of June 30, 2013 and December 31, 2012; no shares issued

 

 

 

Common stock, par value $.001 per share; 50,000,000 shares authorized as of June 30, 2013 and December 31, 2012; 21,906,254 and 21,870,770 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively

 

22

 

22

 

Additional paid-in capital

 

238,763

 

236,375

 

Accumulated other comprehensive (loss) income

 

508

 

(381

)

Accumulated deficit

 

(46,584

)

(49,768

)

Total Standard Parking Corporation stockholders’ equity

 

192,709

 

186,248

 

Noncontrolling interest

 

489

 

752

 

Total equity

 

193,198

 

187,000

 

Total liabilities and stockholders’ equity

 

$

879,695

 

$

905,283

 

 


Note:              The balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

 

See Notes to Condensed Consolidated Interim Financial Statements.

 

5



Table of Contents

 

STANDARD PARKING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except for share and per share data, unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30, 2013

 

June 30, 2012

 

June 30, 2013

 

June 30, 2012

 

 

 

(Restated – Note 2)

 

(Restated – Note 2)

 

Parking services revenue:

 

 

 

 

 

 

 

 

 

Lease contracts

 

$

123,232

 

$

42,414

 

$

244,317

 

$

79,958

 

Management contracts

 

88,659

 

44,372

 

178,754

 

92,336

 

 

 

211,891

 

86,786

 

423,071

 

172,294

 

Reimbursed management contract revenue

 

158,402

 

104,160

 

317,879

 

208,097

 

Total revenue

 

370,293

 

190,946

 

740,950

 

380,391

 

Cost of parking services:

 

 

 

 

 

 

 

 

 

Lease contracts

 

112,014

 

38,000

 

224,132

 

73,387

 

Management contracts

 

53,833

 

24,071

 

112,570

 

53,342

 

 

 

165,847

 

62,071

 

336,702

 

126,729

 

Reimbursed management contract expense

 

158,402

 

104,160

 

317,879

 

208,097

 

Total cost of parking services

 

324,249

 

166,231

 

654,581

 

334,826

 

Gross profit:

 

 

 

 

 

 

 

 

 

Lease contracts

 

11,218

 

4,414

 

20,185

 

6,571

 

Management contracts

 

34,826

 

20,301

 

66,184

 

38,994

 

Total gross profit

 

46,044

 

24,715

 

86,369

 

45,565

 

General and administrative expenses

 

26,868

 

14,868

 

54,816

 

29,913

 

Depreciation and amortization

 

8,252

 

1,807

 

15,745

 

3,535

 

Operating income

 

10,924

 

8,040

 

15,808

 

12,117

 

Other expenses (income):

 

 

 

 

 

 

 

 

 

Interest expense

 

4,763

 

1,132

 

9,603

 

2,262

 

Interest income

 

(128

)

(50

)

(239

)

(120

)

 

 

4,635

 

1,082

 

9,364

 

2,142

 

Income before income taxes

 

6,289

 

6,958

 

6,444

 

9,975

 

Income tax expense

 

2,065

 

2,801

 

1,911

 

4,016

 

Net income

 

4,224

 

4,157

 

4,533

 

5,959

 

Less: Net income attributable to noncontrolling interest

 

780

 

85

 

1,349

 

157

 

Net income attributable to Standard Parking Corporation

 

$

3,444

 

$

4,072

 

$

3,184

 

$

5,802

 

Common stock data:

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

$

0.26

 

$

0.15

 

$

0.37

 

Diluted

 

$

0.15

 

$

0.26

 

$

0.14

 

$

0.37

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

21,889,777

 

15,665,263

 

21,880,274

 

15,614,868

 

Diluted

 

22,221,102

 

15,900,659

 

22,195,953

 

15,860,668

 

 

See Notes to Condensed Consolidated Interim Financial Statements.

 

6



Table of Contents

 

STANDARD PARKING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30, 2013

 

June 30, 2012

 

June 30, 2013

 

June 30, 2012

 

 

 

(Restated – Note 2)

 

(Restated – Note 2)

 

Net income

 

$

4,224

 

$

4,157

 

$

4,533

 

$

5,959

 

Other comprehensive (expense) income, before tax

 

870

 

(80

)

889

 

6

 

Comprehensive income

 

5,094

 

4,077

 

5,422

 

5,965

 

Less: comprehensive income attributable to noncontrolling interest

 

780

 

85

 

1,349

 

157

 

Comprehensive income attributable to Standard Parking Corporation

 

$

4,314

 

$

3,992

 

$

4,073

 

$

5,808

 

 

See Notes to Condensed Consolidated Interim Financial Statements.

 

7



Table of Contents

 

STANDARD PARKING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except for share and per share data, unaudited)

 

 

 

Six Months Ended

 

 

 

June 30, 2013

 

June 30, 2012

 

 

 

(Restated – Note 2)

 

Operating activities:

 

 

 

 

 

Net income

 

$

4,533

 

$

5,959

 

Adjustments to reconcile net income to net cash provided by operations:

 

 

 

 

 

Depreciation and amortization

 

15,170

 

3,496

 

Net accretion of acquired lease contracts

 

(3,013

)

 

Loss on sale and abandonment of assets

 

590

 

41

 

Amortization of debt issuance costs and original issue discount on borrowings

 

1,445

 

311

 

Non-cash stock-based compensation

 

2,468

 

863

 

Excess tax benefit related to stock option exercises

 

 

(221

)

Provisions for losses on accounts receivable

 

149

 

92

 

Deferred income taxes

 

(1,052

)

1,125

 

Net change in operating assets and liabilities

 

(13,283

)

(1,986

)

Net cash provided by operating activities

 

7,007

 

9,680

 

Investing activities:

 

 

 

 

 

Purchase of leasehold improvements and equipment

 

(7,906

)

(1,863

)

Cost of contracts purchased

 

(337

)

(237

)

Proceeds from sale of assets

 

52

 

15

 

Capitalized interest

 

 

(8

)

Contingent payments for businesses acquired

 

 

(46

)

Net cash used in investing activities

 

(8,191

)

(2,139

)

Financing activities:

 

 

 

 

 

Proceeds from exercise of stock options

 

 

154

 

Earn-out payments made

 

(142

)

(1,525

)

Tax benefit related to stock option exercises

 

 

221

 

Payments on term loan

 

(11,250

)

 

Borrowings from senior credit facility

 

6,850

 

(10,000

)

Distribution to noncontrolling interest

 

(1,612

)

(128

)

Payments on long-term borrowings

 

(383

)

(345

)

Net cash used in financing activities

 

(6,537

)

(11,623

)

Effect of exchange rate changes on cash and cash equivalents

 

(272

)

(83

)

Decrease in cash and cash equivalents

 

(7,993

)

(4,165

)

Cash and cash equivalents at beginning of period

 

28,450

 

13,220

 

Cash and cash equivalents at end of period

 

$

20,457

 

$

9,055

 

Supplemental disclosures:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

8,179

 

$

1,779

 

Income taxes

 

1,062

 

2,813

 

 

See Notes to Condensed Consolidated Interim Financial Statements.

 

8



Table of Contents

 

STANDARD PARKING CORPORATION

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(In thousands except for share and per share data, unaudited)

 

1. Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of Standard Parking Corporation (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q/A and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements.

 

In the opinion of management, all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair presentation of the financial position and results of operations have been included. Operating results for the three and six-month periods ended June 30, 2013 are not necessarily indicative of the results that might be expected for any other interim period or the fiscal year ended December 31, 2013. The financial statements presented in this report should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K/A filed on November 18, 2013.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and variable interest entities in which the Company is the primary beneficiary. Noncontrolling interest recorded in the consolidated statement of income is the interest in consolidated variable interest entities not held by the Company. The Company has ownership interests in thirty-eight partnerships, joint ventures or similar arrangements that operate parking facilities. Twenty-nine are Variable Interest Entities (VIE) and nine are voting interest model entities where the company’s ownership ranges from 20-50% and it does not control the entities. The Company consolidates those VIEs where it is the primary beneficiary and accounts for voting interest entities that it does not control using the equity method of accounting. The assets and liabilities of the VIEs are not material to the Company’s Consolidated Balance Sheets. All significant intercompany profits, transactions and balances have been eliminated in consolidation.

 

Financial Instruments

 

The carrying values of cash and cash equivalents, notes and accounts receivable and accounts payable are reasonable estimates of their fair value due to the short-term nature of these financial instruments. Long-term debt has a carrying value that approximates fair value because these instruments bear interest at market rates.

 

Interest Rate Swaps

 

We do not enter into derivative instruments for any purpose other than cash flow hedging purposes.

 

On October 25, 2012, the Company entered into Interest Rate Swap transactions (collectively, the “Interest Rate Swaps”) with each of JPMorgan Chase Bank, N.A. (“JPMorgan Chase Bank”), Bank of America, N.A. (“Bank of America”) and PNC Bank, N.A. in an initial aggregate Notional Amount of $150,000 (the “Notional Amount”). The Interest Rate Swaps have an effective date of October 31, 2012 and a termination date of September 30, 2017. The Interest Rate Swaps effectively fix the interest rate on an amount of variable interest rate borrowings under the Credit Agreement (“the Credit Agreement”), originally equal to the Notional Amount at 0.7525% per annum plus the applicable margin rate for LIBOR loans under the Credit Agreement determined based upon the Company’s consolidated total debt to EBITDA ratio. The Notional Amount is subject to scheduled quarterly amortization that coincides with quarterly prepayments of principal under the Credit Agreement. These Interest Rate Swaps are classified as cash flow hedges, and we calculate the effectiveness of the hedge on a monthly basis. The ineffective portion of the cash flow hedge is recognized in earnings as an increase of interest expense. As of June 30, 2013, no ineffectiveness of the hedge has been recognized. The fair value of the Interest Rate Swaps at June 30, 2013 and December 31, 2012 was an asset of $1,142 and a liability of $794, respectively, and is included in prepaid expenses at June 30, 2013 and other long-term liabilities at December 31, 2012.

 

2. Revisions to Previously Issued Consolidated Financial Statements

 

We have revised our previously issued consolidated financial statements to reflect (a) the finalization of purchase accounting and (b) a change in our accounting for our contract related to the Bradley Airport as described in Note 11 (the “Bradley Agreement”) and certain other adjustments.

 

Purchase Accounting Finalization

 

As described in Note 3 of these consolidated financial statements, we purchased KCPC Holdings, Inc. (“KCPC”) on October 2, 2012.  During September 2013 we finalized the purchase price allocation (“PPA”) for this acquisition.  We have recast our previously issued consolidated financial statements to reflect the impact of the final purchase allocation as if it was completed at the date of acquisition.    The impact of the finalization of the purchase price allocation is reflected in the table shown below.

 

Restatement of Accounting

 

We have restated our consolidated financial statements to correct the accounting for certain transactions.  The restatement is primarily related to the accounting for the agreement under which we operate the Bradley International Airport.

 

We account for the Bradley Agreement, which is described in detail in Note 11 of these consolidated financial statements, as a management agreement.  We have historically recognized an accounts receivable for deficiency payments  that we have made under the Bradley Agreement as we believed based on the Bradley Agreement that we will ultimately receive these amounts.  However, while we continue to believe that these amounts are ultimately collectible we have concluded that the collection of these amounts represent a contingency related to the contract and should be recorded when received. The impact of the restatement is reflected in the table shown below.

 

Impact of the Revisions

 

The following tables summarize the most significant impacts of the changes described above.

 

 

 

As originally
reported

 

Impact of
Purchase Price
Allocation

Finalization

 

As Recast for
Purchase Price
Allocation
Finalization

 

Impact of
Restatement

 

As Revised

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2013

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

172,997

 

788

 

173,785

 

441

 

174,226

 

Long-term receivables, net

 

14,989

 

 

14,989

 

(14,989

)

 

Intangible assets, net

 

160,231

 

20,494

 

180,725

 

 

180,725

 

 

9



Table of Contents

 

Goodwill

 

433,877

 

5,418

 

439,295

 

 

439,295

 

Total assets

 

867,413

 

26,802

 

894,215

 

(14,520

)

879,695

 

Total current liabilities

 

249,959

 

3,011

 

252,970

 

 

252,970

 

Unfavorable lease contracts

 

37,622

 

29,104

 

66,726

 

 

66,726

 

Deferred tax liabilities

 

28,043

 

(3,822

)

24,221

 

5,560

 

18,661

 

Accumulated deficit

 

(36,134

)

(1,491

)

(37,625

)

(8,959

)

(46,584

)

Total Standard Parking Corporation stockholders’ equity

 

203,159

 

(1,491

)

201,668

 

(8,959

)

192,709

 

Total liabilities and shareholders’ equity

 

867,413

 

26,802

 

894,215

 

(14,520

)

879,695

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME STATEMENT

 

 

 

 

 

 

 

 

 

 

 

For six months ended June 30, 2013

 

 

 

 

 

 

 

 

 

 

 

Total cost of parking services

 

653,932

 

1,066

 

654,998

 

(417

)

654,581

 

Total gross profit

 

86,369

 

(417

)

85,952

 

417

 

86,369

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

16,293

 

(780

)

15,513

 

295

 

15,808

 

Income before income taxes

 

6,822

 

(780

)

6,042

 

402

 

6,444

 

Income tax (benefit) expense

 

2,095

 

(327

)

1,768

 

143

 

1,911

 

Net income

 

4,727

 

(453

)

4,274

 

259

 

4,533

 

 

10



Table of Contents

 

For six months ended June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

Parking services revenue:

 

 

 

 

 

 

 

 

 

 

 

Total cost of parking services

 

333,994

 

 

333,994

 

832

 

334,826

 

Total gross profit

 

46,397

 

 

46,397

 

(832

)

45,565

 

Operating income

 

12,949

 

 

12,949

 

(832

)

12,117

 

Income before income taxes

 

10,892

 

 

10,892

 

(917

)

9,975

 

Income tax (benefit) expense

 

4,384

 

 

4,384

 

(368

)

4,016

 

Net income

 

6,508

 

 

6,508

 

(549

)

5,959

 

 

 

 

 

 

 

 

 

 

 

 

 

For three months ended June 30, 2013

 

 

 

 

 

 

 

 

 

 

 

 

11



Table of Contents

 

Total cost of parking services

 

324,621

 

448

 

325,069

 

(820

)

324,249

 

Total gross profit

 

45,672

 

(448

)

45,224

 

820

 

46,044

 

Operating income

 

10,729

 

(625

)

10,104

 

820

 

10,924

 

Income before income taxes

 

6,154

 

(625

)

5,529

 

760

 

6,289

 

Income tax (benefit) expense

 

2,049

 

(262

)

1,787

 

278

 

2,065

 

Net income

 

4,105

 

(364

)

3,741

 

483

 

4,224

 

 

 

 

 

 

 

 

 

 

 

 

 

For three months ended June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

Total cost of parking services

 

166,178

 

 

166,178

 

53

 

166,231

 

Total gross profit

 

24,768

 

 

24,768

 

(53

)

24,715

 

Operating income

 

8,093

 

 

8,093

 

(53

)

8,040

 

 

12



Table of Contents

 

Income before income taxes

 

7,096

 

 

7,096

 

(138

)

6,958

 

Income tax (benefit) expense

 

2,856

 

 

2,856

 

(55

)

2,801

 

Net income

 

4,240

 

 

4,240

 

(83

)

4,157

 

 

We had a $0.02 and $0.01 increase to our net income per share-basic and diluted, respectively, as a result of the restatement of accounting for the Bradley Agreement and a $0.02 reduction to our net income per share-basic and diluted for the purchase price finalization for KCPC for the six months ended June 30, 2013.  Our net income per share-basic and diluted for the same period, after giving effect to the purchase price finalization for KCPC, was $0.13, compared to $0.15, as originally reported.  Our net income per share-basic and diluted for the same period, after giving effect to the purchase price finalization for KCPC and the restatement of accounting for the Bradley Agreement was $0.15 and $0.14, respectively, compared to $0.15 for both basic and diluted net income per share, as originally reported.

 

We had a $0.04 and $0.03 reduction to our net income per share-basic and diluted, respectively, as a result of our restatement of accounting for the Bradley Agreement for the six months ended June 30, 2012.  Our net income per share-basic and diluted for the same period, after giving effect to the restatement of accounting for the Bradley Agreement was $0.37, compared to $0.41 and $0.40, respectively, as originally reported.

 

We had a $0.02 increase to our net income per share-basic and diluted, as a result of the restatement of accounting for the Bradley Agreement and a $0.01 and $0.02 reduction to our net income per share-basic and diluted, respectively, for the purchase price finalization for KCPC for the three months ended June 30, 2013.  Our net income per share-basic and diluted for the same period, after giving effect to the purchase price finalization for KCPC, was $0.14 and $0.13, respectively, compared to $0.15 for both basic and diluted net income per share, as originally reported.  Our net income per share-basic and diluted for the same period, after giving effect to the purchase price finalization for KCPC and the restatement of accounting for the Bradley Agreement was $0.16 and $0.15, respectively, compared to $0.15 for both basic and diluted net income per share, as originally reported.

 

We had a $0.01 reduction and $nil effect to our net income per share-basic and diluted, respectively, as a result of our restatement of accounting for the Bradley Agreement for the three months ended June 30, 2012.  Our net income per share-basic and diluted for the same period, after giving effect to the restatement of accounting for the Bradley Agreement was $0.26, compared to $0.27 and $0.26, respectively, as originally reported.

 

Net income attributable to Standard Parking Corporation, within the Consolidated Statements of Income, and other comprehensive income and comprehensive income attributable to Standard Parking Corporation, within the Consolidated Statements of Comprehensive Income, was only effected by the change in net income as a result of the purchase price finalization for KCPC and the restatement of accounting for the Bradley Agreement for the three and six- months ended June 30, 2013 and the restatement of accounting for the Bradley Agreement for the three and six- months ended June 30, 2012.

 

The effect of the restatement had no impact to our net cash provided by operating activities, net cash provided by (used in) investing activities or net cash used in financing activities, within the Consolidated Statements of Cash Flows, for the three and six- months ended June 30, 2013 and 2012.

 

The notes to these consolidated financial statements have been revised, as needed, to reflect the impact of the purchase price finalization for KCPC and the restatement of accounting for the Bradley Agreement, as previously discussed above.

 

3. Acquisition

 

On October 2, 2012 (“Closing Date”), we completed our acquisition (the “Central Merger”) of 100% of the outstanding common shares of KCPC Holdings, Inc. (“KCPC”), which was the ultimate parent of Central Parking Corporation (“Central”) for 6,161,332 shares of our common stock and the assumption of $217,675 of Central’s debt net of cash acquired. Additionally, Central’s former stockholders will be entitled to receive cash consideration of $27,000, subject to adjustment, to be paid three years after closing to the extent it is not used to satisfy certain obligations that the Company has been indemnified for, by or from the former Central shareholders. The Company financed the acquisition through additional borrowings under the Senior Credit Facility (defined in Note 12).

 

13



Table of Contents

 

Pursuant to the Central Merger agreement, we are entitled to indemnification from the former stockholders of KCPC if and to the extent Central’s combined net debt and the absolute value of Central’s working capital (as determined in accordance with the Merger Agreement) (the “Net Debt Working Capital”) exceeded $285,000 as of September 30, 2012.  While we have not made a formal indemnity claim under the Merger Agreement relating to Net Debt Working Capital, the Net Debt Working Capital was $300,546 as of September 30, 2012 and, accordingly, the Net Debt Working Capital exceeded $285,000 by $15,546.

 

Central Net Debt Working Capital at September 30, 2012 as defined in the Merger Agreement 

 

$

(300,546

)

Threshold

 

285,000

 

Excess over the threshold

 

(15,546

)

Cash consideration payable in three years

 

27,000

 

Cash consideration

 

$

11,454

 

Present value of cash consideration at the acquisition date

 

$

8,943

 

 

Accordingly, the fair value of the final consideration transferred to acquire all of Central’s outstanding stock at the acquisition date is as follows:

 

Stock consideration

 

$

140,726

 

Present value of cash consideration to be issued

 

8,943

 

Total consideration transferred

 

$

149,669

 

 

The Company incurred certain acquisition and integration related costs associated with the transaction that were expensed as incurred and are reflected in the Condensed Consolidated Statements of Income. The Company recognized $3,093 and $7,317 of these costs in its Condensed Consolidated Statement of Income for the three and six months ended June 30, 2013 in general and administrative expenses, respectively.

 

The acquisition has been accounted for using the acquisition method of accounting (in accordance with the provisions of ASC 805, Business Combinations ) which requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.

 

14



Table of Contents

 

The purchase price has been allocated based on the estimated fair value of net assets acquired and liabilities assumed at the date of the acquisition.  We have previously reported our preliminary purchase price allocation.  We have subsequently finalized the purchase price allocation, which resulted in revision to the previously reported preliminary amounts.  The revisions to the purchase price allocation were applied retrospectively back to the date of the acquisition as reflected in the Company’s restated consolidated financial statements included in our Form 10-K/A filed on November 18, 2013.

 

The following table summarizes the fair values of the assets acquired and liabilities assumed in the acquisition as previously reported based on the preliminary allocation and as finalized:

 

 

 

Preliminary
Amounts (a)

 

Amount as
finalized

 

Net current liabilities

 

$

(28,041

)

$

(25,444

)

Leasehold improvements, equipment, land and construction in progress, net

 

24,154

 

24,781

 

Identified intangible assets:

 

 

 

 

 

Management contracts

 

81,000

 

81,000

 

Favorable lease contracts

 

51,650

 

80,235

 

Trade name / trademarks

 

14,900

 

9,100

 

Existing technology

 

34,000

 

34,000

 

Non-competition agreements

 

2,600

 

2,600

 

Other noncurrent assets

 

17,748

 

17,748

 

Long-term debt

 

(237,223

)

(237,223

)

Unfavorable lease contracts

 

(69,316

)

(101,676

)

Other noncurrent liabilities

 

(19,523

)

(19,523

)

Net long-term deferred tax liability

 

(24,516

)

(22,528

)

Net liabilities assumed

 

(152,567

)

(156,930

)

Goodwill

 

302,236

 

306,599

 

Total consideration transferred

 

$

149,669

 

$

149,669

 

 


(a) These amounts reflect the reclassification of net long-term deferred tax liabilities of $24,434 from net current liabilities to net long term deferred tax liability.

 

The acquired management contracts are being amortized over a weighted average life of 16 years. The favorable and unfavorable lease contracts are being amortized over their contractual lives which results in a weighted average life of 10 and 7 years, respectively. The trade names and trademarks are being amortized over 4 years. The non-compete agreements are being amortized over 1 year. The existing technology is being amortized over 4.5 years. See Note 8 for further disclosure regarding the amortization of the intangible assets.

 

Goodwill is calculated as the excess of the consideration transferred over the fair value of net assets acquired. Goodwill is not amortized and is not deductible for tax purposes. Goodwill represents expected synergies with the Company’s existing operations, which include growth of new and existing customers, elimination of corporate overhead redundancies, and logistical improvements.

 

A single estimate of fair value results from a complex series of the Company’s judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations.

 

4. Stock-Based Compensation

 

We measure share-based compensation expense at the grant date, based on the fair value of the award, and the expense is recognized over the requisite employee service period (the vesting period) for awards expected to vest (considering estimated forfeitures).

 

The Company has an amended and restated Long-Term Incentive Plan that was adopted in conjunction with our initial public offering. On April 24, 2013, our shareholders approved an amendment to our Long-Term Incentive Plan that increased the maximum number of shares of common stock available for awards under the Long-Term Incentive Plan from 2,175,000 shares to 2,975,000 shares.  The Plan terminates on April 22, 2028. Forfeited and expired options under the Plan become generally available for reissuance. At June 30, 2013, 673,069 shares remained available for award under the Plan.

 

15



Table of Contents

 

Stock Options and Grants

 

We use the Black-Scholes option-pricing model to estimate the fair value of each option grant as of the date of grant. The volatilities are based on the 90-day historical volatility of our common stock as of the grant date. The risk free interest rate is based on zero-coupon U.S. government issues with a remaining term equal to the expected life of the option.

 

There were no options granted during the six months ended June 30, 2013 and 2012. The Company recognized no stock-based compensation expense related to stock options for the six months ended June 30, 2013 and 2012, as all options previously granted were fully vested. As of June 30, 2013, there were no unrecognized compensation costs related to unvested options.

 

On April 24, 2013, the Company authorized vested stock grants to certain directors totaling 21,949 shares. The total value of the grant, based on the fair value of the stock on the grant date, was $465 and is included in general and administrative expenses.

 

Restricted Stock Units

 

In March 2008, the Company’s Compensation Committee and the Board of Directors authorized a grant of 750,000 restricted stock units that subsequently were awarded to members of our senior management team on July 1, 2008. In November 2008, an additional 5,000 restricted stock units were awarded. The restricted stock units vest primarily in one-third installments on each of the tenth, eleventh and twelfth year anniversaries of the grant date. The restricted stock unit agreements provide for accelerated vesting upon the recipient reaching their retirement age.

 

In October 2012, the Company’s Board of Directors authorized a grant of 191,895 restricted stock units that were awarded to our senior management team. In June 2013, an additional 4,247 restricted stock units were awarded. The restricted stock units vest in one-third installments on each of the first, second and third anniversaries of the grant date. The restricted stock unit agreements were awarded to members of the executive team who played a key role in the due diligence and subsequent planning that led to the successful closing of the Central Merger as well as retention of the team through the integration period. The restricted stock units vest over a three-year period. Additionally in October 2012, as part of employment agreements, 30,529 restricted stock units were awarded and shall become vested on the third anniversary of the Grant Date.

 

The fair value of restricted stock units is determined using the fair value of our common stock on the date of the grant, and compensation expense is recognized over the vesting period. In accordance with the guidance related to share-based payments, we estimated forfeitures at the time of the grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate pre-vesting forfeitures and record stock-based compensation expense only for those awards that are expected to vest.

 

During the three and six months ended June 30, 2013, 27,000 restricted stock units vested. During the three and six months ended June 30, 2012, 104,000 and 146,000 restricted stock units vested, respectively.  No restricted stock units were forfeited.

 

The Company recognized $1,017 and $2,059 of stock-based compensation expense related to the restricted stock units for the three and six months ended June 30, 2013, respectively, which is included in general and administrative expenses.  The Company recognized $257 and $618 of stock-based compensation expenses related to restricted stock units for the three and six months ended June 30, 2012, respectively, which is included in general and administrative expenses.  As of June 30, 2013, there was $7,095 of unrecognized stock-based compensation costs, net of estimated forfeitures, related to the restricted stock units that are expected to be recognized over a weighted average remaining period of approximately 3.9 years.

 

5. Net Income Per Common Share

 

Companies are required to present basic and diluted earnings per share. Basic net income per share is computed by dividing net income by the weighted daily average number of shares of common stock outstanding during the period. Diluted net income per share is based upon the weighted daily average number of shares of common stock outstanding for the period plus dilutive potential common shares, including stock options and restricted stock units using the treasury-stock method.

 

16



Table of Contents

 

A reconciliation of the weighted average basic common shares outstanding to the weighted average diluted common shares outstanding is as follows (unaudited):

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

Restated

 

Restated

 

Restated

 

Restated

 

Weighted average common basic shares outstanding

 

21,889,777

 

15,665,263

 

21,880,274

 

15,614,868

 

Effect of dilutive stock options and restricted stock units

 

331,325

 

235,396

 

315,679

 

245,800

 

Weighted average common diluted shares outstanding

 

22,221,102

 

15,900,659

 

22,195,953

 

15,860,668

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

$

0.26

 

$

0.15

 

$

0.37

 

Diluted

 

$

0.15

 

$

0.26

 

$

0.14

 

$

0.37

 

 

There are no additional securities that could dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share, other than those disclosed.

 

6. Recently Issued Accounting Pronouncements

 

Accounting Standards Adopted

 

In July 2012, the FASB issued ASU 2012-2, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This update provides an entity with the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired and then determine whether it should perform a quantitative impairment test. The amendment is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 with early adoption permitted. Although the Company has not performed its annual impairment test, we adopted the guidance in 2013 and do not expect the adoption to have a material effect on the Company’s financial position, results of operations or cash flows.

 

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220), which deferred the effective date for applying ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, in respect of certain provisions relating to the presentation of separate line items on the income statement for reclassifications of items out of accumulated other comprehensive income into income, in order for the FASB to further evaluate this change in standard before implementation. The deferral is temporary and other provisions of ASU 2011-05 were effective for the Company beginning January 1, 2012. The adoption of this update impacted the presentation and disclosure of the Company’s financial statements but did not impact the Company’s results of operations, financial position, or cash flows.

 

In December 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. This update requires additional disclosures about offsetting and related arrangements on assets and liabilities to enable users of financial statements to understand the effect of such arrangements on an entity’s financial position as reported. This amendment is effective for fiscal 2013. We adopted the guidance in the first quarter of 2013 and it did not have a material effect on the Company’s financial position, results of operations or cash flows.

 

7. Leasehold Improvements, Equipment, Construction in Progress and Land, Net

 

A summary of leasehold improvements, equipment, and construction in progress and related accumulated depreciation and amortization is as follows:

 

 

 

 

 

June 30, 2013

 

December 31, 2012

 

 

 

Ranges of Estimated Useful Life

 

(Unaudited)

 

 

 

Equipment

 

2 - 5 Years

 

$

30,450

 

$

28,498

 

Software

 

3 - 10 Years

 

16,225

 

15,031

 

Vehicles

 

4 Years

 

7,240

 

9,353

 

Other

 

10 Years

 

516

 

367

 

Leasehold improvements

 

Shorter of lease term or economic life up to 10 years

 

18,450

 

17,920

 

Construction in progress

 

 

 

4,691

 

2,086

 

 

 

 

 

77,572

 

73,255

 

Less accumulated depreciation and amortization

 

 

 

(37,974

)

(35,152

)

 

 

 

 

39,598

 

38,103

 

Land

 

 

 

2,299

 

2,299

 

Leasehold improvements, equipment, land and construction in progress, net

 

 

 

$

41,897

 

$

40,402

 

 

17



Table of Contents

 

Depreciation expense was $2,646 and $5,505 for the three and six months ended June 30, 2013, respectively. Depreciation expense was $1,121 and $2,163 for the three and six months ended June 30, 2012, respectively. Depreciation includes losses on sale and abandonment of leasehold improvements and equipment of $675 and $671 for the three and six months ended June 30, 2013, respectively.  Depreciation includes gains on sale and abandonment of leasehold improvements and equipment of $44 and $48 for the three and six months ended June 30, 2012, respectively.

 

18



Table of Contents

 

8. Cost of Contracts, Net

 

Cost of contracts represents the contractual rights associated with providing parking services at a managed or leased facility. Cost consists of capitalized payments made to third parties, amortized over the estimated life of the contracts, including anticipated renewals and terminations.

 

The balance of cost of contracts is comprised of the following:

 

 

 

June 30, 2013

 

December 31, 2012

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

Cost of contracts

 

$

26,357

 

$

26,599

 

Accumulated amortization

 

(13,945

)

(12,384

)

Cost of contracts, net

 

$

12,412

 

$

14,215

 

 

Amortization expense related to cost of contracts was $672 and $1,362 for the three and six months ended June 30, 2013, respectively. Amortization expense related to cost of contracts was $611 and $1,219 for the three and six months ended June 30, 2012, respectively. The weighted average useful life is 9.5 years for 2013 and 9.5 years for 2012.

 

9. Intangible Assets, Net

 

The balance of intangible assets is comprised of the following:

 

 

 

June 30,
2013

 

December
31, 2012

 

 

 

(Unaudited)

 

 

 

Covenant not to compete

 

$

3,533

 

$

3,533

 

Trade names

 

9,820

 

9,820

 

Proprietary know how

 

34,650

 

34,650

 

Lease contract rights

 

80,235

 

80,235

 

Management contract rights

 

81,000

 

81,000

 

Accumulated amortization

 

(28,513

)

(11,894

)

Intangible assets, net

 

$

180,725

 

$

197,344

 

 

Amortization expense related to intangible assets included in depreciation and amortization was $5,020 and $8,975 for the three and six months ended June 30, 2013, respectively. Amortization for lease contracts rights was $3,015 and $6,760 for the three and six months ended June 30, 2013, respectively, and is included in cost of parking services of lease contracts. There was no amortization for lease contracts included in cost of parking services for lease contracts for the three and six months ended June 30, 2012.

 

10. Goodwill

 

Goodwill is assigned to reporting units based upon the specific region where the assets are acquired and associated goodwill resided.

 

19



Table of Contents

 

The following table reflects the changes in the carrying amounts of goodwill by reportable segment for the six months ended June 30, 2013 (unaudited):

 

 

 

Region
One

 

Region
Two

 

Region
Three

 

Region
Four

 

Region
Five

 

Total

 

Balance as of December 31, 2012

 

$

193,758

 

$

32,245

 

$

66,181

 

$

62,621

 

$

84,681

 

$

439,486

 

Contingent payments related to acquisitions

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

 

 

 

(191

)

 

 

 

 

(191

)

Balance as of June 30, 2013

 

$

193,758

 

$

32,245

 

$

65,990

 

$

62,621

 

$

84,681

 

$

439,295

 

 

11. Bradley Agreement

 

We entered into a 25-year agreement with the State of Connecticut that expires on April 6, 2025, under which we operate the surface parking and 3,500 garage parking spaces at Bradley International Airport (“Bradley”) located in the Hartford, Connecticut metropolitan area. The Company manages the facility for which it is expected to receive a contingent management fee.

 

The parking garage was financed on April 6, 2000 through the issuance of $53,800 of State of Connecticut (“State”) special facility revenue bonds, representing $47,700 non-taxable Series A bonds and a separate taxable issuance of $6,100 Series B bonds. The Series B bonds were retired on July 1, 2006 according to the terms of the indenture. The Bradley Agreement provides that we deposit with a trustee for the bondholders all gross revenues collected from operations of the surface and garage parking, and from these gross revenues, the trustee pays debt service on the special facility revenue bonds outstanding, operating and capital maintenance expenses of the surface and garage parking facilities excluding our management fee discussed below, and specific annual guaranteed minimum payments to the State. Principal and interest on the Bradley special facility revenue bonds increase from approximately $3,600 in contract year 2002 to approximately $4,500 in contract year 2025. Annual guaranteed minimum payments to the State will increase from approximately $8,300 in contract year 2002 to approximately $13,200 in contract year 2024. The annual minimum guaranteed payment to the State by the trustee for the three and six months ended June 30, 2013 and 2012 was $5,241 and $5,134, respectively.

 

20



Table of Contents

 

All of the cash flow from the parking facilities is pledged to the security of the special facility revenue bonds and is collected and deposited with the bond trustee. Each month the bond trustee makes certain required monthly distributions, which are characterized as “Guaranteed Payments.” To the extent the monthly gross receipts generated by the parking facilities are not sufficient for the trustee to make the required Guaranteed Payments, we are obligated to deliver the deficiency amount to the trustee. Additionally, the Guaranteed Payments are required to be paid before we are reimbursed for deficiency payments or management fees. We record deficiency payments made as additional cost of parking services.

 

The following is the list of Guaranteed Payments:

 

·              Garage and surface operating expenses,

 

·              Principal and interest on the special facility revenue bonds,

 

·              Trustee expenses,

 

·              Major maintenance and capital improvement deposits, and

 

·              State Minimum Guarantee.

 

However, to the extent there is a cash surplus in any month during the term of the Bradley Agreement, we have the right to be repaid the principal amount of any and all deficiency payments previously made, together with actual interest expenses and a premium, not to exceed 10% of the initial deficiency payment. We calculate and record interest income and premium income along with deficiency principal repayments as a reduction of cost of parking services in the period the associated deficiency payment is received from the trustee.

 

Deficiency Payments

 

To the extent that monthly gross receipts are not sufficient for the trustee to make the required payments, we are obligated pursuant to our agreement to deliver the deficiency amount to the trustee within three business days of being notified. We are responsible for these deficiency payments regardless of the amount of utilization for the Bradley parking facilities. The deficiency payments represent contingent interest bearing advances to the trustee to cover operating cash flow requirements. To the extent sufficient funds are available in the appropriate fund, the trustee is then directed by the State to reimburse us for deficiency payments up to the amount of the calculated surplus.

 

The total deficiency payments we have made, net of reimbursements, as of June 30, 2013 and December 31, 2012:

 

 

 

June 30,
2013

 

December 31,
2012

 

 

 

(Unaudited)

 

 

 

Balance at beginning of year

 

$

14,598

 

$

13,407

 

Deficiency payments made

 

403

 

1,658

 

Deficiency repayment received

 

(760

)

(467

)

Balance at end of period

 

$

14,241

 

$

14,598

 

 

In the six months ended June 30, 2013, we received deficiency repayments (net of deficiency payments made) of $357. In addition, we received $60 of interest income related to deficiency repayments from the trustee. In the six months ended June 30, 2012, we made deficiency payments (net of repayments received) of $917 and received $85 for interest income related to deficiency repayments from the trustee.

 

We believe these advances to be fully recoverable as the Construction, Financing and Operating Special Facility Lease Agreement, which governs reimbursement of Guarantor Payments, places no time restriction on the Company’s right to reimbursement. The payment of principal, interest and premium will be recorded when received. We do not directly guarantee the payment of any principal or interest on any debt obligations of the State of Connecticut or the trustee.

 

Compensation

 

In addition to the recovery of certain general and administrative expenses incurred, the Bradley Agreement provides for an annual management fee payment that is based on three operating profit tiers calculated for each year during the term of the agreement. The management fee is further apportioned 60% to us and 40% to an un-affiliated entity. To the extent that funds are available for the trustee to make a distribution, the annual management fee is paid when sufficient cash is available after the Guaranteed Payments (as defined in our agreement) are paid, and after the repayment of all deficiency payments, including accrued interest and premium. However, our right to the management fee accrues each year during the term of the agreement and is paid when sufficient cash is available for the trustee to make a distribution.

 

The annual management fee is paid after the repayment of all deficiency payments, including accrued interest and premium.

 

21



Table of Contents

 

Cumulative management fees of approximately $9,000 have not been recognized as of June 30, 2013, and no management fee income was recognized during the six months ended June 30, 2013 and 2012.

 

12. Borrowing Arrangements

 

Long-term borrowings, in order of preference, consist of:

 

 

 

 

 

Amount Outstanding

 

 

 

Maturity Date

 

June 30,
2013

 

December 31,
2012

 

 

 

 

 

(Unaudited)

 

 

 

Senior credit facility, net of discount

 

October 2, 2017

 

$

304,191

 

$

307,939

 

Other obligations

 

Various

 

2,196

 

2,620

 

Total debt

 

 

 

306,387

 

310,559

 

Less current portion

 

 

 

21,559

 

21,837

 

Total long-term debt

 

 

 

$

284,828

 

$

288,722

 

 

Senior Credit Facility

 

In connection with the Central Merger, on the Closing Date, the Company entered into a Credit Agreement with Bank of America, as administrative agent, Wells Fargo Bank, N.A. (“Wells Fargo Bank”) and JPMorgan Chase Bank, as co-syndication agents, U.S. Bank National Association, First Hawaiian Bank and General Electric Capital Corporation, as co-documentation agents, Merrill Lynch, Pierce, Fenner & Smith Inc., Wells Fargo Securities, LLC and J.P. Morgan Securities LLC, as joint lead arrangers and joint book managers, and the lenders party thereto (the “Lenders”).

 

Pursuant to the terms, and subject to the conditions, of the Credit Agreement, the Lenders have made available to the Company a new secured Senior Credit Facility (the “Senior Credit Facility”) that permits aggregate borrowings of $450,000 consisting of (i) a revolving credit facility of up to $200,000 at any time outstanding, which includes a letter of credit facility that is limited to $100,000 at any time outstanding, and (ii) a term loan facility of $250,000. The Senior Credit Facility matures on October 2, 2017.

 

The entire amount of the term loan portion of the Senior Credit Facility was drawn by the Company on the Closing Date and is subject to scheduled quarterly payments of principal based on the following annualized amounts: (i) $22,500 in the first year, (ii) $22,500 in the second year, (iii) $30,000 in the third year, (iv) $30,000 in the fourth year and (v) $37,500 in the fifth year. The Company also borrowed $72,800 under the revolving credit facility on the Closing Date. The proceeds from these borrowings were used by the Company to repay outstanding indebtedness of the Company and Central, and will also be used to pay costs and expenses related to the Central Merger and the related financing and fund ongoing working capital and other general corporate purposes. At June 30, 2013, the Company had $304,191 outstanding on the Senior Credit Facility, net of unamortized discount.

 

Borrowings under the Senior Credit Facility bear interest, at the Company’s option, (i) at a rate per annum based on the Company’s consolidated total debt to EBITDA ratio for the 12-month period ending as of the last day of the immediately preceding fiscal quarter, determined in accordance with the applicable pricing levels set forth in the Credit Agreement (the “Applicable Margin”) for LIBOR loans, plus the applicable LIBOR rate or (ii) the Applicable Margin for base rate loans plus the highest of (x) the federal funds rate plus 0.5%, (y) the Bank of America prime rate and (z) a daily rate equal to the applicable LIBOR rate plus 1.0%.

 

Under the terms of the Credit Agreement, the Company is required to maintain a maximum consolidated total debt to EBITDA ratio of not greater than 4.5:1.0 (with certain step-downs described in the Credit Agreement). In addition, the Company is required to maintain a minimum consolidated fixed charge coverage ratio of not less than 1:25:1.0 (with certain step-ups described in the Credit Agreement).

 

Events of default under the Credit Agreement include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, the occurrence of any cross default event, non-compliance with other loan documents, the occurrence of a change of control event, and bankruptcy and other insolvency events. If an event of default occurs and is continuing, the Lenders holding a majority of the commitments and outstanding term loan under the Credit Agreement have the right, among others, to (i) terminate the commitments under the Credit Agreement, (ii) accelerate and require the Company to repay all the outstanding amounts owed under the Credit Agreement and (iii) require the Company to cash collateralize any outstanding letters of credit.

 

22



Table of Contents

 

Each wholly owned domestic subsidiary of the Company (subject to certain exceptions set forth in the Credit Agreement) has guaranteed all existing and future indebtedness and liabilities of the other guarantors and the Company arising under the Credit Agreement.

 

In connection with and effective upon the execution and delivery of the Credit Agreement on October 2, 2012, the Company terminated its then-existing Amended and Restated Credit Agreement (the “Former Credit Agreement”), dated as of July 15, 2008. There were no termination penalties incurred by the Company in connection with the termination of the Former Credit Agreement.

 

We are in compliance with all of our covenants as of June 30, 2013.

 

The weighted average interest rate on our Senior Credit Facility at June 30, 2013 and December 31, 2012 was 3.6% and 3.7%, respectively. The rate includes all outstanding LIBOR contracts, cash flow hedge effectiveness effect and letters of credit. The weighted average interest rate on outstanding borrowings, not including letters of credit, was 3.8% and 3.9% at June 30, 2013 and December 31, 2012, respectively.

 

At June 30, 2013, we had $59,272 of letters of credit outstanding under the Senior Credit Facility, borrowings against the Senior Credit Facility aggregated $304,191, and we had $60,396 available under the Senior Credit Facility.

 

The Company acquired Subordinated Convertible Debentures (“Convertible Debentures”) that prior to the acquisition of Central, were convertible at the option of the holder thereof into shares of Central common stock. As a result of the acquisition, the subordinated debenture holders no longer have the right to convert the Convertible Debentures to common stock of the Company, but do have the right to redeem the Convertible Debentures for $19.18 cash per share upon their stated maturity (April 1, 2028) or upon acceleration or earlier repayment of the Convertible Debentures. There were no redemptions during the six months ended June 30, 2013. Approximately 65,308 Convertible Debentures or $1,254 (redemption value) remain outstanding at June 30, 2013.

 

The remaining $942 of other obligations at June 30, 2013 relates to various financing arrangements.

 

13. Business Unit Segment Information

 

Segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as the source of the Company’s reportable segments. The Company’s segments are organized in a manner consistent with which separate financial information is available and evaluated regularly by our CODM in deciding how to allocate resources and in assessing performance.

 

An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses, and about which separate financial information is regularly evaluated by our CODM. Our CODM is the Company’s president and chief executive officer.

 

Each of the operating segments is directly responsible for revenue and expenses related to their operations including direct regional administrative costs. Finance, information technology, human resources, and legal are shared functions that are not allocated back to the four operating segments. The CODM assesses the performance of each operating segment using information about its revenue and operating income (loss) before interest, taxes, and depreciation and amortization, but does not evaluate segments using discrete asset information. There are no inter-segment transactions and the Company does not allocate interest and other income, interest expense, depreciation and amortization or taxes to operating segments. The accounting policies for segment reporting are the same as for the Company as a whole.

 

Our business is managed based on regions administered by executive vice presidents. The following is summary of revenues (excluding reimbursed management contract revenue) and gross profit by regions for the three and six months ended June 30, 2013 and 2012 with information related to prior periods recast to conform to the current regional alignment (unaudited):

 

23



Table of Contents

 

 

 

For the three months ended

 

For the six months ended

 

 

 

June 30, 2013

 

Gross
Margin %

 

June 30, 2012

 

Gross
Margin %

 

June 30, 2013

 

Gross
Margin
%

 

June 30, 2012

 

Gross
Margin %

 

Revenues(a):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Region One

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

$

76,252

 

 

 

$

18,327

 

 

 

$

151,292

 

 

 

$

35,469

 

 

 

Management contracts(b)

 

26,466

 

 

 

12,718

 

 

 

52,357

 

 

 

24,727

 

 

 

Total Region One

 

102,718

 

 

 

31,045

 

 

 

203,649

 

 

 

60,196

 

 

 

Region Two

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

1,031

 

 

 

 

 

 

2,357

 

 

 

 

 

 

Management contracts

 

5,742

 

 

 

1,044

 

 

 

15,963

 

 

 

8,146

 

 

 

Total Region Two

 

6,773

 

 

 

1,044

 

 

 

18,320

 

 

 

8,146

 

 

 

Region Three

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

12,614

 

 

 

5,882

 

 

 

24,903

 

 

 

11,299

 

 

 

Management contracts

 

18,537

 

 

 

13,585

 

 

 

36,513

 

 

 

27,065

 

 

 

Total Region Three

 

31,151

 

 

 

19,467

 

 

 

61,416

 

 

 

38,364

 

 

 

Region Four

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

11,208

 

 

 

10,702

 

 

 

20,422

 

 

 

21,539

 

 

 

Management contracts

 

24,248

 

 

 

12,213

 

 

 

51,662

 

 

 

24,224

 

 

 

Total Region Four

 

35,456

 

 

 

22,915

 

 

 

72,084

 

 

 

45,763

 

 

 

Region Five

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

22,227

 

 

 

7,503

 

 

 

45,494

 

 

 

11,651

 

 

 

Management contracts

 

8,805

 

 

 

4,526

 

 

 

17,884

 

 

 

7,593

 

 

 

Total Region Five

 

31,032

 

 

 

12,029

 

 

 

63,378

 

 

 

19,244

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

(100

)

 

 

 

 

 

(151

)

 

 

 

 

 

Management contracts

 

4,861

 

 

 

286

 

 

 

4,375

 

 

 

581

 

 

 

Total Other

 

4,761

 

 

 

286

 

 

 

4,224

 

 

 

581

 

 

 

Reimbursed management contract revenue

 

158,402

 

 

 

104,160

 

 

 

317,879

 

 

 

208,097

 

 

 

Total revenues

 

370,293

 

 

 

$

190,946

 

 

 

740,950

 

 

 

$

380,391

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Region One

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

5,270

 

7

%

1,269

 

7

%

10,424

 

7

%

1,878

 

5

%

Management contracts

 

11,711

 

44

%

7,107

 

56

%

22,959

 

44

%

13,412

 

54

%

Total Region One

 

16,981

 

 

 

8,376

 

 

 

33,383

 

 

 

15,290

 

 

 

Region Two

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

63

 

6

%

 

0

%

329

 

14

%

 

0

%

Management contracts

 

1,918

 

33

%

273

 

26

%

4,199

 

26

%

1,470

 

18

%

Total Region Two

 

1,981

 

 

 

273

 

 

 

4,528

 

 

 

1,470

 

 

 

Region Three

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

1,144

 

9

%

555

 

9

%

1,925

 

8

%

1,000

 

9

%

Management contracts

 

6,993

 

38

%

5,764

 

42

%

13,678

 

37

%

11,262

 

42

%

Total Region Three

 

8,137

 

 

 

6,319

 

 

 

15,603

 

8

%

12,262

 

 

 

Region Four

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

651

 

10

%

809

 

8

%

(1,267

)

8

%

1,568

 

7

%

Management contracts

 

7,170

 

26

%

4,271

 

35

%

15,371

 

25

%

7,453

 

34

%

Total Region Four

 

7,821

 

 

 

5,080

 

 

 

14,104

 

 

 

9,021

 

 

 

Region Five

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

3,937

 

18

%

621

 

8

%

8,604

 

19

%

978

 

8

%

Management contracts

 

3,391

 

39

%

1,586

 

35

%

7,170

 

40

%

3,035

 

40

%

Total Region Five

 

7,328

 

 

 

2,207

 

 

 

15,774

 

 

 

4,013

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

153

 

-153

%

1,160

 

100

%

170

 

-113

%

1,146

 

100

%

Management contracts

 

3,643

 

75

%

1,300

 

454

%

2,807

 

64

%

2,363

 

407

%

Total Other

 

3,796

 

 

 

2,460

 

 

 

2,977

 

 

 

3,509

 

 

 

Total gross profit

 

46,044

 

 

 

24,715

 

 

 

86,369

 

 

 

45,565

 

 

 

General and administrative expenses

 

26,868

 

 

 

14,868

 

 

 

54,817

 

 

 

29,913

 

 

 

General and administrative expense percentage of gross profit

 

58

%

 

 

60

%

 

 

63

%

 

 

66

%

 

 

Depreciation and amortization

 

8,252

 

 

 

1,807

 

 

 

15,745

 

 

 

3,535

 

 

 

Operating income

 

10,923

 

 

 

8,040

 

 

 

15,808

 

 

 

12,117

 

 

 

Other expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

4,763

 

 

 

1,132

 

 

 

9,603

 

 

 

2,262

 

 

 

Interest income

 

(128

)

 

 

(50

)

 

 

(239

)

 

 

(120

)

 

 

 

 

4,635

 

 

 

1,082

 

 

 

9,364

 

 

 

2,142

 

 

 

Income before income taxes

 

6,289

 

 

 

6,958

 

 

 

6,444

 

 

 

9,975

 

 

 

Income tax expense

 

2,065

 

 

 

2,801

 

 

 

1,911

 

 

 

4,016

 

 

 

Net income

 

4,224

 

 

 

4,157

 

 

 

4,533

 

 

 

5,959

 

 

 

Less: Net income attributable to noncontrolling interest

 

780

 

 

 

85

 

 

 

1,349

 

 

 

157

 

 

 

Net income attributable to Standard Parking Corporation

 

$

3,444

 

 

 

$

4,072

 

 

 

$

3,184

 

 

 

$

5,802

 

 

 

 


(a)

 

Excludes reimbursed management contract revenue.

 

 

 

(b)

 

The six months ended June 30, 2013 includes a net gain of $2,700 related to the sale of rights associated with certain contracts.  There were no similar payments received in 2012.

 

24



Table of Contents

 

Region One encompasses operations in Connecticut, Delaware, District of Columbia, Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Virginia, West Virginia and Wisconsin.

 

Region Two encompasses event planning and transportation, our acquired valet business and our technology-based parking and traffic management systems.

 

Region Three encompasses operations in Canada, Arizona, California, Colorado, Hawaii, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.

 

Region Four encompasses all major airport and transportation operations nationwide.

 

Region Five encompasses Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Puerto Rico, Tennessee, and Texas.

 

Other consists of ancillary revenue that is not specifically identifiable to a region and insurance reserve adjustments related to prior years.