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Standard Parking Corp.’s
reconciliation process with strong internal controls over cash and credit card payments
along with their well-trained employees has enabled their clients to increase revenues
Services
Consumer Services
(STAN-NASDAQ)
Standard Parking Corporation
900 N Michigan Avenue, Suite 1600
Chicago, IL 60611-1542
Phone: 312-274-2000
G. Marc Baumann
Executive Vice President and CFO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published – May 11, 2007
BIO:
G. Marc Baumann
Executive Vice President and CFO
Mr. Baumann has served as executive vice president, chief financial officer and treasurer
since joining the Company in October 2000. Prior to that time, Mr. Baumann was chief
financial officer for Warburtons Ltd. in Bolton, England from January 1993 to October
2000. Mr. Baumann is a certified public accountant 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 his M.B.A. degree from the Kellogg
School of Management at Northwestern University in 1979.
Company Profile:
Standard Parking is a leading national provider of parking facility management services.
The Company provides on-site management services at multi-level and surface parking
facilities for all major markets of the parking industry. The Company manages
approximately 2,000 facilities, containing over one million parking spaces in more than
300 cities across the United States and Canada, including parking-related and shuttle bus
operations serving approximately 60 airports.
The Company’s diversified client base includes some of the nation's largest private
and public owners, managers and developers of major office buildings, residential
properties, commercial properties, shopping centers and other retail properties, sports
and special event complexes, hotels, and hospitals and medical centers, including
properties such as the Four Seasons Hotel in Chicago, the Harvard Medical School in
Boston, the Nationwide Arena in Columbus and Westfield Shoppingtown Century City in Los
Angeles.
In the airport market, Standard Parking manages parking-related and shuttle bus
operations serving airports throughout the United States, including Chicago O'Hare
International Airport, Cleveland Hopkins International Airport and Dallas/Fort Worth
International Airport.
The Company also provides an array of related ancillary services to its clients. They
include, for example, valet parking services provided at both urban and airport locations,
as well as on-street parking enforcement and meter collection services provided for
municipal clients.
CEOCFO: Mr. Baumann, Standard Parking
is a leading provider of parking management facilities, what services do you provide?
Mr. Baumann: “Essentially, we manage
parking facilities on behalf of the owners of those properties. Standard Parking is the
second largest manager of parking facilities in North America. We manage about 2,000
facilities in all geographic markets and all verticals within the parking industry.”
CEOCFO:
Is there much difference in managing one facility from another?
Mr. Baumann: “There really is a
difference in managing one facility from another. Across the various verticals within
parking, there is everything from a surface lot, which is a piece of land that has been
paved and there may be an employee there to collect money from the people coming to park
there, to a large university campus where there may be monthly parkers as well as visitor,
student and faculty parkers in addition to shuttle bus activity to move people around. We
also manage large airport operations such as the parking at O’Hare International
Airport in Chicago, where we not only operate the parking garages and all of the remote
parking facilities; we also dispatch taxis and limousines and control small vehicle
movement around the airport. In addition, we do valet parking there and we boot cars that
have parking tickets accumulated with the City of Chicago. So, you can see that the
facilities we operate can be a very simple operation or a very complex operation and
everything in-between.”
CEOCFO:
Is one area more profitable than the other?
Mr. Baumann: “I would say Standard
Parking is known for being able to manage large and complex situations. We typically seek
client opportunities that are larger and more complex. Typically, the more that is
expected of us on a relative basis, then the higher our management fee. Complex
assignments generally attract higher management fees than we would receive managing a
surface parking lot.”
CEOCFO:
Do you tend to have long-term contracts?
Mr. Baumann: “There are three methods
that are used for parking facilities: management contracts, leases, and ownership. The
most common form for us is the management contract and at Standard Parking 88% of our
locations are operated this way. Those contracts are typically one to three years in
duration. There will also be provisions for terminating us if the property is sold, and
that sort of thing does happen. Our contract retention rate is 91%, which we believe is
the highest of the national parking operators. You have to be very focused on delivering
service to your clients in order to retain clients and client relationships.”
CEOCFO:
What is an example of what one might find at a facility managed by Standard Parking that
would not be found at other parking facilities?
Mr. Baumann: “There are a number of key
areas. First, we are highly focused on the quality of the parking experience for the
customer that is parking there, and that means making sure that the facility is well
lighted, clean, painted and that our employees are well trained and in uniform. It will be
the kind of place in which someone who is seeking to park their car would feel safe, the
kind of place that they would want to go. That is usually the most important requirement
that our clients have. Behind the scenes, one of the important requirements that most
property owners and managers have is to maximize the profits that the parking facility can
make. Therefore, Standard Parking has rigorous revenue control procedures and policies in
place. We are also the only national operator that has its own dedicated internal audit
function that goes and audits the parking facility to make sure all of our revenue control
policies and procedures are being followed.”
CEOCFO:
What are you looking at when you consider revenue control?
Mr. Baumann: “Obviously we want to make
sure that every car that comes into the parking facility is charged the appropriate fee
based on the fee structure that is in place, and that all the money that is collected
makes it to the bank and is accounted for to our clients. Revenue control procedures
reconcile the amount of tickets that are taken with the number of cars that go through the
gate. The reconciliation process is to make sure there are very strong internal controls
over the cash and credit card payments for parking. That is a crucial area to focus on.
Typically, our clients tell us that when they hire us to replace a different parking
operator, they usually make more money when we operate the parking facility. We attribute
that to the fact that we have more rigorous training of our employees, and we believe we
have lower staff turnover than other parking companies do. We also have an internal audit
function that goes out and audits the parking facilities.”
CEOCFO:
How do you attract and motivate your personnel?
Mr. Baumann: “It starts with a
screening process that is very thorough. Background checks and drug testing are done to
make sure that our pool of people is made up of people who are going to be reliable and
trustworthy. We then take those people through a web-based training program we developed
that we call Standard University, which is a web-based training program. We use that to
train the employees in the way that we want customers treated and in all of our various
policies and procedures. We believe in paying wages that are very competitive so that we
are not trying to save .50 cents an hour for an employee just so that savings can be
there, because what our clients understand is that turnover costs money. Every time you
hire somebody you have to go through that screening and training process, you have to give
them a new uniform. It is better to pay a little more, put the investment into the person
to help them be trained to do the job right and then hopefully they don’t turn over.
We also try hard to promote from within so people who maybe started out as a cashier, if
they show initiative and we think they have the potential for greater responsibilities,
are given a chance to move up in the organization. Likewise, when we are hiring at the
manager level, we hire folks who we feel have the potential to move up in the organization
and take on greater responsibility. We feel that we pay competitively with food service
and other sectors where you may find these type of folks so that we are getting a high
caliber person, and we are trying to show them that there is a career opportunity for them
within the company.”
CEOCFO:
When you win a new contract, is it on price or other features?
Mr. Baumann: “We are not known for
having the lowest fee. We are not selling our service on the basis of ‘if you select
Standard Parking, you will get the lowest fee using our service compared to some other
parking operator’. What we try to sell them on first is that we want to understand
what their objectives are for the parking facility. In some cases, it is just to maximize
revenue; in that case, we talk about the revenue control and other things I just
mentioned. Other clients are very focused on the appearance of the facility. For
example, we operate a large parking facility in Century City out in Los Angeles, and it is
about moving a large number of cars in a limited time period. There are a small number of
parking spaces there and we may park many multiples of that number of cars each day. It is
showing the client that we have the experience to manage large numbers of vehicles coming
in and out. Other clients want a customer who parks in their parking facility to come and
shop at my shop, and therefore what they really want is a well-lit, clean, safe place to
attract shoppers. We also have a number of amenity programs, such as free books on tape
that monthly parkers can take and listen to in their car, and complimentary washing of the
windshield. Most of our facilities will help you find your car if you can’t remember
where you parked. In a cold winter climate, if your car won’t start, we will get you
started. We have a number of those kinds of amenities that we have developed, and our
clients choose which of them they would like in their parking facility. These amenity
programs contribute to the ambiance of the facility. We use the phrase “ambiance in
parking” to describe these things. If the ambiance of the parking facility is
important to the client, then we offer to provide all of these things, and we think we do
more of that than any of the other parking companies.”
CEOCFO:
Would you tell us about your musical themes?
Mr. Baumann: “That was really a
fantastic innovation developed by our vice chairman emeritus, Myron C. Warshauer, whose
grandfather was the founder of Standard Parking. He had the idea that you could use music
to help people find their car. We actually introduced that, in most cases along with some
visual graphics that go along with the music. It might be a different college fight song
on different levels of the parking facility, with some visual graphics consistent with the
university for each level. We found that many of our clients in the large multi-story
facilities really like to have that kind of system in place to help customers remember
where they parked. Airports such as Chicago O’Hare have this in place, where each
parking level represents a different one of Chicago’s professional sports teams.
We held a patent on the use of music to remind people where they parked, but the
patent has now expired. We certainly have led the way with trying to innovate those types
of ideas, and our clients have been very enthusiastic and receptive to trying those things
in their parking facilities.”
CEOCFO:
What are you doing that is working so well and how do you continue that success?
Mr. Baumann: “In every service
business, it is about understanding what your clients’ expectations are and then
organizing your business in a way that delivers on those expectations. That is very much
the culture of Standard Parking and it has been for a long time. Obviously, that challenge
is greater when you have an organization with 2,000 locations and 12,000 employees, but
from our CEO down, that is a message that we continually reinforce into the business. We
are very open and receptive to continually trying to have dialogue with our clients and
trying to understand their needs as they change. For example, some clients have expressed
a desire to automate their parking facilities, so we work with them to facilitate that
change. They still require our services to manage the revenue controls and to provide some
of the other services that we provide. Our approach with our clients is to understand what
they want and then try to deliver it for them, and we think that bodes well for the
future. As I mentioned, that is the case at Chicago O’Hare Airport, for example,
where we provide many services. At some of our other operations, all we manage is parking
and nothing more. The way that we grow as a business is to be in an ongoing dialogue with
our clients in order to expose them to the things that we do for other clients. For
example, we may have an airport where all we do is parking, so we let the client know that
we do have the capability to dispatch taxis and limousines, to boot cars that may have
parking violations and to do valet parking. They can benefit by charging a higher rate for
valet parking and that brings more profit for the airport authority. Therefore, one of our
main ways of growing is to always be in regular communication with our existing clients
about other services that we can provide in and around parking.”
CEOCFO:
How do you get more cars in the same space?
Mr. Baumann: “That is a challenge.
Clearly, it depends a lot on the situation, but you need to have very effective technology
in place so that people move in and out quickly. The one thing that is frustrating to
anyone who parks a car is waiting in line to exit. When we survey a new facility, we look
to see if the facility has old technology that may be in need of upgrading. Our
recommendations to our clients always surround very quick what we call, ‘ingress and
egress’; getting into a facility quickly and be able to find signage and good
lighting so you can find open spaces, but then on the other end get out quickly so that
cars aren’t lining up and waiting. The pricing for parking can vary tremendously. If
you have a retail situation, where you do not want people parking there all day, then your
pricing structure is going to promote turnover. It is going to have attractive rates for
short parking duration, maybe an hour or two, but very expensive rates for a full day. For
example, at our large location in Century City, I don’t know the specifics of the
parking pricing in place there, but I am sure the pricing structure has been set as an
incentive for people to come there to park to shop, but not to just park there on a full
day basis. There can be ways with validations from the retailers to accommodate people
that have shopped for a whole day, so there are ways to solve that problem too. There are
a variety of techniques that we use in a retail situation to get maximum turnover of cars
in a space.”
CEOCFO:
There is a lot more to parking than most people think about!
Mr. Baumann: “There really is. We have
touched on airports and retail, but one of our big client types is residential type
buildings, so you have condominiums and apartment buildings that also have parking. Many
of them are 100% valet. So obviously, in a situation like that, you have people who want
their car, are calling down to the garage and when they get down out of the elevator, they
expect their car to be ready and waiting. A lot of that has to do with training and
scheduling of the staff, so you know the peak times that you have to have staff there and
be able to move large numbers of cars in a short period.”
CEOCFO:
What is ahead in the next two or three years?
Mr. Baumann: “For the most part,
Standard Parking has grown nicely over the last several years. We have the business model
that I described to you. I think you will see us continuing to focus on trying to add the
advanced services that I mentioned. One ancillary service I have not mentioned is ground
transportation, as we do consolidated car rental shuttles at airports. We do urban
shuttles for big clients that have office campuses that operate at many different
buildings. We are also moving into on street meter collection. For example, we
operate the parking meters in New Orleans. That is an area where we have a small number of
locations, but we see growth opportunities for us. Once again, it comes back to what
skills you need to do this; you need to have good cash control and the revenue controls I
talked about, you need to know how to select and screen and train employees and supervise
them in that type of environment. We see the opportunity to grow by building on those
things that we are already doing. At the same time, we are out there looking for potential
acquisitions. We operate in all the major markets in the United States, but there are many
smaller local regional players who perhaps have relationships that we don’t have or
have built a small niche business. We are in frequent contact with these folks with the
goal of asking them if they would like to be a part of Standard Parking. Our goal in
acquisitions is to find outstanding individuals who may have built their own business and
say to them: ‘Why don’t you become part of Standard Parking so that you can grow
beyond what you would have been able to do and get the benefit of our investments in
internal audit, technology, and Standard University.”
CEOCFO:
In closing, why should potential investors be interested?
Mr. Baumann: “The Company has had
consistent growth over the last five years in good and bad economic cycles, and as a
result we get high visibility to our top line. It is a predictable type of business.
There is always going to be a need for parking. We manage all types of parking situations
across all the verticals and we think all the verticals we are in can grow. We operate
with relatively low-risk contracts. The management contract structure does not expose us
to much in the way of downsize risk and many of our fees are fixed and not dependent on
the level of parking activity in the facility. Because of that structure, we don’t
require much capital investment, so it is a business that spends very little on capital
expenditure. Apart from a couple of years ago when we spent about $4.5 million in
one year, on an annual basis over the last five years, we probably averaged under $2
million a year in capital expenditure. For a company that takes in $1.5 billion dollars of
parking receipts, that is a pretty small investment. We also have a diverse business base.
A number of clients that we have are major REITs (Real Estate Investment Trusts), and
likewise many local property owners and universities are our clients, but we are not
overly dependent on any one client or vertical. We have a very high-level service
offering, which is something that is important to the people that own the Class A
properties and familiar names that you hear in the real estate business. We have the
highest retention rate that we are aware of in the industry, and it can go up. We believe
we can increase our retention rate with the services that we provide. We have very high
free cash flow. Our free cash flow per share is greater than our earnings per share, and
our cash flow has been in excess of what the company has needed. Over the last couple of
years we have bought back stock and have announced our intentions starting in 2007 to buy
up to another $20 million of stock. We have an experienced management team, particularly
on the operations side, starting with our CEO and going through the senior operations
organization. These folks have close to 20 years experience each in parking. We have one
of the most experienced management teams in the business.”
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