SP Plus Corp (SP) 2003 Q3 法說會逐字稿

Excuse me, everyone. At this time, Mr. Marc Baumann has now joined. All lines will be muted during the broadcast. After the presentation, we will begin the question-and-answer period. If you would like to ask a question during this period, simply press star and the number 1 on your touch-tone phone and your questions will be answered in the order received. If you're in the queue and no longer wish to ask a question, simply press star 9. Should any participants need assistance, please disconnect and redial the conference number. Mr. Baumann, you may begin.

Thank you, Gregory, and good morning, everyone. Welcome to Standard Parking Corporation's conference call for the third quarter of 2003. I'm Mark Baumann, the Chief Financial Officer of the company and your primary Investor Relations contact. As in the past, we will tape this call and for the next 10 days it will be available to the public. If you are interested in hearing a replay of the call, please dial 1-800-839-6713 for domestic, or 1-402-220-2306 for international and enter reservation number 5933915. We will also have a transcript of this call posted in the investor relations section of the company's website at www.standardparking.com. Follow the links on the website under the section on "about us."

The format of today's call will be a brief presentation by Jim Wilhelm, President and CEO of the company and me followed by a Q&A session. The 10Q for the company was filed last week, and we issued a press release on Friday with our third-quarter results. During this call, we'll make some statements that will be considered forward looking regarding the company's strategies, operations and financial performance. These comments are made under the conditions set forth in the 10Q regarding forward-looking statements.

With that, I'd like to turn the call over to Jim.

Thank you, Marc. Good morning everyone. As Mark mentioned, we filed our 10Q statement last week, during this call we will go over some highlights from that quarter. Parking services revenues excluding reimbursed management contract expenses were $50.5 million for the third quarter and $159.1 million for the first nine months of 2003. Down 8.2% and 4% for the quarter and year respectively, as compared to the same periods in 2002. However, the cost of parking services excluding reimbursed management contracts expenses, decreased 13.7% and 9.1% over the same periods to $35.1million for the third quarter and $114.8 million for the first nine months of 2003. The resulting gross profit was $15.4 million for the quarter, a 7.8% increase over the third quarter of 2002, and 44.3% for the first nine months of 2003, an increase of 9.3% over 2002.

Gross margin for lease contracts increased from 7.5% in the third quarter of 2002 to 12.5% in the third quarter of 2003, primarily due to the termination of lower margin contracts and reduction and operating expenses. Gross margin for management contracts was virtually unchanged over the same period. Total operating income as a percent of gross profit increased from 27.4% in the third quarter of 2002 to 28.3% in the third quarter of 2003. As we've discussed before, we believe operating income as a percent of gross profit is a better measure of operating efficiencies than gross margins.

General and administrative expense was $8.3 million in the third quarter and $24.4 million for the first nine months of 2003. An increase of 12.4% and 8.1% over comparable periods of 2002. These increases are as a result of one-time issues such as accruals anticipating restored performance-based compensation, and the shoring up of resources in the areas of human resources, corporate governance pertaining to the Sarbain Oxley [ph] requirement in the area of business development.

Special charges were $500,000 through the first nine months of 2003, primarily related to costs associated with our parent company and financing activities. Operating income increased 11% to $4.3 million in the third quarter of 2003, as compared to $3.9 million in the third quarter of 2002. Operating income was $11.6 million for the first nine months of 2003, an increase of 35.3% over the first nine months of 2002.

During this quarter, we received a settlement from the County of Wayne, Michigan. This settlement emanated from a dispute with the county over the payment of reimbursable operating expenses incurred by our company for the operation of the Detroit Wayne County airport parking facility. A court ordered mediation panel found no evidence of wrong doing by the company, and as a result, the County agreed to pay the Company $800,000 for reimbursement of these disputed operating expenses. The settlement of this latest dispute,however was merely the last episode in a series of issues in disputes between the Company, Wayne County and the State of Michigan. These various issues ranging from tax appeals to the previously mentioned dispute over reimbursable expenses arose over a time period in excess of 15 years. I want to thank our General Counsel, Robert Sacks, who during these more than 15 years has overseen the final resolution of each of these legal matters to their successful conclusion.

I want to talk a little about our new business acquisitions during the quarter. Our team of business development professionals is now fully geared up and has been very busy winning new contracts. During this quarter, we were awarded several large municipal contracts, the largest of which was a five year contract to manage 4,600 spaces for the parking authority of River City in Louisville, Kentucky. Another significant municipal contract win during the quarter was a contract that managed 1,400 spaces for the City of Cambridge, Massachusetts. We were also awarded contracts by the city of Clearwater, Florida to operate municipal lots at Clearwater beach and the City of Hollywood to provide unified on-street valet services.

High profile commercial properties awarded recently include 3,800 parking spaces at the Camelback Esplanade in Phoenix, Arizona, a Class A office mixed-use project. The complex includes five office towers, movie theatres and several restaurants. We were also awarded the contract to operate 1,500 parking spaces, at the Capital Plaza in Columbus, Ohio. Finally, right here in Chicago we were awarded the contract to operate parking for Millenium Center, a premier residential complex with 700 parking spaces in the heart of the River North entertainment district.

With that I will turn the call back over to Marc Baumann, our CFO who will discuss additional financial information.

Thanks, Jim. Net cash provided by operating activities totaled $7.4 million for the first nine months of 2003, compared to $4.7 million for the first nine months of 2002. Cash provided during the first nine months of 2003 included $12 million, from the return of funds held in trust by our casualty insurance carrier which was exchanged for a letter of credit in the same amount. Offsetting these items were an increase in receivables of $2.7 million which included additional deficiency payments of $2.5 million to the Bradley International Airport trust fund in 2003. A decrease in accounts payable of $900,000, a decrease in other liabilities of $1.2 million, and $7.6 million in interest payments on the 14% to 9.25 senior subordinated notes.

Cash provided during the first nine months of 2002 included a $1 million increase in accounts receivable of $4.2 million increase in other liabilities and a $20 million dollar receipt from the January 2002 exchange. Which were offset by season expenses related to the exchange. A decrease in accounts payable of $4.8 million and $9.4 million in interest payments on the senior subordinated notes. Capital purchases of lease holds and equipment were $600,000 during the first nine months of 2003, compared to $1.1 million during the first nine months of 2002.

Finally, on August 28th, 2003, we entered into a second amended and restated credit agreement. The Phoenix credit facility now consists of a $65 million revolving term loan facility with a maturity of June and July 2006. The previous agreement was for a $43 million facility with maturity of March 2004. With the proceeds from this new Senior Credit Facility the company repurchased a portion of our 14% senior subordinated second lien notes at a discount to face. This discount along with the write-off of the carrying value in excess of principal associated with these repurchase notes was recorded as a gain on the extinguishment of debt.

We also redeemed $2.4 million of the Series B preferred stock during the third quarter, the proceeds received by AP Holdings were used directly or indirectly to repurchase some of its 11.25% senior discount notes. At September 30th, 2003, cash borrowings under the Senior Credit Facility totaled $39.4 million, plus $16.8 million in outstanding letters of credit. Resulting in availability of $8.8 million.

At this point, I'd like to turn the call back over to Gregory for any questions.

We will now begin the question and answer portion of the conference. If you would like to ask a question at this time, again, simply press star and the number 1 on your touch-tone phone and your questions will be answered in the order received. If you no longer wish to ask a question, press star 9. And if you accidentally hit the wrong number, please wait five seconds before re-entering the conference. Your first question comes from Joseph VanMeister from Jefferies & Company.

Hi, guys.

Good morning.

Good morning.

Looks like a great quarter. Just to clarify, there's a $300,000 benefit from the Wayne County Airport settlement in gross margin?

That's right.

Is that correct?

Yes.

And, in terms of bonds that you've repurchased, I'm afraid that I missed -- your current outstanding is $56.9 million, how many bonds were bought back?

We bought back $6.5 million of face of the 14%.

I'm talking about the -- oh, you're saying of the 14% notes you bought back $6.5 million. And what price did you pay? Did you pay par or did you get it at a discount?

It was at a discount. You can figure it out from the queue itself, but it was about 91 cents.

Well done. And, in addition to that, you upstreamed about $2.5 million to your holding company parent?

That's right.

Is there a limitation on the amount that can be upstreamed in a year?

Well, actually it's prohibited by the Senior Credit Facility, and we filed a copy of the Senior Credit Facility, the second amended one, with the queue and you'll see in there that the lenders consented to that payment, or to the redemption of the Series C, I should say.

So that was more of a one-time event rather than something that we should expect to happen on a reoccurring basis?

Well, it can't happen again without the consent of the lenders.

And are you willing to give any guidance for next quarter or for the next few quarters?

No.

And is there an amortization payment that needs to be made on the new Golden Tree term loan?

No. It's a non-amortizing term loan.

So if I get that right, that's prime plus 6.75%, is that right, FCPR, that's prime rate plus 6.75% and you get to pay 3% of that on a pick [ph] basis?

That's right.

Is the minimum rate 12%?

I think it's 11%.

I mean 11%.

11% including the pick portion.

Okay. So that I have that right, it's prime plus 6.8% with a minimum of 11%, and of that entire amount, 3% can be paid in kind.

That's right.

Great. Okay. Thanks very much.

Okay. Joe.

Thank you.

And at this time there are currently no more questions in queue, you may continue with your presentation, Mr. Baumann.

This is Jim Wilhelm, I'd like to thank everyone for calling in and expressing your interest in our company and we hope to have as great a call next quarter. Thanks again, bye .