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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From to
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Commission File Number 1-15629
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IMPERIAL PARKING CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 31-1537375
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 West Cordova Street, Suite 300
Vancouver, BC Canada V6B 1G1
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 681-7311
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Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
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Common Stock, $0.01 Par Value American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
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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[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant on March 9, 2001 (based on the closing price of
the Registrant's Common Stock on the American Stock Exchange on such date) was
approximately $13,942,000. Shares of the Registrant's common stock held by each
executive officer and director and by each entity that owns 5% or more of the
Registrant's outstanding common stock have been excluded in that such persons
may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of shares outstanding of the Registrant's Common Stock at March 9,
2001 was 1,812,142.
Portions of the Registrant's definitive Proxy Statement to be filed for its 2001
Annual Meeting of Stockholders are incorporated by reference into Part III of
this Report.
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TABLE OF CONTENTS
IMPERIAL PARKING CORPORATION
Item PART I
1. BUSINESS.......................................................................................... 3
2. PROPERTIES........................................................................................ 10
3. LEGAL PROCEEDINGS................................................................................. 11
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................... 11
PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............................. 12
6. SELECTED FINANCIAL DATA........................................................................... 13
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............. 16
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................................... 23
9. CHANGES IN THE DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.............. 23
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................................................ 23
11. EXECUTIVE COMPENSATION............................................................................ 23
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................... 23
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................................... 23
PART IV
14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K................................. 24
SIGNATURES........................................................................................ 26
FINANCIAL STATEMENT SCHEDULES
IMPERIAL PARKING CORPORATION FINANCIAL STATEMENT SCHEDULES........................................F-1
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Item 1. BUSINESS
GENERAL
Imperial Parking Corporation (as used in this report, the terms
"Impark", "we", "us" or "the Company" mean Imperial Parking Corporation) is a
leading provider of parking services in North America. As of December 31, 2000,
we managed, leased or owned over 1,450 parking lots in Canada and the United
States, containing more than 270,000 parking spaces, making us the largest
parking provider in Canada and one of the four largest in North America. We
estimate that the more than 240,000 parking spaces we operate throughout Canada
give us approximately half of the urban, private parking lot business in Canada.
We also provide parking lot patrolling, ticketing and collection services for
our own lots and for those operated by other parties.
We provide parking services at multi-level parking facilities and
surface lots. We operate these facilities and lots under three general types of
arrangements: management contracts, leases and fee ownership. As of December 31,
2000, we leased 502 parking facilities and lots, managed 948 parking facilities
and lots, and owned 15 parking facilities and lots.
The Company resulted from the combination on March 27, 2000 of the
Canadian parking assets and operations of First Union Real Estate Equity and
Mortgage Investments ("First Union") and the parking related business of First
Union Management, Inc. ("FUMI"). The businesses combined into Impark are
referred to in this report for periods prior to the combination as follows:
FUR Parking Business. The FUR Parking Business, constituting the
parking assets and operations of First Union, consisted primarily of
15 owned parking properties in Canada. Between April 1997 and March
2000, subsidiaries of First Union operated this business, including
leasing the properties to FUMI for operations and management.
FUMI Parking Business. The FUMI Parking Business consisted of the
parking services and related ancillary activities that have been
continued into the Company. Between April 1997 and March 2000,
subsidiaries of FUMI carried on these activities. The operations of
FUMI's indirect subsidiaries, Imperial Parking Limited and Impark
Services Ltd., consisted of operating and managing parking facilities
in Canada and the United States and carrying on other parking related
activities.
The combination resulting in our formation was completed on March 27,
2000 following a series of transactions pursuant to a detailed plan of
organization. The final step of the series of transactions was the distribution
by First Union of substantially all of the outstanding shares of our common
stock to the shareholders of First Union. For further information regarding this
detailed plan of organization and distribution of common stock, refer to the
Information Statement on Form 10 dated March 27, 2000 that was filed with the
Securities and Exchange Commission.
INDUSTRY
The parking industry is highly fragmented and competitive. Industry
participants, the vast majority of which are privately held companies, consist
of a relatively few national companies and a large number of small regional or
local operators, including a substantial number of companies providing parking
as an ancillary service in connection with property management or ownership. The
parking industry has begun to experience consolidation as smaller operators have
found that they lack the capital, economies of scale and sophisticated
management techniques required to compete with larger providers. We expect this
trend will continue and will provide significant opportunities for us to acquire
smaller existing providers.
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We expect that a number of other trends in the commercial property
management business will continue to provide opportunities for large,
specialized providers of high-quality parking services. We believe that:
o The trend toward consolidation of property management companies
will favor larger, nationwide parking providers, as increasingly
centralized property management companies and property owners seek
to minimize the number of separate parking providers they deal
with;
o As the property management industry becomes increasingly
sophisticated and professional, property management companies and
property owners will likely seek to work with specialized,
professional parking service providers;
o Parking is increasingly seen by building owners as a profit center,
and owners are seeking parking providers who can help them to
maximize profitability, increase efficiency and reduce financial
unpredictability; and
o The owners of premier properties, as they begin to recognize that
the parking experience often provides both the first and last
impression of their properties to tenants and users, are seeking to
offer the highest possible level of quality in their parking
services as a means of distinguishing their properties from those
of competitors.
We believe that the industry trends toward outsourcing by
private-sector owners and privatization by government entities provide
additional growth opportunities for parking facility operators. Private-sector
parking owners have begun to move from owner-operator of their parking
facilities to outsourcing the management of operations to specialized operators.
This allows them to focus on their core competencies while increasing overall
returns on parking assets. In addition, governments and government agencies,
particularly cities and municipal authorities, are increasingly retaining
private firms to operate facilities and parking-related services in an effort to
reduce operating budgets and increase efficiency.
OPERATING ARRANGEMENTS
We operate parking facilities under three general types of
arrangements: leases, management contracts, and fee ownership. As of December
31, 2000, we leased 502 parking facilities, operated 948 parking facilities
through management contracts and owned 15 parking facilities.
The general terms and benefits of these types of arrangements are
described below:
Leases. Under a lease arrangement, we generally pay either a fixed
annual rent, a percentage of gross customer collections, or a combination
thereof to the property owner. We collect all revenues and are responsible for
most operating expenses, but are typically not responsible for major
maintenance. In contrast to the management contracts, lease arrangements are
typically for terms of three to ten years and often have a renewal term, and
provide for a fixed payment to the facility owner regardless of the operating
earnings of the parking facility. As a result, leased facilities generally
require a longer commitment and a larger capital investment by us than do
managed facilities, but generally provide a greater opportunity for long-term
revenue growth and profitability.
Management Contracts. Under a management contract, we generally
receive a base monthly fee for managing the facilities and often receive an
incentive fee based on the achievement of facility revenues above a base amount.
We generally charge fees for various ancillary services such as accounting,
equipment leasing and consulting. Responsibilities under a management contract
include hiring, training and staffing parking personnel, and providing
collections, accounting, record-keeping, insurance and facility marketing
services. In general, the facility owner is responsible for operating expenses
such as taxes, license and permit fees, insurance premiums,
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payroll, as well as, non-routine maintenance, repair costs and capital
improvements. The typical management contract is for a term of one to three
years (often the owner reserves the right to terminate, without cause, on 30
days notice) and may contain a renewal clause.
Fee ownership. Under fee ownership arrangements, we own the property
and fixtures. Ownership of parking facilities typically requires a larger
capital investment than managed or leased facilities but provides maximum
control over the operation of the parking facility, and all increases in revenue
flow directly to us. Ownership provides the potential for realizing capital
gains from the appreciation in the value of the underlying real estate, but it
also subjects us to risks including reduction in value of the property and
additional potential liabilities, as well as additional costs such as real
estate taxes and structural, mechanical or electrical maintenance or repairs.
ENFORCEMENT AND COLLECTIONS
Approximately 70% of our parking lots are operated with parking meters
and without parking lot attendants. We enforce user payment at these lots by
having patrollers circulate regularly through lots to identify delinquent
parkers and issue violation notices. We use technology which enables our
patrollers to monitor and identify first-time and repeat offenders using
hand-held computers. The hand-held computers are uploaded daily to mainframe
computers that track violation history. This hand-held equipment generates
violation notices for offenders. Payments on account of these violation notices
are handled by our collections operation and are included in our revenues.
We facilitate information collection by using current technology
including bar scanning systems. Parking lot supervisors travel to each lot on a
regular basis to collect cash from both parking meters and lot attendants in
order to keep cash balances low and reduce the potential for shrinkage.
GROWTH STRATEGY
Our strategy is to strengthen our position as the leading parking
provider in Canada while significantly expanding our presence into selected
markets in the United States. Key elements of this growth strategy include:
Increase penetration of existing core markets. We will seek to
leverage our long-standing relationships with real estate owners in cities where
we currently have significant operations. Our reputation for premium service,
our local market knowledge and our management infrastructure, allows us to
compete aggressively for new business in these core cities. Because existing
parking operations are sufficient to cover the costs of local and regional
personnel, additional parking operations in these markets will provide a greater
contribution to our profits than the operations in new markets. As we compete
for new business, it will also be critical to retain and improve the
profitability of existing contracts.
Pursue aggressive growth in other urban markets. We have targeted
major cities in the United States where we currently have little or no presence
for aggressive expansion. We believe that expansion in the United States will be
the key component to enhancing our overall profitability. This is because we
have little presence in the United States, the largest parking market in the
world, and key members of our new management team have significant experience in
the United Sates. Also, there are greater opportunities to bid for contracts in
the United States than in Canada where we already dominate the industry.
Additionally, parking rates and average profits per facility tend to be higher
than in Canada. Our strategy is to enter a new market only if we believe we can
quickly gain a significant position in the markets, with sufficient "critical
mass" to compete effectively and realize economies of scale. Certain markets are
dominated by national parking companies that have established strong
relationships through more advanced parking techniques. We may avoid these
markets initially. However, where a market is fragmented by a number of smaller
less sophisticated parking operators we believe there is an opportunity to gain
market share by providing superior systems and controls to prospective
customers. We will pursue opportunities in these markets either through
acquisition or by establishing our own operations there. We believe
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that there are approximately ten new markets in the United States in which we
can secure market share over the next three to four years.
Pursue acquisition opportunities. We believe there are significant
opportunities to expand our business through the acquisition of smaller
operators, both in existing core markets and in other targeted cities where we
believe we can attain market share. The parking industry is highly fragmented
and we believe that many of our smaller competitors have limited access to
capital or do not have the systems or the scale to compete effectively. We have
successfully completed six acquisitions in the last six years, adding
approximately 300 facilities. Typically, we seek to acquire smaller local
operators with several years of experience in their market. We believe this
allows for the immediate understanding of the market and provides a platform for
additional acquisitions and increased penetration in the same city.
Participate in outsourcing and privatization trends. We believe
significant opportunities for growth will result from the trend toward
outsourcing and privatization of parking services. We believe we are
particularly well positioned to participate in these trends because we are able
to provide parking facility management and related services at lower costs and
higher service levels than those provided by municipalities, hospitals and
universities. We have been successful in the past in working with the City of
Victoria and the City of Nanaimo to issue municipal tickets on its lots and have
parking contracts for the City of Coquitlam, the University of British Columbia
and the British Columbia Transit Authority. Our collection subsidiary, City
Collection Company Ltd., is a licensed debt collection company in several
Canadian provinces. We believe that having our own licensed debt collection
company enhances our ability to compete for outsourcing business by allowing us
to provide a package of both parking lot management and debt collection
services.
OPERATING STRATEGY
We seek to increase the revenues and profitability of our parking
facilities through a variety of operating strategies, including the following:
Focus on larger urban markets. We intend to focus on larger urban
markets. We believe that (i) urban markets are more resistant to economic
downturns, (ii) property owners and real estate asset managers in these markets
typically have a presence in other cities, which provides opportunities to
leverage these relationships to expand to new locations, (iii) the typically
higher prices charged in these markets can support our premium service levels,
and (iv) our senior management team has significant expertise in these markets.
Charles Huntzinger and Bryan Wallner primarily contribute to our expertise in
these markets. Between them they have 33 years of parking experience in major
cities including New York, Philadelphia, Baltimore, Washington, Boston,
Richmond, Jacksonville, Pittsburgh, Cleveland, Columbus, Cincinnati, Milwaukee,
Denver, San Francisco, Los Angeles, Seattle, St. Louis, and Indianapolis, as
well as Toronto and Ottawa in Canada. We recently hired several regional and
city managers who have experience in other major U.S. cities including Chicago
and Oakland.
Focus on increasing profitability. We believe there is a significant
opportunity to increase the profitability of existing and future operations and
we intend to focus on the profitability of our operations. Our policy is to
continue to operate only those facilities that meet or exceed profitability
targets. When Mr. Huntzinger joined us in January 1999, he shifted our strategy
from one of gaining market share to one of increasing the profitability of each
location. We now view new locations as profit centers and not primarily
opportunities to increase market share.
Increase proportion of leased facilities. We intend over time to
increase the number of facilities we operate under lease relative to the number
we operate under management contracts. Historically, our net profits have been
significantly higher on leased facilities than on managed facilities. Our goal
is to have a higher proportion of leased facilities than managed facilities. We
believe a mix of leased, managed, and owned parking facilities will diversify
our operations, providing us with a balance of lower risk and lower profit
managed operations, and higher risk and higher profit leased and owned
operations.
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Provide consistently high level of service. Our goal is to provide a
uniformly high level of quality and service across all of the facilities we
manage, characterized by clean, well-lit, secure and pleasant surroundings,
attractive graphics and signage, and professional, courteous and well dressed
staff. We offer a wide range of optional premium services, including valet
parking, concierge services, car washing, dry cleaning drop off and pick up and
vehicle repair. These premium services are typically offered to owners of
first-class properties who seek to provide their tenants with the highest
possible level of service to help differentiate their property from competing
properties.
Continue to implement standardized systems and controls. Over the
course of more than 35 years in the parking management business, we have
developed sophisticated and comprehensive management systems and controls, which
we seek to implement uniformly at all facilities we manage. These systems
include accounting and financial management and reporting practices, general
operating procedures, training, employment policies, cash controls, marketing
procedures and visual image. We believe that our standardized systems and
controls enhance our ability to successfully expand our operations into new
markets.
Aggressively implement technology and automation. We believe that
automation and technology can enhance customer convenience, lower labor costs,
improve cash management and increase overall profitability. We have been a
leader in the field of introducing automation and technology to the parking
business and we were among the first to widely adopt innovations such as the use
of credit card payment systems, hand held computers to track violators and issue
citations, bar-code scanners to ensure monthly parkers are using the correct lot
and are up-to-date in payment and entry and exit gates incorporating sensing
equipment that can automatically recognize and admit authorized vehicles. We
believe that our higher proportion of unmanned facilities gives us a cost
advantage as we compete for business. We have also developed a sophisticated
management information system that enables us to effectively track revenue and
manage cash on a daily basis and generate a wide variety of internal reports, as
well as customized reports requested by our clients.
Implement incentive compensation program. We have adopted a
performance-based compensation system for city managers, vice presidents and
others based on the profitability of each individual's area of responsibility.
We believe this program will enhance the entrepreneurship of our
management-level employees by tying their compensation directly to improvements
in the profitability of the operations they manage and will encourage them to
improve operations and control costs.
Provide profitable patrol, enforcement and ticketing service. We seek
to increase the profitability of our overall operations by providing parking lot
patrol, enforcement and ticketing services, both at our own facilities and at
facilities operated by others. We believe there are significant opportunities to
market these services to facilities we do not operate, especially those owned by
municipalities or by suburban retail centers, who wish to discourage all-day
parkers by enforcing parking regulations which favor short-term parkers.
Maintain strict cash control. Strict cash control is critical to our
success and that of our clients. Our cash control procedures are based on a
ticketing system supervised by high level managers and include on-site spot
checks, multiple daily cash deposits, local audit functions, managerial
oversight and review, and internal audit procedures. It is our policy that
tickets and gate counts are reconciled daily against cash collected. We believe
our cash control procedures are effective in minimizing loss of revenues at
parking facilities.
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ACQUISITIONS
Following the strategy of acquiring smaller operators in targeted
cities, on April 1, 2000 we acquired the business of E-Z Park Company Ltd., LLC
("E-Z Park") for $1.6 million. The purchase price was payable in cash, although
$0.4 million of it is deferred over three years and payable only if the acquired
business meets specified profit targets. To December 31, 2000, none of these
targets have been met. This acquisition has been accounted for by the purchase
method. E-Z Park operated 16 locations in Cincinnati, Ohio and we have been able
to build on the acquisition, growing to a total of 31 locations in Cincinnati by
December 31, 2000 from one location at December 31, 1999.
SEASONALITY
We may experience fluctuations in our income from quarter to quarter
caused by fluctuations in revenues and related expenses due to acquisitions,
pre-opening costs, travel and transportation patterns affected by weather and
calendar related events, and local and national economic conditions.
Additionally, we manage the parking for a number of sports stadiums and arenas
and our income from such facilities can be affected by the seasonality of
revenue and by the relative degree of success of various sports teams.
COMPETITION
The parking industry is fragmented and highly competitive, with
relatively few barriers to entry. We compete regularly with a wide variety of
parking services providers to retain our existing operations and to expand our
operations in existing and new markets. We compete for clients based on the
pricing of our services and our ability to increase revenues and control
expenses for each of our client's parking facilities.
Our largest competitors in North America are Central Parking
Corporation, APCOA/Standard Parking, Inc. and Ampco System Parking. We are
substantially smaller in number of locations and revenue than Central Parking.
We have approximately the same number of locations as APCOA/Standard and Ampco
System. However, we have lower revenues and profits than both APCOA/Standard and
Ampco System because they are principally in the United States where gross
revenues and profits generated from a location are typically higher than in
Canada. However, being principally in Canada gives us a solid Canadian base as
Canadian corporations typically prefer to do business with an established
Canadian parking company. Additionally, since profit per location is generally
lower in Canada, most U.S. competitors have historically focused their efforts
in the U.S. marketplace where there is higher potential profit. Hence, we
believe we have a secure base to work from in Canada while growing our market in
the U.S. where we believe new locations will create higher profit margins than
we typically realize.
We also compete with many regional or local parking service providers,
as well as municipalities and other governmental entities, property owners and
others.
REGULATION
Our business is not substantially affected by direct governmental
regulation, however, several provincial, state and local laws have been passed
in recent years that encourage car pooling and the use of mass transit,
including, for example, laws prohibiting employers from reimbursing employees
parking expenses. Laws and regulations that reduce the number of cars and
vehicles being driven could hurt our business. We are also affected by laws and
regulations (such as zoning ordinances and business taxes) that are common to
any business that owns or leases real estate and by regulations (such as labor
and tax laws) that affect companies with a large number of employees.
Under various federal, provincial, 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
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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 ownership or operation of parking facilities, we may be
potentially liable for such costs. Although we are currently not aware of any
material environmental claims pending or threatened against us or any of our
owned or operated parking facilities, 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 material adverse effect
on our financial condition or results of operations.
Various other governmental regulations affect our operations of
parking facilities, both directly and indirectly. In the United States, these
include the Americans with Disabilities Act, or ADA. Under the ADA, all public
accommodations in the United States, including parking facilities, are required
to meet certain federal requirements related to access and use by disabled
persons. For example, the ADA requires parking facilities to include handicapped
spaces, headroom for wheelchair vans, attendants' booths that accommodate
wheelchairs, and elevators that are operable by disabled persons. We believe
that the parking facilities we own and operate are in substantial compliance
with these requirements.
EMPLOYEES
As of December 31, 2000, we employed approximately 2,300 individuals.
We believe that our employee relations are good. Approximately 38% of our
employees (some 882 employees) are represented by unions, including the
Construction and Specialized Workers' Union Local 1611 (British Columbia),
Christian Labour Association of Canada Local 501 (British Columbia), Service
Employees International Union (Regina), Saskatchewan Joint Board, Retail,
Wholesale & Department Store Union Local 558 (Saskatoon), Canada Labour Congress
(Winnipeg), Steelworkers (Sudbury), Teamsters (Ottawa and San Francisco), SEIU,
UFCW (Toronto), SEIU (London), Le Syndicat des employes and Union des employes
de service (Montreal) and Garage Employees (New York).
SEGMENTED INFORMATION
Information about our foreign and domestic operations appears in Note
14 to our 2000 Consolidated Financial Statements that are included in response
to Item 8 and are listed in Item 14 to this Annual Report on Form 10-K.
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Item 2. PARKING FACILITY PROPERTIES
The following table summarizes certain information regarding our
parking facilities and surface lots as of December 31, 2000. We believe that our
owned facilities generally are in good condition and adequate for our present
needs.
Leased Managed Owned Total
-------------- --------------- ---------------- --------------
Location Lots Spaces Lots Spaces Lots Spaces Lots Spaces
- -------- ---- ------ ---- ------ ---- ------ ---- ------
CANADA
BRITISH COLUMBIA
Vancouver 58 4,262 522 107,026 - - 580 111,288
Other 5 398 46 5,247 - - 51 5,645
--- ------ ---- ------- -- ----- ----- -------
Total 63 4,660 568 112,273 - - 631 116,933
ALBERTA
Edmonton 84 6,567 42 7,092 2 623 128 14,282
Calgary 83 9,634 28 6,406 3 345 114 16,385
Banff 1 70 6 612 - - 7 682
--- ------ ---- -------- -- ----- ----- -------
Total 168 16,271 76 14,110 5 968 249 31,349
SASKATCHEWAN
Saskatoon 42 3,164 10 1,304 - - 52 4,468
Regina 44 2,180 11 2,309 1 20 56 4,509
--- ------ ---- ------- -- ----- ----- -------
Total 86 5,344 21 3,613 1 20 108 8,977
MANITOBA
Winnipeg 60 3,731 81 15,903 8 667 149 20,301
ONTARIO
Toronto 27 4,093 74 36,316 1 50 102 40,459
Hamilton 5 595 11 3,795 - - 16 4,390
London 2 244 11 3,062 - - 13 3,306
Ottawa 3 257 11 5,750 - - 14 6,007
Windsor 2 93 7 547 - - 9 640
Sudbury 2 570 3 825 - - 5 1,395
--- ------ ---- ------- -- ----- ----- -------
Total 41 5,852 117 50,295 1 50 159 56,197
QUEBEC/OTHER
Montreal 4 235 17 4,329 - - 21 4,564
Halifax 2 79 6 1,359 - - 8 1,438
St. John's 3 276 4 621 - - 7 897
--- ------ ---- ------- -- ----- ----- -------
Total 9 590 27 6,309 - - 36 6,899
TOTAL CANADA 427 36,448 890 202,503 15 1,705 1,332 240,656
UNITED STATES
Minneapolis 25 4,489 31 7,054 - - 56 11,543
Milwaukee 14 2,280 2 557 - - 16 2,837
Buffalo 10 1,947 - - - - 10 1,947
Seattle - - 7 3,839 - - 7 3,839
San Francisco 6 4,945 6 753 - - 12 5,698
Cleveland 1 400 - - - - 1 400
Cincinnati 19 2,123 12 3,716 - - 31 5,839
--- ------ ---- ------- -- ----- ----- -------
TOTAL UNITED STATES 75 16,184 58 15,919 - - 133 32,103
TOTAL 502 52,632 948 218,422 15 1,705 1,465 272,759
=== ====== ==== ======= == ===== ===== =======
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Item 3. LEGAL PROCEEDINGS
The provision of services to the public entails an inherent risk of
liability. We are engaged from time to time in routine litigation incidental to
our business. Other than a case involving Eau Claire Market in Calgary, Alberta
described below, there is no legal proceeding to which we are a party which, if
decided adversely could materially harm our financial condition. We attempt to
disclaim liability for personal injury and property damage claims by printing
disclaimers on our ticket stubs and by placing warning signs in the facilities
we operate. We also carry liability insurance that we believe meets or exceeds
industry standards as determined by our landlords. We can provide no assurance,
however, that any future legal proceedings (including any related judgments,
settlements or costs) will not have a material adverse effect on our financial
condition, liquidity or results of operations.
The Eau Claire Market litigation was filed in the Queen's Bench of
Alberta on August 20, 1998. It involves a claim against a property in which
Imperial Parking Canada Corporation ("Imperial Canada"), a subsidiary of Impark
and successor to Imperial Parking Limited by amalgamation, is the lessee. The
plaintiff MP Acquisitions Ltd. asserts that it is entitled to priority over
Imperial Canada's lease and to possession of the property. We believe that this
claim is without merit. If, however, we do not prevail in the litigation, we may
be forced to renegotiate the lease with the landlord, in which case the rent
could be substantially increased and may materially impact our results.
Imperial Canada, is also a defendant in a lawsuit brought by Newcourt
Financial Ltd. as the assignee of Oracle Corporation Canada Inc. The suit was
filed in Ontario Superior Court on June 11, 1999. It alleges that Imperial
Canada and FUMI owe approximately $825,000 under a software license and services
agreement. We believe that these claims are without merit. First Union has
agreed to indemnify Imperial Canada for any liability arising with respect to
this claim.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the Company's stockholders during
the fourth quarter of fiscal 2000.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company through December 31, 2000, and
their ages as of March 9, 2001, are as follows:
Name Age Position (s)
---- --- ------------
Charles E. Huntzinger 53 President, Chief Executive Officer and Director
J.Bruce Newsome 50 Senior Vice President, Finance and Chief Financial Officer
Bryan L. Wallner 41 Senior Vice President, Operations and Chief Operating Officer
Daniel P. Friedman 43 Vice Chairman and Director
David Schonberger 45 Vice President
CHARLES E. HUNTZINGER has served as our President and Chief Executive
Officer since joining us in January 1999. From 1993 until December 1998, Mr.
Huntzinger was associated with Central Parking Corporation where he was vice
president for the Midwest Region and, later, for the New York Region. From 1992
until 1993 Mr. Huntzinger was vice president of Spectacore, a stadium management
company and owner of the Philadelphia
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Flyers; he was in charge of parking operations. Mr. Huntzinger was the Chief
Operating Officer for Parkway Corporation from 1978 until 1992, where he was in
charge of parking operations nationwide.
J. BRUCE NEWSOME has served as our Senior Vice President, Finance and
Chief Financial Officer since 1989. From 1986 to 1989, Mr. Newsome served as
Vice President of Finance and Controller of predecessor businesses to the
Company. Prior to 1986, Mr. Newsome served as Controller of these businesses. He
has been involved in several acquisitions in the last 17 years and is
responsible for ensuring that financial, accounting, MIS and treasury systems
will accommodate expansion plans. Before joining Impark, Mr. Newsome was a
senior manager at the accounting firm of KPMG.
BRYAN L. WALLNER became our Senior Vice President, Operations in March
1999 and was promoted to Chief Operating Officer in November 2000. Prior to
joining us, Mr. Wallner was a regional manager for Central Parking Corporation
("Central Parking"). He guided Central Parking's growth in the Midwest, opening
offices in four new cities. He has expertise in stadium/arena, mixed use,
retail, office as well as valet, shuttle, and patrol contracts. Mr. Wallner
began his career in the parking industry in 1987 with Central Parking in St.
Louis, Missouri.
DANIEL P. FRIEDMAN became Vice Chairman of our Board of Directors in
March 2000. Since June 2000, he has been a managing member of Radiant Partners
LLC, a real estate asset management and investment firm. From November 1998 to
March 2001, he served as President and Chief Executive Officer of First Union
Real Estate Equity and Mortgage Investments and as a trustee from November 1998
to September 2000. He was President and Chief Operating Officer of Enterprise
Asset Management, Inc. from June 1996 to November 1998 and was executive Vice
President and Chief Operating officer of Enterprise from February 1992 to June
1996. At Enterprise, he was responsible for asset management and new business
development. From September 1994 to November 1998, Mr. Friedman was a manager of
all the Cheshire Limited Liability Companies ("Cheshire"). Cheshire acquires and
restructures non-performing underlying residential co-op mortgage loans and
unsold co-op apartments. From May 1993 to December 1997, Mr. Friedman was a
board member of Emax Advisors, Inc. From May 1993 to December 1996, he was a
board member of Emax Securities, Inc., a NASD broker/dealer.
DAVID SCHONBERGER became our Vice President in March 2000. Since June
2000, he has been a managing member of Radiant Partners LLC, a real estate asset
management and investment firm. From November 1998 to March 2001, he served as
Executive Vice President of First Union Real Estate Equity and Mortgage
Investments. From November 1997 to November 1998, he was senior vice president
of Enterprise Asset Management Inc. At Enterprise, he was responsible for retail
and raw land development projects. Since January 1990, Mr. Schonberger has been
director of Legacy Construction Corporation, a privately held leasing and
project management company specializing in institutional property management and
oversight of specialty construction and development projects. In February 1996,
Legacy Construction Corporation merged with Peter Elliot Corporation to form
Peter Elliot LLC. From February 1996 to October 1997, Mr. Schonberger served as
treasurer and manager for Peter Elliot LLC.
PART II.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the American Stock Exchange
("AMEX"). The common stock was first traded on AMEX on March 28, 2000 following
the distribution of substantially all of the issued and outstanding shares of
our common stock to shareholders of First Union Real Estate Equity Mortgage and
Investments on March 27, 2000. Prior to the distribution there was no
established public trading market for the our shares.
The number of holders of record of our common stock as of March 9,
2001, was approximately 1,381.
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The following table sets forth for the periods indicated the high and low sales
prices for our common stock as reported by AMEX.
Fiscal 2000 High Low
----------- ---- ---
First quarter 17 3/4 13 1/16
Second quarter 17 7/16 11 5/8
Third quarter 17 1/4 16 1/8
Fourth quarter 18 16 3/16
No dividends have been declared on our common stock since the distribution. Our
policy is to reinvest earnings to fund future growth. Accordingly, we do not
anticipate declaring dividends on our common stock in the foreseeable future.
Item 6. SELECTED FINANCIAL DATA
The selected financial data presented below as at and for periods
commencing prior to January 1, 2000 has been calculated by combining information
in the combined financial statements of the FUR Parking Business and the FUMI
Parking Business and from the consolidated financial statements of Impark
Holdings Inc. The selected financial data for these periods has been extracted
from audited financial statements. For further information on these financial
statements, refer to our Information Statement on Form 10 dated March 27, 2000
that was filed with the Securities and Exchange Commission.
The selected financial data presented below for the year ended
December 31, 2000 has been calculated by combining information in our audited
consolidated financial statements for fiscal 2000 with the combined financial
statements of the FUMI Parking Business for the three months ended March 31,
2000. The selected balance sheet data as at December 31, 2000 has been extracted
from our consolidated financial statements at that date.
The selected financial data for all periods is presented on a pro
forma basis after giving effect to the following pro forma transactions:
(i) the elimination of inter-entity lease fees and interest costs;
(ii) the elimination of the asset management fee earned during the
period January 1, 1999 to March 27, 2000 for managing the United
States parking properties of First Union. The fee agreement was
cancelled on March 27, 2000; and
(iii) the elimination of interest expense on long-term debt repaid and
the note payable capitalized on the combination on March 27,
2000.
For purposes of presenting selected financial data, an adjustment has
not been made for interest income on additional cash balances contributed on the
combination on March 27, 2000.
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This financial data should be read in conjunction with the
consolidated financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Nine
months
ended Year ended December 31,
December 31, ---------------------------------------------------------
1996 1997 1998 1999 2000
------------- ------------ ------------ ------------ ------------
(thousands of dollars)
STATEMENT OF OPERATIONS DATA (1), (2)
Revenues $ 35,755 $ 50,775 $ 54,087 $ 59,065 $ 67,809
---------- ---------- ---------- ---------- ---------
Gross margin 10,546 13,699 14,891 14,706 17,121
---------- ---------- ---------- ---------- ---------
Operating income (loss) (3) 411 (2,325) (5,524) (557) 935
Interest expense (587) (680) (784) - -
Other income (expense) (4) 674 (976) (15,884) (279) 411
---------- ---------- ---------- ---------- ---------
Income (loss) from continuing operations $ 498 $ (3,981) $ (22,192) $ (836) $ 1,346
========== ========== ========== ========== =========
Per share data
Income (loss) from continuing operations
- Basic and diluted $ 0.23 $ (1.87) $ (10.43) $ (0.39) $ 0.64
BALANCE SHEET DATA (END OF PERIOD) (1), (2)
Cash and cash equivalents $ 617 $ 882 $ 1,128 $ 3,378 $ 5,615
Working capital (7,833) (7,023) (8,181) (30,144) 96
Goodwill 31,457 66,560 45,379 43,344 41,131
Total assets 69,499 99,423 74,923 76,176 79,391
Long-term liabilities 26,351 52,365 55,219 40,024 1,656
Total owners' equity (deficiency) 25,027 14,767 (2,797) (8,230) 60,029
OTHER INFORMATION (1), (2)
Gross collections (5) $ 126,458 $ 172,729 $ 173,925 $ 176,753 $193,819
EBITDA (6) 2,978 2,626 (81) 4,470 5,696
(1) The amounts presented for the nine months ended December 31, 1996 have
been extracted from the consolidated financial statements of Impark
Holdings Inc., which, for accounting and SEC reporting purposes,
represents a predecessor entity to Impark.
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(2) The amounts presented for these captions have been accumulated as
follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
------------------------------------------------- --------------------------------------------
IMPARK FUMI FUR ELIMINATION TOTAL FUMI FUR ELIMINATION TOTAL
------ ------- ------- ----------- -------- -------- --------- ----------- -------
(THOUSANDS OF DOLLARS)
STATEMENT OF OPERATIONS DATA
Revenues 14,065 36,710 302 (302) 50,775 54,087 454 (454) 54,087
------ ------- ------- -------- --------- -------- -------- ------- -------
Gross margin 2,341 11,056 302 -- 13,699 14,449 442 -- 14,891
------ ------- ------- -------- --------- --------- -------- ------- -------
Operating income (loss) (2,272) (324) 271 -- (2,325) (5,921) 397 -- (5,524)
Interest expense (453) (4,650) (904) 5,327 (680) (6,542) (2,757) 8,515 (784)
Other income (expense) 67 (370) 1,999 (2,672) (976) (15,492) 3,333 (3,725) (15,884)
------ ------- -------- -------- --------- -------- -------- -------- -------
Income (loss) from continuing
operations (2,658) (5,344) 1,366 2,655 (3,981) (27,955) 973 4,790 (22,192)
BALANCE SHEET DATA (END OF YEAR)
Cash and cash equivalents -- -- 882 -- 882 -- 1,128 -- 1,128
Working capital -- (7,375) 352 -- (7,023) (9,353) 1,172 -- (8,181)
Goodwill -- 66,560 -- -- 66,560 45,379 -- -- 45,379
Total assets -- 89,440 41,660 (31,677) 99,423 65,229 42,002 (32,308) 74,923
Long-term liabilities -- 60,768 22,977 (31,380) 52,365 63,052 23,759 (31,592) 55,219
Total owners' equity -- (3,089) 17,856 -- 14,767 (20,348) 17,551 -- (2,797)
(deficiency)
OTHER
Gross collections 49,631 123,098 302 (302) 172,729 173,925 454 (454) 173,925
EBITDA (1,206) 3,530 302 -- 2,626 (523) 442 -- (81)
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 2000
---------------------------------------- -----------------------------------------
FUMI FUR ELIMINATION TOTAL FUMI(8) FUR ELIMINATION TOTAL
------- ------- ----------- ------- ------- ------ ----------- -------
(THOUSANDS OF DOLLARS)
STATEMENT OF OPERATIONS DATA
Revenues 60,145 582 (1,662) 59,065 14,901 53,305 (397) 67,809
------- ------- ------- ------- ------- ------- ------ -------
Gross margin 15,206 580 (1,080) 14,706 3,904 13,487 (270) 17,121
------- ------- ------- ------- ------- ------- ------ -------
Operating income (loss) (14) 537 (1,080) (557) 186 1,019 (270) 935
Interest expense (5,872) (3,044) 8,916 -- (1,446) (786) 2,232 --
Other income (expense) (431) (14,816) 14,968 (279) (61) 1,507 (1,035) 411
------- ------- -------- ------- -------- ------- ------ -------
Income (loss) from continuing
operations (6,317) (17,323) 22,804 (836) (1,321) 1,740 927 1,346
BALANCE SHEET DATA (END OF YEAR)
Cash and cash equivalents 1,394 1,984 -- 3,378 -- 5,615 -- 5,615
Working capital (33,218) 3,074 -- (30,144) -- 96 -- 96
Goodwill 43,344 -- -- 43,344 -- 41,131 -- 41,131
Total assets 65,109 30,113 (19,046) 76,176 -- 79,391 -- 79,391
Long-term liabilities 48,292 28,061 (36,329) 40,024 -- 1,656 -- 1,656
Total owners' equity (28,601) 1,371 19,000 (8,230) -- 60,029 -- 60,029
(deficiency)
OTHER
Gross collections 177,833 582 (1,662) 176,753 45,653 148,564 (397) 193,820
EBITDA 4,970 580 (1,080) 4,470 1,237 4,729 (270) 5,696
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(3) The operating loss for 1998 includes a severance provision of $2.4
million and operating income for 1999 includes a recovery of previously
overprovided amounts of $1.8 million.
(4) Other income (expense) principally includes gains or losses on the sale
or write-down of assets, other interest expense and income taxes. In
the year ended December 31, 1998, other income (expense) includes a
write-down of goodwill of $15.0 million. Please see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" for additional information on this write-down.
(5) Gross collections represent the aggregate cash collected from the
revenue generating activities of continuing operations. It includes
revenues reported under generally accepted accounting principles as
well as collections made on parking facilities for which Impark has a
management contract. Gross collections are not a measure under
generally accepted accounting principles and are not an alternative to
revenues or cash flows. Gross collections are significant to an
understanding of the operations of the Company because management uses
gross collections as a key indicator of its business opportunities,
they demonstrate the magnitude of its historical business activities,
management contract revenues are partly based on the level of gross
collections and management's decisions on the allocation of resources
among its business activities are in part based on the level of gross
collections.
(6) EBITDA equals operating income as shown on the table above, plus
depreciation and amortization expense. EBITDA is included because
management believes it to be a useful tool for measuring our ability to
generate cash flow from operations. EBITDA does not represent cash flow
from operations, is not a measure under generally accepted accounting
principles and should be considered together with the other financial
information included in the table and presented elsewhere in this Form
10-K or incorporated by reference herein. EBITDA measures as presented
may not be comparable to similarly titled measures of other entities.
(7) There were no cash dividends declared on common shares during any of
the periods disclosed in the Selected Financial Data table above.
(8) Results of the FUMI Parking Business for 2000 are for the three months
ended March 31, 2000.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of our historical results of operations and
financial condition should be read in conjunction with the Consolidated
Financial Statements and the Selected Financial Data, which are included in this
document.
DESCRIPTION OF FINANCIAL INFORMATION
Impark resulted from the combination on March 27, 2000 of the parking
related businesses of FUMI and the Canadian parking facilities of First Union. A
brief description of the operations of each business combined is as follows:
FUMI Parking Business. The FUMI Parking Business consisted of the
parking services and related ancillary activities that we acquired on March 27,
2000. From April 1997 to March 2000, subsidiaries of FUMI carried on these
activities. The operations of FUMI's indirect subsidiaries, Imperial Parking
Limited and Impark Services Ltd., consisted of operating and managing parking
facilities in Canada and the United States and carrying on other parking related
activities.
FUR Parking Business. The FUR Parking Business consisted primarily of
owning 15 parking properties in Canada. From April 1997 to March 2000,
subsidiaries of First Union operated this business, including leasing the
properties to FUMI for operation and management.
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17
Periods Presented. The results of operations for the years ended
December 31, 1998, 1999 and 2000 combine the results of the FUMI Parking
Business and the FUR Parking Business on a pro forma basis as if the March 27,
2000 transactions had been completed at the commencement of the earliest of the
periods presented. We have presented the information in this manner to assist
the reader, as we believe it is the most meaningful way to consider and evaluate
the Company in its current form. In doing this we are not indicating what the
results of operations would actually have been if the businesses had been
combined on those dates.
OVERVIEW
We operate parking facilities under three types of arrangements:
leases, management contracts, and fee ownership. These three types are discussed
further in this report under Item 1. Business.
Revenues consist of parking revenues from leased and owned facilities, and
revenues earned in accordance with the terms of management contracts. The
following table sets out the pro forma revenues earned from each of the three
operating arrangements for each of the three years ended December 31, 2000:
YEAR ENDED DECEMBER 31,
1998 1999 2000
------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
Leased Facilities $ 44,610 82.5% $ 50,196 85.0% 57,586 84.9%
Managed Facilities 7,967 14.7% 7,193 12.2% 8,615 12.7%
Owned Facilities 1,510 2.8% 1,676 2.8% 1,608 2.4%
-------- ----- -------- ----- -------- -----
Total $ 54,087 100% $ 59,065 100% $ 67,809 100%
-------- ----- -------- ----- -------- -----
The number of facilities operated as at each fiscal year end under each of these
arrangements is as follows:
AS AT DECEMBER 31,
------------------------------------
1998 1999 2000
---- ---- ----
Leased Facilities 514 490 502
Managed Facilities 1,015 915 948
Owned Facilities 15 15 15
----- ----- -----
1,544 1,420 1,465
----- ----- -----
In 1999 we disposed of 155 locations on the sale of two of our subsidiaries,
Robbins Parking Services Ltd. (4 leased and 137 managed locations), and Imperial
Parking (Asia) Ltd. (12 leased and 2 managed locations).
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Total revenues, on a pro forma basis, increased $8.7 million, or 14.7%,
to $67.8 million for fiscal 2000 compared to $59.1 million for fiscal 1999. This
increase was principally attributable to greater revenues from leased facilities
as detailed below.
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Pro forma revenues from leased facilities for fiscal 2000 increased to
$57.6 million from $50.2 million in fiscal 1999, an increase of $7.4 million, or
14.7%. The increase is primarily a result of commencing operations in San
Francisco in February 2000, and specifically the opening of the Pacific Bell
baseball stadium in April 2000, which contributed $5.7 million in lease revenue.
The acquisition in April 2000 of ten leased facilities upon the purchase of E-Z
Park and subsequent organic growth in Cincinnati, also generated $1.7 million of
additional lease revenue in fiscal 2000. A further $1.6 million of additional
lease revenue was generated in fiscal 2000 from converting a significant urban
mid-west U.S. parkade in December 1999 from a management contract to a lease.
These increases were offset by the sales in 1999 of the Robbins Parking and
Asian divisions which had generated $2.0 million of lease revenue in 1999.
Pro forma revenues from management contracts for fiscal 2000 increased
to $8.6 million from $7.2 million in fiscal 1999, an increase of $1.4 million or
19.4%. The increase is attributed to organic growth and increased management
fees on existing locations of $1.7 million offset by the sales in 1999 of the
Robbins Parking and Asian operations which had generated $0.3 million of
management contract revenue in 1999.
Pro forma direct costs in fiscal 2000 increased to $50.7 million from
$44.4 million in fiscal 1999, an increase of $6.3 million or 14.2%. This
increase was attributable to higher rent expense from the start of operations in
San Francisco, the acquisition of E-Z Park and the conversion of the urban
mid-west U.S. parkade to a lease arrangement. Rent expense increased from $29.0
million for fiscal 1999 to $35.4 million for fiscal 2000, an increase of $6.4
million or 22.1%. Rent as a percentage of revenues, excluding Robbins and Asia,
increased from 51.6% to 52.2% for fiscal 1999 and 2000, respectively. Offsetting
this increase in direct costs was the effect of the sales in 1999 of the Robbins
and Asian operations which incurred $2.1 million of direct costs in fiscal 1999.
An increase of $2.0 million in other operating expenses related to the increase
in lease revenue accounted for the remaining change in direct costs for fiscal
2000 over fiscal 1999. Direct costs as a percentage of revenues decreased to
74.8% in fiscal 2000 from 75.1% in fiscal 1999.
Pro forma general and administrative expenses increased $1.2 million to
$11.4 million for fiscal 2000 from $10.2 million for fiscal 1999. Expenses in
1999 included an adjustment for an employee severance provision accrued in 1998,
but which was determined to be over-accrued by $1.8 million and reversed in
1999. 1999 also included additional severance of $0.9 million and $0.4 million
related to the Robbins and Asian operations sold in 1999. Excluding these three
items, general and administrative expenses for 1999 were $10.7 million. The
increase in 2000 over 1999 includes $0.4 million related to growth in new cities
(Cincinnati, San Francisco, Cleveland and New York) and $0.2 million of
compensation expense for shares and options issued to directors and management
in 2000. General and administrative expenses, excluding severance, as a
percentage of pro forma total revenues decreased to 16.8 % for the fiscal 2000
compared to 18.8 % for fiscal 1999.
Depreciation and amortization for fiscal 2000 decreased to $4.8 million
from $5.0 million in fiscal 1999, a decrease of $0.2 million or 4.0%, as a
result of the full amortization of certain management and lease agreements which
are amortized over the term of the agreements.
In fiscal 2000, other income of $0.4 million reflects interest earned
on cash balances and other investments of $0.7 million partially offset by
corporate tax expense of $0.3 million. No interest income was recorded in the
1999 pro forma results.
The provision for deferred income taxes, including $0.8 million for
non-deductible goodwill amortization, would have been $1.7 million higher for
fiscal 2000, except for credit of $1.7 million for the change in the valuation
allowance against the deferred tax asset representing loss carry forwards in
Canada. The Company's loss carry forwards in Canada are fully recognized in the
financial statements at December 31, 2000. The valuation allowance at December
31, 2000 is $0.9 million and largely represents the expectation that the losses
will be utilized at rates lower than currently in effect. We will provide for a
deferred tax expense at statutory rates in 2001 based on pre-tax income adjusted
for non-deductible goodwill amortization. Current taxes payable for 2001 will be
limited to capital and state taxes.
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Pro forma net earnings for fiscal 2000 were $1.3 million - an increase
of $2.1 million from the $0.8 million loss for fiscal 1999. This increase is
primarily due to increased gross margin of $2.4 million, lower other operating
expenses of $0.8 million, and higher other income of $0.7 million offset by the
reversal in 1999 of over-accrued severance of $1.8 million.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Total revenues, on a pro forma basis, increased $5.0 million, or 9.2%,
to $59.1 million for fiscal 1999 compared to $54.1 million for fiscal 1998. This
increase was principally attributable to greater revenues from leased
facilities, as detailed below.
Pro forma revenues from leased facilities increased $5.6 million, or
12.6%, to $50.2 million for fiscal 1999 as compared to $44.6 million for fiscal
1998. This increase was driven by new business growth, primarily in Calgary,
Alberta, Toronto, Ontario, Minneapolis, Minnesota and Milwaukee, Wisconsin where
15 major new leased facilities were added during the period. Also, the parking
revenues have been reduced in 1999 versus 1998 by $1.5 million as a result of
the Robbins Parking and Asian operations sold during the year.
Pro forma revenues from management contracts decreased $0.8 million, or
9.7%, to $7.2 million for fiscal 1999 as compared to $8.0 million for fiscal
1998. This decrease resulted primarily from FUMI cancelling the agreements for
Impark to manage its U.S. properties in October 1998. Also, the parking revenues
have been reduced in 1999 versus 1998 by $0.4 million as a result of the Robbins
Parking and Asian operations sold during the year.
Pro forma direct costs increased $5.2 million, or 13.2%, to $44.4
million for fiscal 1999 from $39.2 million for fiscal 1998. This increase was
due principally to increased rents of $4.8 million on the 15 major new lease
facilities added during the year. The remaining increase was primarily due to
increased payroll cost of $0.5 million on the 15 new facilities. Direct costs,
as a percentage of total revenues, increased to 75.1% for fiscal 1999 from 72.5%
for fiscal 1998. The increase was primarily attributable to the 15 large new
lease deals in Calgary, Toronto, Minneapolis and Milwaukee. A number of these
locations were unprofitable or only marginally profitable in their first year.
New lease locations may require a few years to achieve their revenue and profit
potential. In order to maximize the financial performance of a new lease, we
would make physical and operational changes that include but are not limited to,
providing better lighting, developing new pricing and marketing policies,
implementing new safety and security procedures, upgrading signage and parking
equipment and redirecting traffic flow. Also, the direct costs have been reduced
in 1999 versus 1998 by $1.5 million as a result of the Robbins Parking and Asian
operations sold during the year.
Pro forma general and administrative expenses decreased by $4.8
million, or 31.6%, to $10.2 million for fiscal 1999 from $15.0 million for
fiscal 1998. The decrease was primarily due to an employee severance provision
of $2.4 million in 1998. This provision was ultimately determined to be
over-accrued by $1.8 million which was reversed in 1999. This reversal was
partially offset by a severance provision in 1999 of $0.9 million. The decrease
was also partially attributable to $1.1 million higher U.S. expansion costs for
fiscal 1998. Also, general and administrative expenses have been reduced in 1999
versus 1998 by $0.2 million as a result of the Robbins Parking and Asian
operations sold during the year. General and administrative expenses, before
taking into account severance, decreased as a percentage of total revenue from
23.3% in 1998 to 18.8% in 1999. This was a result of management efforts to
reduce general and administrative expenses and the effect of spreading general
and administrative expenses over a greater revenue base.
Depreciation and amortization decreased from $5.4 million for fiscal
1998 to $5.0 million for fiscal 1999, a decrease of $0.4 million. The decrease
was attributable to lower depreciation and amortization on management contracts
and agreements in 1999 than in 1998 as they became fully amortized during this
period.
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20
On a pro forma basis there was no interest expense for fiscal 1999 as
the bank and related party debt has been considered repaid. For fiscal 1998
interest expense on a pro forma basis was $0.8 million on debt owing to a former
shareholder. This debt was repaid in June 1998.
Other expenses in fiscal 1998 included a write-down in the value of
goodwill of $15.0 million at the fiscal year end. Goodwill was primarily created
on the push-down of the acquisition of the business of Impark Holdings by FUMI
in April 1997. Due to the losses incurred in the FUMI Parking Business since its
acquisition, at December 31, 1998 the management of FUMI and of a predecessor to
the Company assessed the recoverability of the net book value of goodwill. This
review was made by comparing the net book value of the estimates of future cash
flows from the FUMI Parking Businesses. As a results of this review, an
impairment charge in goodwill of $15.0 million was recorded.
Net loss on a pro forma basis decreased from $22.2 million for fiscal
1998 to $0.8 million for fiscal 1999, a decrease of $21.4 million. The decrease
was primarily due to recording in 1998 the $15.0 million goodwill write-down
combined with lower general and administrative expenses of $4.8 million, lower
interest costs of $0.8 million, lower depreciation and amortization of $0.4
million and reduced other expenses of $0.6 million, offset by decreased gross
margin of $0.2 million.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2000 we had cash of $8.3 million. Of this amount,
$2.7 million is restricted, including $2.3 million in support of a lien bond
that was issued during the third quarter while we negotiate final costs with the
contractor of the San Francisco Giants development. We estimate that up to
approximately $1.0 million will be required to complete funding of the
development costs of the stadium parking based on a total estimated cost of $7.8
million.
For fiscal 2000, we used $2.7 million of cash in operating activities.
This amount included uses of cash resulting from the following:- (i) $4.0
million of prepaid parking revenue from the Giants baseball season ticket
holders that was part of the cash balances of the FUMI Parking Business acquired
in March 2000 and subsequently remitted to the landlords of the parking
facilities over the course of the 2000 baseball season; (ii) $2.7 million of
cash which has been restricted, principally to support a lien bond issued in
conjunction with the negotiation of final costs of the San Francisco Giants
parking facility; and (iii) $2.2 million deposited with Canada Customs and
Revenue Agency on account of a previously provided liability from a legal
dispute over the taxable nature of parking violation notice revenue in Canada.
The dispute was settled in June 2000. We do not expect to make any further
payments in settlement of the tax liability in excess of the $2.2 million
deposited. Excluding the impact of these three items, we generated $6.2 million
of cash from operations for fiscal 2000.
We acquired $14.4 million of cash at the time of the acquisition of the
FUMI Parking Business by way of $8.1 million of cash in the FUMI Parking
Business and $6.3 million of cash contributed, net of repayment of outstanding
credit facilities, by First Union. In addition to funding the cash used in
operating activities, the cash was used to repurchase 284,762 shares during the
year at a cost of $4.7 million. We purchased a further 30,835 shares in January
2001 at a cost of $0.5 million.
Further uses of cash in fiscal 2000 included $1.1 million of capital
expenditure on fixed assets, $1.2 million for the acquisition of EZ Park and
$1.9 million of development costs for the Giants project.
In October, 2000 we finalized a new $20 million credit facility with
HSBC Bank Canada. This facility will be used to support working capital,
establish letters of credit and fund capital investment opportunities. As at
December 31, 2000, we had not drawn down on the credit facility. We may need
letters of credit for bids on larger lease or management contracts.
20
21
In the next 12 months, we anticipate the working capital necessary to
satisfy current obligations will be generated from operations, available cash
and our new bank facility.
Depending on the timing and magnitude of future investment
opportunities, which could be in the form of leased or purchased properties,
joint ventures and acquisitions, we anticipate the cash required to come from
operations, the new bank facility, a rights offering or an equity offering.
In the future, if we identify investment opportunities requiring cash
in excess of operating cash flows and credit facilities, we may seek additional
sources of capital, including the sale or issuance of Impark common stock or a
rights offering, or amending our credit facility to obtain additional
indebtedness. No assurances can be given that such increases would be available
at the time needed to complete any such transaction.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities". This statement
is effective for fiscal quarters of fiscal years beginning after June 15, 2000.
SFAS 133 establishes consistent accounting and reporting standards for
derivative instruments and for hedging activities. As of December 31, 2000, we
have not adopted this standard and do not expect to do so prior to its required
application date. As of December 31, 2000, we believe we have not entered into
significant instruments that are subject to SFAS 133, and that the initial
adoption of SFAS 133 will not have a material impact on our consolidated
financial statements.
FOREIGN CURRENCY EXPOSURE
We operate wholly-owned subsidiaries in Canada. Total historical
revenues from Canadian operations amounted to $0.6 million and $38.3 million for
fiscal years 1999 and 2000, respectively. We intend to continue to invest in
Canadian leased or owned facilities, and may identify expansion opportunities in
other foreign countries. Our exposure to foreign currency fluctuations is
limited as the Canadian dollar revenues have to date been significantly offset
by Canadian dollar operating costs. Presently, we have no formal hedging
programs. We anticipate implementing a hedging program if such risk materially
increases.
IMPACT OF INFLATION AND CHANGING PRICES
Our primary sources of revenues are parking revenues from owned and
leased locations and management contract revenue (net of expense
reimbursements). In the years ended December 31, 1999 and 2000 inflation had a
limited impact on our operations.
QUARTERLY RESULTS
We may experience fluctuations in our income from quarter to quarter
due to fluctuations in revenues and related expenses due to acquisitions,
pre-opening costs, travel and transportation patterns affected by weather and
calendar related events, and local and national economic conditions.
Additionally, we manage the parking for a number of sports stadiums and arenas
and our income can be affected by the relative degree of success of various
sports teams.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This report includes various forward-looking statements regarding us
and our business that are subject to risks and uncertainties, including, without
limitation, the factors set forth below. Forward-looking statements include, but
are not limited to, discussions regarding our operating strategy, growth
strategy, acquisition strategy, cost savings initiatives, industry, economic
conditions, financial condition, liquidity and capital resources and
21
22
results of operations. Such statements include, but are not limited to,
statements preceded by, followed by or that otherwise include the words
"believes," "expects," "anticipates," "intends," "estimates" or similar
expressions. For those statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995.
The following important factors, in addition to those discussed
elsewhere in this report, and the documents which are incorporated herein by
reference, could affect our future financial results and could cause actual
results to differ materially from those expressed in forward-looking statements
contained or incorporated by reference in this document:
- -- successfully integrating past and future acquisitions in light of
challenges in retaining key employees, synchronizing business processes
and efficiently integrating facilities, marketing, and operations;
- -- successful implementation of our operating and growth strategy,
including possible strategic acquisitions;
- -- fluctuations in quarterly operating results caused by a variety of
factors including the timing of gains on sales of owned facilities,
pre-opening costs, changes in our cost of borrowing, effect of weather
on travel and transportation patterns, player strikes or other events
affecting major league sports and local, national and international
economic conditions;
- -- our ability to form and maintain our strategic relationships with
certain large real estate owners and operators;
- -- global and regional economic factors;
- -- compliance with laws and regulations, including, without limitation,
environmental, antitrust and consumer protection laws and regulations
at the federal, state, provincial, local and international levels.
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
To December 31, 2000, we have not entered into significant derivative
instruments either for hedging or speculative purposes. As of December 31, 2000,
we had no such instruments outstanding. We will periodically hold excess
available cash in cash equivalents which are short-term deposits at major
financial institutions with terms to maturity at the date of acquisition of
three months or less.
Interest Rates
Our primary exposure to market risk consists of changes in interest
rates on cash invested in short-term deposits which are all included in cash
equivalents on our consolidated balance sheet. Changes in interest rates could
impact our anticipated real rate of return. However, due to the short-term
nature of such investments, the risk of loss to market is not significant.
Foreign Currency Exposure
We operate wholly-owned subsidiaries in Canada. Total revenues from
Canadian operations amounted to $38.3 million for the year ended December 31,
2000 as detailed in Note 14 to the Financial Statements. We intend to continue
to invest in Canadian leased or owned facilities, and may identify expansion
opportunities in other foreign countries. Our exposure to foreign currency
fluctuations is limited as the Canadian dollar revenues have to date been
significantly offset by Canadian dollar operating costs. Presently, we have no
formal hedging programs. We anticipate implementing a hedging program if such
risk materially increases.
22
23
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements listed in Item 14(a)1 and 14(a)2
are included in this report on pages F-1 through F-6.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning this Item is incorporated by reference to the
Company's definitive proxy materials for the Company's 2001 Annual Meeting of
Shareholders except that the information required by this item concerning the
executive officers of the Company is incorporated by reference to the
information set forth in the section entitled "Executive Officers of the
Company" at the end of Part I of this Annual Report on Form 10-K.
Item 11. EXECUTIVE COMPENSATION
Information concerning this Item is incorporated by reference to the
Company's definitive proxy materials for the Company's 2001 Annual Meeting of
Shareholders.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning this Item is incorporated by reference to the
Company's definitive proxy materials for the Company's 2001 Annual Meeting of
Shareholders.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning this Item is incorporated by reference to the
Company's definitive proxy materials for the Company's 2001 Annual Meeting of
Shareholders.
23
24
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. FINANCIAL STATEMENTS
The following financial statements are filed as part of this report:
Page
----
Independent Auditors' Report...................................................................F-1
Consolidated Financial Statements:
Balance Sheets as of December 31, 2000 and 1999............................................F-2
Statements of Operations for the years ended December 31, 2000, 1999 and 1998..............F-3
Statements of Stockholders' Equity for the years ended December 31, 2000, 1999 and 1998....F-4
Statement of Cash Flows for the years ended December 31, 2000, 1999 and 1998...............F-5
Notes to Consolidated Financial Statements.................................................F-6
2. FINANCIAL STATEMENTS SCHEDULES
None
Financial statement schedules have been omitted because they are not
applicable.
3. EXHIBITS
Each exhibit listed below in the Index to Exhibits is filed as a part
of this report. Exhibits not incorporated by reference to a prior filing are
designated by an asterisk ("*"); all exhibits not so designated are incorporated
herein by reference to a prior filing as indicated.
Index to Exhibits
- -----------------
Exhibit No. Description
----------- -----------
2.1 Form of Memorandum of Understanding regarding the
Distribution between First Union Real Estate Equity and
Mortgage Investments ("First Union") and the Registrant
(Incorporated by reference to Exhibit 2.1 to the Company's
Registration Statement No. 001-15629 on Form 10/A as filed on
March 2, 2000).
3.1 Form of Amended and Restated Certificate of Incorporation of
the Registrant (Incorporated by reference to Exhibit 3.1 to
the Company's Registration Statement No. 001-15629 on Form
10/A as filed on March 2, 2000).
3.2 Form of Amended and Restated By-Laws of the Registrant
(Incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement No. 001-15629 on Form 10/A as filed on
March 2, 2000).
4.1 Specimen certificate for shares of common stock of the
Registrant (Incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement No. 001-15629 on Form 10/A
as filed on March 2, 2000).
24
25
Exhibit No. Description
----------- -----------
10.1 Form of 2000 Stock Incentive Plan of the Registrant
(Incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement No. 001-15629 on Form 10/A as filed on
March 2, 2000).
10.4 Form of Indemnification Agreement (Incorporated by reference
to Exhibit 10.4 to the Company's Registration Statement No.
001-15629 on Form 10/A as filed on March 2, 2000).
10.6 Form of Huntzinger Employment Agreement (Incorporated by
reference to Exhibit 10.6 to the Company's Registration
Statement No. 001-15629 on Form 10/A as filed on March 21,
2000).
10.7 Form of Wallner Employment Agreement (Incorporated by
reference to Exhibit 10.7 to the Company's Registration
Statement No. 001-15629 on Form 10/A as filed on March 21,
2000).
10.8 Newsome Employment Agreement (Incorporated by reference to
Exhibit 10.8 to the Company's Registration Statement No.
001-15629 on Form 10/A as filed on March 2, 2000).
10.10* Form of $20.0 million Credit Facility dated as of September
20, 2000 by and among HSBC Bank Canada, the Company, Imperial
Parking Canada Corporation, Imperial Parking (U.S.), Inc. and
certain affiliates.
21.1* Subsidiaries of the Registrant.
(b) REPORT ON FORM 8-K
The following reports on Form 8-K were filed by the Company during the
last quarter of fiscal year ended December 31, 2000:
December 12, 2000 - Item 5. Other events - Presentation to analysts or
other financial institutions.
December 27, 2000 - Item 5. Other events - Repurchase of outstanding
common shares.
25
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
IMPERIAL PARKING CORPORATION
Date: March 20, 2001 By: /s/ J. BRUCE NEWSOME
- ----------------------- ---------------------------------.
J. Bruce Newsome
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ CHARLES E. HUNTZINGER President, Chief Executive Officer March 20, 2001
- ------------------------- and Director
Charles E. Huntzinger (Principal Executive Officer)
/s/ J. BRUCE NEWSOME Senior Vice President, Finance March 20, 2001
- -------------------- and Chief Financial Officer
J. Bruce Newsome (Principal Financial and Accounting Officer)
/s/ WILLIAM A. ACKMAN Chairman of the Board of Directors March 20, 2001
- ---------------------
William A. Ackman
/s/ DANIEL P. FRIEDMAN Vice-Chairman of the Board of Directors March 20, 2001
- ----------------------
Daniel P. Friedman
/s/ TALTON R. EMBRY Director March 20, 2001
- -------------------
Talton R. Embry
/s/ ARMAND E. LASKY Director March 20, 2001
- -------------------
Armand E. Lasky
/s/ BETH A. STEWART Director March 20, 2001
- -------------------
Beth A. Stewart
/s/ MARY ANN TIGHE Director March 20, 2001
- ------------------
Mary Ann Tighe
/s/ DAVID J. WOODS Director March 20, 2001
- ------------------
David J. Woods
26
27
REPORT OF INDEPENDENT ACCOUNTANTS
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Imperial Parking Corporation
as at December 31, 2000 and 1999 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
three year period ended December 31, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 Imperial Parking
Corporation as at December 31, 2000 and 1999 and the results of its operations
and its cash flows for each of the years in the three year period ended December
31, 2000, in conformity with accounting principles generally accepted in the
United States of America.
KPMG LLP
Chartered Accountants
Vancouver, Canada
January 26, 2001
F-1
28
IMPERIAL PARKING CORPORATION
Consolidated Balance Sheets
(Stated in thousands of United States dollars)
December 31, 2000 and 1999
- ----------------------------------------------------------------------------------------------------
2000 1999
- ----------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 5,615 $ 1,984
Restricted cash (note 17(b)) 2,688 --
Accounts receivable 3,561 30
Receivables from related parties -- 1,717
Current portion of recoverable development costs 969 --
Inventory 748 --
Deposits and prepaid expenses 821 --
Deferred income taxes (note 11) 1,700 --
- ----------------------------------------------------------------------------------------------------
16,102 3,731
Recoverable development costs 4,614 --
Notes receivable from related parties (note 4) -- 17,330
Fixed assets (note 5) 14,299 8,721
Management and lease agreements (note 6) 416 --
Other assets (note 7) 2,829 331
Goodwill (note 8) 41,131 --
- ----------------------------------------------------------------------------------------------------
$79,391 $30,113
====================================================================================================
- ------------------------------------------------------------------------------------------------------
2000 1999
- ------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Rents payable $ 6,871 $ --
Trade accounts payable and other accrued liabilities 3,153 254
Payable to employees and former employees 2,895 --
Sales tax payable 1,370 --
Payable to related parties -- 403
Deferred revenue 1,717 --
- ------------------------------------------------------------------------------------------------------
16,006 657
Note payable to First Union (note 10) -- 28,061
Other long-term liabilities 1,656 --
Deferred income taxes (note 11) 1,700 24
- ------------------------------------------------------------------------------------------------------
19,362 28,742
Stockholders' equity (note 12):
Common stock $0.01 par value; 10,000,000 shares authorized:
1,843,000 shares issued and outstanding 18 --
Additional paid-in capital 59,991 17,017
Retained earnings (deficit) 1,464 (14,984)
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment (1,444) (662)
- ------------------------------------------------------------------------------------------------------
60,029 1,371
- ------------------------------------------------------------------------------------------------------
$ 79,391 $ 30,113
======================================================================================================
Commitments and contingencies (note 17)
Subsequent event (note 18)
See accompanying notes to consolidated financial statements.
F-2
29
IMPERIAL PARKING CORPORATION
Consolidated Statements of Operations
(Stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- -----------------------------------------------------------------------------------------------------
2000 1999 1998
- -----------------------------------------------------------------------------------------------------
Revenues $53,305 $ 582 $ 454
Direct costs 39,818 2 12
- -----------------------------------------------------------------------------------------------------
Gross margin 13,487 580 442
Other expenses:
General and administrative 8,758 - -
Depreciation and amortization 3,710 43 45
- -----------------------------------------------------------------------------------------------------
12,468 43 45
- -----------------------------------------------------------------------------------------------------
Operating income 1,019 537 397
Other income (expense):
Interest income 744 - -
Interest income on notes receivable from
related companies 1,035 4,032 3,725
Interest expense on note payable to FUR (786) (3,044) (2,757)
Allowance for credit losses - (19,000) -
Other - 66 -
- -----------------------------------------------------------------------------------------------------
993 (17,946) 968
- -----------------------------------------------------------------------------------------------------
Income (loss) before income taxes 2,012 (17,409) 1,365
Income taxes (note 11):
Current (recovery) 272 (97) 380
Deferred - 11 12
- -----------------------------------------------------------------------------------------------------
272 (86) 392
- -----------------------------------------------------------------------------------------------------
Net income (loss) 1,740 (17,323) 973
Other comprehensive income (loss):
Foreign currency translation adjustments (782) 1,143 (1,278)
- -----------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ 958 $(16,180) $ (305)
=====================================================================================================
Basic and diluted income (loss) per share
(note 13) $ 0.83 $ (8.14) $ (0.46)
=====================================================================================================
See accompanying notes to consolidated financial statements.
F-3
30
IMPERIAL PARKING CORPORATION
Consolidated Statements of Stockholders' Equity
(Stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign Compre-
Common stock Additional Retained currency hensive
---------------- paid-in earnings translation income
Number Amount capital (deficit) adjustment Total (loss)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 -- $-- $ 17,017 $ 1,366 $ (527) $ 17,856
Net income -- -- -- 973 -- 973 $ 973
Foreign currency translation adjustment -- -- -- -- (1,278) (1,278) (1,278)
- ------------------------------------------------------------------------------------------------------------------------ --------
Balance, December 31, 1998 -- -- 17,017 2,339 (1,805) 17,551 $ (305)
========
Loss for the year -- -- -- (17,323) -- (17,323) $(17,323)
Foreign currency translation adjustment -- -- -- -- 1,143 1,143 1,143
- ------------------------------------------------------------------------------------------------------------------------ --------
Balance, December 31, 1999 -- -- 17,017 (14,984) (662) 1,371 $(16,180)
========
Contributions by First Union:
To repay outstanding credit facility -- -- 26,369 -- -- 26,369
Interest in limited liability company -- -- 3,413 -- -- 3,413
Cash for working capital and to fund future
costs of limited liability company -- -- 5,879 -- -- 5,879
In settlement of obligations to related parties -- -- 8,020 -- -- 8,020
To acquire net assets of FUMI parking related
business -- -- 18,604 -- -- 18,604
Net income -- -- -- 1,740 -- 1,740 $ 1,740
Foreign currency translation adjustment -- -- -- -- (782) (782) (782)
Capitalization of Impark, par value of $0.01
per share 2,121,318 21 (14,708) 14,708 -- 21
Shares issued to directors 6,444 -- 114 -- -- 114
Purchase of fractional shares -- -- (24) -- -- (24)
- ------------------------------------------------------------------------------------------------------------------------
2,127,762 21 64,684 1,464 (1,444) 64,725
Shares repurchased (284,762) (3) (4,693) -- -- (4,696)
- ------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity, December 31, 2000 1,843,000 $18 $ 59,991 $ 1,464 $(1,444) $60,029
======================================================================================================================== --------
Comprehensive income $ 958
==================================================================================================================================
See accompanying notes to consolidated financial statements.
F-4
31
IMPERIAL PARKING CORPORATION
Consolidated Statements of Cash Flows
(Stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- ---------------------------------------------------------------------------------------------------
2000 1999 1998
- ---------------------------------------------------------------------------------------------------
Cash flows provided by (used in) operating activities:
Net income (loss) $ 1,740 $(17,323) $ 973
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 3,710 43 45
Recovery of recoverable development costs 811 -- --
Interest income capitalized to note
receivable (697) (2,688) (2,487)
Interest expense capitalized to note
payable to First Union 786 2,740 2,469
Shares issued for non-cash consideration 114 -- --
Deferred income taxes -- 11 12
Allowance for credit losses -- 19,000 --
Changes in non-cash working capital items:
Restricted cash (2,688) -- --
Accounts receivable (714) (21) 6
Inventory 135 -- --
Deposits and prepaid expenses (156) -- --
Rents payable (397) -- --
Trade accounts payable and other
accrued liabilities 571 (53) (425)
Payable to employees and former
employees (11) -- --
Sales tax payable (1,578) -- --
Deferred revenue (4,211) -- --
Interest receivable on notes receivable
from related parties 8 (346) --
Receivables from related parties (127) (582) (469)
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (2,704) 781 124
Cash flows provided by (used in) investing activities:
Purchase of fixed assets (1,115) (5) (141)
Acquisition of minority interest in FUMI parking
related business (453) -- --
Repayment of outstanding credit facilities (26,369) -- --
Cash portion of business acquired 8,123 -- --
Acquisition of parking business (1,219) -- --
Change in other assets 1,597 -- --
Increase in recoverable development costs (1,852) -- --
- ---------------------------------------------------------------------------------------------------
Net cash used in investing activities (21,288) (5) (141)
Cash flows provided by (used in) financing activities:
Cash contributions 32,701 -- --
Purchase of common shares (4,720) -- --
Change in other liabilities (25) -- --
Increase in amount due to FUMI -- (11) 333
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities 27,956 (11) 333
Effect of exchange rate changes on cash and cash
equivalents (333) 91 (70)
- ---------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 3,631 856 246
Cash and cash equivalents, beginning of year 1,984 1,128 882
- ---------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 5,615 $1,984 $1,128
===================================================================================================
Supplementary information:
Interest paid $ -- $ 408 $ 288
Income taxes paid 491 -- 1,159
Non-cash transactions:
Interest income capitalized to notes
receivable 697 2,688 2,487
Shares issued for non-cash consideration 114 -- --
===================================================================================================
See accompanying notes to consolidated financial statements.
F-5
32
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
1. OPERATIONS:
Imperial Parking Corporation (the "Company") is the corporation, which
resulted from the combination, on March 27, 2000, of the Canadian parking
facilities of First Union Real Estate Equity and Mortgage Investments (the
"FUR Parking Business") and the parking related businesses of First Union
Management, Inc. (the "FUMI Parking Business") which consisted of the
following:
FUR Parking Business - The FUR Parking Business, constituting the parking
assets and operations of First Union Real Estate Equity and Mortgage
Investments ("First Union"), consisted primarily of 15 owned parking
properties in Canada. Since April 1997, subsidiaries of First Union
operated this business, including leasing the properties to First Union
Management, Inc. ("FUMI") for operations and management.
FUMI Parking Business - The FUMI Parking Business consisted of the parking
services and related ancillary activities that have been continued into
Impark. Since April 1997, subsidiaries of FUMI carried on these activities.
The continuing operations of FUMI's indirect subsidiaries, Imperial Parking
Limited and Impark Services Ltd., consisted of operating and managing
parking facilities in Canada and the United States and carrying on other
parking related activities.
For financial reporting purposes, the Company is considered to be a
continuation of the FUR Parking Business and the comparative financial
statements solely reflect its operations. The accompanying consolidated
financial statements reflect the Company's acquisition of the FUMI Parking
Business, which has been accounted for with effect from the close of
business on March 31, 2000 (note 3).
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These financial statements are prepared on a consolidated basis to
present the financial positions and results of operations of the
Company and its subsidiaries all of which are wholly-owned. All
significant intercompany balances and transactions have been
eliminated.
These consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States.
F-6
33
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(b) Use of estimates:
The preparation of financial statements in conformity with United
States 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 reporting period.
Significant areas requiring the use of management estimates relate to
assessment of the outcome of contingencies, valuation of goodwill,
estimation of the useful lives of fixed assets, management and lease
agreements and goodwill in determining depreciation and amortization,
and the extent and timing of recoverability of loss carryforwards.
Actual amounts may differ from the estimates applied in the preparation
of these financial statements.
(c) Cash equivalents:
Cash equivalents consist of certificates of deposit with an initial
term of less than three months. For purposes of the statements of cash
flows, the Company considers all highly liquid instruments with
original terms to maturity of three months or less when acquired to be
cash equivalents.
(d) Inventory:
The Company's inventory consists of equipment parts and supplies and is
recorded at the lower of cost, determined on a first-in, first-out
basis, and replacement cost.
(e) Fixed assets:
Fixed assets are recorded at cost. Depreciation and amortization is
provided as follows:
----------------------------------------------------------------------
Asset Basis Rate
----------------------------------------------------------------------
Buildings and improvements straight-line over 40 years
Furniture and fixtures declining-balance 20%
Equipment declining-balance 20% and 30%
Automotive equipment declining-balance 30%
----------------------------------------------------------------------
Leasehold improvements are depreciated straight-line over the shorter
of the lease term or the estimated useful life of the asset. Routine
maintenance and repairs are expensed as incurred.
F-7
34
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(f) Management and lease agreements:
Management and lease agreements are recorded at cost and represent the
Company's investment in parking lot agreements. Cost is based upon the
estimated fair value of the agreements at the time of the acquisition
determined using the discounted estimated future cash flow from these
agreements. Amortization is provided over the lives of the related
agreements in amounts equal to the discounted future cash flows used to
measure their original cost.
(g) Impairment of fixed assets and management and lease agreements:
The Company accounts for fixed assets and management and lease
agreements in accordance with the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". This Statement requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying value of
an asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to
be recognized is measured by the amount by which the carrying amount of
the asset exceeds its fair value. Assets to be disposed of are reported
at the lower of their carrying value or fair value less costs to sell.
(h) Recoverable development costs:
Recoverable development costs are recoverable from landlords on a
straight-line basis over the term of the related parking lot leases
which range from 1.5 to 9.5 years.
(i) Goodwill:
Goodwill represents the excess of cost over the value assigned to the
net assets acquired on business acquisitions. Goodwill is amortized on
a straight line basis over 20 years.
The Company assesses the recoverability of goodwill by determining
whether the amortization of the goodwill balance over its remaining
life can be recovered through undiscounted future operating cash flows
of the acquired operation. The amount of goodwill impairment, if any,
is measured based on projected discounted future operating cash flows
using a discount rate reflecting the Company's average cost of funds.
The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
F-8
35
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(j) Income taxes:
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to (i) differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and (ii) operating loss and tax credit carry
forwards. 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. To the extent that it is not more likely than not that
deferred tax assets will be realized, a valuation allowance is
provided.
(k) Revenue recognition:
Revenues consist of the parking revenues from managed and leased
locations. Revenues from managed locations represent revenues (both
fixed fees and additional payments based upon parking revenues) from
facilities managed for other parties and miscellaneous management fees
for accounting, insurance and other ancillary services such as
consulting and transportation management services. Parking and
management contract revenues are recognized when earned in accordance
with the terms of the agreements. Revenues from leased locations are
recognized in accordance with the terms of the agreements. Deferred
revenue primarily represents revenue received in advance of its due
date.
(l) Foreign currency translation:
The functional currency of the Company's operations in the United
States is the United States dollar. For facilities and operations
located in Canada, the functional currency is the Canadian dollar
("Cdn.").
The assets and liabilities of the Canadian operations are translated
into United States dollars at exchange rates in effect at the balance
sheet date. Revenue and expense items are translated at the rates of
exchange prevailing during the year. The gains or losses resulting from
these translations are excluded from the determination of income and
included in the separate foreign currency translation account within
shareholders' equity. Other exchange gains and losses are included in
the determination of income.
(m) Comprehensive income:
To the Company, comprehensive income consists of net income and the
change in the foreign currency translation amount for the year and is
presented in the consolidated statements of stockholders' equity as
other comprehensive income. Comprehensive income does not affect the
Company's financial position, results of operations or income (loss)
per share.
F-9
36
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(n) Income per share:
Basic earnings per common share is calculated by dividing net income
(loss) by the weighted average number of common shares outstanding
during the year. Diluted income per common share is calculated by
adjusting outstanding shares assuming conversion of all potentially
dilutive stock options. The weighted average number of shares
outstanding gives retroactive effect to the shares issued on the
formation of the Company.
(o) Stock option plan:
The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees", and related
interpretations, in accounting for its fixed plan stock options. As
such, compensation expense would be recorded on the date of grant only
if the current market price of the underlying stock exceeded the
exercise price. The Company values variable priced stock options issued
based upon an option-pricing model and recognizes this value as an
expense over the period in which the options vest. SFAS No. 123,
"Accounting for Stock-Based Compensation", established accounting and
disclosure requirements using a fair value-based method of accounting
for stock-based employee compensation plans. As allowed by SFAS 123,
the Company has elected to apply the intrinsic value-based method of
accounting described above, and will adopt the disclosure requirements
of SFAS No. 123.
3. ACQUISITION OF BUSINESSES:
(a) FUMI Parking Business:
On March 27, 2000 the Company was formed through a series of
transactions involving the combination of the FUR Parking Business and
the FUMI Parking Business. For accounting purposes the FUR Parking
Business has been treated as acquiring the FUMI Parking Business with
effect from the close of business on March 31, 2000 and has accounted
for the acquisition using the purchase method. The fair value of the
assets acquired and liabilities assumed of the FUMI Parking Business
were as follows:
-----------------------------------------------------------------------
Working capital deficit $(10,281)
Other assets and liabilities, net 6,276
Fixed assets 5,659
Management and lease agreements 763
Goodwill 42,556
-----------------------------------------------------------------------
44,973
Indebtedness (26,369)
-----------------------------------------------------------------------
$ 18,604
-----------------------------------------------------------------------
F-10
37
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
3. ACQUISITION OF BUSINESSES (CONTINUED):
(a) FUMI Parking Business (continued):
Included in the working capital deficit was $8.1 million of cash in the
FUMI Parking Business.
The results of operations of the FUMI Parking Business for the years
ended December 31, 1999 and 1998 and the three months ended March 31,
2000, are summarized as follows:
------------------------------------------------------------------------------------
March 31, December 31, December 31,
2000 1999 1998
------------------------------------------------------------------------------------
(unaudited)
Revenues $14,901 $60,145 $ 54,087
Direct costs 10,997 44,939 39,638
------------------------------------------------------------------------------------
Gross margin 3,904 15,206 14,449
Other expenses:
General and administrative 2,667 10,236 14,972
Depreciation and amortization 1,051 4,984 5,398
------------------------------------------------------------------------------------
3,718 15,220 20,370
------------------------------------------------------------------------------------
Operating income (loss) 186 (14) (5,921)
Other expense (1,507) (6,303) (22,034)
------------------------------------------------------------------------------------
Loss from continuing operations $(1,321) $(6,317) $(27,955)
====================================================================================
Results from April 1, 2000 onwards are included in the consolidated
results of the Company.
F-11
38
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
3. ACQUISITION OF BUSINESSES (CONTINUED):
(a) FUMI Parking Business (continued):
The following unaudited pro forma statements of operations for the
years ended December 31, 2000 and 1999 reflect the acquisition of the
FUMI Parking Business as if it had been completed as of January 1,
1999. Certain inter-company transactions have been eliminated and
acquisition transactions reflected in the pro forma statement as noted
below. These pro forma amounts do not purport to be indicative of the
results that would have actually been obtained if the acquisition
occurred as of the dates indicated or that may be obtained in the
future.
--------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------
(unaudited)
Revenue $67,809 $59,065
Direct costs 50,688 44,359
--------------------------------------------------------------------------------
Gross margin 17,121 14,706
Other expenses:
General and administrative 11,425 10,236
Depreciation and amortization 4,761 5,027
--------------------------------------------------------------------------------
16,186 15,263
--------------------------------------------------------------------------------
Operating income (loss) 935 (557)
Other income (expense) 411 (279)
--------------------------------------------------------------------------------
Income (loss) for the year $ 1,346 $ (836)
================================================================================
Earnings (loss) per share - basic and diluted $ 0.64 $ (0.39)
================================================================================
Unaudited pro forma consolidated results after giving effect to the
other businesses acquired during the year would not have been
materially different from the reported amounts for the year.
F-12
39
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
3. ACQUISITION OF BUSINESSES (CONTINUED):
(a) FUMI Parking Business (continued):
In preparing the pro forma statements of operations the results of the
Company and the FUMI Parking Business were combined and the following
transactions eliminated:
------------------------------------------------------------------------------------
March 31, December 31,
2000 1999
------------------------------------------------------------------------------------
Revenue:
Inter-entity lease fees $ 127 $ 582
Asset management fee 270 1,080
Direct cost:
Inter-entity lease fees 127 582
Interest expense (income):
Inter-entity interest income (1,035) (4,032)
Inter-entity interest expenses 1,035 4,032
Interest expense on note payable capitalized 786 3,044
Interest expense on long-term debt 411 1,840
Other expense:
Allowance for credit losses -- 19,000
=====================================================================================
(b) E-Z Park Company, Ltd. LLC:
Effective April 1, 2000, the Company purchased the business of E-Z Park
Company, Ltd. LLC for cash consideration of $1.2 million and a note
payable of $0.4 million. The purchase price has been allocated as to
$1.5 million to goodwill and $0.1 million to management and lease
agreements. The acquisition has been accounted for by the purchase
method with the results of operations included in these consolidated
financial statements from the date of acquisition.
4. NOTES RECEIVABLE FROM RELATED PARTIES:
--------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------
Members of the FUMI Parking Business:
Imperial Parking Limited $ -- $28,460
Imperial Services Limited -- 7,870
--------------------------------------------------------------------------
-- 36,330
Allowance for credit loss -- 19,000
--------------------------------------------------------------------------
$ -- $17,330
==========================================================================
F-13
40
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
4. NOTES RECEIVABLE FROM RELATED PARTIES (CONTINUED):
The notes receivable from related parties represented senior subordinated
partial payment-in kind notes secured, in part, by guarantees provided by
certain entities within the FUMI Parking Business and which as at December
31, 1999 (prior to the allowance for credit losses), were receivable as
Cdn. $52.4 million.
These notes earned interest at 12.0% per annum, of which 4% was receivable
quarterly in cash and the balance deferred until the principal outstanding
on the notes was repayable in full. Interest income earned during the
periods indicated has been capitalized to the balance of notes receivable
from related parties as follows:
-------------------------------------------------------------------------
Year ended December 31, 1998 $2,487 (Cdn.$4,029)
Year ended December 31, 1999 $2,688 (Cdn.$3,993)
Year ended December 31, 2000 $697 (Cdn.$1,003)
-------------------------------------------------------------------------
Pursuant to the series of transactions relating to the acquisition of the
FUMI Parking Business, the notes were settled and are no longer
outstanding.
5. FIXED ASSETS:
-----------------------------------------------------------------------------
Accumulated Net book
2000 Cost depreciation value
-----------------------------------------------------------------------------
Land $ 6,847 $ -- $ 6,847
Buildings and improvements 1,689 152 1,537
Leasehold improvements 3,048 586 2,462
Furniture and fixtures 265 42 223
Equipment 3,876 865 3,011
Automotive equipment 259 40 219
-----------------------------------------------------------------------------
$15,984 $1,685 $14,299
=============================================================================
F-14
41
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
5. FIXED ASSETS (CONTINUED):
-------------------------------------------------------------------------
Accumulated Net book
1999 Cost depreciation value
-------------------------------------------------------------------------
Land $7,114 $ -- $7,114
Buildings and improvements 1,722 115 1,607
-------------------------------------------------------------------------
$8,836 $115 $8,721
=========================================================================
6. MANAGEMENT AND LEASE AGREEMENTS:
-----------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------
Cost $ 841 $ --
Accumulated amortization (425) --
-----------------------------------------------------------------------
$ 416 $ --
=======================================================================
Under certain parking management agreements, the Company is committed to
pay fees to landlords based on either a fixed monthly rate, a percentage of
gross parking revenues or a percentage of net income. These fees payable
are recognized in accordance with the terms of the specific agreement.
7. OTHER ASSETS:
------------------------------------------------------------------------
2000 1999
------------------------------------------------------------------------
Note receivable (a) $2,068 $ --
Other 761 331
------------------------------------------------------------------------
------------------------------------------------------------------------
$2,829 $331
========================================================================
(a) The note is receivable from a director of a subsidiary of the Company
and bears interest at 8% per annum to May 2004 and 9.25% thereafter.
The note is repayable in monthly blended interest and principal
repayments of $21,675 until April 2004. One principal payment of $1.3
million on May 31, 2004 and monthly blended interest and principal
repayments of $25,287 until the note matures in May 2010.
F-15
42
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
8. GOODWILL:
-------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------
Cost, beginning of year $ -- $ --
Acquisition of businesses 44,067 --
-------------------------------------------------------------------------
Cost, end of year 44,067 --
Effect of exchange rates (1,235) --
Accumulated amortization (1,701) --
-------------------------------------------------------------------------
$41,131 $ --
=========================================================================
9. BANK CREDIT FACILITIES:
The Company has bank credit facilities consisting of operating and term
facilities. The revolving operating facility is available to a maximum of
$5.0 million and the term facility to $15.0 million, none of which, at
December 31, 2000, had been drawn.
The bank credit facilities are secured by a general assignment by the
Company in favour of the bank, debentures over certain real property,
assignment of rents and leases, securities pledge agreements and assignment
of insurance. The terms of the bank credit facilities require that certain
financial and non-financial covenants be met by the Company including the
maintenance of specified financial ratios and tests.
10. NOTE PAYABLE TO FIRST UNION:
The promissory note payable to First Union was capitalized to equity on
March 27, 2000 as part of the combination of the FUR Parking Business and
FUMI Parking Business. The note carried interest payable each year at
11.875% per annum, and as at December 31, 1999, Cdn. $40.5 million was
repayable.
Interest expense incurred during the years indicated has been capitalized
to the note payable to First Union as follows:
---------------------------------------------------------------------------
Year ended December 31, 1998 $2,469 (Cdn.$3,796)
Year ended December 31, 1999 $2,740 (Cdn.$3,954)
Year ended December 31, 2000 $786 (Cdn.$1,143)
---------------------------------------------------------------------------
F-16
43
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
11. INCOME TAXES:
Income tax expense (recovery) consists of:
---------------------------------------------------------------------------
Current Deferred Total
---------------------------------------------------------------------------
Year ended December 31, 2000:
Canada $153 $-- $ 153
United States 119 -- 119
---------------------------------------------------------------------------
$272 $-- $ 272
===========================================================================
Year ended December 31, 1999:
Canada $(97) $11 $ (86)
United States -- -- --
---------------------------------------------------------------------------
$(97) $11 $ (86)
===========================================================================
Year ended December 31, 1998:
Canada $380 $12 $ 392
United States -- -- --
---------------------------------------------------------------------------
$380 $12 $ 392
===========================================================================
Income tax expense attributable to income from continuing operations
differed from the amounts computed by applying the U.S. federal income tax
rate of 35% to income before income taxes as a result of the following:
-------------------------------------------------------------------------------------------
2000 1999 1998
-------------------------------------------------------------------------------------------
Computed "expected" tax expense $ 698 $(6,093) $ 486
Increase (reduction) in income taxes
resulting from:
Impact of difference between U.S. federal and
Canadian effective tax rates 223 (786) 57
Change in valuation allowance, net of
acquisition (1,683) -- --
Amortization of non-deductible goodwill 765 -- --
Corporation capital tax 207 -- --
State taxes 65 -- --
Deductions allocated to the FUR Parking
Business by First Union -- (190) (151
Allowance for credit losses -- 7,095 --
Other (3) (112) --
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
$ 272 $ (86) $ 392
===========================================================================================
F-17
44
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
11. INCOME TAXES (CONTINUED):
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 2000 and 1999 are as follows:
----------------------------------------------------------------------------------------
2000 1999
----------------------------------------------------------------------------------------
Deferred tax assets:
Loss carryforwards $ 7,442 $ 6,825
Accrued liabilities 410 --
----------------------------------------------------------------------------------------
7,852 6,825
Valuation allowance (857) (6,825)
----------------------------------------------------------------------------------------
Net deferred tax assets 6,995 --
Deferred tax liabilities:
Long-lived assets, principally due to differences in
depreciation (1,494) (24)
Basis in goodwill (4,997) --
Other assets (504) --
----------------------------------------------------------------------------------------
Total deferred tax liabilities (6,995) (24)
----------------------------------------------------------------------------------------
Net deferred tax liability $ -- $ (24)
========================================================================================
Reflected on consolidated balance sheet:
Current deferred asset, net $ 1,700 $ --
Non-current deferred liability, net (1,700) (24)
----------------------------------------------------------------------------------------
Net deferred tax liability $ -- $ (24)
========================================================================================
The valuation allowance for deferred tax assets as of December 31, 1999 and
2000 was $6.8 million and $0.9 million, respectively. In assessing the
realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods
in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment.
F-18
45
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
11. INCOME TAXES (CONTINUED):
The Company and its subsidiaries had total income tax losses and deductions
of approximately $16.7 million available at December 31, 2000 to reduce
future income taxes payable which are available and expire as follows:
-----------------------------------------------------------------------
2001 $ 183
2002 11
2003 11
2004 215
2005 7,439
2006 8,815
-----------------------------------------------------------------------
$16,674
=======================================================================
12. STOCKHOLDERS' EQUITY:
(a) Treasury stock:
(i) In June 2000, the Board of Directors approved a voluntary Odd-Lot
Tender program, whereby shareholders, on closing at June 13,
2000, owning less than 100 shares, could sell their shares of
common stock at $16.00 without incurring brokerage commissions.
The program closed on July 27, 2000 with shareholders tendering
38,298 shares at a cost of $632,901, including expenses.
(ii) In October 2000, the Board of Directors authorized $1,000,000 for
the repurchase of the Company's outstanding common stock. Under
this buy-back authorization, the Company repurchased 31,370
shares in October 2000 at a cost of $511,000.
(iii) In December 2000, the Board of Directors authorized the
repurchase of 215,094 shares in December 2000 at a cost of
$3,553,000.
(b) Stock options:
In March 2000, the board of directors approved the 2000 Stock Incentive
Plan (the "Plan") prior to filing its Registration Statement on Form 10
to distribute common stock. A total of 315,000 shares were reserved for
issuance under the Plan.
To date, the board of directors have approved the grant to certain
directors, officers and senior employees of incentive stock options
pursuant to the Plan which, if all exercised, would result in the
issuance of 243,902 shares in the common stock of the Company. The
grant of these options is subject to approval at the Annual General
Meeting of stockholders scheduled for Spring 2001 and will only be
recognized as granted for accounting purposes when such approval is
received.
F-19
46
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
13. EARNINGS PER SHARE:
The following table sets forth the computation of basic and diluted
earnings per share:
-----------------------------------------------------------------------------------------------------------
2000 1999 1998
---------------------------- --------------------------- ---------------------------
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 and
diluted per
share:
Income (loss) $1,740 2,100 $0.83 $(17,323) 2,127 $(8.14) $973 2,127 $0.46
for the year
==========================================================================================================
14. BUSINESS SEGMENTS:
Senior management of the Company reviews the revenue and overall results of
operations by geographic regions. The following table summarizes the
revenue, operating results and assets for these geographic regions:
----------------------------------------------------------------------------------------
2000 1999 1998
---------------------------------- ------ ------
Canada U.S. Total Canada Canada
----------------------------------------------------------------------------------------
Revenue 38,338 14,967 53,305 582 454
Depreciation and
amortization 3,162 548 3,710 43 45
Operating income 1,063 (44) 1,019 537 397
Income taxes 153 119 272 (86) 392
Total assets 63,405 15,986 79,391 30,113 42,002
Long-lived assets 52,841 10,448 63,289 26,382 40,150
=======================================================================================
The Company's operations were only in Canada in 1998 and 1999.
F-20
47
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
15. UNAUDITED QUARTERLY FINANCIAL INFORMATION:
The following table sets forth selected unaudited quarterly information for
the Company's last eight fiscal quarters.
-------------------------------------------------------------------------------------------------
Fiscal 2000 Quarter End
---------------------------------------------------------
December 31 September 30 June 30 March 31
-------------------------------------------------------------------------------------------------
Revenues 16,788 18,529 17,861 127
Gross margin 3,932 4,733 4,695 127
Net income (loss) for the period (21) 574 911 276
Net income (loss) per share (0.01) 0.27 0.43 0.13
=================================================================================================
The three quarters ended June, 30, September 30, and December 31, 2000
reflect the acquisition of the FUMI Parking Business as discussed in note
3.
-------------------------------------------------------------------------------------------------
Fiscal 1999 Quarter End
---------------------------------------------------------
December 31 September 30 June 30 March 31
-------------------------------------------------------------------------------------------------
Revenues 150 144 144 144
Gross margin 148 144 144 144
Net income (loss) for the period (18,488) 390 387 388
Net income (loss) per share (8.69) 0.18 0.18 0.18
=================================================================================================
Loss for the quarter ended December 31, 1999 includes an allowance for
credit losses of $19.0 million against notes receivable from related
parties.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Financial instruments of the Company at December 31, 2000 include cash and
cash equivalents, restricted cash, accounts receivable, note receivable,
rent and trade accounts payable and accrued liabilities, payable to
employees and former employees and sales tax payable. The fair values of
these items included in current assets and liabilities are estimated to
equal their carrying value due to their short-term to maturity or ability
for prompt liquidation.
The fair value of notes receivable is not readily determinable due to the
nature of the relationship between the Company and the other party.
F-21
48
IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars)
Years ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
17. COMMITMENTS AND CONTINGENCIES:
(a) Operating lease commitments:
The Company leases certain of its office premises, automobiles and
office equipment under long-term operating leases. The aggregate annual
minimum lease payments required under operating leases in each of the
next five years are as follows:
-----------------------------------------------------------------------
2001 $1,356
2002 796
2003 509
2004 275
2005 196
-----------------------------------------------------------------------
$3,132
=======================================================================
(b) Contingencies:
The Company is disputing development costs in the amount of $2.4
million claimed by a development contractor. The Company has completed
mediation proceedings with the contractor and anticipates a resolution
to these claims in early 2001. An accrual has been recorded for the
estimated settlement costs. In order to remove property liens by the
contractor, the Company has placed restricted funds on deposit of $2.7
million.
As part of its regular operations, the Company periodically becomes
involved with legal claims or potential claims related to damage to
vehicles or personal injuries for which the Company carries insurance,
or disagreements with individual employees or on the interpretation of
management or lease agreements. In the opinion of management, the
resolution of these matters will not have a material effect on the
financial condition, results of operations or cash flows of the
Company.
18. SUBSEQUENT EVENT:
On January 4, 2001, the Board of Directors of the Company increased the
authorization limit for the repurchase of the Company's outstanding common
stock as discussed in note 12(a) from $1,000,000 to $1,250,000. Under the
buy back authorization, the Company repurchased 30,835 shares to January
26, 2001 at a cost of $543,500.
F-22