10-K405 1 d10k405.txt FORM 10-K ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K [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 Or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from to Commission file number: 333-50437 ---------------- APCOA/Standard Parking, Inc. (Exact name of registrant as specified in its charter) Delaware 16-1171179 (State or other jurisdiction of (I.R.S. Employer Identification No.) Incorporation or organization) 900 N. Michigan Avenue Chicago, Illinois 60611-1542 (Address of principal executive offices, including zip code) (312) 274-2000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: None. 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 periods 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 II of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting and non-voting shares of common stock held by non-affiliates of the registrant is not applicable as there is not a public market for such stock. As of December 31, 2000, there were 31.31 shares of common stock of the registrant outstanding. ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" as well as in this Annual Report generally. You should carefully review the risks described in this Annual Report as well as the risks described in other documents filed by the Company from time to time with the Securities and Exchange Commission. In addition, when used in this Annual Report, the words "anticipates," "believes," "plans," "estimates," and "expects" and similar expressions are generally intended to identify forward-looking statements. Such statements are subject to a number of risks and uncertainties. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by the Company or these forward looking statements. The Company undertakes no obligation to revise these forward-looking statements to reflect any future events or circumstances. ITEM 1. BUSINESS General APCOA/Standard, formerly known as APCOA, Inc. ("APCOA"), is a leading national provider of parking facility management services. The Company provides on-site management services at multi-level and surface parking facilities in the two major markets of the parking industry: urban parking and airport parking. The Company manages 1,947 parking facilities, containing approximately 1,030,000 parking spaces in over 220 cities across the United States and Canada. The Company's gross customer collections, parking services revenue, gross profit and net loss for the years ended December 31, 2000 and 1999 were $1,545.7 and $1,369.3 million, $252.5 and $247.9 million, $60.1 and $54.8 million and ($11.5) and ($9.5) million, respectively. The Company believes that its superior management services coupled with its focus on increasing market share in select core cities helps to maximize profitability per parking facility. The Company believes that it enhances its leading position by providing: (i) Ambiance in Parking(R), an approach to parking that includes a number of on-site, value-added services and amenities; (ii) state-of-the-art information technology, including Client View(R), a proprietary client reporting system which allows the Company to provide clients with real-time access to site-level financial and operating information; and (iii) award-winning training programs for on-site employees that promote customer service and client retention. The Company believes that it distinguishes itself from its competitors because of the aforementioned services. The Company's diversified client base includes some of the nation's largest owners and developers of major office building complexes, shopping centers, sports complexes, hotels and hospitals. In addition, the Company manages 155 parking operations at 67 airports, including many of the major airports in North America. The Company does not own any parking facilities and, as a result, the Company assumes few of the risks of real estate ownership. The Company operates its clients' parking properties through two types of arrangements: management contracts and leases. Under a management contract, the Company typically receives a base monthly fee for managing the property, and may also receive an incentive fee based on the achievement of facility revenues above a set amount. In some instances, the Company also receives certain fees for ancillary services. Typically, all of the underlying revenues and expenses under a management contract flow through to the property owner, not to the Company. Under lease arrangements, the Company generally pays either a fixed annual rental, a percentage of gross customer collections, or a combination thereof to the property owner. The Company collects all revenues under lease arrangements and is responsible for most operating expenses, but it is typically not responsible for major maintenance or capital expenditures. As of December 31, 2000, the Company operated approximately 81% of its 1,947 parking facilities under management contracts and approximately 19% under leases. Renewal rates for the Company's management contracts and leases averaged approximately 90% for the last three years. 2 The Combination Pursuant to the Combination Agreement, dated as of January 15, 1998 by and among Myron C. Warshauer, Stanley Warshauer, Steven A. Warshauer, Dosher Partners, L.P., a Delaware limited partnership, SP Parking Associates, an Illinois general partnership, and SP Associates, an Illinois general partnership (collectively, the "Standard Owners") and APCOA, APCOA acquired (the "Combination"), on March 30, 1998, all of the outstanding capital stock, partnership and other equity interests of Standard Parking Corporation, an Illinois corporation; Standard Auto Park, Inc., an Illinois corporation; Standard Parking Corporation MW, an Illinois corporation; Standard Parking, L.P., a Delaware limited partnership; Standard Parking Corporation IL, an Illinois corporation; and Standard/Wabash Parking Corporation, an Illinois corporation (all such entities, collectively, "Standard"), for consideration consisting of $65.0 million in cash, 5.01, shares or 16%, of the common stock of the Company outstanding as of January 15, 1998, and the assumption of certain liabilities, including a $5.0 million consulting and non-compete obligation for one of the former owners of Standard, which represents the current value of the payments to be made, as determined by consulting actuaries. In addition, on March 30, 1998, APCOA paid to the Standard Owners $2.8 million, generally representing Standard's earnings from January 1, 1998 through the date of the Combination and Standard's cash on hand at such time. In connection with the Standard acquisition, on March 30, 1998 the Company issued $140 million principal amount of 9.25% Senior Subordinated Notes due 2008 in a Rule 144A private placement. Effective September 14, 1998, the Company completed an offer to exchange all the outstanding Senior Subordinated Notes with new notes with substantially identical terms that are registered under the Securities Act of 1933. Upon the closing of the Combination, the Company entered into a $40.0 million secured revolving Senior Credit Facility with Bank One N.A. (formerly known as The First National Bank of Chicago). Borrowings under the Senior Credit Facility bear interest at variable rates based, at the Company's option, either on LIBOR, the federal funds rate, or the Agent's base rate. Also in connection with the Combination, AP Holdings, Inc. ("AP Holdings"), a Delaware corporation and the parent of the Company, contributed $40.7 million of cash to the Company in exchange for $40.7 million initial liquidation preference of new preferred stock of the Company. The contribution was financed through AP Holdings' offering of $70.0 million in aggregate principal amount of its 11.25% Senior Discount Notes 2008. Other Acquisitions On January 22, 1998, the Company acquired the assets of Huger Parking Company, LLC, d/b/a Dixie Parking, for $1.0 million in cash at closing and $3.3 million in notes payable. On May 1, 1998, the Company acquired the remaining 76% interest in Executive Parking Industries LLC, through the acquisition of all of the outstanding capital stock of S&S Parking, Inc., the sole asset of which was such 76% interest in EPI, for $7.0 million in cash. In addition, on June 1, 1998, APCOA/Standard acquired all of the outstanding capital stock of Century Parking, Inc., and Sentry Parking Corporation, for $5.2 million in cash at closing and $1.0 million payable on the third anniversary of the closing date. On September 1, 1998, APCOA/Standard acquired the operations of Virginia Parking Service, Inc. in a stock purchase transaction for $3.1 million in cash, including direct costs, and up to $1.3 million in notes payable over five years with interest at the prime rate. On April 1, 1999, the Company acquired the assets of Pacific Rim Parking, Inc. ("Pacific Rim") in Los Angeles for $0.75 million in cash and up to $0.75 million in non-interest bearing notes payable over five years. On May 1, 1999 the Company acquired various contracts of System Parking Inc. in Atlanta for $0.25 million in cash. Effective as of July 1, 1999 the Company acquired all of the outstanding stock of Universal Park Holdings, Inc., operating under the names U-Park and Select Valet Parking, in Vancouver B.C. for $1.61 million plus a multiple of EBITDA on a future earnout as defined in the agreement. All of these acquisitions have been accounted for under the purchase method and their operating results have been included in the consolidated results since their respective date of acquisition. The historical operating 3 results of the businesses prior to acquisition were not material relative to the consolidated results of APCOA/Standard. Industry Overview General. The International Parking Institute, a trade organization of parking professionals, estimates that as of December 1999 there were approximately 35,000 parking facilities in the United States generating over $26.0 billion in gross customer collections. The parking industry is highly fragmented, with over 1,700 commercial parking operators in the United States, as estimated by the Parking Market Research Company, an independent research company. Industry participants, the vast majority of which are privately held companies, consist of relatively few nationwide 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. Clients of parking facility managers include the owners of office buildings, major airports, shopping centers, sports complexes, hotels and hospitals, which provide parking to customers. Operating Arrangements. Parking facilities operate under two general types of arrangements: management contracts and leases. The general terms and benefits of these two types of arrangements are as follows: Management Contracts. Under a management contract, the facility manager generally receives a base monthly fee for managing the facility and often receives an incentive fee based on the achievement of facility revenues above a base amount. Facility managers 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 manager is not responsible for structural or mechanical repairs, and typically is not responsible for providing security or guard services. Under typical management contracts, the facility owner is responsible for operating expenses such as taxes, license and permit fees, insurance premiums, payroll and accounts receivable processing and wages of personnel assigned to the facility. In addition, the facility owner is responsible for non-routine maintenance, repair costs and capital improvements. The typical management contract is for a term of one to three years (though the owner often reserves the right to terminate, without cause, on 30 days' notice) and may contain a renewal clause. Leases. Under a lease arrangement, the parking facility operator generally pays either a fixed annual rent, a percentage of gross customer collections, or a combination thereof to the property owner. The parking facility operator collects all revenues and is responsible for most operating expenses, but is typically not responsible for major maintenance. In contrast to management contracts, lease arrangements are typically for terms of three to ten years and typically contain 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 the parking facility operator than do managed facilities. Parking Industry Markets. The parking industry is comprised of two major markets: urban parking and airport parking. The urban parking market consists of many sub-markets with differing clients including commercial, office, residential, event, entertainment, retail, shopping centers, hospitals and hotels. In contrast, the airport parking market consists of a relatively small number of clients with large revenue-generating parking operations and needs that are unique to airport parking facilities. Industry Growth Dynamics. A number of opportunities for growth exist for parking facility operators: Industry Consolidation. There are many opportunities for industry consolidation, both domestically and abroad. Consolidation among operators provides opportunity to achieve accelerated growth in the parking industry because of the limitations on growth in revenues of existing operations. While some growth in revenues from existing operations is possible through redesign, increased operational efficiency or increased facility use and prices, such growth is ultimately limited by the size of a facility and market conditions. 4 Privatization of Government-Owned and Operated Facilities. Additional growth in the industry has been a function of the trend for parking facility owners to move from owner-operation to outsourcing the management of operations to private operators. This is particularly true in the case of privatization of government operations and facilities, which is resulting in new opportunities for the parking industry. The Company believes that 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. Expanding Relationships with Large Property Managers, Owners and Developers. Generally, the overall parking industry expansion is created by new construction of parking facilities by property managers, owners and developers. Growth for parking facility operators generally results from more established parking facility operators leveraging their relationships with property managers and owners to take market share from smaller companies. As new construction of parking facilities increases, the Company believes that facility operators with established relationships with such parking facility developers can leverage such relationships to capture incremental market share. Business Strategy and Competitive Advantages The Company believes its innovative parking facility amenities, services and management, coupled with its state-of-the-art information technology and reporting systems, position the Company to enhance its standing as a leading provider of parking services. Specific elements of the Company's business strategy and competitive advantages include: Focus on Core Cities. Part of the Company's business strategy is to focus on increasing system-wide profitability by maximizing operating leverage. As part of this strategy, the Company operates in certain core cities and realizes certain economies of scale, including the ability to spread administrative overhead costs across a large number of parking facilities in a single market. Stable Operating Portfolio. From 1994 to 2000, the Company reduced exposure to increasing cost of parking services by (i) increasing the proportion of its management contracts, which generally pass cost of parking services on to the Company's clients, and (ii) maintaining low minimum rental commitments under its non-cancelable leases. Additionally, the Company's average management and lease contract renewal rate over the last three years was approximately 90%. Leading Client Base. The Company's diversified, long-standing customer base comprises many of the premier national property management and ownership organizations in the United States and Canada. The Company is a market leader in airport parking, operating approximately 155 parking facilities at 67 airports in the United States and Canada. The Company's focus on select core cities enables the Company to maintain broader and stronger relationships with the local client base, which the Company believes improves its client retention rates and its ability to compete for new contracts. Value-Added Services and Information Systems. The Company believes that it can continue to increase profitability and attract new clients by providing: (i) Ambiance in Parking(R); (ii) state-of-the-art information technology, including Client View(R); and (iii) award-winning training programs for on-site employees. In addition, these capabilities facilitate development opportunities that typically lead to long-term lease and management contracts on new facilities. Ambiance in Parking(R) The Company offers a comprehensive package of on-site parking services and amenities, which the Company characterizes as Ambiance in Parking(R). The package includes: Patented Musical Theme Floor Reminder System. The Company's patented musical theme floor reminder system is designed to help customers remember the garage level on which they had parked. A different song is played on each floor of the parking garage. Each floor also displays distinctive signs and graphics which correspond with the floor's theme. For example, in one garage with U.S. cities as a theme, 5 songs played include "I Left My Heart in San Francisco" on one floor and "New York, New York" on a different floor. Other garages have themes such as college fight songs, broadway musicals, classic movies and professional sports teams. Little Parkers(R) is our child-friendly environment program, featuring baby-changing facilities and free toys for kids. Books-To-Go(R) is an audiotape library which is provided free-of-charge for monthly parkers. Films-To-Go(R) is a videotape library which is provided free-of-charge for monthly parkers. ParkNet(R) traffic information system allows parking customers to obtain continuous, site-specific traffic reports relating to current traffic conditions on area expressways as well as the routes utilized to get from the specific parking facility to the expressways. CarCare(TM) service program is provided in conjunction with Midas International Corporation. Parking customers can have their cars picked up from the parking facility, serviced and returned before the end of the business day. Complimentary Windshield and Headlight Cleaning. During off-peak hours, the Company's parking attendants clean windshields and headlights of cars and place a card on the windshield informing the parking customer that this service has been provided. Emergency Car Services. The Company offers complimentary services such as battery starts, lost car assistance, tire inflation, tire change and vehicle escort service. State-of-the-Art Information Technology The Company's information technology provides valuable benefits to the Company's clients. Client View(R), a proprietary Windows(R)-based client reporting system, allows the Company's clients to access, on a real-time basis, site-level financial and operating information. The Company has created advanced information systems that connect local offices across the country to its corporate office. A centralized staff provides accounting and administrative expertise and controls that eliminate duplication of administrative and accounting functions at the field level. ParkStat(R), one of the Company's proprietary software tools, enhances the performance of parking facilities managed by the Company. By automatically polling information from on-site collection devices, ParkStat(R) uses location-specific information to calculate the impact of pricing alternatives, optimize staffing levels, improve forecasting and assist in long-range planning. Technological innovations such as an automated credit card lane and a radio-activated hands-free parking access system allow fast and hassle-free service for parking customers. Regulation The Company's business is not substantially affected by direct governmental regulation, although parking facilities are sometimes directly regulated by both municipal and state authorities. The Company is affected by laws and regulations (such as zoning ordinances) that are common to any business that deals with real estate and by regulations (such as labor and tax laws) that affect companies with a large number of employees. In addition, several state and local laws have been passed in recent years that encourage car pooling and the use of mass transit, including, for example, a Los Angeles, California law prohibiting employers from reimbursing employee parking expenses. Laws and regulations that reduce the number of cars and vehicles being driven could adversely impact the Company's business. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in such property. Such laws typically impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In connection with the operation of parking facilities, the Company may be potentially liable for any such costs. Although the Company is currently not aware of any material environmental claims pending or threatened against 6 it or any of the parking facilities which it operates, there can be no assurance that a material environmental claim will not be asserted against the Company or against the parking facilities which it operates. The cost of defending against claims of liability, or of remediating a contaminated property, could have a material adverse effect on the Company's financial condition or result of operations. Various other governmental regulations affect the Company's operation of parking facilities, both directly and indirectly, including the ADA. Under the ADA, all public accommodations, 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. When negotiating management contracts and leases with clients, the Company generally has the property owner contractually assume responsibility for any ADA liability in connection with the property; however, there can be no assurance that the property owner has assumed such liability for any given property and there can be no assurance that the Company would not be held liable despite assumption of responsibility for such liability by the property owner. Management believes that the parking facilities the Company operates are in substantial compliance with ADA requirements. Employees As of December 31, 2000, the Company employed approximately 14,000 individuals, including approximately 8,400 full-time and 5,600 part-time employees. As of December 31, 1999, the Company employed approximately 13,300 individuals, including approximately 8,000 full-time and 5,300 part-time employees. The Company believes that its employee relations are good. Intellectual Property The APCOA(R) name and logo and the Standard(R) name and logo are registered with the United States Patent and Trademark Office. In addition, the Company has registered the names and, as applicable, the logos of all material subsidiaries and divisions of the Company in the United States Patent and Trademark Office or the equivalent State registry, including the right to the exclusive use of the name Central Park in the Chicago metropolitan area. The Company has also obtained a United States patent for its Multi-Level Vehicle Parking Facility (the Musical Theme Floor Reminder System) and trademark protection for its proprietary parker programs, such as Books-To-Go(R), Films- To-Go(R), Little Parkers(R) and Ambiance in Parking(R). Proprietary software developed by the Company, such as Client View(R), Hand Held Program(R), License Plate Inventory Program(R), ParkNet(R) and ParkStat(R) are registered in the United States Copyright Office. Competition The parking industry is fragmented and highly competitive, with limited barriers to entry. The Company faces direct competition for additional facilities to manage or lease, while the Company's facilities themselves compete with nearby facilities for its parking customers, and in the labor market generally for qualified employees. Moreover, the construction of new parking facilities near the Company's existing facilities can adversely affect the Company's business. The Company competes for additional facilities with a variety of other companies. Although there are relatively few large, national parking companies that compete with the Company, the Company also faces competition from numerous smaller, locally-owned independent operators, as well as from developers, hotels, national financial services companies and other institutions that self-manage both their own parking facilities as well as facilities owned by others. Many municipalities and other governmental entities also operate their own parking facilities, thus eliminating those facilities as potential management or lease opportunities for the Company. Some of the Company's present and potential competitors have or may obtain greater financial and marketing resources than those of the Company which may negatively impact the Company's ability to retain existing contracts and gain new contracts. 7 ITEM 2. PROPERTIES Parking Facilities The Company operates parking facilities in 40 states, Washington D.C. and three provinces of Canada pursuant to management contracts or leases. The Company does not currently own any parking facilities. The following table summarizes certain information regarding the Company's facilities as of December 31, 2000:
# of Locations # of Spaces Airports and Urban ------------------- ------------------------- States/Provinces Cities Airport Urban Total Airport Urban Total ---------------- ------------------------ ------- ----- ----- ------- ------- --------- Alabama Airports 3 3 1,430 1,430 Arizona Phoenix 22 22 25,208 25,208 Richmond, Vancouver, British Columbia Victoria and Whistler 48 48 4,180 4,180 California Airports, Los Angeles, Long Beach, Sacramento, San Diego, San Francisco, and San Jose 7 518 525 24,762 173,520 198,282 Airports, Colorado Colorado Springs, and Denver 3 26 29 14,202 12,601 26,803 Airports, Greenwich and Connecticut Stamford 8 7 15 5,000 5,170 10,170 District of Columbia Washington, DC 36 36 13,790 13,790 Delaware Wilmington 1 1 473 473 Airports, Miami, Orlando Florida and Pensacola 17 59 76 23,856 22,573 46,429 Georgia Airports and Atlanta 2 25 27 2,180 13,500 15,680 Hawaii Airports and Honolulu 3 47 50 2,393 18,760 21,153 Idaho Airports 1 1 372 372 Illinois Airports and Chicago 9 193 202 30,540 107,543 138,083 Airports, Indianapolis Indiana and Ft. Wayne 1 20 21 1,234 7,606 8,840 Kansas Topeka 2 2 894 894 Kentucky Louisville 2 2 716 716 Louisiana Airports and New Orleans 1 42 43 1,302 13,528 14,830 Maine Airports and Portland 3 1 4 1,371 528 1,899 Baltimore, Bethesda and Maryland Towson 19 19 5,088 5,088 Airports, Boston, Cambridge, and Massachusetts Worchester 133 133 56,419 56,419 Airports, Detroit and Michigan Southfield 7 10 17 5,879 7,609 13,488 Airports, Minneapolis Minnesota and St. Paul 5 39 44 21,001 17,514 38,515 Missouri Airports and Kansas City 16 96 112 24,242 20,566 44,808 Montana Airports and Great Falls 4 4 8 1,952 1,906 3,858 Nebraska Airports 2 2 1,307 1,307 Nevada Las Vegas and Reno 4 4 1,368 1,368 New Jersey Airports 9 9 18,500 18,500 New Mexico Airports 1 1 0 0 Airports, Buffalo and New York Rochester 9 24 33 8,807 25,186 33,993 North Carolina Charlotte 1 1 818 818 North Dakota Airports 2 2 1,415 1,415 Ohio Airports, Akron, Cleveland, Cincinnati, Columbus and Toledo 14 103 117 18,731 52,816 71,547 Airports, North York, Ontario Scarborough and Toronto 3 46 49 3,340 34,744 38,084 Oregon Airports 3 3 2,231 2,231 Airports and Wilkes Pennsylvania Barre 2 1 3 1,331 431 1,762 Quebec Airports 4 4 9,405 9,405 Rhode Island Providence 3 3 6,045 6,045 South Carolina Airports 4 4 4,232 4,232 South Dakota Airports 2 2 1,508 1,508 Airports, Memphis and Tennessee Nashville 2 17 19 3,077 6,201 9,278 Airports, Dallas, Forth Texas Worth and Houston 4 97 101 4,341 78,889 83,230 Virginia Airports, Alexandria, Richmond and Virginia Beach 6 110 116 3,468 36,828 40,296 Washington Airports and Seattle 2 11 13 822 3,347 4,169 Wisconsin Airports and Milwaukee 12 9 21 11,303 1,688 12,991 --- ----- ----- ------- ------- --------- Totals 171 1,776 1,947 255,534 778,053 1,033,587 === ===== ===== ======= ======= =========
8 The Company has interests in 19 joint ventures that each operates between one and three parking facilities. The Company is the general partner of seven limited partnerships that each operates between one and twelve parking facilities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Summary of Operating Facilities." The Company leases approximately 45,000 square feet of office space for its corporate offices in Chicago, Illinois. The lease expires in 2008, and includes a renewal option for an additional five years. The lease also includes expansion options for up to 3,700 additional square feet of space, and the Company has a right of first refusal on 24,000 square feet more. The Company believes that the leased facility, together with expansion options, is adequate to meet current and foreseeable future needs. The Company also leases regional offices. These lease agreements generally include renewal and expansion options, and the Company believes that these facilities are adequate to meet its current and foreseeable future needs. ITEM 3. LEGAL PROCEEDINGS The Company is subject to various claims and legal proceedings which consist principally of lease and contract disputes and includes litigation with The County of Wayne relating to the management of parking lots at the Detroit Metropolitan Airport. These claims and legal proceedings are considered ordinary, routine, and incidental to the Company's business, and in the opinion of management, the ultimate liability with respect these proceedings and claims will not materially affect the financial position, operations, or liquidity of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None. ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS There is no public trading market for the common stock of APCOA/Standard. APCOA/Standard did not pay a cash dividend in respect of its common stock in 2000, 1999 or 1998. By the terms of the Company's Revolving Credit Facility, the Company is restricted from paying cash dividends on its capital stock while such facility is in effect. The Company paid dividends in respect of its Redeemable Preferred Stock in additional shares of Redeemable Preferred Stock aggregating $5,696, $5,106 and $3,491 in 2000, 1999 and 1998, respectively. The indenture governing the Company's Senior Subordinated Notes also limits the Company's ability to pay cash dividends. Unless the Company meets certain financial ratios, it may not pay dividends in respect of its stock except for those payable in additional shares of stock. There are no restrictions on the ability of APCOA/Standard's wholly-owned subsidiaries to pay cash dividends to APCOA/Standard. Other Events As previously disclosed in Item 3 of APCOA/Standard Form 10-Q for the quarter ended September 30, 2000, the bankruptcy filing of AmeriServe Food Distribution, Inc. on January 31, 2000 was a default under certain debt instruments of Holberg. As a result of such defaults, the creditors of Holberg could have taken control of Holberg or AP Holdings, APCOA/Standard's parent. A change in control of Holberg or AP Holdings would also constitute a change in control of APCOA/Standard under APCOA/Standard's debt instruments and of AP Holdings under its bond indenture. 9 On March 5, 2001, Holberg restructured certain of its debt and eliminated the defaults thereunder, thereby eliminating the possibility of a change of control of AP Holdings under its bond indenture or the possibility of a change in control of APCOA/Standard under the APCOA/Standard debt instruments as a result of such defaults (see Item 12). ITEM 6. SELECTED HISTORICAL FINANCIAL DATA The following table presents selected historical consolidated financial data at and for the years ended December 31, 2000, 1999 and 1998, which have been derived from the audited financial statements of APCOA/Standard and 1997 and 1996, which have been derived from the audited financial statements of APCOA. The selected financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical consolidated financial statements and notes thereto included elsewhere herein.
Year Ended December 31, ------------------------------------------------------ 2000 1999 1998(1) 1997 1996 ---------- ---------- ---------- -------- -------- Income Statement Data: Parking services revenue................ $ 252,482 $ 247,899 $ 195,517 $117,704 $138,409 Cost of parking services............... 192,345 193,094 155,230 94,846 116,158 General and administrative expenses............... 36,121 32,453 23,506 13,528 13,017 Other special charges... 4,636 5,577 18,050 -- -- Depreciation and amortization........... 12,635 9,343 7,435 3,767 4,888 ---------- ---------- ---------- -------- -------- Operating income (loss). 6,745 7,432 (8,704) 5,563 4,346 Interest expense, net... 17,382 15,684 10,938 3,243 2,877 Minority interest....... 341 468 487 321 424 Income tax expense...... 503 752 430 140 106 Extraordinary loss...... -- -- 2,816 -- -- ---------- ---------- ---------- -------- -------- Net income (loss)....... $ ( 11,481) $ (9,472) $ (23,375) $ 1,859 $ 939 ========== ========== ========== ======== ======== Other Data: Gross customer collections............ $1,545,690 $1,369,319 $1,026,085 $476,183 $430,696 Capital expenditures.... 4,684 10,261 7,691 2,357 2,552 Net cash provided by (used in): Operating activities.. (3,217) (17,709) (20,381) 931 2,042 Investing activities.. (4,897) (13,531) (96,025) (3,592) (3,349) Financing activities.. 7,240 16,844 132,267 3,451 1,288 Effect of exchange rate changes......... (802) 428 -- -- -- Number of managed locations............ 1,577 1,423 1,165 378 207 Number of leased locations............ 370 407 439 267 243 Number of total locations............ 1,947 1,830 1,604 645 450 Number of parking spaces............... 1,033,587 1,012,000 794,000 273,000 225,000 Balance Sheet Data (at end of year): Cash and cash equivalents............ $ 3,539 $ 5,215 $ 19,183 $ 3,322 $ 2,532 Working capital deficiency............. (11,941) (12,180) (9,119) (17,059) (19,455) Total assets............ 208,341 213,270 216,769 59,095 52,823 Total debt.............. 175,895 167,469 149,431 38,283 32,795 Redeemable preferred stock.................. 54,976 49,280 44,174 8,728 7,841 Common stock subject to put/call rights........ 6,304 4,589 4,589 -- -- Common stockholders' deficit................ (100,731) (79,611) (54,908) (22,259) (23,231)
-------- (1) Includes the results of Standard Parking effective from March 30, 1998. 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of APCOA/Standard's results of operations should be read in conjunction with the consolidated financial statements of APCOA/Standard and the notes thereto included elsewhere herein. Overview APCOA/Standard operates facilities under two types of arrangements: management contracts and leases. Under a management contract, APCOA/Standard typically receives a base monthly fee for managing the property, and may also receive an incentive fee based on the achievement of facility revenues above a base amount. In some instances, APCOA/Standard also receives certain fees for ancillary services. Typically, all of the underlying revenues, expenses and capital expenditures under a management contract flow through to the property owner, not to APCOA/Standard. Under lease arrangements, APCOA/Standard generally pays to the property owner either a fixed annual rental, a percentage of gross customer collections or a combination thereof. APCOA/Standard collects all revenues under lease arrangements and is responsible for most operating expenses, but it is typically not responsible for major maintenance or capital expenditures. As of December 31, 2000, the Company operated approximately 81% of its 1,947 parking facilities under management contracts and approximately 19% under leases. Parking services revenue--lease contracts. Lease parking services revenues related to lease contracts consist of all revenues received at a leased facility. Parking services revenue--management contracts. Parking services revenue related to management contracts consist of management fees, including both fixed and revenue-based, and fees for ancillary services such as accounting, equipment leasing, consulting, and other value-added services with respect to managed locations, but exclude gross customer collections at such locations. Management contracts generally provide APCOA/Standard a management fee regardless of the operating performance of the underlying facility. Cost of parking services--lease contracts. Cost of parking services under lease arrangements consists of contractual rental fees paid to the facility owner and all operating expenses incurred in connection with operating the leased facility. Contractual fees paid to the facility owner are based on either a fixed contractual amount or a percentage of gross revenue, or a combination thereof. Generally under a lease arrangement, APCOA/Standard is not responsible for major capital expenditures or property taxes. Cost of parking services--management contracts. Cost of parking services under management contracts is generally passed through to the facility owner, therefore, these costs are not included in the results of operations of the Company. Several APCOA/Standard contracts, however, require APCOA/Standard to pay for certain costs that are offset by larger management fees. These contracts tend to be large airport properties with high cost structures. General and administrative expenses. General and administrative expenses include primarily salaries, wages, travel and office related expenses for the headquarters, field offices and supervisory employees. Summary of Operating Facilities The following table reflects the Company's facilities at the end of the periods indicated:
December 31, December 31, December 31, 2000 1999 1998 ------------ ------------ ------------ Managed Facilities................. 1,577 1,423 1,165 Leased Facilities.................. 370 407 439 ----- ----- ----- Total Facilities................. 1,947 1,830 1,604 ===== ===== =====
11 The Company's strategy is to add locations in core cities where a concentration of locations improves customer service levels and operating margins. In general, contracts added as set forth in the table above followed this strategy. Results of Operations
Year Ended December 31, ---------------------------------- 2000 1999 1998 ---------- ---------- ---------- (in thousands) Gross customer collections.............. $1,545,690 $1,369,319 $1,026,085 ========== ========== ========== Parking services revenue: Lease contracts....................... $ 181,828 $ 196,441 $ 162,568 Management contracts.................. 70,654 51,458 32,949 ---------- ---------- ---------- 252,482 247,899 195,517 Cost of parking services: Lease contracts....................... 159,702 172,217 144,086 Management contracts.................. 32,643 20,877 11,144 ---------- ---------- ---------- 192,345 193,094 155,230 General and administrative expenses..... 36,121 32,453 23,506 Other special charges................... 4,636 5,577 18,050 Depreciation and amortization........... 12,635 9,343 7,435 ---------- ---------- ---------- Operating income (loss)................. 6,745 7,432 (8,704) Interest expense, net................... 17,382 15,684 10,938 Minority interest....................... 341 468 487 Income tax expense...................... 503 752 430 Extraordinary item...................... -- -- 2,816 ---------- ---------- ---------- Net loss................................ $ (11,481) $ (9,472) $ (23,375) ========== ========== ==========
In analyzing gross margins of APCOA/Standard, it should be noted that the cost of parking services for parking facilities under management contracts is generally paid by the Company's clients. Margins for lease contracts vary significantly not only due to operating performance, but also variability of parking rates in different cities and space utilization by parking facility type and location. Fiscal 2000 Compared to Fiscal 1999 Gross customer collections. Gross customer collections consist of gross receipts collected at all leased and managed properties, including unconsolidated affiliates. Gross customer collections increased $176.4 million, or 12.9%, to $1,545.7 million in fiscal 2000 compared to $1,369.3 million in fiscal 1999. This increase is attributable to the addition of 117 locations during the period and growth at existing locations. Parking services revenue--Lease contracts. Lease contract revenue decreased $14.6 million or 7.4% to $181.8 million in the year ended December 31, 2000 as compared to $196.4 million in the year-ago period. This decrease resulted from the net reduction of 37 leases through contract expirations and conversions to management contracts. One large airport lease contract was converted to a management contract in the second half of 2000, a large airport contract was lost in the second half of 1999, and a change was made in reclassification of reimbursable costs. Parking services revenue--management contracts. Management contract revenue increased $19.2 million, or 37.3% to $70.7 million in the year ended December 31, 2000 as compared to $51.5 million in the year-ago period. This resulted from the net increase of 154 contracts through internal growth, conversions from lease contracts, an addition of a large airport contract in the second half of 2000 and a conversion of a large airport contract from a lease to a management contract. 12 Cost of parking services--lease contracts. Cost of parking for lease contracts decreased $12.5 million, or 7.3%, to $159.7 million for the year ended December 31, 2000 from $172.2 million during the year-ago period. This decrease resulted from the net reduction of 37 leases through contract expirations, conversions to management contracts and the loss of one large airport contract in the second half of 1999. Gross margin for leases declined slightly to 12.2% during 2000 compared to 12.3% during 1999. The nominal decrease was due to slightly higher operating expenses. Cost of parking services--management contracts. Cost of parking for management contracts increased $11.8 million or 56.4%, to $32.6 million for the year ended December 31, 2000 as compared to $20.8 million in 1999. The increase resulted from the addition of a net total of 154 new contracts through internal growth and conversions from lease contracts. Gross margins for management contracts declined to 53.8% in the year 2000 compared to 59.4% in the previous year. Most management contracts have no cost of parking services related to them as all costs are reimbursable to the Company. However, several contracts (primarily large airport properties and several urban locations) require the Company to pay for certain costs which are offset by larger management fees. The increase in cost of parking management contracts was related to the addition of several contracts of this type. General and administrative expenses. General and administrative expenses increased $3.7 million, or 11.3%, to $36.1 million during 2000 compared to $32.5 million during 1999. This increase resulted from investment in the Company's infrastructure in the first half of 2000. Other special charges. The Company recorded $4.6 million of other special charges during 2000. The charge included $2.5 million of severance costs, $0.9 million of prior period retroactive insurance premium increases, and $1.2 million of incremental integration costs and other. Other income and expense. Interest expense, net of interest income, totaled $17.4 million in the current year, up from $15.7 million in 1999. This increase is the result of increased borrowings under the Company's Senior Credit Facility. Minority interest decreased $0.1 million to $0.4 million in 2000 from $0.5 million in 1999. Income tax expense, which consists primarily of Canadian income tax, decreased to $0.5 million in 2000 from $0.8 million in 1999 as a result of the decrease in Canadian income. Fiscal 1999 Compared to Fiscal 1998 Gross Customer Collections. Gross customer collections consist of gross receipts collected at all leased and managed properties, including unconsolidated affiliates. Gross customer collections increased $343.2 million, or 33.4%, to $1,369.3 million in fiscal 1999, compared to $1,026.1 million in fiscal 1998. This increase is attributable $120.9 million to the combination with Standard and $222.3 million to the addition of other locations during the period and growth at existing locations. Parking services revenue--lease contracts. Lease contract revenue increased $33.8 million, or 20.8%, to $196.4 million in the year ended December 31, 1999 as compared to $162.6 million in 1998. This increase resulted from the net addition of 39 leases through the combination with Standard and a net loss of 72 leases that were converted to management contracts or lost. Parking services revenue--management contracts. Management contract revenue increased $18.6 million, or 56.2% to $51.5 million in 1999 as compared to $32.9 million in 1998. During 1999, a net 281 management contracts were added through internal growth and acquisitions. Cost of parking services--lease contracts. Cost of parking for lease contracts increased $28.1 million, or 19.5% to $172.2 million for the year ended December 31, 1999 from $144.1 million in 1998. This increase resulted from the addition of 39 leases through the combination with Standard and a net reduction of 72 leases through conversion to management contracts and lost contracts. Gross margin for leases increased to 12.3% during 1999 compared to 11.4% during 1998. This increase resulted from improvement in operations, conversion of leases to management contracts and the termination of marginal contracts. 13 Cost of parking services--management contracts. Cost of parking for management contracts increased $9.7 million, or 87.3% to $20.8 million in 1999 as compared to $11.1 million in 1998. This increase resulted from the net addition in 1999 of 281 management contracts through internal growth and acquisitions made in 1999. Gross margin for management contracts declined to 59.4% in the current year compared to 66.2% in the prior year. Most management contracts have no cost of parking services related to them as all costs are reimbursable to the Company. However, several contracts (primarily large airport properties and several urban locations), require the Company to pay for certain costs which are offset by larger management fees. The increase in cost of parking management contracts was related to the addition of several contracts of this type. General and administrative expenses. General and administrative costs increased $8.9 million, or 38.1%, to $32.4 million during 1999 as compared to $23.5 million during 1998. The increase resulted from costs associated with the acquired companies, inflation, and investment in the Company's infrastructure in anticipation of future growth. Other special charges. The Company incurred $5.6 million of other special charges during 1999. The charge included (A) $1.6 million of severance costs, (B) $3.1 million of integration costs related primarily to actions to facilitate the accounting system consolidation and activities to realign and centralize administrative and other support functions, and (C) $0.9 million of expenses incurred for acquisition activity that was terminated. The Company incurred $18.1 million of other special charges during 1998 in connection with the combination with Standard and the other acquisitions completed during 1998, which were based upon a thorough analysis of the costs associated with implementing the business plan of consolidating the Company's headquarters in Chicago and costs related to APCOA/Standard staff reductions. The charge included (A) $5.0 million of relocation costs in connection with the relocation costs in connection with the headquarters relocation of the Company, the relocation of two major field offices, moving the families of 20 Cleveland headquarters staff members to Chicago and other relocations within the field organization, (B) $6.9 million in severance costs consisting of cash compensation to 54 people and (C) the write-off of $2.6 million related to abandoned and impaired assets that will no longer be used in the business, (D) a $2.6 million increase in insurance reserves resulting from a buyout of APCOA's insurance program in connection with the combination of the APCOA and Standard insurance programs and (E) $1.0 million of other special costs. Other income and expense. Interest expense, net of interest income, totaled $15.7 million in 1999 up from $10.9 million from 1998. This is the result of debt financing incurred in connection with the combination with Standard and other acquisitions and increased borrowings under the Company's Senior Credit Facility. Minority interest was $0.5 million for both years. Income taxes consist primarily of Canadian income tax, and increased to $0.8 million in 1999 from $0.4 million in 1998 as a result of the increase in Canadian income. 14 Comparison of Results of Operations on a Combined Basis The following supplementary information is provided to enhance the analysis of results of operations. The results presented below represent the combined historical results of APCOA and Standard for the periods presented, without pro forma adjustments for the impact of the acquisition of Standard. These combined results do not purport to represent what the actual results would have been if the acquisition had occurred at the beginning of 1998.
Year Ended December 31, --------------------- 1999 1998 ---------- ---------- (in thousands) Gross customer collections......................... $1,369,319 $1,103,000 ========== ========== Parking services revenue: Lease contracts.................................. $ 196,441 $ 174,613 Management contracts............................. 51,458 35,463 ---------- ---------- 247,899 210,076 Cost of parking services: Lease contracts.................................. 172,217 155,275 Management contracts............................. 20,877 11,144 ---------- ---------- 193,094 166,419 General and administrative expenses................ 32,453 25,524 ---------- ---------- Operating income before depreciation, amortization and special charges............................... $ 22,352 $ 18,133 ========== ==========
Fiscal 1999 Compared to Fiscal 1998 Gross customer collections. Gross customer collections increased $266.3 million, or 24.1% to $1,369.3 in 1999 as compared to $1,103.0 in 1998. This resulted from the net addition of 248 new contracts during 1999. Parking services revenue--lease contracts. Lease contract revenue increased $21.8 million, or 12.5%, to $196.4 million in the year ended December 31, 1999 as compared to $174.6 million in the year-ago period. This resulted from the acquisitions made in 1998 and 1999 which was partially offset by a net reduction of 33 leases in 1999, many of which were converted to management contracts. Parking services revenue--management contracts. Management contract revenue increased $16.0 million, or 45.1%, to $51.5 million in 1999 as compared to $35.5 million in 1998. During 1999, a net 281 management contracts were added through internal growth and acquisitions made in 1999. Cost of parking services--lease contracts. Cost of parking for lease contracts increased $16.9 million, or 10.9% to $172.2 million for the year ended December 31, 1999 from $155.3 million during the year-ago period. This increase resulted from acquisitions made in 1998 and 1999. Gross margin for leases increased to 12.3% during 1999 compared to 11.1% during 1998. This increase resulted from improvement in operations, conversion of leases to management contracts and the loss of marginal contracts. Cost of parking services--management services. Cost of parking for management contracts increased by $9.7 million, or 87.3%, to $20.8 million in 1999 as compared to $11.1 million in 1998. This increase resulted from the net addition of 281 management contracts through internal growth and acquisitions made in 1999. Gross margin for management contracts declined to 59.4% in the current year compared to 68.6% in the prior year. Most management contracts have no cost of parking services related to them as all costs are reimbursable to the Company. However, several contracts (primarily large airport properties and several urban locations), require the Company to pay for certain costs which are offset by larger management fees. The increase in cost of parking management contracts was related to the addition of several contracts of this type. 15 General and administrative expenses. General and administrative costs increased $6.9 million, or 27.1% to $32.4 million during 1999 as compared to $25.5 million during 1998. This increase resulted from costs associated with the acquired companies, inflation, and investment in the Company's infrastructure in anticipation of future growth. Liquidity and Capital Resources As a result of day-to-day activity at the parking locations, APCOA/Standard collects significant amounts of cash. Lease contract revenue is deposited into local APCOA/Standard bank accounts, with a portion remitted to the clients in the form of rental payments according to the terms of the leases. Under management contracts, some clients require APCOA/Standard to deposit the daily receipts into a local APCOA/Standard bank account. Others require the deposit into a client account, and some have a segregated account for the receipts and disbursements of the property. Locations with revenues deposited into the APCOA/Standard banks enable the Company to operate with a negative working capital. This negative working capital arises from the liability that is created for the amount of revenue that will be remitted to the clients in the form of rents or net profit distributions subsequent to month end, after the books are closed and reconciled. Since the Company operates with a revolving Senior Credit Facility, all funds held for future remittance to the clients are used to reduce the credit line until the payments are made to the clients. Locations with revenues deposited into client accounts or segregated accounts can, depending upon timing of rent or net profit distributions, result in significant amounts of cash being temporarily inaccessible to the Company for use for operating needs. Additionally, the ability to utilize cash deposited into local APCOA/Standard accounts is dependent upon the movement of that cash into the Company's corporate account. For these reasons, the Company from time to time carries significant cash balances, while utilizing its Senior Credit Facility. Fiscal 2000 Compared to Fiscal 1999 The Company had cash and cash equivalents of $3.5 million at December 31, 2000 compared to $5.2 million at December 31, 1999. Net cash used in operating activities totaled $3.2 million for 2000 compared to cash used of $17.7 million for 1999. Cash used during 2000 included $4.6 million of cash for other special charges, $2.8 million in final rent payment for terminated lease contracts, $2.5 million held for a client construction project and $1.2 million in compensation and other items. Notes and accounts receivable increased $4.1 million in 2000 relating to new contracts and existing locations. Cash was provided by an increase in accounts payable of $9.8 million primarily related to an increase in the number of clients depositing revenues into APCOA/Standard banks from segregated accounts of $6.0 million and an increase of $3.8 million in trade accounts payable. Other assets declined by $1.1 million. Cash used in investing activities totaled $4.9 million in 2000 compared to cash used of $13.5 million in 1999. Cash used in investing included capital expenditures of $4.9 million for capital investments to secure and/or extend leased facilities and investment in information system enhancements. Cash provided by financing activities totaled $7.2 million in 2000 compared to cash provided from financing activities that totaled $16.8 million in 1999. The 2000 activity included $8.9 million in borrowings from the Senior Credit Facility, which was partially offset by repayments on long term borrowings and joint venture borrowings of $1.3 million. In addition, the Company incurred additional debt issuance costs of $0.3 million in connection with amendments to the Company's Senior Credit Facility. 16 Fiscal 1999 Compared to Fiscal 1998 The Company had cash and cash equivalents of $5.2 million at December 31, 1999 compared to $19.2 million at December 31, 1998. Net cash used in operating activities totaled $17.7 million in 1999 compared to cash used of $20.4 million in 1998. Cash used during 1999 included $8.9 million of other special charges, $5.6 million for the purchase of an insurance tail policy to cover claims for all years prior to 1999 under APCOA's previous insurance program, and $3.8 million to affiliated companies. Notes and accounts receivable increased $11.9 million in 1999 relating to acquired contracts and existing locations and were partially offset by increases in accounts payable of $6.8 million and decreases in prepaid and other assets of $1.1 million and $2.4 million, respectively. Cash used in investing activities totaled $13.5 million in 1999 compared to $96.0 million in 1998. Cash used included the acquisitions of the assets of Pacific Rim in Los Angeles for $0.8 million, various contracts of System Parking in Atlanta for $0.3 million, the outstanding stock of Universal Park Holdings, Inc. in Vancouver B.C. for $1.6 million and the buy-out of a lease in Los Angeles for $0.4 million. In addition, cash used in investing activities included capital expenditures of $10.3 million which were used for the investment in information system enhancements, furnishing and improvement of the Company's combined office space in Chicago, and capital investments to secure and/or extend leased facilities. Cash generated from financing activities totaled $16.8 million compared to $132.3 million in 1998. The 1999 activity included $18.1 million in borrowings from the revolving Senior Credit Facility and $1.3 million in joint venture borrowings which was partially offset by repayments on long term borrowings and joint venture borrowings of $2.2 million. In addition, the Company incurred additional debt issuance costs of $0.3 million in connection with amendments to the Company's Senior Credit Facility. Other Liquidity and Capital Resources Information The Company's Senior Credit Facility (the "Facility") provides cash borrowings up to $40.0 million with sublimits for Letters of Credit up to $10.0 million, at variable rates based, at the Company's option, either on LIBOR, the overnight federal funds rate, or the bank's base rate. The Company utilizes the Facility to provide readily-accessible cash for working capital purposes. The Facility includes covenants that limit the Company from incurring additional indebtedness, issuing preferred stock or paying dividends, and contains certain other restrictions. At December 31, 2000, the Company had $0.3 million of letters of credit outstanding under the Facility and borrowings against the Facility aggregated $27.0 million. At March 29, 2001, borrowings against the Facility aggregated $29.8 million. The Facility was amended on March 30, 2000, with the principal changes to the agreement providing for revisions to interest rates charged on borrowings and certain financial covenants. The Facility was amended on May 12, 2000, with the principal change to the agreement relating to the definition of a change in control. The Facility was amended on November 14, 2000, with the principal changes to the agreement providing for revisions to interest rates charged on borrowings and certain financial covenants. As of December 31, 2000, the Company was in compliance with the covenants contained in the Facility or has obtained the necessary waivers on or before March 30, 2000. The Facility was amended on March 30, 2001 with the principal changes to the agreement providing for revisions to interest rates charged on borrowings, certain financial covenants, a change to restore the original borrowing limits, and a change in the expiration date from March 30, 2004 to July 1, 2002. The Company has significant indebtedness. As of December 31, 2000, the Company had indebtedness under Senior Subordinated Notes, Senior Credit Facility, joint venture debentures, capital lease obligations and other asset financing totaling approximately $175.0 million. The Company's ability to meet its anticipated future requirements for working capital, capital expenditures, scheduled payments of interest and principal on its indebtedness depends on the Company's future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other 17 factors beyond its control. Based upon the current level of operations and anticipated growth, the Company believes that, together with available borrowings under its Facility, its cash flow and available liquidity will be adequate to meet the Company's anticipated requirements up to the expiration date of the Facility. However, there can be no assurance that the Company's business will generate sufficient cash flow or that future borrowings will be available in an amount sufficient to enable the Company to meet its future requirements, or that any refinancing of existing indebtedness (including the Facility) would be available on commercially reasonable terms, or at all. The Company has lease commitments of $27.4 million for fiscal 2001. The leased properties generate sufficient cash flow to meet the base rent payments. If the Company identifies investment opportunities requiring cash in excess of the Company's cash flows and existing cash, the Company may borrow under the Senior Credit Facility. In January 1999, the Company completed the combination of the insurance programs of APCOA and Standard into one program. In conjunction therewith, the Company purchased an insurance policy to cover amounts previously self-insured by APCOA and its affiliates. The APCOA insurance program had historically included a self-insured retention component, which required the establishment of reserves to reflect the estimated final settlement value of open claims. The purchase of a tail policy to eliminate future exposure from retrospective adjustments resulted in a use of cash of $5.6 million in January of 1999, $2.6 million of which was included in other special charges. This transaction provided an offsetting increase in availability of funds by allowing the elimination of letters of credit in the amount of $4.7 million. The Company has in the past pursued a strategy of growth through acquisition. On January 22, 1998, the Company acquired the assets of Huger Parking Company, LLC, d/b/a Dixie Parking, for $1.0 million in cash and notes aggregating $3.25 million. On May 1, 1998, the Company acquired the remaining 76% interest in Executive Parking Industries, LLC through acquisition of its parent company for $7.0 million in cash. On June 1, 1998, the Company completed the acquisition of Century Parking and Sentry Parking for consideration consisting of $5.2 million in cash at closing and $1.0 million payable on the third anniversary of the closing date. In addition, on September 1, 1998 the Company acquired the capital stock of Virginia Parking Services, Inc. for $2.7 million in cash including direct costs, and up to $1.25 million in notes. On April 1, 1999, the Company acquired the assets of Pacific Rim Parking, Inc. ("Pacific Rim") in Los Angeles for $.75 million in cash and up to $.75 million in non-interest bearing notes payable over five years. On May 1, 1999 the Company acquired various contracts of System Parking Inc. in Atlanta for $.25 million in cash. Effective as of July 1, 1999 the Company acquired all of the outstanding stock of Universal Park Holdings, Inc., operating under the names U-Park and Select Valet Parking, in Vancouver B.C. for $1.61 million plus a multiple of EBITDA on a future earnout as defined in the agreement. All of the acquisitions have been accounted for under the purchase method. The historical operating results of the businesses prior to acquisition were not material relative to the consolidated results of APCOA/Standard. There can be no assurance as to the Company's ability to effect future acquisitions, nor as to the effect of any such acquisition on the Company's operations, financial condition and profitability. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk exposure consists of risk related to changes in interest rates. Historically, the Company has not used derivative financial instruments for speculative or trading purposes. The Company has a $40.0 million revolving variable rate Senior Credit Facility (see Note D of the Notes to the Consolidated Financial Statements). Interest expense on such borrowing is sensitive to changes in the market rate of interest. If the Company were to borrow the entire $40.0 million cash availability under the Facility, a 1% increase in the average market rate would result in an increase in the Company's annual interest expense of $0.4 million. 18 This amount is determined by considering the impact of the hypothetical interest rates on the Company's borrowing cost, but does not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Due to the uncertainty of the specific changes and their possible effects, the foregoing sensitivity analysis assumes no changes in the Company's financial structure. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements required by this Item are attached to and are hereby incorporated into this Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth certain information with respect to each person who is an executive officer or director of the Company as of March 30, 2001:
Name Age Title ---- --- ----- John V. Holten........... 44 Director and Chairman Myron C. Warshauer....... 61 Director and Chief Executive Officer James A. Wilhelm......... 47 President Herbert W. Anderson, Jr.. 42 Executive Vice President, Operations Executive Vice President, Chief Financial G. Marc Baumann.......... 45 Officer, and Treasurer Executive Vice President, General Counsel and Robert N. Sacks.......... 48 Secretary Steven A. Warshauer...... 46 Executive Vice President, Operations Michael K. Wolf.......... 51 Executive Vice President, Chief Administrative Officer and Associate General Counsel Gunnar E. Klintberg...... 52 Director and Vice President Edward Simmons........... 51 Executive Vice President, Operations
John V. Holten. Mr. Holten is Chairman and Chief Executive Officer of Steamboat Holdings, Inc., the indirect parent company of APCOA/Standard. Mr. Holten has served as a Director and Chairman of APCOA since 1989, and has served as Director and Chairman of the Company since March 30, 1998 when APCOA consummated its combination with Standard. Mr. Holten was Managing Director of DnC Capital Corporation, a merchant banking firm in New York City, from 1984 to 1986. Mr. Holten received his M.B.A. from Harvard University in 1982 and he graduated from the Norwegian School of Economic and Business Administration in 1980. Myron C. Warshauer. Mr. Warshauer has served as a Director and as the Chief Executive Officer of the Company since the consummation of the Combination. From February to August 2000, he also served as President. Mr. Warshauer served as Chief Executive Officer of Standard from 1973 and, prior to such time, was associated with Standard since 1963. Mr. Warshauer received his B.S. Degree in Finance from the University of Illinois in 1962, and received a Masters Degree in Business Administration from Northwestern University in 1963. James A. Wilhelm. Mr. Wilhelm has served as President since August 2000. Mr. Wilhelm served as Executive Vice President--Operations of the Company since the consummation of the Combination and has served the Company as Senior Executive Vice President and Chief Operations Officer from September 1, 1999 to August 2000. Mr. Wilhelm joined Standard in 1985, serving as Executive Vice President since January 1, 1998. Prior to the consummation of the Combination, Mr. Wilhelm was responsible for managing Standard's Midwest and Western Regions, which include parking facilities in Chicago and sixteen other cities throughout 19 the United States and Canada. Mr. Wilhelm received his B.A. Degree from Northeastern Illinois University in 1976. Mr. Wilhelm is a member of the National Parking Association and the International Parking Institute. Herbert W. Anderson, Jr. Mr. Anderson has served as Executive Vice President, Operations of the Company since the consummation of the Combination. Mr. Anderson joined APCOA in 1994, and served as Corporate Vice President--Urban Properties since 1995. Mr. Anderson graduated from LaSalle University and began his career in the parking industry in 1984. Mr. Anderson is a member of the Board of the National Parking Association. G. Marc Baumann. Mr. Baumann has served as Executive Vice President and Chief Financial Officer since joining the Company in October 2000. Prior to his appointment as Chief Financial Officer for APCOA/Standard Parking, Mr. Baumann was Chief Financial Officer for Warburtons Ltd. in Bolton, England. Mr. Baumann joined Warburtons, Inc. in Chicago in 1989 as Executive Vice President and Chief Financial Officer, and was promoted to the positions of President and Chief Executive Officer in 1990. In 1993, Mr. Baumann relocated to England in connection with his appointment as Chief Financial Officer of Warburtons, Ltd., the largest independent bakery in the United Kingdom. Prior to his employment with Warburtons, Mr. Baumann was Executive Vice President and Chief Operating Officer for Hammacher Schlemmer & Co. Mr. Baumann is a Certified Public Accountant in Illinois and a member of both the American Institute of Certified Public Accountants and the Illinois CPA Society. He received his B.S. degree in 1977 from Northwestern University and an M.B.A. from the Kellogg Graduate School of Management at Northwestern University in 1979. Robert N. Sacks. Mr. Sacks joined APCOA in 1988, and served as General Counsel and Secretary since 1988, and as Vice President, Secretary, and General Counsel since 1989, and as Senior Vice President, Secretary and General Counsel since 1997. Mr. Sacks has served as Executive Vice President, General Counsel and Secretary of the Company since the consummation of the Combination. Mr. Sacks has overall responsibility for the Legal Department which includes negotiation, documentation and approval of parking and corporate contracts, financing documentation, Securities and Exchange Act compliance and reporting, and coordination of outside counsel. In his position, Mr. Sacks is also responsible for maintaining field compliance with corporate legal and financial policies. Mr. Sacks received his B.A. Degree, cum laude, from Northwestern University in 1976 and, in 1979, received his J.D. Degree from Suffolk University where he was a member of the Suffolk University Law Review. Mr. Sacks has spoken on legal issues concerning the parking industry at the National Parking Association National Convention and the Institutional and Municipal Parking Congress. Steven A. Warshauer. Mr. Warshauer has served as Executive Vice President, Operations of the Company since the consummation of the Combination. Mr. Warshauer joined Standard in 1982, initially servicing as Vice President, then becoming Senior Vice President. Mr. Warshauer is a Certified Public Accountant and a member of both the American Institute of Certified Public Accountants and the Illinois Society of Certified Public Accountants. Mr. Warshauer received his Bachelor of Science Degree from the University of Northern Colorado in 1976 with dual majors in Accounting and Finance. Prior to joining Standard, he practiced with a national accounting firm. Michael K. Wolf. Mr. Wolf has served as Executive Vice President--Chief Administrative Officer and Associate General Counsel of the Company since the consummation of the Combination. Mr. Wolf joined Standard as Senior Vice President and General Counsel in 1990, after sixteen years in the private practice of law. Mr. Wolf was subsequently appointed Executive Vice President of Standard. Prior to joining Standard, Mr. Wolf was a partner of the international law firm of Jones, Day, Reavis & Pogue, resident in the Chicago office, where his primary concentration was in the field of real estate. Mr. Wolf received his B.A. Degree in 1971 from the University of Pennsylvania, and in 1974 received his J.D. Degree from Washington University, where he served as Notes and Comments editor of the Washington University Law Quarterly. Upon graduation from law school, Mr. Wolf was elected to the Order of the Coif. 20 Gunnar E. Klintberg. Mr. Klintberg is the Vice Chairman of Steamboat Holdings, Inc. Mr. Klintberg has been a Director of APCOA since 1989, and has served as Director of the Company since consummation of the Combination. Mr. Klintberg was a Managing Partner of DnC Capital Corporation, a merchant banking firm in New York City, from 1983 to 1986. From 1975 to 1983, Mr. Klintberg held various management positions with the Axel Johnson Group, headquartered in Stockholm, Sweden. Mr. Klintberg headed up the Axel Johnson Group's headquarters in Moscow from 1976 to 1979 and served as assistant to the President of Axel Johnson Group's $1 billion operation in the U.S., headquartered in New York City, from 1979 to 1983. Mr. Klintberg received his undergraduate degree from Dartmouth College in 1972 and a degree in Business Administration and Economics from the University of Eppsala, Sweden in 1974. Edward Simmons. Mr. Simmons has served as Executive Vice President, Operations of the Company since September 1999, and has served as Vice President of Operations since joining the Company in May, 1998. Previously, he was President and CEO of Executive Parking Inc. Prior to joining Executive Parking, Mr. Simmons was Vice President/General Manager for Red Carpet Parking Service, and a consultant on facility layout and design and General Manager of J & J Parking. Mr. Simmons is an executive board member and past president of the Parking Association of California. Mr. Simmons is a member of numerous charities and civic organizations. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth information for 2000, 1999 and 1998 with regard to compensation for services rendered in all capacities. Information set forth in the table reflects compensation earned by such individuals for services with APCOA/Standard, APCOA, Standard or its respective subsidiaries. SUMMARY COMPENSATION TABLE
Other Annual All Other Name and Principal Fiscal Salary Bonus Compensation Compensation Position Year ($) $ $ ($) ------------------ ------ ---------- ------- ------------ ------------ Myron C. Warshauer...... 2000 603,400(1) -- 34,216(3) 68,435(4) Director and Chief Executive Officer 1999 601,615(1) -- 33,087(3) 53,265(4) 1998 481,158(1) -- 24,041(3) 40,166(4) Michael K. Wolf......... 2000 379,802(1) 35,306 -- 18,588(2) Executive Vice President, Chief 1999 378,284(1) 20,000 -- 19,452(2) Administrative Officer 1998 424,480(1) -- -- -- James A. Wilhelm........ 2000 337,632(1) 108,625 3,263(3) 9,417(2) President 1999 311,685(1) 75,000 -- 10,662(2) 1998 306,846(1) -- -- -- Steven A. Warshauer..... 2000 313,106(1) 63,900 5,868(3) -- Executive Vice President--Operations 1999 301,514(1) 50,000 -- -- 1998 219,923(1) -- -- -- James LaRocco (5)....... 2000 217,870(1) 55,000 68,782(3) 25,579(2) Executive Vice President--Operations 1999 193,653(1) 76,000 18,991(3) 25,579(2) 1998 186,805(1) 286,762 12,048(3) 29,584(2)
-------- (1) The amount shown includes amounts contributed by the Company to its 401(k) plans under a contribution matching program. (2) The amount shown reflects deposits made by APCOA/Standard on behalf of Named Executive Officers into a supplemental pension plan pursuant to which the Named Executive Officers will be entitled to monthly cash retirement and death benefit payments. (3) The amount shown includes car allowances, club dues, health insurance premiums and legal fees related to estate planning. 21 (4) The amount shown reflects premiums paid by APCOA/Standard on behalf of Myron C. Warshauer for life insurance policies to which Mr. Warshauer is entitled to the cash surrender value. (5) As of March 30, 2001, Mr. LaRocco's employment with the Company was terminated. Director Compensation Directors of the Company do not receive compensation for serving on the Company's Board of Directors. Compensation Committee Interlocks and Insider Participation The Company did not have a Compensation Committee in the year ended December 31, 2000. During 2000, no executive officer of the Company served as a member of the Compensation Committee of another entity. Employment Contracts and Termination of Employment Arrangements The Employment Agreement between the Company and Myron C. Warshauer (the "Warshauer Employment Agreement") provides that Myron C. Warshauer serve as Chief Executive Officer of the Company, and be appointed as a member of the Board of Directors of the Company (the "Board") and each committee of the Board, for a period beginning on the date of the consummation of the Combination and ending on Myron C. Warshauer's 65th birthday (the "Employment Period"). Myron C. Warshauer will receive during the Employment Period an annual base salary of $600,000 ("Annual Base Salary"). The Warshauer Employment Agreement also provides for certain perquisites. Under the Warshauer Employment Agreement, if Myron C. Warshauer's employment were to be terminated by Myron C. Warshauer for Good Reason (as defined below), or by the Company other than for Cause (as defined below), death or Disability (as defined below), the Company would be obligated to (i) pay Myron C. Warshauer a lump sum cash payment in an amount equal to the aggregate Annual Base Salary that he would have received for the remainder of the Employment Period, reduced to present value using as a discount rate the "applicable federal rate," as defined in Section 1274(d) of the Internal Revenue Code of 1986, as amended, and (ii) continue to provide for the same period welfare benefits to Myron C. Warshauer and/or his family, at least as favorable as those that would have been provided to them under the Warshauer Employment Agreement if Myron C. Warshauer's employment had continued until the end of the Employment Period, provided, however, that during any period when Myron C. Warshauer is eligible to receive such benefits under another employer-provided plan, such benefits provided by the Company may be made secondary to those provided under such other plan. If Myron C. Warshauer's employment were to be terminated by reason of his Disability during the Employment Period, the Company would be obligated to pay Myron C. Warshauer, or his legal representative, as applicable, the Annual Base Salary for the duration of the Employment Period in effect at the time of the termination of employment. In addition to the above compensation and benefits, if Myron C. Warshauer's employment were to be terminated for any reason other than by the Company for Cause, the Company would be obligated, beginning on the date of such termination in the case of a voluntary termination by Myron C. Warshauer, and beginning on Myron C. Warshauer's 65th birthday in all other cases, and ending on the first to occur of Myron C. Warshauer's 75th birthday and Myron C. Warshauer's death (such ending date, the "Cutoff Date"), to (i) pay Myron C. Warshauer $200,000 annually, adjusted for inflation and (ii) provide Myron C. Warshauer with an executive office and secretarial services. In consideration for such benefits, Myron C. Warshauer is obligated to provide reasonable consulting services to the Company from the date of termination of his employment through the Cutoff Date. As used in the Warshauer Employment Agreement: (i) "Cause" means (a) illegal conduct, or gross misconduct, that results in material damage to the business or reputation of the Company; or (b) any willful and 22 continued failure by Myron C. Warshauer to perform his duties under the Warshauer Employment Agreement, (ii) "Disability" means that Myron C. Warshauer has been unable, for a period of 180 consecutive days, or for periods aggregating 180 business days in any period of twelve months, to perform a material portion of his duties under the Warshauer Employment Agreement, as a result of physical or mental illness or injury, and a physician selected by the Company has determined that Myron C. Warshauer's incapacity is total and permanent, and (iii) "Good Reason" means (a) the relocation of Myron C. Warshauer's principal place of business outside of the central business district and northern suburbs of Chicago; (b) a material reduction in Myron C. Warshauer's responsibilities; (c) the assignment to Myron C. Warshauer of duties inconsistent with his position as set forth in the Warshauer Employment Agreement; (d) a change in Myron C. Warshauer's title from that required under the Warshauer Employment Agreement; (e) a removal of Myron C. Warshauer from the Board or any committee thereof; (f) a requirement that Myron C. Warshauer report to anyone other than the Chairman of the Board; or (g) any material breach by the Company of any other term of the Warshauer Employment Agreement. The Warshauer Employment Agreement also provides that during the period beginning on the date of the consummation of the Combination and ending on Myron C. Warshauer's 75th birthday (the "Noncompetition Period"), Myron C. Warshauer shall not, without written consent of the Board, engage in or become associated with any business or other endeavor that engages in construction, ownership, leasing, design and/or management of parking lots, parking garages, or other parking facilities or consulting with respect thereto, provided, however, that Myron C. Warshauer may own or sell investments in certain parking facilities ("Permitted Investments") during the Noncompetition Period, and may own or sell any interest in any other real estate ("Other Real Estate") at any time after the Employment Period for the remainder of the Noncompetition Period. The Warshauer Employment Agreement provides that, if such Permitted Investment or Other Real Estate includes a parking facility, Myron C. Warshauer shall initiate negotiations, or, under certain circumstances, use reasonable and good-faith efforts to cause such negotiations, with the Company in an attempt to determine mutually agreeable terms pursuant to which the Company will manage or lease the parking facility and, if such negotiations fail, that, under certain circumstances, the Company shall have a right of first refusal with respect to any management agreement or lease that may be negotiated with any independent third party. Pursuant to the Warshauer Employment Agreement, the Company shall establish a stock option or phantom stock option plan (the "Option Plan") providing for grants of actual or phantom options with respect to the common stock of the Company ("Company Common Stock"), under which Myron C. Warshauer will be granted options to purchase a number of shares of the Company Common Stock equal to 1% of the total number of shares of Company Common Stock. All such options will have a term of ten years from the date of the grant. The Option Plan was to be implemented within 120 days after the Closing Date. The Company anticipates finalizing the option plan for Myron Warshauer by June 30, 2001. Walter Stuelpe resigned as President of the Company, effective February 1, 2000. As of February 29, 2000, Mr. Stuelpe's employment with the Company terminated pursuant to a written settlement agreement and release. Under the terms of the settlement agreement, the Company agreed to continue to pay Mr. Stuelpe his Salary (as defined in the settlement agreement), in the normal course, through June 30, 2001 and make one final lump sum payment in the amount of $245,827.00 on July 1, 2001, in full satisfaction of any further obligation of the Company to pay Salary to Mr. Stuelpe; provided, however, Mr. Stuelpe was paid his 1999 bonus at the same time as the Company's other senior executives received their bonuses for calendar year 1999. The Company agreed, for the period from March 1, 2000 to December 31, 2000 to (i) pay standard premium charges for health continuation coverage, if Mr. Stuelpe should exercise his right to elect such continuation coverage with the Company (ii) pay required premiums, subject to contribution by Mr. Stuelpe in certain instances, so that Mr. Stuelpe will continue to be covered by life insurance, accidental death and dismemberment insurance, business travel accident insurance and long term disability insurance, presently covered under the Company's group coverage (iii) pay Mr. Stuelpe the Additional Contributions (as defined in the settlement agreement) with respect to the Company's matching contributions for the 401(k) Plan and the 401(k) Wrap Around Plan for calendar year 1999 (iv) continue to provide Mr. Stuelpe with an automobile, in accordance with past practice and (v) continue to pay, consistent with past practice, Mr. Stuelpe's dues and assessments for various clubs and organizations to which he belongs. 23 The remaining outstanding balance of the Promissory Note (as defined in the settlement agreement) shall be forgiven on the Termination Date (as defined in the settlement agreement). The Company also agreed to pay a portion of Mr. Stuelpe's legal fees incurred in connection with the settlement agreement. The Company assigned to Mr. Stuelpe a certain life insurance policy on Mr. Stuelpe's life, together with its cash surrender value and paid up premiums through December 31, 2000, in full satisfaction of any and all obligations of the Company under the Supplemental Pension Plan (as defined in the settlement agreement). On April 1, 2000, the Company paid Mr. Stuelpe, $1,270,424, which represents the lump sum value of Mr. Stuelpe's accrued benefits under the Key Executive Officers Retirement Plan (as defined in the settlement agreement). Mr. Stuelpe agrees he will not, from and after the Termination Date, disclose any confidential information of the Company if such disclosure would have a materially adverse effect on the Company. For a period commencing on March 1, 2000 and ending December 31, 2001, Mr. Stuelpe shall not render services to, or have any ownership interest in, any business which is competitive with the Company. Mr. Wolf's current employment agreement with the Company provides for a three-year term, scheduled to lapse on March 26, 2001, default annual renewals, and an annual base salary of not less than $376,400, subject to annual review, plus an annual bonus based on a percentage of the annual base salary to be mutually agreed upon by the Company and Mr. Wolf, as well as certain other benefits. Mr. Wolf shall hold all confidential information in strict confidence and not publish or otherwise disclose any portion thereof to any person whatsoever except with the prior written consent of the Company. During the term of the employment agreement and for two years after its termination (or eighteen months if such termination follows a Change in Control (as defined in the agreement)), Mr. Wolf shall not render services to, or have any ownership interest in, any business which is competitive with the Company in certain geographic areas. If Mr. Wolf's employment is terminated by reason of his death, the Company is obligated to pay Mr. Wolf's estate an amount equal to the sum of (i) Mr. Wolf's annual base salary through the end of the calendar month in which death occurs and (ii) any earned and unpaid annual bonus, vacation pay and other vested benefits. If Mr. Wolf's employment is terminated by reason of his Disability (as defined in the agreement), the Company is obligated to pay Mr. Wolf or his legal representative (a) an amount equal to Mr. Wolf's annual base salary for the duration of the employment period in effect on the date of termination, reduced by amounts received under any disability benefit program and (b) any earned and unpaid annual bonus and other vested benefits. If Mr. Wolf's employment is terminated by the Company other than for death or Disability and without Cause (as defined in the agreement), the Company is required to continue (A) to pay Mr. Wolf for the remainder of the employment period in effect immediately before the date of termination his annual base salary and annual bonus(es) through the end of the then-current employment period and (B) to provide Mr. Wolf and/or his family with certain other benefits. If Mr. Wolf's employment is terminated by the Company for any reason other than Cause during the three-year period following a Change in Control (as defined in the agreement), the Company is obligated to (x) pay Mr. Wolf an amount ("Severance Pay") equal to the greater of (1) one and one-half times the sum of (I) Mr. Wolf's current annual base salary plus (II) the amount of any bonus paid to Mr. Wolf in the preceding twelve months and (2) the annual base salary and annual bonuses through the end of the then-current employment period and (y) continue to provide Mr. Wolf with certain other benefits for a certain period of time. If Mr. Wolf terminates his employment voluntarily following a Change in Control, he shall not be entitled to Severance Pay, provided, however, that any such termination by Mr. Wolf for Good Reason (as defined in the agreement) shall not be considered a voluntary termination and Mr. Wolf will be treated as if he had been terminated by the Company other than for Cause. Mr. Wolf's employment agreement with the Company was amended on December 6, 2000 (Exhibit 10.22) which provides Mr. Wolf the right (but not the obligation) to require the Company to transfer to Mr. Wolf ownership of any one or more of certain insurance policies identified in the amendment. 24 Effective as of August 1, 1999, Mr. Wilhelm entered into a new employment agreement with the Company. Mr. Wilhelm's new employment agreement with the Company provides for a three-year term, scheduled to lapse on July 31, 2002, default annual renewals and an annual base salary of not less than $300,000, subject to annual review, plus an annual bonus based on an annual bonus program to be established by the Company, as well as certain other benefits. Mr. Wilhelm shall hold all confidential information in strict confidence and not publish or otherwise disclose any portion thereof to any person whatsoever except with the prior consent of the Company. During the term of the employment agreement and for 18 months thereafter, Mr. Wilhelm has agreed not to solicit existing clients of the Company or solicit any employees of the Company. These obligations are in addition to Mr. Wilhelm's obligations regarding the Company's confidential information. In consideration for Mr. Wilhelm's agreements regarding confidential information and non-solicitation of the Company's clients and employees, the Company has agreed to pay Mr. Wilhelm Salary Continuation Payments (as defined in the agreement) for a period of 18 months following the Date of Termination (as defined in the agreement). If Mr. Wilhelm's employment is terminated for any reason, the Company is obligated to pay Mr. Wilhelm or Mr. Wilhelm's estate, as applicable, an amount equal to the sum of (a) Mr. Wilhelm's annual base salary through the date of termination and (b) accrued but unused vacation pay and other vested benefits. If Mr. Wilhelm's employment shall be terminated for Cause or Performance Reasons (each term as defined in the agreement), the Company shall also pay Mr. Wilhelm the Salary Continuation Payments. If Mr. Wilhelm shall voluntarily terminate his employment with the Company, then the Company shall be obligated to pay Mr. Wilhelm (a) his annual base salary through the date of termination, (b) any accrued but unused vacation pay and other vested benefits and (c) Salary Continuation Payments for 18 months. If Mr. Wilhelm terminates his employment voluntarily he shall not be entitled to Severance Pay (as thereafter described); provided however, that any such termination by Mr. Wilhelm for Good Reason (as defined in the agreement) shall not be considered a voluntary termination and Mr. Wilhelm will be treated as if he had been terminated by the Company other than for Cause or Performance Reasons. If Mr. Wilhelm's employment is terminated by the Company other than for death or disability, without Cause and not due to Performance Reasons, the Company is required to (a) pay Mr. Wilhelm Severance Pay equal to the product of two times the sum of (x) Mr. Wilhelm's current annual Salary, plus (y) the amount of any Annual Bonus (as defined in the agreement) paid to Mr. Wilhelm for the preceding calendar year, minus the aggregate amount of Salary Continuation Payments, payable in equal monthly installments over a 24 month period commencing on the Date of Termination, (b) pay Mr. Wilhelm Salary Continuation Payments, and (c) provide Mr. Wilhelm and his family with certain other welfare benefits. Mr. Steven Warshauer's current employment agreement with the Company provides for a three-year term, scheduled to lapse on March 26, 2001, default annual renewals, and an annual base salary of not less than $300,000, subject to annual review, plus an annual bonus based on a percentage of the annual base salary to be mutually agreed upon by the Company and Mr. Warshauer, as well as certain other benefits. Mr. Warshauer shall hold all confidential information in strict confidence and not publish or otherwise disclose any portion thereof to any person whatsoever except with the prior written consent of the Company. During the term of the employment agreement and for two years after its termination (or eighteen months if such termination follows a Change in Control (as defined in the agreement)), Mr. Warshauer shall not render services to, or have any ownership interest in, any business which is competitive with the Company in certain geographical areas; provided, however, from and after such time as Mr. Warshauer is no longer employed by the Company for any reason, he may become involved in the operation and management of the Auditorium Garage located in Chicago, as well as own an equity interest in this garage. If Mr. Warshauer's employment is terminated by reason of his death, the Company is obligated to pay Mr. Warshauer's estate an amount equal to the sum of (i) Mr. Warshauer's annual base salary through the end of the calendar month in which death occurs and (ii) any earned and unpaid annual bonus, vacation pay and other vested benefits. 25 If Mr. Warshauer's employment is terminated by reason of his Disability (as defined in the agreement), the Company is obligated to pay Mr. Warshauer or his legal representative (a) an amount equal to Mr. Warshauer's annual base salary for the duration of the employment period in effect on the date of termination, reducted by amounts received under any disability program and (b) any earned and unpaid annual bonus and other vested benefits. If Mr. Warshauer's employment is terminated by the Company other than for death or Disability and without Cause (as defined in the agreement), the Company is required to continue (A) to pay Mr. Warshauer for the remainder of the employment period in effect immediately before the date of termination his annual base salary and annual bonus(es) through the end of the then current employment period and (B) to provide Mr. Warshauer and/or his family with certain other benefits. If Mr. Warshauer's employment is terminated by the Company for any reason other than Cause during the three-year period following a Change in Control (as defined in the agreement), the Company is obligated to (x) pay Mr. Warshauer an amount ("Severance Pay") equal to the greater (1) one and one- half times the sum of (I) Mr. Warshauer's current annual base salary plus (II) the amount of any bonus paid to Mr. Warshauer in the preceding twelve months and (2) the annual base salary and annual bonuses through the end of the then current employment period and (y) continue to provide Mr. Warshauer with certain other benefits for a certain period of time. If Mr. Warshauer terminates his employment voluntarily following a Change of Control, he shall not be entitled to Severance Pay, provided, however, that any such termination by Mr. Warshauer for Good Reason (as defined in the agreement) shall not be considered a voluntarily termination and Mr. Warshauer will be treated as if he had been terminated by the Company other than for Cause. The employment agreement between the Company and James V. LaRocco provides for a term commencing January 1, 2000 and continuing until March 30, 2001 (the "Term"). The employment agreement automatically renews unless at least 90 days prior to the end of the Term the Company or Mr. LaRocco provides written notice of an intent to terminate the agreement. Mr. LaRocco's employment agreement provides for annual compensation based on an incentive package estimated for the calendar year 2000 to be $309,800, and certain other benefits. Mr. LaRocco shall hold all confidential information in strict confidence and not publish or otherwise disclose any portion thereof to any other person whatsoever except with the prior consent of the Company. During the term and for 18 months thereafter, Mr. LaRocco has agreed not to solicit existing clients of the Company or employees of the Company. If Mr. LaRocco's employment is terminated for any reason, other than his voluntary termination or termination by the Company for Cause (as defined in the agreement), the Company is obligated to pay Mr. LaRocco (a) an amount equal to his earned and unpaid incentive compensation (less than advances) through the end of the calendar month when termination occurs and (b) accrued but unused vacation days and other vested benefits. If Mr. LaRocco's employment is terminated for Cause or as a result of Mr. LaRocco's voluntary termination, the Company is obligated to pay or provide Mr. LaRocco an amount equal to his accrued but unused vacation days and other vested benefits. As of March 30, 2001 (the "Termination Date"), Mr. LaRocco's employment with the Company terminated pursuant to a written notice from the Company to Mr. LaRocco dated December 12, 2000 notifying Mr. LaRocco of the Company's intention to terminate the employment Agreement at the end of the term ending March 30, 2001. Mr. LaRocco will be entitled to the incentive compensation and benefits set forth in his employment agreement dated January 1, 2000, required to paid in the case of a termination for any reason other than for Cause or a voluntary termination. As soon as practicable, but within 30 days from the Termination Date, the Company will assign to Mr. LaRocco a certain life insurance policy on Mr. LaRocco's life, together with its cash surrender value and paid up premiums through the Termination Date, in full satisfaction of any and all obligations of the Company under the Supplemental Pension Plan (as defined in the employment agreement). 26 Douglas Warshauer gave notice to the Company in the fall of his intention to terminate his employment effective December 31, 2001. Under the terms of Mr. Warshauer's employment agreement dated March 26, 1998, as amended by the Amendment to Employment Agreement dated August 18, 2000 and acknowledged by letter agreement dated December 22, 2000 (the employment agreement, as amended by the Amendment and letter agreement are together referred to as the "employment agreement"), the Company agreed to pay Mr. Warshauer for a period of two years (a) his Annual Base Salary of $191,425, plus (b) the Target Annual Bonus of $90,000, in twenty four (24) equal monthly installments. In addition, for a period of 18 months following his termination of employment, the Company agreed to continue to provide Mr. Warshauer and his family Welfare Benefits (as defined in the employment agreement). Mr. Warshauer shall hold all confidential information in strict confidence and not publish or otherwise disclose any portion thereof to any person whatsoever except with the prior written notice of the Company. For a period of two years following Mr. Warshauer's termination of employment, Mr. Warshauer agrees not to render services to, or have any ownership interest in, any business that is competitive with the Company in certain geographical areas. As of March 30, 2001 (the "Termination Date"), Mr. Celebrezze's employment with the Company terminated, pursuant to written notice from the Company to Mr. Celebrezze dated December 18, 2000. Under the terms of his employment agreement as supplemented by letter agreements dated April 28, 2000 and September 28, 2000 and the termination letter dated December 18, 2000, the Company agreed to continue to pay Mr. Celebrezze the greater of what is provided in his employment agreement or the full two-year Good Reason package (as defined in the employment agreement). The Good Reason package includes Annual Base Salary and Target Bonus, as well as continuation of the welfare benefits provided in his employment agreement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT The following table sets forth certain information regarding the beneficial ownership of Company Common Stock by (i) each person known to the Company to own beneficially more than 5% of Company Common Stock, (ii) each director of the Company, (iii) each Named Executive Officer and (iv) all executive officers and directors of the Company, as a group. All information with respect to beneficial ownership has been furnished to the Company by the respective stockholders of the Company. Except as otherwise indicated in the footnotes, each beneficial owner has the sole power to vote and to dispose of all shares held by such holder.
Amount and Percent of Nature of Shares Name and Address Beneficial Ownership Outstanding ---------------- ------------------------------ ----------- AP Holdings*.................. 26.3 shares of Common Stock 84.0% Steamboat Holdings, Inc.**.... (1) John V. Holten**.............. (1) Dosher Partners, L.P.*........ 1.25 shares of Common Stock(2) 4.0 Waverly Partners, L.P.*....... 1.25 shares of Common Stock(3) 4.0 Myron C. Warshauer*........... (3)(4) SP Associates*................ 2.5 shares of Common Stock(4) 8.0 Directors and Executive Officers as a Group.......... (1)(2)(3)(5)
-------- * The address of AP Holdings, Dosher Partners, L.P., Waverly Partners, L.P., SP Associates and the business address of Mr. Warshauer is 900 N. Michigan Avenue, Chicago, Illinois 60611-1542. ** The address of Steamboat Holdings, Inc. and the business address of Mr. Holten is 545 Steamboat Road, Greenwich, Connecticut 06830. (1) Mr. Holten may be deemed to be the beneficial owner of all of the outstanding common stock of Steamboat Holdings, Inc. ("Steamboat"), which owns 91.67% of the outstanding common stock of AP Holdings. The AP Holdings common stock owned by Steamboat has been pledged to its lenders to secure borrowings made 27 by Steamboat. If a specified event of default related to the indebtedness occurs, the lender may assume control of AP Holdings. (2) All of the interests in Dosher Partners, L.P. are beneficially owned by Myron C. Warshauer and trusts for the benefit of certain members of his family. Mr. Warshauer disclaims beneficial ownership of the assets of Dosher Partners, L.P., including the shares of Common Stock held by it, to the extent those interests are held for the benefit of such trusts. (3) Waverly Partners, L.P. ("Waverly") is a limited partnership in which Myron C. Warshauer is general partner. Mr. Warshauer disclaims beneficial ownership of the assets of Waverly, including the shares of Common Stock held by it. (4) SP Associates is a general partnership controlled by affiliates of JMB Realty Corp. (5) Certain other executive officers of APCOA/Standard in the aggregate own approximately 1.05% of the common stock of AP Holdings. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Company Stockholders Agreement Upon consummation of the combination on March 30, 1998, the Company entered into a Stockholders Agreement (the "Stockholders Agreement") with Dosher Partners, L.P. ("Dosher"), and SP Associates (collectively, the "Standard Parties") and Holberg and AP Holdings (collectively with the Standard Parties, the "Stockholders"). The Stockholders Agreement provides, among other things, for (i) prior to the earliest of (a) the seventh anniversary of the consummation of the Combination, (b) the termination of Myron C. Warshauer's employment with the Company under certain circumstances and (c) the consummation of an initial public offering of Company Common Stock (as such offering will be defined in the Stockholders Agreement), certain obligations of Holberg to allow Dosher the opportunity to acquire all, but not less than all, of the Company Common Stock held by Holberg and/or its affiliates before Holberg may directly or indirectly sell an amount of Company Common Stock which would constitute a Control Transaction (as defined in the Stockholders Agreement); provided that, under certain circumstances, Holberg may sell such shares to a party other than Dosher if the terms of such other party's offer are more favorable to Holberg, (ii) until the consummation of an initial public offering of Company Common Stock, certain rights of each Standard Party to purchase shares of Company Common Stock to the extent necessary to maintain such Standard Party's percentage ownership of the Company, (iii) the right of the Standard Parties to participate in, and the right of Holberg to require the Standard Parties to participate in, certain sales of Company Common Stock, (iv) following the third anniversary of the consummation of the Combination and prior to an initial public offering of Company Common Stock, certain rights of the Company to purchase, and certain rights of the Standard Parties to require the Company to purchase, shares of Company Common Stock at prices determined in accordance with the Stockholders Agreement and (v) certain additional restrictions on the rights of the Standard Parties to transfer shares of Company Common Stock. The Stockholders Agreement also contains certain provisions granting the Stockholders certain rights in connection with registrations of Company Common Stock in certain offerings and provides for indemnification and certain other rights, restrictions and obligations in connection with such registrations. Steamboat Holdings, Inc. intends to become a party to the Stockholders Agreement as a Permitted Transferee of Holberg. Effective October 1, 1998, Dosher transferred a 4% interest in APCOA/Standard common stock to Waverly Partners, L.P. ("Waverly"), a limited partnership in which Myron C. Warshauer is general partner, Douglas Warshauer individually is a limited partner and Douglas Warshauer as Trustee for the Douglas Warshauer Family Trust is a limited partner. Waverly and each original signatory to the Stockholders Agreement consented to the transfer pursuant to a Consent and Joinder to Stockholders' Agreement dated as of October 1, 1998. Pursuant to an amendment to Stockholders Agreement dated as of December 29, 2000, the definition of "Price" contained in subsection (b) of Section 6.2 of the Stockholders Agreement was modified and is more fully described in Exhibit 3.3 attached hereto and filed herewith. 28 Tax Sharing Agreement The Company is a party to the Tax Sharing Agreement, dated April 28, 1989, by and among Holberg, AP Holdings and the Company (the "Tax Sharing Agreement"), which applies to each of Holberg's consolidated return years beginning with 1989. The Tax Sharing Agreement provides that each member of Holberg's affiliated group, including the Company, will pay to Holberg the amount of federal income tax that such member would be required to pay on a separate return basis for the year in question, except that the amount that the Company is required to pay to Holberg will not exceed the tax liabilities of the Company on a separate return basis for all taxable years to which the Tax Sharing Agreement applies and for which the Company joined in the Holberg consolidated return, computed as if the Company had actually filed separate returns for all such years and taking into account any net operating loss carryforward the Company would have had if it had filed a separate return for all such years. Holberg is not required to make a payment to the Company by virtue of the utilization by the Holberg affiliated group of any net operating loss generated by the Company. In the event that the consolidated federal income tax liability of the Holberg affiliated group is adjusted for any taxable period, whether by means of an amended return, claim for refund, or tax audit by the Internal Revenue Service, the liability of the Company under the Tax Sharing Agreement will be recomputed to give effect to such adjustments. Preferred Stock Prior to the consummation of the Combination, Holberg held $8.7 million of preferred stock of APCOA. A portion of the proceeds of the financing obtained in conjunction with the combination with Standard (see Note B of the Notes to Consolidated Financial Statements) was used to redeem $8.0 million of the preferred stock. The remaining $0.7 million was contributed to the capital of the Company. The preferred stock issued by the Company to AP Holdings in conjunction with the combination with Standard has the same maturity as the debt securities of AP Holdings issued to finance the preferred stock contribution, has an initial liquidation preference equal to the issue price of such debt securities, increases in liquidation preference at the same rate as such debt securities accrue interest, such that the liquidation preference of the preferred stock will at all times be equal to the then principal amount of such debt securities, and accrues cash dividends commencing at such times as such debt securities commence to accrue cash interest, at the same rate as such debt securities. Management Contracts and Related Arrangements with Affiliates The Company has a management contract with the Buckingham Plaza Limited Partnership ("BPLP") to operate the parking facility at a condominium complex in Chicago of which BPLP was the developer. Myron C. Warshauer and SP Associates own an equity interest in one of BPLP's limited partners. The Company receives an annual management fee of $12,000 pursuant to such management contract. The Company estimates that such management fee is no less than would normally be obtained through arms-length negotiations. The Company has management contracts to operate two surface parking lots in Chicago. Myron C. Warshauer, Steven A. Warshauer, Stanley Warshauer, Michael K. Wolf and SP Associates own membership interests in a limited liability company that is a member of the limited liability companies that own such surface parking lots. The Company received a total of $132,500 in management fees for such lots in 2000 under the applicable management contracts. The Company estimates that such management fees are no less favorable than would normally be obtained through arms-length negotiations The Company provides office and related support services to Auditorium Garage, Inc. ("Auditorium"), an Illinois corporation owned by Stanley Warshauer and his wife, in conjunction with Auditorium's management of a parking facility. Auditorium reimbursed the Company for the general and administrative costs associated with providing these services approximately $24,900 in 2000. The Company provides office and related support services for a parking facility (the "Theater District Garage") that is leased to Standard/Tremont Parking Corporation ("Standard Tremont"), an Illinois corporation 29 that is owned by Stanley Warshauer, Steven A. Warshauer and Myron C. Warshauer. Standard Tremont reimburses the Company for the general and administrative costs associated with providing these services, which reimbursement totaled $3,637. The Company pays 12.5% of the lease net operating income derived from one parking facility to Warshauer Management Corporation for services rendered in obtaining the right to operate the facility. SP Associates is an affiliate of JMB Realty Corp., from which the Company leases office space for its corporate offices in Chicago. Payments pursuant to the lease agreement aggregated approximately $1.2 million during 2000. The Company purchases workers' compensation and health insurance covering certain parking facilities from JMB Insurance Agency, Inc., an affiliate of JMB Realty Corp. which in turn is an affiliate of SP Associates. The Company estimates that the premiums and commissions paid for such insurance are comparable to premiums it would pay for comparable coverage from an unrelated third party. Additionally, the Company paid $25,000 to JMB Insurance Agency, Inc. for consulting services during 2000. In March 1998, the Company acquired a lease for $1.4 million from an entity which is 15% owned by certain members of the management group. The lease is for a term of eleven years and calls for annual rent of $185,000 per year plus percentage rent if the property achieves certain earnings levels. The lease was terminated in September 2000, in connection with the sale of the property by the owner. The management group received $172,000 representing their pro- rata share of the sale proceeds. On December 31, 2000, the Company entered into an agreement to sell, at fair market value, certain contract assets to D & E Parking, Inc. ("D & E"), a California corporation, in which certain officers of the Company have an interest. The Company recorded a gain of $1million from this transaction in 2000. The Company will continue to operate the parking facilities and receive management fees and reimbursement for support services in connection with the operation of the parking facilities. Liability Insurance Prior to 1999, APCOA/Standard participated in a master insurance program with Holberg which served to reduce the insurance costs of the combined group. In connection with the insurance program, during 1998 the Company placed $2.2 million on deposit with an affiliate for insurance collateral purposes. In January of 1999, the Company completed the combination of all the insurance programs of all merger and acquired entities into one program. In connection therewith the Company purchased coverage for its previously self- insured layer, and a tail policy to eliminate exposure from retrospective adjustments. Consulting Agreement with Sidney Warshauer Consummation of the Combination was conditioned by Standard, among other things, upon the execution of a Consulting Agreement (the "Agreement") between the Company and Sidney Warshauer, the father of Myron C. Warshauer. Sidney Warshauer is 85 years old. The Agreement provides that Sidney Warshauer render such services as may be requested, from time to time, by the Board of Directors of the Company (the "Board") and/or the Chief Executive Officer of the Company, consistent with Mr. Warshauer's past practices and experience, for a period beginning on the date of the consummation of the Combination and ending on Sidney Warshauer's death. Sidney Warshauer will receive, during such period, annual payments of $552,000 along with certain other benefits. The Agreement provides that, from the date of the closing of the Combination until his death, Sidney Warshauer will not disclose Company confidential information or compete with the Company. The Agreement is not terminable by the Company for any reason other than the death of Sidney Warshauer, or a breach by Sidney 30 Warshauer of his obligations under the Agreement with respect to non- disclosure of Company confidential information or his obligation to refrain from engaging in competition with the Company. The parties intended that all payments under the Agreement represent additional purchase price in the form of supplemental retirement benefits in recognition of Sidney Warshauer's significant contributions to Standard. The actuarial value, as of March 30, 1998, of the payments under the Agreement was approximately $5.0 million. See Note B of the Notes to the Consolidated Financial Statements. Certain Other Matters Relating to Holberg Holberg has received customary investment banking and advisory fees from APCOA in connection with certain prior transactions, and received a $1.0 million advisory fee (and reimbursement of expenses) upon consummation of the Combination. The Company also may pay an annual management fee to Holberg and otherwise reimburse Holberg for certain expenses incurred by Holberg on behalf of the Company. All of these fees and other amounts paid to Holberg are subject to the limits and restrictions imposed by the Indenture and the covenants in the Senior Credit Facility. APCOA/Standard and Holberg and its affiliates periodically engaged in bi- lateral loans and advances. The Company may, from time to time, enter into such bi-lateral loans and advances in the future as permitted under the indenture and the Senior Credit Facility. These loans and advances are interest bearing at a variable rate that approximates the prime interest rate. The accumulated interest is added to, or deducted from (as appropriate), the balance in the loan or advance account. In connection with the Combination, APCOA made a $6.5 million non-cash distribution to Holberg of the receivable in such amount due from Holberg to APCOA, at the date of the Combination. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this Report: 1. Financial Statements. Report of Independent Auditors Audited Consolidated Financial Statements Consolidated Balance Sheets at December 31, 2000 and 1999 For the years ended December 31, 2000, 1999 and 1998: Consolidated Statements of Operations Consolidated Statements of Stockholders' Deficit Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements
2. Financial statement schedule. Schedule II--Valuation and Qualifying Accounts All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto. 3. Exhibits Exhibit Number ------- 1.1 Purchase Agreement, by and among the Company, the Subsidiary Guarantors, Donaldson, Lufkin & Jenrette Securities Corporation and First Chicago Capital Market, Inc., dated as of March 25, 1998 (incorporated by reference to Exhibit 1.1 to the Company's Registration Statement on Form S-4 (No. 333-50437) filed on April 17, 1998, as amended on June 9, 1998, July 15, 1998, August 11, 1998 and August 14, 1998 (the "Registration Statement")).
31 Exhibit Number ------- 2.1 Combination Agreement, dated as of January 15, 1998, by and between APCOA, Inc. and the Standard Owners (incorporated by reference to Exhibit 2.1 to the Registration Statement). 3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registration Statement). 3.2 Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Registration Statement). 3.3 Amended and Restated By-Laws of the Company dated as of December 29, 2000. 4.1 Indenture, dated as of March 30, 1998, amended as of July 6, 1998 and September 21, 1998, by and among the Company, the Subsidiary Guarantors and State Street Bank and Trust Company (incorporated by reference to Exhibit 4.1 to the Registration Statement). 4.2 Form of New Note (included as Exhibit A to Exhibit 4.1). 4.3 Form of New Note Guarantee (included as Exhibit D to Exhibit 4.1). 4.4 Supplemental Indenture, dated as of January 12, 1999 by and among the Company, the Subsidiary Guarantors and State Street Bank and Trust Company (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K filed for December 31, 1998). 4.5 Supplemental Indenture, dated as of September 21, 1998, among Virginia Parking Service, Inc., the Company, and State Street Bank and Trust Company (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K filed for December 31, 1998). 4.6 Supplemental Indenture, dated as of July 6, 1998, among S&S Parking, Century Parking, Inc. and Sentry Parking Corporation, the Company, and State Street Bank and Trust Company (incorporated by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K filed for December 31, 1998). 4.7 First Amendment to Senior Credit Facility dated November 12, 1999 by and among the Company, the Lenders, and N.A. Bank One as agent for Lenders (incorporated by reference to Exhibit 4.7 to the Company's September 10, 1999 Form 10-Q). 4.8 Second Amendment to the Senior Credit Facility dated March 30, 2000 by and among the Company, the Lenders and Bank One N.A., as agent for the Lenders (incorporated by reference to Exhibit 4.8 to the Company's May 12, 2000 Form 10-Q). 4.9 Third Amendment to the Senior Credit Facility dated May 12, 2000 by and among the Company, the Lenders and Bank One N.A., as agent for the Lenders (incorporated by reference to Exhibit 4.9 to the Company's August 9, 2000 Form 10-Q). 4.10 Fourth Amendment to the Senior Credit Facility dated November 14, 2000 by and among the Company, the Lenders and Bank One, N.A. as agent for the Lenders (incorporated by reference to Exhibit 4.10 to the Company's September 30, 2000 Form 10-Q). 4.11 Fifth Amendment to the Senior Credit Facility dated March 30, 2001 by and among the Company, the Lenders and Bank One, N.A., as agent for the Lenders. 10.1 Registration Rights Agreement, dated as of March 30, 1998, by and among the Company, the Subsidiary Guarantors, Donaldson, Lufkin & Jenrette Securities Corporation and First Chicago Capital Markets, Inc. (incorporated by reference to Exhibit 10.1 to the Registration Statement).
32 Exhibit Number ------- 10.2 Credit Agreement, dated as of March 30, 1998, by and among the Company, The First National Bank of Chicago, as Agent and Lender, and the Other Institutions party thereto (incorporated by reference to Exhibit 10.2 to the Registration Statement). 10.3 Stockholders' Agreement, dated as of March 30, 1998, by and among Dosher Partners, L.P., SP Associates and Holberg, AP Holdings and the Company (incorporated by reference to Exhibit 10.3 to the Registration Statement). 10.4 Consent and Joinder to Stockholders' Agreement dated as of October 1, 1998, by and among the Company, Dosher Partners, L.P., SP Associates, Holberg, AP Holdings and Waverly (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K filed by December 31, 1998). 10.5 Stockholders' Agreement, dated as of April 14, 1989, by and among AP Holdings, Holberg and each member of the management of the Company who is a stockholder of AP Holdings (incorporated by reference to Exhibit 10.4 to the Registration Statement). 10.6 Tax Sharing Agreement, dated as of April 28, 1989, as amended as of March 30, 1998, by and among Holberg, AP Holdings and the Company (incorporated by reference to Exhibit 10.5 to the Registration Statement). 10.7 Employment Agreement between the Company and Myron C. Warshauer (incorporated by reference to Exhibit 10.6 to the Registration Statement). 10.8 Employment Agreement between the Company and G. Walter Stuelpe, Jr. (incorporated by reference to Exhibit 10.7 to the Registration Statement). 10.9 Executive Transition Employment Agreement between the Company and James V. LaRocco, Jr. (incorporated by reference to Exhibit 10.8 to the Registration Statement). 10.10 Employment Agreement between the Company and Michael K. Wolf (incorporated by reference to Exhibit 10.12 to the Registration Statement). 10.11 Deferred Compensation Agreement between the Company and Michael K. Wolf (incorporated by reference to Exhibit 10.13 to the Registration Statement). 10.12 Company Retirement Plan for Key Executive Officers (incorporated by reference to Exhibit 10.14 to the Registration Statement). 10.13 Consulting Agreement between the Company and Sidney Warshauer (incorporated by reference to Exhibit 10.15 to the Registration Statement). 10.14 Employment Agreement between the Company and James A. Wilhelm (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K filed for December 31, 1998). 10.15 Promissory Note dated June 25, 1998 by and between G. Walter Stuelpe, Jr. and the Company (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K filed for December 31, 1998). 10.16 Letter Agreement between the Company and The First National Bank of Chicago as Agent and Lender, dated March 30, 1999 (incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K filed for December 31, 1998). 10.17 Employment Agreement between the Company and Steven Warshauer (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K filed for December 30, 1999). 10.18 Settlement Agreement and Release between the Company and G. Walter Stuelpe Jr. (incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K filed for December 30, 1999).
33 Exhibit Number ------- 10.19 Employment Agreement between the Company and Douglas R. Warshauer dated March 26, 1998. 10.20 Amendment to Employment Agreement between the Company and Douglas R. Warshauer dated August 18, 2000. 10.21 Employment Agreement between the Company and James V. LaRocco dated January 1, 2000. 10.22 Second Amendment to Employment Agreement between the Company and Michael K. Wolf dated December 6, 2000. 10.23 Employment Agreement between the Company and Michael J. Celebrezze (incorporated by reference to Exhibit 10.11 to the Registration Statement). 21.1 Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the Registration Statement). 25.1 Statement of Eligibility and Qualification of Trustee on Form T-1 of State Street Bank and Trust Company under the Trust Indenture Act of 1939 (incorporated by reference to Exhibit 25.1 to the Registration Statement).
(b) Reports on Form 8-K. On March 5, 2001, the Company filed a Form 8-K under Item 5. 34 INDEX TO HISTORICAL FINANCIAL STATEMENTS
Page ---- APCOA/Standard Parking, Inc. Report of Ernst & Young LLP, Independent Auditors....................... 36 Consolidated Balance Sheets as of December 31, 2000 and 1999............ 37 Consolidated Statements of Operations for each of the three years in the period ended December 31, 2000......................................... 38 Consolidated Statements of Stockholders' Deficit for each of the three years in the period ended December 31, 2000............................ 39 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2000......................................... 40 Notes to Consolidated Financial Statements.............................. 41
35 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Board of Directors APCOA/Standard Parking, Inc. We have audited the accompanying consolidated balance sheets of APCOA/Standard Parking, Inc. (the "Company") as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' deficit and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amount 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Ernst & Young LLP Chicago, Illinois March 30, 2001 36 APCOA/STANDARD PARKING, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except for share data)
December 31 ------------------- ASSETS 2000 1999 ------ --------- -------- Current assets: Cash and cash equivalents............................... $ 3,539 $ 5,215 Notes and accounts receivable, less allowances of $2,056 and $2,301 in 2000 and 1999, respectively.............. 46,826 42,715 Prepaid expenses and supplies........................... 1,775 1,645 --------- -------- Total current assets.................................. 52,140 49,575 Leaseholds and equipment: Equipment............................................... 15,741 13,866 Leasehold improvements.................................. 25,880 20,734 Leaseholds.............................................. 41,568 42,703 Construction in progress................................ 2,027 5,498 --------- -------- 85,216 82,801 Less accumulated depreciation and amortization.......... 56,724 50,142 --------- -------- 28,492 32,659 Other assets: Advances and deposits................................... 2,075 2,040 Cost in excess of net assets acquired, less accumulated amortization of $11,270 and $8,132 in 2000 and 1999, respectively........................................... 113,293 114,923 Intangible and other assets, less accumulated amortization of $4,807 and $2,997 in 2000 and 1999, respectively........................................... 12,341 14,073 --------- -------- 127,709 131,036 --------- -------- Total assets.......................................... $ 208,341 $213,270 ========= ======== LIABILITIES AND STOCKHOLDERS' DEFICIT ------------------------------------- Current liabilities: Accounts payable........................................ 35,079 $ 25,289 Accrued rent............................................ 5,070 7,812 Compensation and payroll withholdings................... 5,649 10,621 Property, payroll and other taxes....................... 3,998 3,554 Accrued insurance and expenses.......................... 12,948 13,151 Current portion of long-term borrowings................. 1,406 1,328 --------- -------- Total current liabilities............................. 64,081 61,755 Long-term borrowings, excluding current portion: Obligations under credit agreements..................... 166,950 158,100 Other................................................... 6,640 8,041 --------- -------- 173,590 166,141 Other long-term liabilities............................... 10,121 11,116 Redeemable preferred stock................................ 54,976 49,280 Common stock subject to put/call rights; 5.01 shares issued and outstanding................................... 6,304 4,589 Common stockholders' deficit: Common stock, par value $1.00 per share, 1,000 shares authorized; 26.3 shares issued and outstanding......... 1 1 Additional paid-in capital.............................. 11,422 11,422 Advances to and deposits with affiliates................ (11,979) (10,553) Accumulated other comprehensive (loss) income........... (374) 428 Accumulated deficit..................................... (99,801) (80,909) --------- -------- Total common stockholders' deficit.................... (100,731) (79,611) --------- -------- Total liabilities and stockholders' deficit........... $ 208,341 $213,270 ========= ========
See Notes to Consolidated Financial Statements. 37 APCOA/STANDARD PARKING, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands)
Years Ended December 31 ---------------------------------- 2000 1999 1998 ---------- ---------- ---------- Gross customer collections................. $1,545,690 $1,369,319 $1,026,085 ========== ========== ========== Parking services revenue: Lease contracts.......................... 181,828 $ 196,441 $ 162,568 Management contracts..................... 70,654 51,458 32,949 ---------- ---------- ---------- 252,482 247,899 195,517 Costs and expenses: Cost of parking services: Lease contracts........................ 159,702 172,217 144,086 Management contracts................... 32,643 20,877 11,144 ---------- ---------- ---------- 192,345 193,094 155,230 General and administrative............... 36,121 32,453 23,506 Other special charges.................... 4,636 5,577 18,050 Depreciation and amortization............ 12,635 9,343 7,435 ---------- ---------- ---------- Total costs and expenses............... 245,737 240,467 204,221 ---------- ---------- ---------- Operating income (loss).................. 6,745 7,432 (8,704) Other expenses (income): Interest expense......................... 18,311 16,743 12,301 Interest income.......................... (929) (1,059) (1,363) ---------- ---------- ---------- 17,382 15,684 10,938 Loss before minority interest, income taxes and extraordinary item.................... (10,637) (8,252) (19,642) Minority interest.......................... 341 468 487 Income tax expense......................... 503 752 430 ---------- ---------- ---------- Loss before extraordinary item............. (11,481) (9,472) (20,559) Extraordinary item......................... -- -- 2,816 ---------- ---------- ---------- Net loss................................... (11,481) (9,472) (23,375) Preferred stock dividends.................. (5,696) (5,106) (3,491) Increase in fair value of common stock to put/call.................................. (1,715) ---------- ---------- ---------- Net loss attributable to common stockholders.............................. $ (18,892) $ (14,578) $ (26,866) ========== ========== ==========
See Notes to Consolidated Financial Statements. 38 APCOA/STANDARD PARKING, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (In thousands, except for share data)
Common Stock --------------- Additional Advances to Accumulated Other Number of Par Paid-In And Deposits Comprehensive Accumulated Shares Value Capital With Affiliates Income Deficit Total --------- ----- ---------- --------------- ----------------- ----------- --------- Balance (deficit) at January 1, 1998........ 26.3 $ 1 $17,205 $ -- $ -- $(39,465) $ (22,259) Net and comprehensive loss................... (23,375) (23,375) Non-cash distribution to affiliate.............. (6,511) -- -- (6,511) Contribution to capital. 728 -- -- 728 Preferred stock dividends.............. (3,491) (3,491) ---- --- ------- -------- ----- -------- --------- Balance (deficit) at December 31, 1998...... 26.3 $ 1 $11,422 $ -- $ -- $(66,331) $ (54,908) Net loss................ (9,472) (9,472) Cumulative translation adjustment............. 428 428 --------- Comprehensive loss...... (9,044) --------- Preferred stock dividends.............. (5,106) (5,106) Advances to and deposits with affiliates........ (10,553) (10,553) ---- --- ------- -------- ----- -------- --------- Balance (deficit) at December 31, 1999...... 26.3 $ 1 $11,422 $(10,553) $ 428 $(80,909) $ (79,611) Net loss................ (11,481) (11,481) Cumulative translation adjustment............. (802) (802) --------- Comprehensive loss...... (12,283) --------- Preferred stock dividends.............. (5,696) (5,696) Increase in fair value of common stock subject to put/call............ (1,715) (1,715) Advances to and deposits with affiliates........ (1,426) (1,426) ---- --- ------- -------- ----- -------- --------- Balance (deficit) at December 31, 2000...... 26.3 $ 1 $11,422 $(11,979) $(374) $(99,801) $(100,731) ==== === ======= ======== ===== ======== =========
See Notes to Consolidated Financial Statements. 39 APCOA/STANDARD PARKING, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Year Ended December 31 ---------------------------- 2000 1999 1998 -------- -------- -------- Operating activities Net loss......................................... $(11,481) $ (9,472) $(23,375) Adjustments to reconcile net loss to net cash used in operations: Depreciation and amortization.................. 12,635 9,343 7,435 Provision for impairment of assets............. -- -- 2,600 Changes in operating assets and liabilities, net of acquisitions: Notes and accounts receivable................ (4,111) (11,949) (14,133) Prepaid assets............................... (130) 1,089 477 Other assets................................. 1,217 2,425 (816) Accounts payable............................. 9,790 6,802 (4,834) Accrued liabilities.......................... (11,137) (12,115) 18,776 Due from affiliates.......................... -- (3,832) (6,511) -------- -------- -------- Net cash used in operating activities...... (3,217) (17,709) (20,381) Investing activities Purchase of leaseholds and equipment............. (4,684) (10,261) (7,691) Purchase of leaseholds and equipment by joint ventures........................................ (213) (339) (828) Increase in other assets......................... -- -- (461) Businesses acquired, net of cash acquired........ -- (3,181) (87,045) Proceeds from disposition of leaseholds and equipment....................................... -- 250 -- -------- -------- -------- Net cash used in investing activities............ (4,897) (13,531) (96,025) Financing activities Proceeds from long-term borrowings............... 8,850 18,100 140,000 Payments on long-term borrowings................. (588) (1,660) (32,298) Proceeds from joint venture borrowings........... -- 1,281 -- Payments on joint venture borrowings............. (736) (558) (530) Payments of debt issuance costs.................. (286) (319) (7,588) Proceeds from issuance of redeemable preferred stock........................................... -- -- 40,683 Redemption of redeemable preferred stock......... -- -- (8,000) -------- -------- -------- Net cash provided by financing activities........ 7,240 16,844 132,267 -------- -------- -------- Effect of exchange rate changes on cash and cash equivalents..................................... (802) 428 -- -------- -------- -------- Decrease increase in cash and cash equivalents... (1,676) (13,968) 15,861 Cash and cash equivalents at beginning of year... 5,215 19,183 3,322 -------- -------- -------- Cash and cash equivalents at end of year......... $ 3,539 $ 5,215 $ 19,183 ======== ======== ========
See Notes to Consolidated Financial Statements. 40 APCOA/STANDARD PARKING, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2000, 1999 and 1998 (In thousands) Note A. Significant Accounting Policies APCOA/Standard Parking, Inc. ("APCOA/Standard" or "the Company"), formerly known as APCOA, Inc. ("APCOA"), and its subsidiaries and affiliates manage, operate and develop parking properties throughout the United States and Canada. The Company is a majority-owned subsidiary of AP Holdings, Inc. ("AP Holdings"). The Company provides on-site management services at multi-level and surface facilities in the two major markets of the parking industry: urban parking and airport parking. The Company manages approximately 1,947 parking facilities, containing approximately 1,030,000 parking spaces in over 220 cities across the United States and Canada. Principles of Consolidation--The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and joint ventures in which the Company has more than 50% ownership interest. Minority interest recorded in the consolidated statement of operations is the joint venture partner's noncontrolling interest in consolidated joint ventures. Minority interest included in the consolidated balance sheets was $121 and $5 at December 31, 2000 and 1999, respectively. Investments in joint ventures where the Company has a 50% or less noncontrolling ownership interest are reported on the equity method. Investments and losses in joint ventures accounted for using the equity method in the consolidated balance sheets were $(20) and $315 at December 31, 2000 and 1999, respectively. All significant intercompany profits, transactions and balances have been eliminated in consolidation. Gross Customer Collections--Gross customer collections represent gross receipts collected at all leased and managed properties, including unconsolidated affiliates. Parking Revenue--The Company recognizes gross receipts from leased locations and management fees earned from management contract properties as parking revenue as the related services are provided. Also included in parking revenue were $1,788 in 2000, $2,116 in 1999 and $127 in 1998 from gains on sales of parking contracts in the ordinary course of business. Cost of Parking Services--The Company recognizes costs for leases and nonreimbursed costs from managed facilities as cost of parking services. Cost of parking services consists primarily of rent and payroll related costs. Advertising Costs--Advertising costs are expensed as incurred and are included in general and administrative expenses. Advertising expenses aggregated $379, $402 and $343 for 2000, 1999 and 1998, respectively. Cash and Cash Equivalents--Cash equivalents represent funds temporarily invested in money market instruments with maturities of one to five days. Cash equivalents are stated at cost, which approximates market value. Leaseholds and Equipment--Leaseholds, equipment and leasehold improvements are stated at cost. Leaseholds (cost of parking contracts) are amortized on a straight-line basis over the average contract life of 7 years. Equipment is depreciated on the straight-line basis over the estimated useful lives of approximately 5 years on average. Leasehold improvements are amortized on the straight-line basis over the terms of the respective leases or the service lives of the improvements, whichever is shorter (average of approximately 7 years). Depreciation and amortization includes (gains) losses on abandonments of leaseholds of $(2), $105 and $260 in 2000, 1999 and 1998, respectively. Cost in Excess of Net Assets Acquired (Goodwill)--Cost in excess of net assets acquired arising from acquisitions is amortized using the straight-line method over 40 years. 41 Long Lived Assets--The Company accounts for impairment of long-lived assets, which includes goodwill, in accordance with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. When indicators of impairment are present, the Company periodically reviews the carrying value of long-lived assets, including goodwill, contract and lease rights, and non-compete agreements, to determine if the net book values of such assets continue to be recoverable over the remainder of the original estimated useful life. In performing this review for recoverability, the Company estimates the future cash flows expected to result from the use of the asset and its eventful disposition. If the sum of the expected net future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized based on the estimated diminution of value. If the assets involved are to be held and used in the operations of the Company, consideration is also given to actions or remediations the Company might take in order to achieve the original estimates of cash flows. Intangible Assets--Legal and other costs incurred to acquire certain parking businesses and establish parking joint ventures ($489 at December 31, 2000) are being amortized on a straight-line basis over seven years, the estimated life of the underlying parking contracts. Debt issuance costs of $5,875 and $6,576 at December 31, 2000 and 1999 respectively, are amortized over the terms of the credit agreements using the straight-line method which approximates the interest method. Additionally, $3,983 and $4,720 of intangibles at December 31, 2000 and 1999 respectively, consisting primarily of a covenant not to compete (see Note B), are being amortized on a straight- line basis over the term of the respective agreements which range from 5 to 10 years. Financial Instruments--The carrying values of cash, accounts receivable and accounts payable are reasonable estimates of their fair value due to the short-term nature of these financial instruments. The Company's 9.25% Senior Subordinated Notes are included in the Consolidated Balance Sheet at $140,000, which represents the aggregate face value of the notes. Market value at December 31, 2000 aggregated $44,800. Other long-term debt has a carrying value that approximates fair value. Foreign Currency Translation--The functional currency of the Company's foreign operations is the local currency. Accordingly, assets and liabilities of the Company's foreign operations are translated from foreign currencies into U.S. dollars at the rates in effect on the balance sheet date while income and expenses are translated at the weighted-average exchange rates for the year. Adjustments resulting from the translations of foreign currency financial statements are accumulated and classified as a separate component of stockholders' deficit. Use of Estimates--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Recent Accounting Pronouncements--In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (Statement 133), which is required to be adopted on January 1, 2001. Statement 133 requires all derivatives to be recognized in the balance sheet as either assets or liabilities at fair value. Derivatives that are not hedges, as defined in statement 133, must be adjusted to fair value through income. In addition, all hedging relationships must be designated, reassessed and documented pursuant to the provisions of SFAS No. 133. Management believes the adoption of this statement will not have a material effect on the Company. Reclassifications--Certain amounts previously presented in the financial statements of prior periods have been reclassified to conform to current year presentation. 42 Note B. Acquisitions In January 1998, APCOA entered into a definitive combination agreement to acquire all of the outstanding capital stock, partnership and other equity interests of Standard Parking Corp. and certain of its affiliates ("Standard"). On March 30, 1998, APCOA acquired Standard for consideration consisting of $65,000 in cash, 16% of the common stock of APCOA outstanding as of January 15, 1998 and the assumption of certain liabilities, including a $5,000 consulting and non-compete obligation for one of the former owners of Standard, which represents the current value of the payments to be made, as determined by consulting actuaries. In addition, on March 30, 1998, APCOA paid to the Standard owners $2,822, generally representing Standard's earnings from January 1 through the date of the acquisition and Standard's cash on hand at such time. Financing of the acquisition included a contribution from AP Holdings of $40,683, in exchange for redeemable preferred stock, and other transactions as described below and in Notes D and H. The acquisition was accounted for under the purchase method; accordingly, Standard's results are included in the consolidated financial statements of APCOA/Standard from the date of acquisition. Following is the final purchase price allocation, based on the estimated fair value of assets acquired and liabilities assumed. Cash consideration.............................................. $65,000 5.01 shares of common stock issued, at calculated put/call value.......................................................... 4,589 Closing distribution to the Standard owners..................... 2,822 Consulting and non-compete agreement with former owner.......... 5,000 Direct acquisition costs........................................ 7,179 ------- Total purchase price........................................ $84,590 ======= Cash............................................................ $ 1,632 Notes and accounts receivable................................... 318 Prepaid expenses................................................ 180 Leaseholds and equipment........................................ 7,971 Consulting and non-compete agreement............................ 5,000 Cost in excess of net assets acquired........................... 77,557 Other assets.................................................... 415 Accounts payable and accrued expenses........................... (3,855) Other costs and liabilities..................................... (4,628) ------- $84,590 =======
The put/call value above is based primarily upon a multiple of EBITDA, as defined, of the Company. Under certain circumstances the Company can be required to repurchase these shares, however in no case will the Company be obligated to do so prior to March 2001. Direct acquisition costs incurred in connection with the acquisition include investment banking fees of $3,289 and legal and other professional fees of $3,890. The following unaudited pro forma results of operations for 1998 assume the acquisition of Standard occurred on January 1, 1998.
1998 -------- Net revenue..................................................... $210,075 Loss before extraordinary item.................................. (19,697)
This pro forma information does not purport to be indicative of the results that actually would have been obtained if the combination had taken place at the beginning of the periods presented and is not intended to be a projection of future results. On January 22, 1998, the Company acquired the assets of Huger Parking Company, LLC, d/b/a Dixie Parking, for $1,000 in cash at closing and $3,250 in notes payable, of which $1,000 was repaid in March of 43 1998. The $2,250 balance is payable over 20 years with interest based on prime. On May 1, 1998, the Company acquired the remaining 76% interest in Executive Parking Industries LLC, through the acquisition of all of the outstanding capital stock of S&S Parking, Inc., the sole asset of which was such 76% interest in EPI, for $7,020 in cash. In addition, on June 1, 1998, APCOA/Standard acquired all of the outstanding capital stock of Century Parking, Inc., and Sentry Parking Corporation, for $5,168 in cash at closing including direct acquisition costs and $1,000 payable on the third anniversary of the closing date. On September 1, 1998, APCOA/Standard acquired the operations of Virginia Parking Service, Inc. in a stock purchase transaction for $3,114 in cash including direct costs, and up to $1,250 in notes payable over five years with interest at the prime rate. On April 1, 1999, the Company acquired the assets of Pacific Rim Parking, Inc. ("Pacific Rim") in Los Angeles for $750 in cash and up to $750 in non- interest bearing notes payable over five years. On May 1, 1999 the Company acquired various contracts of System Parking Inc. in Atlanta for $250 in cash. Effective as of July 1, 1999 the Company acquired all of the outstanding stock of Universal Park Holdings, Inc., operating under the names U-Park and Select Valet Parking, in Vancouver B.C. for $1,610 plus a multiple of EBITDA on a future earnout as defined in the agreement. All of these acquisitions have been accounted for under the purchase method and their operating results have been included in the consolidated results since their respective date of acquisition. The historical operating results of the businesses prior to acquisition were not material relative to the consolidated results of APCOA/Standard. Note C. Other special charges Included in "other special charges" in the accompanying consolidated statement of operations for the years ended December 31, 2000, 1999 and 1998 are the following (expenses are cash unless otherwise stated):
December 31, --------------------- 2000 1999 1998 ------ ------ ------- Employee severance costs........................... $2,475 $1,607 $ 6,900 Employee relocation costs.......................... -- -- 5,000 Increase in insurance reserves..................... 895 -- 2,600 Impairment and abandonment of assets that will no longer be used (non-cash expense)................. -- -- 2,600 Incremental integration costs and other............ 1,266 3,070 950 Costs associated with terminated transactions...... -- 900 -- ------ ------ ------- Total other special charges.................... $4,636 $5,577 $18,050 ====== ====== =======
Supplement Disclosure--Other Special Charges
December 31, --------------------- 2000 1999 1998 ------ ------ ------- Accrued at beginning of year.......................... $2,024 $6,163 $ 0 Provision for other special charges................... 4,635 5,577 18,050 Paid during year...................................... 3,665 9,716 11,887 ------ ------ ------- Accrued at end of year................................ $2,994 $2,024 $ 6,163 ====== ====== =======
In 1998, the employee severance costs consist of cash compensation and related expenses to 54 people for whom employment was terminated. The employee relocation costs are in connection with the relocation and consolidation of the headquarters of the Company, the relocation of two major field offices, moving Cleveland headquarters staff members to Chicago and other relocations within the field organization. The $2,600 increase in insurance reserves results from a buyout of the insurance program of APCOA in connection with the combination of APCOA and Standard insurance programs. The impairment and abandonment of assets that will no longer be used consists of the write-off of $2,600 of capitalized costs and leasehold improvements. Incremental integration costs and other, relate primarily to actions to facilitate the accounting system consolidation. 44 In 1999, the employee severance costs relate primarily to a provision for key management severance. The integration costs relate primarily to actions to facilitate the accounting system consolidation and activities to realign and centralize administrative and other support functions. The costs associated with terminated transactions relate to expenses incurred for acquisition activity that was terminated. In 2000, the employee severance costs relate to a provision for key management severance of $1,400 and cash compensation and related expenses for other employees for whom employment was terminated of $1,075. The costs associated with the insurance program relate to retroactive prior period premium adjustments of $895. The costs associated with incremental integration costs and other include $294 for settlement costs and outside accounting firm costs related to the combination with Standard, $235 for closure of administrative office, and $736 for a provision related primarily to estimated settlements on disputed receivables. Note D. Borrowing Arrangements Long-term borrowings consist of:
Amount Outstanding December 31 Interest ----------------- Rate(s) Due Date 2000 1999 ------------ ----------- -------- -------- Senior Subordinated Notes........ 9.25% March, 2008 $140,000 $140,000 Senior Credit Facility........... Various July, 2002 26,950 18,100 Joint venture debentures......... 11.00-15.00% Various 5,118 5,854 Capital leases and other......... Various Various 2,928 3,515 -------- -------- 175,896 167,469 Less current portion.............. 1,406 1,328 -------- -------- $173,590 $166,141 ======== ========
APCOA/Standard's 9.25% Senior Subordinated Notes, (the "Notes"), were issued in September of 1998 and are due in March of 2008. The Notes are registered with the Securities and Exchange Commission. The issuance was exchanged for unregistered notes with substantially identical terms, which had been issued earlier in 1998 to finance the acquisition of Standard and retire certain existing indebtedness, and for general working capital purposes. The Company's Senior Credit Facility (the "Facility") provides cash borrowings up to $40.0 million with sublimits for Letters of Credit up to $10.0 million, at variable rates based, at the Company's option, either on LIBOR, the overnight federal funds rate, or the bank's base rate. From time to time the Company utilizes the Facility to provide readily-accessible cash for working capital purposes. The Facility includes covenants that limit the Company from incurring additional indebtedness, issuing preferred stock or paying dividends, and contains certain other restrictions. At December 31, 2000, the Company had $.3 million of letters of credit outstanding under the Facility and borrowings against the Facility aggregated $27.0 million. The Facility was amended on March 30, 2000, with the principal changes to the agreement providing for revisions to interest rates charged on borrowings and certain financial covenants. The Facility was amended on May 12, 2000, with the principal change to the agreement relating to the definition of a change in control. The Facility was amended on November 14, 2000, with the principal changes to the agreement providing for revisions to interest rates, charges on borrowings and certain financial covenants. As of December 31, 2000, the Company was in compliance with the covenants contained in the Senior Credit Facility or has obtained the necessary waivers on or before March 30, 2001. The Facility was amended on March 30, 2001 with the principal changes to the agreement providing for revisions to interest rate charges on borrowings, certain financial covenants, a change to restore the original borrowing limits, and a change in the expiration date from March 30, 2004 to July 1, 2002. The Notes and Facility contain covenants that limit APCOA/Standard from incurring additional indebtedness and issuing preferred stock, restrict dividend payments, limit transactions with affiliates and restrict certain other transactions. Substantially all of APCOA/Standard's net assets are restricted under these provisions and covenants (See Note J). 45 Consolidated joint ventures have entered into four agreements for stand- alone development projects providing nonrecourse funding. These joint venture debentures are collateralized by the specific contracts that were funded and approximate the net book value of the related assets. The Company has entered into capital leases and various financing agreements, which were used for the purchase of equipment. The Company paid interest of $18,133; $15,778; and $8,572 in 2000, 1999, and 1998, respectively. The aggregate maturities of borrowings outstanding at December 31, 2000 are as follows: 2001............................ $ 1,406 2002............................ 28,351 2003............................ 1,038 2004............................ 882 2005............................ 919 2006 and thereafter............. 142,400 -------- $175,896 ========
Note E. Income Taxes The Company is included in the consolidated federal income tax return filed with its affiliates and has a tax sharing agreement with the affiliates. The Company's income tax provision is determined on a separate return basis. Income tax expense consists of foreign, state and local taxes. At December 31, 2000, the Company has net operating loss carryforwards of $66,657 for federal income tax purposes that expire in years 2004 through 2020. A reconciliation of the Company's reported income tax expense to the amount computed by multiplying loss before minority interest and income taxes by the effective federal income tax rate is as follows:
2000 1999 1998 ------- ------- ------- Statutory benefit............................. $(3,673) $(2,965) $(7,801) Change in valuation allowance................. 3,673 2,965 7,801 Foreign, state and local income taxes......... 503 752 430 ------- ------- ------- Income tax expense............................ $ 503 $ 752 $ 430 ======= ======= =======
Significant components of the provision for income taxes attributable to continuing operations are as follows:
2000 1999 1998 ---- ---- ---- Current: Foreign.................................................. $242 $462 $139 State.................................................... 261 290 291 ---- ---- ---- Total current............................................ 503 752 430 ---- ---- ---- Deferred: Foreign.................................................. -- -- -- State.................................................... -- -- -- ---- ---- ---- Total deferred........................................... -- -- -- ---- ---- ---- Income tax expense....................................... $503 $752 $430 ==== ==== ====
46 Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 2000 and 1999 are as follows:
2000 1999 ------- ------- Net operating loss carryforwards........................ $25,996 $21,186 Accrued compensation.................................... 2,256 2,569 Other, net.............................................. 1,664 1,589 ------- ------- 29,916 25,344 Book over tax depreciation and amortization............. (1,328) (1,124) ------- ------- 28,588 24,220 Less: valuation allowance for deferred tax assets....... 28,588 24,220 ------- ------- Net deferred tax assets................................. $ -- $ -- ======= =======
For financial reporting purposes, a valuation allowance for net deferred tax assets will continue to be recorded until realization of such assets is more likely than not. Taxes paid were $320, $679 and $331 in 2000, 1999 and 1998, respectively. Note F. Benefit Plans The Company offers deferred compensation arrangements for certain key executives and sponsors an employees' savings and retirement plan in which certain employees are eligible to participate. Subject to their continued employment by the Company, employees offered supplemental pension arrangements will receive a defined monthly benefit upon attaining age 65. At December 31, 2000 and 1999, the Company has accrued $2,740 and $3,890 respectively, representing the present value of the future benefit payments. Participants in the savings and retirement plan may elect to contribute a portion of their compensation to the plan. The Company, in turn, contributes an amount in cash or other property as required by the plan. Expenses related to these plans amounted to $985, $750 and $663 in 2000, 1999 and 1998, respectively. The Company also contributes to two multi-employer defined contribution and nine multi-employer defined benefit plans which cover certain union employees. Expenses related to these plans were $583, $815 and $732 in 2000, 1999 and 1998, respectively. Note G. Leases The Company operates parking facilities under operating leases expiring on various dates, generally prior to the year 2012. Certain of the leases contain options to renew at the Company's discretion. At December 31, 2000, the Company was committed to install in future years, at an estimated cost of $821, certain capital improvements at leased facilities. Future annual rent expense is not determinable due to the application of percentage factors based on revenues. At December 31, 2000, the Company's minimum rental commitments, excluding contingent rent provisions under all non-cancelable leases with remaining terms of more than one year, are as follows: 2001............................ $ 27,356 2002............................ 24,981 2003............................ 16,569 2004............................ 12,872 2005............................ 8,639 2006 and thereafter............. 40,507 -------- $130,924 ========
47 Rent expense, including percentage rents, was $124,900, $133,962 and $105,452 in 2000, 1999 and 1998, respectively. In the normal course of business, the Company is involved in disputes, generally regarding the terms of lease agreements. In the opinion of management, the outcome of these disputes and litigation will not have a material adverse effect on the consolidated financial position or operating results of the Company. Note H. Redeemable Preferred Stock In connection with the Standard acquisition on March 30, 1998, the Company received $40,683 from AP Holdings in exchange for $70,000 face amount of 11.25% Redeemable Preferred Stock. Dividends are payable semi-annually in additional shares of Stock until March 2003, when dividends become payable in cash. The stock is redeemable for cash at the option of the Company or AP Holdings at any time prior to March 2001 in the event of a public equity offering, or at any time subsequent to March 2003. Proceeds from the issuance together with the proceeds from the Senior Subordinated Notes described in Note D, were used to finance the acquisition of Standard, to retire certain indebtedness, to redeem preferred stock held by an affiliate, and for general working capital purposes. Note I. Contingency and Related Party Transactions As previously disclosed in Item 3 of APCOA/Standard's Form 10-Q for the quarter ended September 30, 2000, the bankruptcy filing of AmeriServe Food Distribution, Inc. on January 31, 2000, was a default under certain debt instruments of Holberg. As a result of such defaults, the creditors of Holberg could have taken control of Holberg or AP Holdings, APCOA's parent. A change in control of Holberg or AP Holdings would also constitute a change in control of APCOA/Standard under APCOA/Standard's debt instrument and of AP Holdings under its bond indenture. On March 5, 2001, Holberg restructured certain of its debt and eliminated the defaults thereunder, thereby eliminating the possibility of a change of control of AP Holdings under its bond indenture or the possibility of a change in control of APCOA/Standard under the APCOA/Standard debt instruments as a result of such defaults. Due from affiliates includes a $6,727 receivable from AP Holdings and amounts due from Holberg of $3,052 as the result of various transactions between the Company and Holberg including net cash transferred and reimbursement of certain expenses paid by APCOA/Standard on AP Holdings behalf. Interest is recorded on amounts due based on current investment rates of return. The Company is subject to various claims and legal proceedings which consist principally of lease and contract disputes and includes litigation with The County of Wayne relating to the management of parking facilities at the Detroit Metropolitan Airport. These claims and legal proceedings are considered ordinary, routine, and incidental to the Company's business, and in the opinion of management, the ultimate liability with respect these proceedings and claims will not materially affect the financial position, operations, or liquidity of the Company. Until January 1999, the Company participated in a master insurance program with Holberg which served to reduce the insurance costs of the combined group. In connection with the insurance program, during 1998 the Company placed $2,200 on deposit with a Holberg affiliate for insurance collateral purposes. Due to the current financial situation of Holberg and indirectly AP Holdings, the Company has reclassified the $11,979 in 2000, and $10,553 in 1999 of advances to and deposits with these affiliates from a long-term asset to stockholders' deficit. Such reclassification was made due to uncertainty regarding the ability of the affiliates to repay such amounts without potentially receiving distributions from the Company. In connection with the acquisition of Standard in 1998, the Company made a $6,511 non-cash distribution to Holberg of a receivable for that amount due from Holberg to the Company. 48 The Company used $8,728 of proceeds from the financing obtained in connection with the acquisition of Standard to redeem $8,000 of preferred stock held by Holberg. The remaining $728 was contributed by Holberg to the capital of the Company. On December 31, 2000, the Company entered into an agreement to sell, at fair market value, certain contract assets to D & E Parking, Inc. ("D & E"), a California corporation, in which certain officers of the Company have an interest. The Company recorded a gain of $1 million from this transaction in 2000. The Company will continue to operate the parking facilities and receive management fees and reimbursement for support services in connection with the operation of the parking facilities. Note J. Subsidiary Guarantors All of the Company's direct or indirect wholly owned domestic subsidiaries, including Standard, other than inactive subsidiaries, fully, unconditionally, jointly and severally guarantee the Senior Subordinated Notes discussed in Note D. Separate financial statements of the guarantor subsidiaries are not separately presented because, in the opinion of management, such financial statements are not material to investors. The non-guarantor subsidiaries include joint ventures, wholly owned subsidiaries of the Company organized under the laws of foreign jurisdictions and inactive subsidiaries, all of which are included in the consolidated financial statements. The following is summarized combining financial information for APCOA/Standard, the guarantor subsidiaries of the Company and the non-guarantor subsidiaries of the Company:
APCOA/ Guarantor Non-Guarantor Standard Subsidiaries Subsidiaries Elimination Total -------- ------------ ------------- ----------- -------- 2000 Balance Sheet Data: Cash and cash equivalents.......... $ (593) $ 76 $ 4,056 $ -- $ 3,539 Notes and accounts receivable........... 50,972 (7,529) 3,383 -- 46,826 Current assets........ 50,792 (6,264) 7,612 -- 52,140 Leaseholds and equipment, net....... 15,693 7,395 5,404 -- 28,492 Cost in excess of net assets acquired, net. 19,062 90,673 3,558 -- 113,293 Investment in subsidiaries......... 93,211 -- -- (93,211) -- Total assets.......... 187,446 96,818 17,288 (93,211) 208,341 Accounts payable...... 21,744 10,172 3,163 -- 35,079 Current liabilities... 46,328 8,938 8,815 -- 64,081 Long-term borrowings, excluding current portion.............. 169,305 175 4,110 -- 173,590 Redeemable preferred stock................ 54,976 -- -- -- 54,976 Common stock subject to put/call rights... 6,304 -- -- -- 6,304 Total stockholders' equity (deficit)..... (94,942) 83,504 3,918 (93,211) (100,731) Total liabilities and stockholders' equity (deficit)............ 187,446 96,818 17,288 (93,211) 208,341 Income Statement Data: Parking services revenue.............. $128,553 $92,336 $31,593 -- $252,482 Gross profit.......... 36,081 17,762 6,294 -- 60,137 Other special charges. 4,636 -- -- -- 4,636 Depreciation and amortization......... 6,249 5,155 1,231 -- 12,635 Operating income (loss)............... 20,975 (18,970) 4,740 -- 6,745 Interest expense (income), net........ 16,858 (84) 608 -- 17,382 Equity in earnings of subsidiaries......... (15,243) -- -- 15,243 -- Net income (loss)..... (11,481) (18,887) 3,644 15,243 (11,481) Cash Flows Data: Net cash provided by (used in) operating activities........... $ (5,332) $(1,471) $ 3,586 -- $ (3,217)
49
APCOA/ Guarantor Non-Guarantor Standard Subsidiaries Subsidiaries Elimination Total -------- ------------ ------------- ----------- -------- Investing activities: Purchase of leaseholds and equipment.......... $ (4,268) $ (416) $ -- $ -- $ (4,684) Purchase of leaseholds and equipment By joint venture............ -- -- (213) -- (213) Net cash used in investing activities. (4,268) (416) (213) -- (4,897) Financing activities: Proceeds from long- term borrowings.... 8,850 -- -- -- 8,850 Payments on long- term borrowings.... (874) -- -- -- (874) Payments on joint venture borrowings. (736) -- -- -- (736) Net cash provided by financing activities. 7,240 -- -- -- 7,240 Effect of exchange rate changes......... (802) -- -- -- (802) 1999 Balance Sheet Data: Cash and cash equivalents.......... $ 2,569 $ 1,963 $ 683 $ -- $ 5,215 Notes and accounts receivable........... 34,973 2,606 5,136 -- 42,715 Current assets........ 39,130 4,608 5,837 -- 49,575 Leaseholds and equipment, net....... 17,204 9,263 6,192 -- 32,659 Cost in excess of net assets acquired, net. 19,536 92,590 2,797 -- 114,923 Investment in subsidiaries......... 102,639 -- -- (102,639) -- Total assets.......... 187,655 112,225 16,029 (102,639) 213,270 Accounts payable...... 15,860 5,962 3,467 -- 25,289 Current liabilities... 41,423 10,439 9,893 -- 61,755 Long-term borrowings, excluding current portion.............. 160,667 371 5,103 -- 166,141 Redeemable preferred stock................ 49,280 -- -- -- 49,280 Common stock subject to put/call rights... 4,589 -- -- -- 4,589 Total stockholders' equity (deficit)..... (76,402) 98,889 541 (102,639) (79,611) Total liabilities and stockholders' equity. 187,655 112,225 16,029 (102,639) 213,270 Income Statement Data: Parking services revenue.............. $107,555 $ 99,551 $40,793 -- $247,899 Gross profit.......... 25,149 24,278 5,378 -- 54,805 Other special charges. 5,577 -- -- -- 5,577 Depreciation and amortization......... 4,492 3,828 1,023 -- 9,343 Operating income (loss)............... 10,839 (7,219) 3,812 -- 7,432 Interest expense (income) net......... 15,225 (86) 545 -- 15,684 Equity in earnings of subsidiaries......... (4,700) -- -- 4,700 -- Operating income (loss)............... (9,472) (7,133) 2,433 4,700 (9,472) Interest expense (income) net......... Net cash used in operating activities. $(15,769) $ (1,740) $ (200) $ -- $(17,709) Investing activities: Purchase of leaseholds and equipment.......... (7,126) (3,135) -- -- (10,261) Purchase of leaseholds and equipment JV....... -- -- (339) -- (339) Businesses acquired. (3,181) -- -- -- (3,181) Other............... 250 -- -- -- 250 Net cash used in investing activities. (9,718) (3,474) (339) -- (13,531)
50
APCOA/ Guarantor Non-Guarantor Standard Subsidiaries Subsidiaries Elimination Total -------- ------------ ------------- ----------- -------- Financing activities: Proceeds from long- term borrowings.... $ 18,100 $ -- $ -- $ -- $ 18,100 Payments on long- term borrowings.... (1,660) -- -- -- (1,660) Proceeds from joint venture borrowings. 1,281 -- -- -- 1,281 Payments on joint venture borrowings. (558) -- -- -- (558) Payments of debt issuance costs..... (319) -- -- -- (319) Net cash provided by financing activities. 16,844 -- -- -- 16,844 Effect of exchange rate changes......... 428 -- -- -- 428 1998 Balance Sheet Data: Cash and cash equivalents.......... $ 10,784 $ 7,177 $ 1,222 $ -- $ 19,183 Notes and accounts receivable........... 27,406 3,657 1,576 -- 32,639 Current assets........ 38,886 11,968 3,774 -- 54,628 Leaseholds and equipment, net....... 12,129 10,086 5,403 -- 27,618 Cost in excess of net assets acquired, net. 18,966 88,961 814 -- 108,741 Investment in subsidiaries......... 107,293 -- -- (107,293) -- Total assets.......... 193,411 118,881 11,770 (107,293) 216,769 Accounts payable...... 11,235 6,390 559 -- 18,184 Current liabilities... 40,757 16,022 6,968 -- 63,747 Long-term borrowings, excluding current portion.............. 142,716 277 4,499 -- 147,492 Redeemable preferred stock................ 44,174 -- -- -- 44,174 Common stock subject to put/call rights... 4,589 -- -- -- 4,589 Total stockholders' equity (deficit)..... (48,710) 101,544 (449) (107,293) (54,908) Total liabilities and stockholders' equity. 193,411 118,881 11,770 (107,293) 216,769 Income Statement Data: Parking services revenue.............. $ 82,764 $ 76,087 $36,666 $ -- $195,517 Gross profit.......... 20,034 18,173 2,080 -- 40,287 Other special charges. 18,050 -- -- -- 18,050 Depreciation and amortization......... 3,533 2,955 947 -- 7,435 Operating income (loss)............... (9,782) 807 271 -- (8,704) Interest expense (income), net........ 10,311 (12) 639 -- 10,938 Equity in earnings of subsidiaries......... (46) -- -- 46 -- Net income (loss)..... (23,375) 809 (855) 46 (23,375) Cash Flows Data: Net cash provided by (used in) operating activities........... $(25,729) $ 3,816 $ 1,532 $ -- $(20,381) Investing activities: Purchase of leaseholds and equipment.......... (5,387) (1,476) (828) -- (7,691) Purchases of leasholds and other equipment JV....... -- -- (828) -- (828) Businesses acquired. (90,863) 3,818 -- -- (87,045) Other............... (461) -- -- -- (461) Net cash provided by (used in) investing activities........... (96,711) 2,342 (1,656) -- (96,025)
51
APCOA/ Guarantor Non-Guarantor Standard Subsidiaries Subsidiaries Elimination Total -------- ------------ ------------- ----------- -------- Financing activities: Proceeds from long- term borrowings.... $140,000 $-- $ -- $-- $140,000 Payments on long- term borrowings.... (32,298) -- (530) -- (32,828) Payments of debt issuance costs..... (7,588) -- -- -- (7,588) Proceeds from issuance of preferred stock.... 40,683 -- -- -- 40,683 Redemption of redeemable preferred stock.... (8,000) -- -- -- (8,000) Net cash provided by (used in) financing activities........... 132,797 -- (530) -- 132,267
Note K. Legal Proceedings The Company is subject to various claims and legal proceedings which consist principally of lease and contract disputes and includes litigation with The County of Wayne relating to the management of parking facilities at the Detroit Metropolitan Airport. These claims and legal proceedings are considered ordinary, routine, and incidental to the Company's business, and in the opinion of management, the ultimate liability with respect to these proceedings and claims will not materially affect the financial position, operations, or liquidity of the Company. Note L. Quarterly Results (Unaudited) The following tables contain selected unaudited Statement of Operations information for each quarter of 2000 and 1999. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.
Year Ended December 31, 2000 ---------------------------------- Fourth Third Second First Quarter Quarter Quarter Quarter ------- ------- ------- ------- Revenue.................................. $64,207 $63,117 $62,067 $63,091 Gross Profit............................. 15,461 15,137 15,376 14,163 Net Loss................................. (6,060) (2,311) (1,199) (1,911) Year Ended December 31, 1999 ---------------------------------- Fourth Third Second First Quarter Quarter Quarter Quarter ------- ------- ------- ------- Revenue.................................. $63,924 $60,276 $62,830 $60,869 Gross Profit............................. 13,425 14,735 13,675 12,970 Net Loss................................. (7,637) (1,205) (730) 100
52 APCOA/STANDARD PARKING, INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS (In thousands)
Additions ----------------------------- Charged Balance at to Costs Charged Balance at Beginning and to Other Acquisition End of of Year Expenses Accounts Balance Deductions(1) Year ---------- -------- -------- ----------- ------------- ---------- Year ended December 31, 1998: Deducted from asset accounts Allowance for doubtful accounts............ $ 443 $317 $-- $1,000 $ (17) $1,743 Year ended December 31, 1999: Deducted from asset accounts Allowance for doubtful accounts............ 1,743 873 -- -- (315) 2,301 Year ended December 31, 2000: Deducted from asset accounts Allowance for doubtful accounts... 2,301 -- 482 -- (727) 2,056
-------- (1) Represents uncollectible account written off, net of recoveries. 53 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. APCOA/Standard Parking, Inc. /s/ Myron C. Warshauer By: _________________________________ Myron C. Warshauer Director and Chief Executive Officer Date: Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Myron C. Warshauer Director and Chief Executive March 30, 2001 ____________________________________ Officer (Principal Myron C. Warshauer Executive Officer) /s/ G. Marc Baumann Executive Vice President, March 30, 2001 ____________________________________ Chief Financial Officer, G. Marc Baumann and Treasurer (Principal Financial and Accounting Officer) /s/ John V. Holten Director and Chairman March 30, 2001 ____________________________________ John V. Holten /s/ Gunnar E. Klintberg Director and Vice President March 30, 2001 ____________________________________ Gunnar E. Klintberg /s/ Robert N. Sacks Executive Vice President, March 30, 2001 ____________________________________ General Counsel and Robert N. Sacks Secretary
54 INDEX TO EXHIBITS
Sequentially Exhibit Numbered Number Description Page ------- ----------- ------------ 1.1 Purchase Agreement, by and among the Company, the Subsidiary Guarantors, Donaldson, Lufkin & Jenrette Securities Corporation and First Chicago Capital Markets, Inc., dated as of March 25, 1998 (incorporated by reference to Exhibit 1.1 to the Company's Registration Statement on Form S-4 (No. 333-50437) filed on April 17, 1998, as amended on June 9, 1998, July 15, 1998, August 11, 1998 and August 14, 1998 (the "Registration Statement")). 2.1 Combination Agreement, dated as of January 15, 1998, by and between APCOA, Inc. and the Standard Owners (incorporated by reference to Exhibit 2.1 to the Registration Statement). 3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registration Statement). 3.2 Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Registration Statement). 3.3 Amended and Restated By-Laws of the Company dated as of December 29, 2000. 4.1 Indenture, dated as of March 30, 1998, amended as of July 6, 1998 and September 21, 1998, by and among the Company, the Subsidiary Guarantors and State Street Bank and Trust Company (incorporated by reference to Exhibit 4.1 to the Registration Statement). 4.2 Form of New Note (included as Exhibit A to Exhibit 4.1). 4.3 Form of New Note Guarantee (included as Exhibit D to Exhibit 4.1). 4.4 Supplemental Indenture, dated as of January 12, 1999 by and among the Company, the Subsidiary Guarantors and State Street Bank and Trust Company (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K filed for December 31, 1998). 4.5 Supplemental Indenture, dated as of September 21, 1998, among Virginia Parking Service, Inc., the Company, and State Street Bank and Trust Company (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K filed for December 31, 1998). 4.6 Supplemental Indenture, dated as of July 6, 1998, among S&S Parking, Century Parking, Inc. and Sentry Parking Corporation, the Company, and State Street Bank and Trust Company (incorporated by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K filed for December 31, 1998). 4.7 First Amendment to Senior Credit Facility dated November 12, 1999 by and among the Company, the Lenders, and N.A. Bank One as agent for Lenders (incorporated by reference to Exhibit 4.7 to the Company's September 10, 1999 Form 10-Q). 4.8 Second Amendment to the Senior Credit Facility dated March 30, 2000 by and among the Company, the Lenders and Bank One N.A., as agent for the Lenders (incorporated by reference to Exhibit 4.8 to the Company's May 12, 2000 Form 10-Q). 4.9 Third Amendment to the Senior Credit Facility dated May 12, 2000 by and among the Company, the Lenders and Bank One N.A., as agent for the Lenders (incorporated by reference to Exhibit 4.9 to the Company's August 9, 2000 Form 10-Q). 4.10 Fourth Amendment to the Senior Credit Facility dated November 14, 2000 by and among the Company, the Lenders and Bank One, N.A. as agent for the Lenders (incorporated by reference to Exhibit 4.10 to the Company's September 30, 2000 Form 10-Q). 4.11 Fifth Amendment to the Senior Credit Facility dated March 30, 2001 by and among the Company, the Lenders and Bank One, N.A., as agent for the Lenders.
Sequentially Exhibit Numbered Number Description Page ------- ----------- ------------ 10.1 Registration Rights Agreement, dated as of March 30, 1998, by and among the Company, the Subsidiary Guarantors, Donaldson, Lufkin & Jenrette Securities Corporation and First Chicago Capital Markets, Inc. (incorporated by reference to Exhibit 10.1 to the Registration Statement). 10.2 Credit Agreement, dated as of March 30, 1998, by and among the Company, The First National Bank of Chicago, as Agent and Lender, and the Other Institutions party thereto (incorporated by reference to Exhibit 10.2 to the Registration Statement). 10.3 Stockholders' Agreement, dated as of March 30, 1998, by and among Dosher Partners, L.P., SP Associates and Holberg, AP Holdings and the Company (incorporated by reference to Exhibit 10.3 to the Registration Statement). 10.4 Consent and Joinder to Stockholders' Agreement dated as of October 1, 1998, by and among the Company, Dosher Partners, L.P., SP Associates, Holberg, AP Holdings and Waverly (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K filed for December 31, 1998). 10.5 Stockholders' Agreement, dated as of April 14, 1989, by and among AP Holdings, Holberg and each member of the management of the Company who is a stockholder of AP Holdings (incorporated by reference to Exhibit 10.4 to the Registration Statement). 10.6 Tax Sharing Agreement, dated as of April 28, 1989, as amended as of March 30, 1998, by and among Holberg, AP Holdings and the Company (incorporated by reference to Exhibit 10.5 to the Registration Statement). 10.7 Employment Agreement between the Company and Myron C. Warshauer (incorporated by reference to Exhibit 10.6 to the Registration Statement). 10.8 Employment Agreement between the Company and G. Walter Stuelpe, Jr. (incorporated by reference to Exhibit 10.7 to the Registration Statement). 10.9 Executive Transition Employment Agreement between the Company and James V. LaRocco, Jr. (incorporated by reference to Exhibit 10.8 to the Registration Statement). 10.10 Employment Agreement between the Company and Michael K. Wolf (incorporated by reference to Exhibit 10.12 to the Registration Statement). 10.11 Deferred Compensation Agreement between the Company and Michael K. Wolf (incorporated by reference to Exhibit 10.13 to the Registration Statement). 10.12 Company Retirement Plan for Key Executive Officers (incorporated by reference to Exhibit 10.14 to the Registration Statement). 10.13 Consulting Agreement between the Company and Sidney Warshauer (incorporated by reference to Exhibit 10.15 to the Registration Statement). 10.14 Employment Agreement between the Company and James A. Wilhelm (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K filed for December 31, 1998). 10.15 Promissory Note dated June 25, 1998 by and between G. Walter Stuelpe, Jr. and the Company (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K filed for December 31, 1998). 10.16 Letter Agreement between the Company and The First National Bank of Chicago as Agent and Lender, dated March 30, 1999 (incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K filed for December 31, 1998).
Sequentially Exhibit Numbered Number Description Page ------- ----------- ------------ 10.17 Employment Agreement between the Company and Steven Warshauer (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K filed for December 30, 1999). 10.18 Settlement Agreement and Release between the Company and G. Walter Stuelpe Jr. (incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K filed for December 30, 1999). 10.19 Employment Agreement between the Company and Douglas R. Warshauer dated March 26, 1998. 21.1 Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the Registration Statement). 25.1 Statement of Eligibility and Qualification of Trustee on Form T-1 of State Street Bank and Trust Company under the Trust Indenture Act of 1939 (incorporated by reference to Exhibit 25.1 to the Registration Statement).