Central Parking Corporation (CPC)
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Carell, Jr. Returns as CEO of Central Parking Corporation to Turn It Around and Restore
Carell is a graduate of Vanderbilt University. He serves as a member of the Board of Directors for Cheekwood Botanical Gardens and Fine Arts Center, Vanderbilt Medical Center, and is a long time member of the Vanderbilt University Board of Trust.
Carell served as chairman of a Capital Campaign which raised over $50,000,000 for the new Childrens Hospital as part of the Vanderbilt University Medical Center and which will be named in his honor. At the present time, Carell is chairing the one billion two hundred million dollar Vanderbilt University-wide Capital Campaign.
Carell and his wife, Ann, live in Nashville,
Tennessee, and have three daughters and six grandchildren. He is a member of Belle
Meade Country Club and the University Club, both in Nashville, Tennessee, and Links Club
of New York.
CEOCFOinterviews: Mr. Carell, please give us a brief history of Central Parking Corporation and your reason for returning as CEO after having retired?
Mr. Carell: The company started 35 years ago, was incorporated in 1968 and one of the principal milestones was when we went public and became listed on the NYSE in 1995. In the spring of 2001, I elected to retire and continue to be chairman, but gave up the CEO position. We had good intentions for what was to take place and for approximately a year it worked very well. But, in the second year, the new management team ran into difficulties. The board made a change around the middle of April and I agreed to come back in as CEO. My family still owns about 47% of the stock. So, I have two reasons. One is the interest of the stock and the other is the pride I have in the company, both of which are very strong. We have made good progress in the weeks since my assuming this role again; the stock has gone up about six dollars. We still have many things in front of us to accomplish. We are moving in the right direction.
CEOCFOinterviews: Please tell us about your parking facilities.
Mr. Carell: Our parking facilities are divided into three categories. We have properties that we own, which amount to about 213 properties. In total, we have approximately 3,900 locations. We are double the size of any competitor in this industry, anywhere in the world. The second component of our market is locations that we lease, and in those cases, we pay the owner of that property a guaranteed rent. The third component is the management account business whereby we manage the facility under a plan of operation, but the owner of the property still has a great deal of control over the facility. This type of arrangement is typical in properties like hospitals where they may want to control the rates charged or the hours, and it is prevalent in venues that involve sports stadiums or arenas. We are in ninety cities in the United States and we are in fifteen foreign countries.
CEOCFOinterviews: What does the operation of such a business entail?
Mr. Carell: No one
comes to just park; they drive into the city to attend a sporting event or whatever the
case may be. The primary purpose is not to park; they are going for some other purpose.
What we try to do is add value to that experience. We are providing a safe, clean,
convenient place in which to park the automobile. That involves providing a structure or
facility that is well lit, has good graphics and parking professionals who are polite and
understand their role. In addition to the service component, we also have to try to
maximize the income for the owner of the property. If it is a leased property, then we
have to try to maximize the revenue by parking as many automobiles as we can based on the
demand, and charging a parking rate that is commensurate with the neighborhood, the area
and with the economic environment.
CEOCFOinterviews: What is better for the company, to own, manage or lease?
Mr. Carell: Normally leasing is preferred. Leases can result in higher rewards but also carry much higher risk. Unfortunately, under the present economic climate , leases are somewhat difficult. In the case of a management agreement, we are not at risk and irrespective of economic times, we may be affected by the fees that we receive, but we are not nearly as impacted as we would be under a lease.
Owning properties is a secondary aspect and we will only own a small percentage of properties. We dont own properties in order to park the car; we own properties because it is a real estate investment and we can park cars in the interim between the time we buy the property and the time that we sell it. For example, a city over time moves east or west, north or south based on typical geographic restraints; some cities are bounded by rivers and some by an interstate. The way in which a city can grow is somewhat determined. If we see a city is moving to the south and we have an opportunity to buy a piece of property that we think will eventually be a good development site for a multi-story building, we will buy that site. We will use it for parking, and then in three to five years, we will sell that property to a developer who will then put a 20 story building on that site. We will have made a nice profit from real estate, and we will have made a profit holding it as a parking lot. Another benefit is, often times when we sell that property, it will carry a covenant that will allow us to operate any parking that the developer may build in conjunction with the project.
Which one would we prefer? It really just depends on the market and the economic conditions as well as the degree of control that the owner wants. If it is a hospital, for example, usually the administration wants to have a continual dialogue as far as control is concerned and when I say control, that means operating hours, rates that are going to be charged to visitors, nurses and doctors. The fact that it constantly changes precludes us from having a lease on the property and under a lease we would have to know what those conditions are going to be for the term of the agreement.
CEOCFOinterviews: Being a global service provider, how do you differentiate the company in terms of technology and employee development?
Mr. Carell: The
key to this business is having a good controlled system, which starts at the parking lot
where the money is generated. It then passes through a city office and then comes into
corporate. Most of that is done electronically. In order to keep up with what takes place
around the world, we have an excellent staff of management people, and that has been the
key to this business. I am actually a graduate engineer and I practiced that before going
into the parking business; but we set up a program of training people. You cannot get a
graduate degree in parking.
Our managers are expected to be very entrepreneurial. We start a progression and move a high potential person into a small city and that small city could be Lexington, Kentucky or Colorado Springs. They will start to manage that city for the first time. In that city, they have responsibility for profit and loss, operations, marketing, even human resources. Their responsibilities encompass the gamut of business functions. Assuming they demonstrate growth in that position, then they will get moved to another city, a larger city. If they are successful there, then they may end up in Chicago or Washington D.C. Our people typically come up through the ranks and our senior vice presidents, on average, have twelve or fifteen years experience.
If you are the general manager in a city such as Mobile, Alabama, you receive a base salary and a percentage of your profits. If you move from Mobile to Birmingham, you are going to have a larger potential profit. When you are hired, we ask if you are willing to relocate. This cadre of people will determine the success of the company. It is the most important factor in our success over 35 years.
CEOCFOinterviews: How are you using the Internet in your various initiatives?
Mr. Carell: We do a lot of business with credit cards and that necessitates everything being connected via the web. With regards to a management account, the employees are ours. We pay any bills associated with those locations, such as utilities or supplies and then we are reimbursed the following month. We put all of those reports detailing the revenues and expenses on the Internet; our clients dont get a hardcopy from us. They go into their terminal and pull up their report. If a client sees three thousand dollars of supplies cost on there, he can drill down to the individual invoices that make up the three thousand dollar charge. If they want to see what their revenue has been for the day, or if we had a big weekend, they can go into the computer, dial right into our office and determine the revenue for the period. It is very secure. Only the client has the password to get in. We do payroll over the Internet, and most of the accounting is done in that fashion. In 1995, we had about 2000 properties, and we are at nearly 4000 today. We have doubled our size and increased our corporate office by only 15%.
CEOCFOinterviews: Are you in your various facilities for a long time?
Mr. Carell: We are. Some of the management accounts have cancellation privileges. We renew about 97% of our management accounts. Leases are typically ten to fifteen years in term and sometimes longer. We are typically there a long time. That is how you build relationships. I would say that about 75% or more of our business is done on a repeat basis. In the real estate business the same clients are found in multiple cities; in fact, in some cases, we find the same clients in South America and New York. They have moved and are developing a property somewhere else.
CEOCFOinterviews: What are the geographical locations that spark your interest currently?
Mr. Carell: We
have been able to recognize changes in our business. They say that with web-based or
high-tech businesses, first-mover advantages do not last very long because competitors
eventually replicate them. In our business, being able to recognize where the market
is going usually gives us a two to three year advantage. We have gone through several
cycles of where the business is going. For example, in the United States when they began
to rebuild basketball and hockey arenas and baseball stadiums, instead of building them in
the suburbs as they did for many years, they have been building them downtown. We
concentrated in that market and we do more stadiums and arenas than anyone else.
CEOCFOinterviews: Will you tell us about the financial condition of the company, and could you tell us about the shareholder suits now facing Central Parking?
Mr. Carell: The
shareholder suits are a result of some disturbing quarterly reports. Until the end of
September, which was the end of our fiscal year, everything looked well, but then the
company ran into some difficulties. However, it wasnt the parking business that
caused the problem; it was the result of some one-time charges. From an accounting
perspective, we had been handling receivables in one matter for a number of years and then
it became apparent that we needed to modify that. In my opinion, there was nothing wrong,
we just needed to change the procedure. In changing the procedure, it caused a
significant hit on the second quarter earnings. In addition to that, there were several
other one-time charges.
These things caused some difficult times for the whole country and as a result of that, there have been some stockholder suits filed. I have been named in one suit because I sold some stock in November. There is a defined window period, following an earnings announcement to the public during which executive officers and directors are permitted to buy or sell the stock. During such a period I sold some stock that went to charity. I was not the CEO then, I was the Chairman, but I was named because I sold some stock. I sold some in May, again following an earnings announcement, and then some in August. I sold the balance in November. I was funding what is called a Charitable Life Unit Trust (CLUT). We will work our way through the suits and I think we will be exonerated. It will be a distraction but I dont think there will be any substance to the lawsuit."
CEOCFOinterviews: In closing, why should potential investors be interested in Central Parking Corporation?
Mr. Carell: I am back, and I think I know this business better than anyone has ever known the parking business, and certainly better than anyone does today. My competitors and clients would certainly voice the same opinion. In early May, when I returned as CEO, the stock was a little over eight dollars. It is more than fourteen dollars today. I need to get the stock back in the range of twenty to twenty-five dollars. There is nothing organically wrong with the company. The principals of the parking business are as valid today as they have ever been. We are having increasing numbers of automobiles purchased into the population each year. The economy will recover as it always has, and people will be returning again to the theatre, going out to dinner and so on. We know how to work during this difficult time. We have always been a company with strong cash flow. Even during this difficult time, we will still have strong cash flow in this fiscal year that we will be completing on the 30th of September. It is going to take us nine to twelve months to straighten out all of the difficulties and were hoping to see an improving economy. I feel very confident that we will be able to bring this company back to the prominence that it once held and once delivered to stock holders.
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