Central Parking Corporation Reports Earnings for First Fiscal Quarter

Business Wire, Feb 14, 2003

Business Editors

NASHVILLE, Tenn.--(BUSINESS WIRE)--Feb. 14, 2003

Central Parking Corporation (NYSE:CPC) today announced GAAP net earnings of $0.19 per diluted share for the quarter ended December 31, 2002. This compares to reported GAAP net earnings for the quarter ended December 31, 2001 of $0.18 per diluted share. Revenues for the first quarter of fiscal 2003 excluding reimbursed management costs increased to $183.0 million compared to $177.0 million in the year-earlier period.

The Company previously indicated that it expected pro forma earnings of $0.30 to $0.33 per diluted share. As a result of new regulations issued by the SEC to respond to provisions of the Sarbanes-Oxley Act of 2002 relating to the reporting of non-GAAP financial measures, Central Parking announced that it is discontinuing the practice of reporting pro forma earnings.

Impacting the Company's net earnings for the first quarter of 2003 is a $1.5 million increase in accounts payable to correct an error in the process for recording vendor invoices, which impacted net earnings per diluted share by $.03. This error was in a large part attributed to the Company's decentralized payables process. A rigorous process has been established to capture and record vendor invoices on a more timely basis and to estimate the liabilities for vendor invoices not yet received. The Company believes that this improved process has resulted in a more accurate accounts payable balance and does not anticipate further adjustments. Plans are underway to centralize the accounts payable process.

Also impacting net earnings in the first quarter of 2003 was a $1.1 million increase in bad debt expense including reserves. This increase in the bad debt expense was attributed to the Company aggressively pursuing collections, identifying deterioration in aging accounts, customers who have filed for bankruptcy and balances being disputed by customers whose resolution is in litigation. Additionally, the Company implemented a reconciliation software system to monitor credit card transactions throughout the corporation. During the quarter this system highlighted specific technical problems resulting in exposures related to aged transactions for which a reserve of $500,000 was established. The Company does not believe that these levels of bad debt expense will be experienced in the future. These actions to boost reserves impacted net earnings per diluted share by $0.03.

William J. Vareschi, Jr., chief executive officer, said, "Our operating results are being affected by the difficult economic environment that has led to increased unemployment, deteriorating office occupancy rates and a decline in overall activity in key central business districts. In addition, December was an especially challenging month with a decided slowing in our same-store sales growth from earlier in the quarter, exacerbated by severe weather over much of the country. For the quarter, same store sales were up 2.1%, with the New York area showing approximately a 10% increase, while the balance of the country was down about 2% from prior year levels. As we noted in our year-end earnings announcement, our guidance for the first quarter and full fiscal year was based on an assumption of modest economic growth in the 2-2.5% range. Unfortunately, GDP growth in the quarter ended December 31, 2002 was a lackluster 0.7% resulting in lower revenues below our earlier guidance. Total costs related to the parking segment increased to 87.8% of revenues from 86.8% of revenues a year earlier. This deterioration was driven by:

-- The absence of price increases (flat to negative pricing) to offset cost inflation driven by higher rent, property taxes and payroll and payroll related costs,

-- Start up costs related to new business brought on since last year,

-- A $400 thousand write-down of an employee medical stop loss receivable

-- Increased snow removal costs totaling $800 thousand, and

-- The previously discussed increase in bad debt expense

"These costs could not be offset by productivity gains.

"With respect to the management contract segment, revenues were close to our expectations and up approximately 3% over the same period last year. However, the margin rate fell by about two hundred basis points. This decline in margin was principally due to the settlement of two employment litigation claims and a year-over-year increase of approximately $1 million in employee health care costs. We are aggressively seeking to pass along these higher insurance costs and have increased our charge to management clients by an average of 18% effective January 1, 2003. In addition, the Company's general and administrative costs were higher than the prior year primarily due to one-time consulting costs related to tax initiatives and our program to centralize sourcing, along with program costs related to technology and quality assurance. In addition, we experienced unusually high litigation costs and upfront commissions associated with several new lease agreements.