##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K (Mark one) x
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
  Commission File Number 1-15629 IMPERIAL PARKING CORPORATION 
  Delaware
    
    91-2161409(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 601 West Cordova Street, Suite 300Vancouver, BC Canada
(Address of principal executive offices)
    
    V6B 1G1
(Zip Code)
 Registrants telephone number, including area code: (604) 681-7311 Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Class
    
    Name of Each Exchange
On Which RegisteredCommon Stock, $0.01 Par Value
    
    American Stock Exchange
 Securities Registered Pursuant to Section 12(g) of the Act:
None   x o
 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 III of this Form 10-K or any amendment to
this Form 10-K. o Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes o No x The aggregate market value of the Registrants voting and non-voting common
equity held by non-affiliates of the Registrant on June 30, 2003 (based on the
closing price of the Registrants Common Stock on the American Stock Exchange
on June 30, 2003) was approximately $20,399,000. Shares of the Registrants
common stock held by each executive officer and director and by each entity
that owns 5% or more of the Registrants outstanding common stock have been
excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes. The number of shares outstanding of the Registrants Common Stock at March 5,
2004 was 1,828,326. Portions of the Registrants definitive Proxy Statement to be filed for its
2004 Annual Meeting of Stockholders are incorporated by reference into Part III
of this Report. 1




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TABLE OF CONTENTS




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Important Information Regarding Forward-Looking Statements Certain matters discussed under the captions Business, Managements
Discussion and Analysis of Financial Condition and Results of Operations,
Quantitative and Qualitative Disclosures About Market Risk and elsewhere
in this Annual Report on Form 10-K and the information incorporated by
reference in this report may constitute forward-looking statements for
purposes of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements include statements related to our operating
strategy, growth strategy, cost savings initiatives, industry and economic
conditions and future financial performance and other matters related to the
future, and sometimes are preceded by, followed by or otherwise include the
words believes, expects, anticipates, intends, estimates or similar
expressions in these discussions. Our actual future performance,
achievements and may differ materially from those expressed or implied by
these forward-looking statements as a result of such known and unknown
risks, uncertainties, assumptions and other factors. Representative examples
of these factors include, without limitation:  -
    
    costs and expenses associated with the proposed merger with The Gates Group, LLC (including the risk that the merger
agreement could be terminated under circumstances that would require the Company to pay a fee of $2.0 million and reimburse
expenses of up to $750,000);-
    
    failure to consummate the proposed merger, for any reason;-
    
    successfully integrating past and future acquisitions in light of challenges in retaining key employees, synchronizing
business processes and efficiently integrating facilities, marketing, and operations;-
    
    successful implementation of our operating and growth strategy, including possible strategic acquisitions;-
    
    fluctuations in quarterly operating results caused by a variety of factors including the timing of gains on sales of owned
facilities, pre-opening costs, changes in our cost of borrowing, effect of weather on travel and transportation patterns,
player strikes or other events affecting major league sports and local, national and international economic conditions;-
    
    our ability to form and maintain our strategic relationships with certain large real estate owners and operators;-
    
    global and regional economic factors; and-
    
    compliance with laws and regulations, including, without limitation, environmental, antitrust and consumer protection laws
and regulations at the federal, state, provincial, local and international levels. Additional factors are described in Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations  Certain Factors
Affecting Future Operating Results. Readers are cautioned that the Companys actual results could differ
materially from those set forth in such forward- looking statements. 3




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PART I 
 Item 1. Business General Imperial Parking Corporation (as used in this report, the terms Impark,
we, us or the Company mean Imperial Parking Corporation, including its
consolidated subsidiaries), a Delaware corporation, is a leading provider of
parking services in North America. As of December 31, 2003, we managed,
leased or owned 1,360 parking lots in Canada and 327 parking lots in the
United States, containing more than 350,000 parking spaces in aggregate,
making us the leading parking provider in Canada and one of the four largest
in North America. We also provide parking lot patrolling, ticketing and
collection services for our own lots and for those operated by other
parties. On January 22, 2004, we announced that we had entered into a definitive
merger agreement to be acquired by IPK Acquisition Corporation, an affiliate
of The Gates Group, LLC (Gates). Under the terms of the merger agreement,
which remains subject to our stockholders approval, stockholders would
receive $26.00 per share in cash, without interest, subject to a downward
adjustment to the extent that the Companys post November 30, 2003
transaction costs exceed $1.55 million. The aggregate value of the merger
transaction exceeds $55.7 million, including the repayment of indebtedness.
A special committee of our board of directors unanimously approved the
transaction. We currently anticipate consummating the merger in the second
calendar quarter of 2004. Industry The parking industry is highly fragmented and competitive. Industry
participants, the vast majority of which are privately held companies,
consist of a relatively few national 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. The parking industry has experienced consolidation
as smaller operators have found that they lack the capital, economies of
scale and sophisticated management techniques required to compete with
larger providers. We expect this trend to continue and to provide
opportunities for us to acquire smaller existing providers. We expect a number of other trends in the commercial property management
business to continue to provide opportunities for large, specialized
providers of high-quality parking services. We believe that:  
    
    The trend toward consolidation of property management
companies favors larger, nationwide parking providers, as
increasingly centralized property management companies and property
owners seek to minimize the number of separate parking providers
they deal with;  
    
    As the property management industry becomes increasingly
sophisticated and professional, property management companies and
property owners will likely seek to work with specialized,
professional parking service providers;  
    
    Parking is increasingly seen by building owners as a profit
center, and owners are seeking parking providers who can help them
to maximize profitability, increase efficiency and reduce financial
unpredictability; and  
    
    The owners of premier properties, as they recognize that the
parking experience often provides both the first and last
impression of their properties to tenants and users, are seeking to
offer the highest possible level of quality in their parking
services as a means of distinguishing their properties from those
of competitors. We believe that the industry trends toward outsourcing by private-sector
owners and some privatization by government entities provide additional
growth opportunities for parking facility operators. Private-sector parking
owners have begun to move from owner-operator of their parking facilities to
outsourcing the management of operations to specialized operators. This
allows them to focus on their core competencies while increasing overall
returns on parking assets. In addition, governments and government
agencies, particularly cities and municipal authorities, sometimes retain
private firms to operate facilities and parking-related services in an
effort to reduce operating budgets and increase efficiency. 4




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Operating Arrangements We operate parking facilities under three general types of arrangements:
leases, management contracts, and fee ownership. As of December 31, 2003,
we leased 592 parking facilities, operated 1,080 parking facilities through
management contracts and owned 15 parking facilities. The general terms and benefits of these types of arrangements are described
below: Leases.Under a lease arrangement, we generally pay either a fixed
annual rent, a percentage of gross customer collections, or a combination
thereof to the property owner. We collect all revenues and are responsible
for most operating expenses, but are typically not responsible for major
maintenance or structural improvements. In contrast to management
contracts, lease arrangements are typically for terms of three to ten years
and may have a renewal term, and usually 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 us than do managed facilities, but generally
provide a greater opportunity for long-term revenue growth and
profitability. Management Contracts.Under a management contract, we generally
receive a base monthly fee for managing the facilities and often receive an
incentive fee based on the achievement of facility revenues above a base
amount. We generally charge fees for various ancillary services such as
accounting, supervision, payroll processing, auditing, banking, equipment
leasing and consulting. Responsibilities under a management contract
include hiring, training and staffing parking personnel, and providing
collections, accounting, record-keeping, insurance, auditing and facility
marketing services. In general, the facility owner is responsible for
operating expenses such as taxes, license and permit fees, insurance
premiums, payroll, as well as, non-routine maintenance, repair costs and
capital improvements. The typical management contract is for a term of one
to three years (often the owner reserves the right to terminate, without
cause, on 30 days notice) and may contain a renewal clause. Fee ownership.Under fee ownership arrangements, we own the property
and fixtures. Ownership of parking facilities typically requires a larger
capital investment than managed or leased facilities but provides maximum
control over the operation of the parking facility, and all increases in
revenue flow directly to us. Ownership provides the potential for realizing
capital gains from the appreciation in the value of the underlying real
estate, but it also subjects us to risks including reduction in value of the
property and additional potential liabilities, as well as additional costs
such as real estate taxes and structural, environmental, mechanical or
electrical maintenance or repairs. Enforcement and Collections Approximately 60% of our parking lots are operated with parking meters and
without parking lot attendants. We enforce user payment at these lots by
having patrollers circulate regularly through lots to identify delinquent
parkers and issue violation notices. We use technology that enables our
patrollers to monitor and identify first-time and repeat offenders using
hand-held computers. The hand-held computers are uploaded daily to
mainframe computers that track violation history. This hand-held equipment
generates violation notices for offenders. Payments on account of these
violation notices, or follow-up notices, are handled by our collections
operation and are included in our revenues. Our collection practices are currently being challenged in Alberta, Canada, see
Certain Factors Affecting Future Operating Results  Changes in Privacy
Legislation Could Harm Our Business By Making Collections More Difficult and
Costly for more information. Growth Strategy Our strategy is to strengthen our position as the leading parking provider
in Canada while significantly expanding our presence into selected markets
in the United States. Key elements of this growth strategy include: Increase penetration of existing core markets.We will seek to
leverage our long-standing relationships with real estate owners in cities
where we currently have significant operations. Our reputation for premium
service, our local market knowledge and our management infrastructure,
allows us to compete aggressively for new business in these core 5




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cities. Because existing parking operations are sufficient to cover the
costs of local and regional personnel, we expect that additional parking
operations in these markets will provide a greater contribution to our
profits than the operations in new markets. As we compete for new business,
we will also strive to retain and improve the profitability of existing
contracts. Pursue aggressive growth in other urban markets.We have targeted
major cities in the United States where we currently have little or no
presence for aggressive expansion. In the past five years, we have added
New York, San Francisco, Chicago, Philadelphia, Seattle, Cincinnati,
Cleveland, Atlanta, Columbus and Miami to our U.S. portfolio. We believe
that continued expansion in the United States is a key component to
enhancing our overall profitability. The United States is the largest
parking market in the world, and members of our management have significant
experience in the United States. Also, there are greater opportunities to
bid for contracts in the United States than in Canada where we are already a
leader in our industry. Additionally, we believe parking rates and average
profits per facility can be higher in the United States than in Canada. Our
strategy is to enter a new market only if we believe we can quickly gain a
significant position in the market, with sufficient critical mass to
compete effectively and realize economies of scale. Certain markets are
dominated by national parking companies that have established strong
relationships with facility owners. However, where a market is fragmented
by a number of smaller less sophisticated parking operators we believe there
is an opportunity to gain market share by providing superior systems and
controls to prospective customers. We expect to pursue opportunities in
these markets either through acquisition or by establishing our own
operations there. We believe that there are several markets in the United
States in which we anticipate gaining market share over the next three to
four years. Pursue acquisition opportunities.We believe there are opportunities
to expand our business through the acquisition of smaller operators, both in
existing core markets and in other targeted cities where we believe we can
attain market share. The parking industry is highly fragmented and we
believe that many of our smaller competitors have limited access to capital
or do not have the systems or the scale to compete effectively. We have
completed four acquisitions in the last six years, adding approximately 130
facilities. Typically, we seek to acquire small to medium-sized local
operators with several years of experience in their market. We believe this
allows for the immediate understanding of the market and provides a platform
for increased penetration in the same city. Operating Strategy We seek to increase the revenues and profitability of our parking facilities
through a variety of operating strategies, including the following: Focus on larger urban markets.We intend to focus on larger urban
markets. We believe that (i) urban markets are more resistant to economic
downturns, (ii) property owners and real estate asset managers in these
markets typically have a presence in other cities, which provides
opportunities to leverage these relationships to expand to new locations,
(iii) the typically higher prices charged in these markets can support our
premium service levels, and (iv) our senior management has significant
expertise in these markets. Together, Charles Huntzinger and Bryan Wallner
have over 40 years of parking experience in urban markets including New
York, Philadelphia, Baltimore, Washington, Boston, Richmond, Jacksonville,
Pittsburgh, Cleveland, Columbus, Cincinnati, Milwaukee, Denver, San
Francisco, Los Angeles, Seattle, St. Louis, and Indianapolis, as well as
Toronto and Ottawa in Canada. Increase proportion of leased facilities.We intend over time to
increase the number of facilities we operate under lease relative to the
number we operate under management contracts, especially in larger US
cities. Historically, our net profits have been higher on leased facilities
than on managed facilities. Although our net profits have been higher from
leased facilities, typically these profits increase year over year over the
term of the leases. Therefore, we experience lower profits and sometimes
losses during the first one or two years of a lease term. This is
illustrated by the table below, which groups our leased locations that were
active at December 31, 2003 by the year that we opened the location. 6




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Year ended December 31, 2003Number ofYear opened
    
    Locations(1)
    
    Revenue ($000)
    
    Gross margin ($000)
    
    Coverage (2)Before 1999
    
    
    328
    
    
    $
    34,392
    
    
    $
    4,383
    
    
    
    1.151999
    
    
    24
    
    
    
    2,619
    
    
    
    385
    
    
    
    1.172000
    
    
    44
    
    
    
    14,372
    
    
    
    1,477
    
    
    
    1.112001
    
    
    76
    
    
    
    18,968
    
    
    
    36
    
    
    
    1.002002
    
    
    48
    
    
    
    11,393
    
    
    
    773
    
    
    
    1.072003
    
    
    72
    
    
    
    12,118
    
    
    
    251
    
    
    
    1.02Total
    
    
    592
    
    
    $
    93,862
    
    
    $
    7,305
    
    
    
    1.08
 (1) Includes only those leased locations open as at December 31, 2003 and
does not include leased locations operated during the year, but closed by
year-end. (2) Coverage is calculated by dividing Revenue by the amount that Revenue
exceeds Gross margin. Coverage should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles. Coverage is not an accepted measure under
generally accepted accounting principles and other companies will use
different measures or different calculations of profitability. Included in the 592 locations above were 133 locations that incurred a loss
for 2003 totaling $3.0 million. Of these 133 locations incurring a loss, 39
were opened in 2003 and incurred a total loss of $0.7 million. Our goal is to increase the proportion of leased facilities to managed
facilities. We believe a more balanced mix of leased and managed parking
facilities will diversify our operations, providing us with a balance of
lower risk and lower profit managed operations, and higher risk and higher
profit leased and owned operations. Provide consistently high level of service.Our goal is to provide a
uniformly high level of quality and service across all of the facilities we
manage, characterized by clean, well-lit, secure and pleasant surroundings,
attractive graphics and signage, and professional, courteous and well
dressed staff. We offer a wide range of optional premium services,
including valet parking, concierge services, car washing, dry cleaning drop
off and pick up and vehicle repair. These premium services are typically
offered to owners of first-class properties who seek to provide their
tenants with the highest possible level of service to help differentiate
their property from competing properties. Continue to implement standardized systems and controls.As a result of
our experience in the parking management business, we have developed
sophisticated and comprehensive management systems and controls, which we
seek to implement uniformly at the facilities we manage. These systems
include accounting and financial management and reporting practices, general
operating procedures, training, employment policies, cash controls,
marketing procedures and visual image. We believe that our standardized
systems and controls enhance our ability to successfully expand our
operations into new markets. Aggressively implement technology and automation.We believe that
automation and technology can enhance customer convenience, lower labor
costs, improve cash management and increase our overall profitability. We
have been a leader in the field of introducing automation and technology to
the parking business and we were among the first to widely adopt innovations
such as the use of credit card payment systems, payment using cellular
telephones at unmanned locations, hand held computers to track violators and
issue citations, bar-code scanners to ensure monthly parkers are using the
correct lot and are up-to-date in payment and entry and exit gates
incorporating sensing equipment that can automatically recognize and admit
authorized vehicles. We believe that our higher proportion of unmanned
facilities gives us a cost advantage as we compete for business. We have
also developed a sophisticated management information system that enables us
to track revenue and manage cash on a daily basis and generate a wide
variety of internal reports, as well as customized reports requested by our
clients. Implement incentive compensation program.We have adopted a
performance-based compensation system for city managers, vice presidents and
others based on the profitability of each individuals area of
responsibility. We believe this program will enhance the entrepreneurship
of our management employees by tying their compensation directly to
improvements in the profitability of the operations they manage and we
believe these incentives will encourage them to improve operations and
control costs. 7




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Provide profitable patrol, enforcement and ticketing service.We seek
to increase the profitability of our overall operations by providing parking
lot patrol, enforcement and ticketing services, both at our own facilities
and at facilities operated by others. We believe there are opportunities to
market these services to facilities we do not operate, especially those
owned by municipalities or by suburban retail centers, who wish to
discourage all-day parkers by enforcing parking regulations which favor
short-term parkers. Maintain strict cash control.Strict cash control is critical to our
success and that of our clients. Our cash control procedures are based on
an auditing system supervised by professional managers and auditors, and
include on-site spot checks, video surveillance, multiple daily cash
deposits, reconciliation of tickets and gate counts to cash collected, local
audit functions, managerial supervision and review, and internal audit
procedures. We believe our cash control procedures can be effective in
minimizing loss of revenues at parking facilities. With banks providing
better access to account information on a daily basis via the internet, we
are able centrally to independently review daily deposits and identify
unusual trends for further review. Specialization.We believe by focusing on specific market segments such
as stadiums, arenas, universities and hospitals, we can create additional
market share from those segments. We started a stadium/arena division in
2003, which successfully acquired the parking contracts at Miller Park in
Milwaukee and RFK Stadium in Washington, DC during the year. Our subsidiary,
DLC Management specializes in managing parking facilities in and around
hospitals. We are also looking to expand the premium management service that
is offered by our Advanced Parking division. Acquisitions We continue to look for opportunities to acquire small or medium-sized
parking operators in target markets. However, none of the opportunities
reviewed in 2003 resulted in an acquisition being completed during the year. Seasonality We may experience fluctuations in our income from quarter to quarter caused
by fluctuations in revenues and related expenses due to the impact of
weather and calendar related events on travel and transportation patterns.
Additionally, we manage the parking for a number of sports stadiums and
arenas and our income from such facilities can be affected by the
seasonality of revenue and by the relative degree of success of various
sports teams. Historically, our results have been strongest during the
quarters that end on June 30 and September 30. Competition The parking industry is fragmented and highly competitive, with relatively
few barriers to entry. We compete regularly with a wide variety of parking
services providers to retain our existing operations and to expand our
operations in existing and new markets. We compete for clients based on the
pricing of our services and our ability to increase revenues and control
expenses for each of our clients parking facilities. Our largest competitors in North America are Central Parking Corporation,
Standard Parking, Inc. and Ampco System Parking. We are substantially
smaller in number of locations and revenue than Central Parking, but we have
approximately the same number of locations as Standard and Ampco System. We
have lower revenues than Standard because Standard is principally located in
the United States where gross revenues generated from a location are
typically higher than in Canada. However, being principally in Canada gives
us a solid Canadian base, as Canadian corporations typically prefer to do
business with an established Canadian parking company. Additionally, since
profit per location is generally lower in Canada, most U.S. competitors have
historically focused their efforts in the U.S. marketplace where there is
higher potential profit. We also compete with many regional or local parking service providers, as
well as municipalities and other governmental entities, property owners and
others. Regulation Our business has not been substantially affected by direct governmental
regulation. However, a number of state, provincial and local laws have been
passed in recent years that encourage car pooling and the use of mass
transit. Laws 8




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and regulations that reduce the number of cars and vehicles could negatively
affect our business. Although we do not generate a significant portion of
our business from parking at airports, restrictions have been imposed
following the September 11 terrorist attacks that limit parking at some US
airport terminals. Changes in personal privacy or freedom of information
legislation at the federal, state or provincial level could also harm our
business by making collections of outstanding parking violations more
difficult or costly. See Certain Factors Affecting Future Operating
Results  Changes in Privacy Legislation Could Harm Our Business by Making
Collections More Difficult and Costly. We are also affected by laws and
regulations (such as zoning ordinances and business taxes) that are common
to any business that owns or leases real estate and by regulations (such as
labor and tax laws) that affect companies with a large number of employees. Under various federal, state, provincial and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may be liable for the cost 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 ownership or operation of parking facilities, we may be
potentially liable for such costs. Although we are not currently aware of
any material environmental claims pending or threatened against us or any of
our owned or operated parking facilities, there can be no assurance that a
material environmental claim will not be asserted against us or against any
of our owned or operated parking facilities. The cost of defending against
claims of liability, or of remediating a contaminated property, could have a
material adverse effect on our financial condition or results of operations. Various other governmental regulations affect our operations of parking
facilities, both directly and indirectly. In the United States, these
include the Americans with Disabilities Act, or the ADA. Under the ADA, all
public accommodations in the United States, 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. We believe that the parking facilities we own and operate are in
substantial compliance with these requirements. Employees As of December 31, 2003, we employed approximately 3,400 individuals. We
believe that our employee relations are satisfactory. Approximately 39% of
our employees (some 1,345 employees) are represented by unions, including
the Construction and Specialized Workers Union (British Columbia),
Christian Labour Association of Canada (British Columbia), Manitoba
Government and General Employees Union (Winnipeg), Teamsters (San
Francisco, New York City and Chicago), SEIU, UFCW (Toronto), SEIU (London),
and Garage Employees (New York). Segment Information Information about our foreign and domestic operations appears in Note 14 to
our 2003 Consolidated Financial Statements that are included in response to
Item 8 and are listed in Item 15 to this Annual Report on Form 10-K. Available Information We maintain a company website at www.impark.com. We make copies of our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and any amendments to those reports filed with or furnished to
the Securities and Exchange Commission (SEC) available to investors on or
through our website free of charge as soon as reasonably practicable after
we have electronically filed them with or furnished them to the SEC. The
contents of our website do not constitute a portion of this report. The public may read and copy any materials filed by us with the SEC at the
SECs Public Reference Room, located at 450 Fifth Street, NW, Washington, DC
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains a website at which reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC
are available. This website may be accessed at www.sec.gov. 9




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Item 2.Properties The following table summarizes certain information regarding our parking
facilities and surface lots as of December 31, 2003. We believe that our
owned facilities generally are in good condition and adequate for our
present needs. Our owned facilities are also not subject to a mortgage or
other significant encumbrance. Leased
    
    Managed
    
    Owned
    
    TotalLocation
    
    Lots
    
    Spaces
    
    Lots
    
    Spaces
    
    Lots
    
    Spaces
    
    Lots
    
    SpacesCANADAWestern
    
    
    226
    
    
    
    22,698
    
    
    
    662
    
    
    
    131,212
    
    
    
    5
    
    
    
    968
    
    
    
    893
    
    
    
    154,878Prairies
    
    
    142
    
    
    
    8,995
    
    
    
    119
    
    
    
    17,518
    
    
    
    9
    
    
    
    687
    
    
    
    270
    
    
    
    27,200Eastern
    
    
    65
    
    
    
    6,435
    
    
    
    131
    
    
    
    66,475
    
    
    
    1
    
    
    
    50
    
    
    
    197
    
    
    
    72,960Total
    
    
    433
    
    
    
    38,128
    
    
    
    912
    
    
    
    215,205
    
    
    
    15
    
    
    
    1,705
    
    
    
    1,360
    
    
    
    255,038USAWestern
    
    
    35
    
    
    
    8,379
    
    
    
    31
    
    
    
    12,330
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    20,709Mid-west
    
    
    71
    
    
    
    23,983
    
    
    
    51
    
    
    
    23,876
    
    
    
    
    
    
    
    
    
    
    
    122
    
    
    
    47,859Eastern
    
    
    53
    
    
    
    12,394
    
    
    
    86
    
    
    
    16,912
    
    
    
    
    
    
    
    
    
    
    
    139
    
    
    
    29,306Total
    
    
    159
    
    
    
    44,756
    
    
    
    168
    
    
    
    53,118
    
    
    
    
    
    
    
    
    
    
    
    327
    
    
    
    97,874TOTAL
    
    
    592
    
    
    
    82,884
    
    
    
    1,080
    
    
    
    268,323
    
    
    
    15
    
    
    
    1,705
    
    
    
    1,687
    
    
    
    352,912
 The cities included in the regions listed above are as follows:  
    
    Western Canada  Vancouver, Kamloops, Kelowna, Edmonton, Calgary and Banff
    
    Prairies (Canada)  Regina, Saskatoon and Winnipeg
    
    Eastern Canada  Toronto, Hamilton, London, Ottawa, Windsor, Montreal, Halifax and St.Johns
    
    Western USA  Seattle, San Francisco and Oakland
    
    Mid-western USA  Minneapolis, Milwaukee, Chicago, Cleveland, Cincinnati and Columbus
    
    Eastern USA  New York City, Buffalo, Philadelphia, Atlanta,
Washington DC, Wilmington, Atlantic City and Miami 
 Item 3. Legal Proceedings The provision of services to the public entails an inherent risk of
liability. We are engaged from time to time in routine litigation incidental
to our business. Other than cases involving Sterling Parking Ltd. and the
City of Calgary in Calgary, Alberta and certain employees in Seattle,
Washington, described below, there is no legal proceeding to which we are a
party which, if decided adversely we anticipate could have a material
adverse effect on our results of operation or financial condition. We
attempt to disclaim liability for personal injury in facilities we operate.
We also carry liability insurance that we believe meets or exceeds industry
standards as determined by our landlords. We can provide no assurances,
however, that any future legal proceedings (including any related judgments,
settlements or costs) will not have a material adverse effect on our
financial condition, liquidity or results of operations. Apart from
developments in the City of Calgary business tax matter and the Seattle
matter, which are discussed below, there has been no material change in the
status of the litigation described below since our quarterly report on Form
10-Q for the quarter ended September 30, 2003. Impark Canada is a defendant in a lawsuit brought by Newcourt Financial Ltd.
(Newcourt) as the assignee of Oracle Corporation Canada Inc. (Oracle).
The suit was filed in Ontario Superior Court on September 11, 1999. The
co-defendant is First Union Management, Inc. (FUMI). At the time of the
material events alleged in the lawsuit, FUMI was an affiliate of Impark
Canada. The lawsuit alleges that Impark Canada and FUMI owe approximately
$825,000 under a software licence and services agreement, plus interest and
legal costs. We believe the claim is largely without merit. In response to
the claim, Impark Canada and FUMI commenced their own action in British
Columbia on November 12, 1999, seeking a declaration that no amounts are
owing to either Newcourt or Oracle under the license and services agreement.
The Ontario lawsuit has been stayed pending the resolution of the B.C.
action. The B.C. action is in pre-trial 10




---



##### 



proceedings and a trial date has been scheduled for June 7, 2004. First
Union Real Estate Equity and Mortgage Investments (FUR) has agreed in
writing to indemnify Impark Canada with respect to all liabilities and
damages that may be incurred by Impark with respect to this claim. FUR is an
affiliate of FUMI and is publicly listed on the New York Stock Exchange. Impark Canada is a defendant in a lawsuit brought by Sterling Parking Ltd.,
which was filed April 3, 2001 in the Queens Bench of Alberta. The suit
involves an alleged breach by Impark Canada of a confidentiality agreement
entered into with Sterling in October 2000 relating to the potential
management by Impark Canada of certain Sterling lots in Calgary. The
agreement prohibited Impark Canada from bidding on any Sterling lots while
negotiations of such transaction were underway. During negotiations, Impark
Canada successfully bid on two Sterling lots. The proposed transaction with
Sterling was not completed. Sterling claims in the lawsuit that Impark
Canada wrongfully bid on the two lots and an additional three lots, as well
as improperly used Sterling confidential information, all in breach of the
confidentiality agreement. The total damages claimed by Sterling are
approximately $7.9 million (C$11.6 million). The lawsuit is in pre-trial
proceedings. A trial has been scheduled to commence on November 22, 2004. We
believe that Sterlings allegations are largely without merit and that the
amount of damages claimed is far in excess of the actual damages suffered by
Sterling, if any. We have accrued at December 31, 2003 our best estimate of
costs related to this action. However, any damages awarded against Impark
Canada in excess of this amount could have a material effect on our
financial position and results of operation. Impark Canada commenced a lawsuit against the City of Calgary in Alberta,
Canada in the Queens Bench of Alberta on April 12, 2001. The City of
Calgary had earlier passed a business tax bylaw in 2001 imposing a revised
method for calculating the business tax payable by commercial parking lot
operators in that city. The new bylaw imposes a business tax on the basis of
the square footage of the premises leased or operated, as opposed to the
historical method of assessing business taxes on the basis of rent paid by
the lessee. Impark Canada is applying for a court ruling that the 2001 bylaw
is void for vagueness or that it is invalid because of its discriminatory
effect. Impark Canada is also appealing the increased business taxes through
the government assessment review process. We were unsuccessful in our first
stage of appeal of the 2001 business taxes at the Calgary City Assessment
Review Board (ARB) and again at our second stage of appeal at the Alberta
Municipal Government Board (MGB). In February 2002, the City of Calgary
passed a 2002 Business Tax Bylaw, which approximately tripled the business
tax for Impark operations in Calgary for the 2002 calendar year to
approximately $1.1 million (C$1.4 million). We were unsuccessful in our
first stage of appeal of the 2002 business taxes at the ARB and appealed
this decision to the MGB in November 2002. The MGB released its decision in
July 2003 and determined that the assessment method used by the City in 2002
was not assessed fairly in that year. The City chose not to appeal the
MGBs decision, and accordingly Impark Canada was entitled to a refund of a
substantial portion of the assessed taxes for 2002, which in turn was
applied directly by the City against amounts owing in respect of 2003. We
are still determining the impact, if any, of this decision upon amounts paid
to the City in 2001 and 2003. In February 2003, the City of Calgary passed a
2003 Business Tax Bylaw, which imposed the same rate and assessment method
of business tax for Impark operations in Calgary for the 2003 calendar year
as was used by the City in their initial assessments for 2002, at an amount
of approximately $1.0 million (C$1.3 million). We were unsuccessful in our
first stage of appeal of the 2003 business taxes at the ARB in April 2003
and have appealed this decision to the MGB. We do not expect to receive the
MGBs decision prior to September 2004. In February 2004, the City of
Calgary passed a 2004 Business Tax Bylaw, which imposed the same rate and
assessment method of business tax for Impark operations in Calgary for the
2004 calendar year as was used in 2003, at an amount of approximately $1.0
million (C$1.3 million). We will appeal the 2004 business taxes to the ARB.
We have amended our lawsuit against the City of Calgary to include the 2002
and 2003 assessments, and intend to amend the lawsuit to include the 2004
assessment. The lawsuit is currently in pre-trial proceedings and no trial
date has been set. We believe that the Citys 2001, 2002, 2003 and 2004
business tax bylaws are void and invalid. With respect to the 2001 business
tax assessment, if we are unsuccessful in our lawsuit against the City of
Calgary, then we will not be entitled to the return of any portion of the
2001 business tax assessment, which we have already paid in 2001. With
respect to the 2003 business tax assessment, if we are unsuccessful in
appealing the assessment and if we are unsuccessful in our lawsuit against
the City of Calgary, we will not be entitled to any refund of the amounts
already paid in respect of 2003. With respect to the 2004 business tax
assessment, if we are unsuccessful in appealing the assessment and if we are
unsuccessful in our lawsuit against the City of Calgary, we will be required
to pay the full amount of the 2004 assessment, currently $1.0 million, for
which we intend to accrue th
e proportionate amount throughout the fiscal
2004 year. On February 13, 2003, three former employees of Imperial Parking (U.S.),
Inc. (Impark US) in Seattle, Washington started a lawsuit in the Superior
Court of the State of Washington, King County, against Impark US in respect
of alleged violations of the Washington Industrial Welfare Act. The
plaintiffs are seeking to have the lawsuit certified as a class 11




---



##### 



action on behalf of all current and former parking attendants of Impark US
in Seattle. The plaintiffs allege that Impark US, during the three year
period prior to the lawsuit and continuing to date: (a) failed to provide
attendants with one ten-minute paid rest break for each four hours of work,
and (b) failed to pay overtime pay to attendants. The plaintiffs seek
monetary damages, statutory penalties and injunctive relief on behalf of the
class. The total damages claimed by the plaintiffs are unspecified at this
time and are stated to be proven at trial. The lawsuit is in pre-trial
proceedings. On December 19, 2003, the court denied the plaintiffs motion
to certify the class, without making any findings on the underlying merits
of the claim. The plaintiff has indicated its intention to appeal this
decision. No trial date has been set. We believe that the plaintiffs
allegations are without merit, the lawsuit should not be certified as a
class action, and that the actual damages suffered by the plaintiffs, if
any, are minimal. We have accrued at December 31, 2003 our best estimate of
costs related to this action; however; any damages awarded against Impark US
in excess of this amount could have a material effect on our financial
position and results of operation. 
 Item 4. Submission of Matters To a Vote of Security Holders. No matter was submitted to a vote of the Companys stockholders during the
fourth quarter of fiscal 2003. 12




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##### 



PART II. 
 Item 5. Market for Registrants Common Equity and Related Stockholder
Matters The Companys common stock is listed on the American Stock Exchange
(AMEX). The following table sets forth for the periods indicated the high
and low sales prices for our common stock as reported by AMEX. In the event
the merger is consummated, the Companys common stock will cease to be
listed on the American Stock Exchange. Fiscal 2002
    
    High
    
    LowFirst quarter
    
    
    27.09
    
    
    
    25.50Second quarter
    
    
    27.23
    
    
    
    23.75Third quarter
    
    
    24.70
    
    
    
    22.10Fourth quarter
    
    
    22.99
    
    
    
    21.15
 Fiscal 2003
    
    High
    
    LowFirst quarter
    
    
    24.50
    
    
    
    18.40Second quarter
    
    
    22.90
    
    
    
    19.40Third quarter
    
    
    22.60
    
    
    
    21.10Fourth quarter
    
    
    25.50
    
    
    
    18.40
 The number of holders of record of our common stock as of March 5, 2004, was
approximately 1,131. No dividends have been declared on our common stock since their distribution
in March 2000. Our policy is to reinvest earnings to fund future growth.
Accordingly, we do not anticipate declaring dividends on our common stock in
the foreseeable future. No shares of common stock were repurchased and no unregistered equity
securities were issued during the quarter ended December 31, 2003. Equity Compensation Plan Information The following table provides information as of December 31, 2003 regarding
shares of common stock of the Company that may be issued under our existing
equity compensation plans, including the Companys 2000 Stock Incentive
Plan. Equity Compensation Plan InformationNumber of securitiesremaining available forNumber of securities to be
    
    Weighted Average
    
    future issuance underissued upon exercise of
    
    exercise price of
    
    equity compensation planoutstanding options,
    
    outstanding options,
    
    (excluding securitiesPlan category
    
    warrants and rights
    
    warrants and rights
    
    referenced in column (a))(a)
    
    (b)
    
    (c)Equity compensation plans approved
by security holders (1)
    
    
    275,405
    
    
    $
    18.79
    
    
    
    6,342Equity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    275,405
    
    
    $
    18.79
    
    
    
    6,342
 (1) Consists of the 2000 Stock Incentive Plan 
 13




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##### 



Item 6. Selected Financial Data The Company resulted from the combination on March 27, 2000 of the Canadian
parking assets and operations of First Union Real Estate Equity and Mortgage
Investments (First Union) and the parking related business of First Union
Management, Inc. (FUMI). The businesses combined into Impark are referred
to in this report for periods prior to the combination as follows:  FUR Parking Business. The FUR Parking Business, constituting the
parking assets and operations of First Union, consisted primarily of 15
owned parking properties in Canada. Between April 1997 and March 2000,
subsidiaries of First Union operated this business, including leasing
the properties to FUMI for operations and management.FUMI Parking Business. The FUMI Parking Business consisted of the
parking services and related ancillary activities that have been
continued into the Company. Between April 1997 and March 2000,
subsidiaries of FUMI carried on these activities. The operations of
FUMIs indirect subsidiaries, Imperial Parking Limited and Impark
Services Ltd., consisted of operating and managing parking facilities
in Canada and the United States and carrying on other parking related
activities. The selected financial data presented below as at and for periods commencing
prior to January 1, 2000 has been calculated by combining information in the
combined financial statements of the FUR Parking Business and the FUMI
Parking Business. The selected financial data for these periods has been
extracted from audited financial statements. For further information on
these financial statements, refer to our Information Statement on Form 10
dated March 27, 2000 that was filed with the Securities and Exchange
Commission. The selected financial data presented below for the year ended December 31,
2000 has been calculated by combining information in our audited
consolidated financial statements for fiscal 2000 with the unaudited
combined financial statements of the FUMI Parking Business for the three
months ended March 31, 2000. The selected balance sheet data as at December
31, 2000 has been extracted from our audited consolidated financial
statements at that date. The selected financial data for all periods prior to 2001 is presented on a
pro forma basis after giving effect to the following pro forma transactions:  (i)
    
    the elimination of inter-entity lease fees and interest
costs;(ii)
    
    the elimination of the asset management fee earned during the
period January 1, 1999 to March 27, 2000 for managing the United
States parking properties of First Union. The fee agreement was
cancelled on March 27, 2000; and(iii)
    
    the elimination of interest expense on long-term debt repaid
and the note payable capitalized on the combination on March 27,
2000. For purposes of presenting selected financial data, an adjustment has not
been made for interest income on additional cash balances contributed on the
combination on March 27, 2000. This financial data should be read in conjunction with the Consolidated
Financial Statements and Managements Discussion and Analysis of Financial
Condition and Results of Operations. Year ended December 31,1999 (1)
    
    2000 (1)
    
    2001
    
    2002
    
    2003Statement of Operations DataTotal revenues
    
    $
    83,531
    
    
    $
    93,779
    
    
    $
    117,898
    
    
    $
    139,842
    
    
    $
    154,497Parking and management contract revenues
    
    
    59,065
    
    
    
    67,809
    
    
    
    90,548
    
    
    
    109,351
    
    
    
    121,130Gross margin
    
    
    14,706
    
    
    
    17,121
    
    
    
    20,521
    
    
    
    22,191
    
    
    
    23,289Operating income (loss) (2)
    
    
    (557
    )
    
    
    935
    
    
    
    1,716
    
    
    
    3,459
    
    
    
    (29,955
    )
 14




---



##### 



Year ended December 31,1999 (1)
    
    2000 (1)
    
    2001
    
    2002
    
    2003Interest expense
    
    
    
    
    
    
    
    
    
    
    (298
    )
    
    
    (420
    )
    
    
    (356
    )Other income (expense) (3)
    
    
    (39
    )
    
    
    744
    
    
    
    577
    
    
    
    514
    
    
    
    (1,016
    )Income tax expense
    
    
    (240
    )
    
    
    (333
    )
    
    
    (822
    )
    
    
    (1,630
    )
    
    
    (2,185
    )Income (loss) from continuing operations
    
    $
    (836
    )
    
    $
    1,346
    
    
    $
    1,173
    
    
    $
    1,923
    
    
    $
    (33,512
    )Per share dataIncome (loss) from continuing operations- Basic
    
    $
    (0.39
    )
    
    $
    0.64
    
    
    $
    0.65
    
    
    $
    1.06
    
    
    $
    (18.35
    )- Diluted
    
    
    (0.39
    )
    
    
    0.64
    
    
    
    0.63
    
    
    
    1.02
    
    
    
    (18.35
    )Balance Sheet Data (end of period)Cash and cash equivalents
    
    $
    3,378
    
    
    $
    5,615
    
    
    $
    10,991
    
    
    $
    15,138
    
    
    $
    18,804Working capital
    
    
    (30,144
    )
    
    
    96
    
    
    
    291
    
    
    
    1,541
    
    
    
    (608
    )Goodwill
    
    
    43,344
    
    
    
    41,131
    
    
    
    44,259
    
    
    
    45,213
    
    
    
    18,839Total assets
    
    
    76,176
    
    
    
    79,391
    
    
    
    89,245
    
    
    
    92,428
    
    
    
    75,215Long-term liabilities
    
    
    40,048
    
    
    
    3,356
    
    
    
    8,201
    
    
    
    6,829
    
    
    
    5,732Total stockholders equity (deficiency)
    
    
    (8,230
    )
    
    
    60,029
    
    
    
    58,261
    
    
    
    61,472
    
    
    
    38,254Other informationGoodwill amortization (4)
    
    
    2,284
    
    
    
    2,194
    
    
    
    2,206
    
    
    
    
    
    
    
    Goodwill impairment (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,526
  (1)
    
    The amounts presented for these captions have been accumulated as follows: Year ended
    
    Year endedDecember 31, 1999
    
    December 31, 2000FUMI
    
    FUR
    
    Elimination
    
    Total
    
    FUMI (6)
    
    The Company
    
    Elimination
    
    Total(thousands of dollars)
    
    (thousands of dollars)Statement of Operations DataTotal revenues
    
    
    84,611
    
    
    
    582
    
    
    
    (1,662
    )
    
    
    83,531
    
    
    
    21,298
    
    
    
    72,878
    
    
    
    (397
    )
    
    
    93,779Parking and management contract
revenues
    
    
    60,145
    
    
    
    582
    
    
    
    (1,662
    )
    
    
    59065
    
    
    
    14,901
    
    
    
    53,305
    
    
    
    (397
    )
    
    
    67,809Gross margin
    
    
    15,206
    
    
    
    580
    
    
    
    (1,080
    )
    
    
    14,706
    
    
    
    3,904
    
    
    
    13,487
    
    
    
    (270
    )
    
    
    17,121Operating income (loss)
    
    
    (14
    )
    
    
    537
    
    
    
    (1,080
    )
    
    
    (557
    )
    
    
    186
    
    
    
    1,019
    
    
    
    (270
    )
    
    
    935Interest expense
    
    
    (5,872
    )
    
    
    (3,044
    )
    
    
    8,916
    
    
    
    
    
    
    
    (1,446
    )
    
    
    (786
    )
    
    
    2,232
    
    
    
    Other income (expense)
    
    
    (105
    )
    
    
    (14,902
    )
    
    
    14,968
    
    
    
    (39
    )
    
    
    
    
    
    
    1,779
    
    
    
    (1,035
    )
    
    
    744Income taxes
    
    
    (326
    )
    
    
    86
    
    
    
    
    
    
    
    (240
    )
    
    
    (61
    )
    
    
    (272
    )
    
    
    
    
    
    
    (333
    )Income (loss) from continuing
operations
    
    
    (6,317
    )
    
    
    (17,323
    )
    
    
    22,804
    
    
    
    (836
    )
    
    
    (1,321
    )
    
    
    1,740
    
    
    
    927
    
    
    
    1,346Balance Sheet Data (end of year)Cash and cash equivalents
    
    
    1,394
    
    
    
    1,984
    
    
    
    
    
    
    
    3,378
    
    
    
    
    
    
    
    5,615
    
    
    
    
    
    
    
    5,615Working capital
    
    
    (33,218
    )
    
    
    3,074
    
    
    
    
    
    
    
    (30,144
    )
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    96Goodwill
    
    
    43,344
    
    
    
    
    
    
    
    
    
    
    
    43,344
    
    
    
    
    
    
    
    41,131
    
    
    
    
    
    
    
    41,131Total assets
    
    
    65,109
    
    
    
    30,113
    
    
    
    (19,046
    )
    
    
    76,176
    
    
    
    
    
    
    
    79,391
    
    
    
    
    
    
    
    79,391Long-term liabilities
    
    
    48,292
    
    
    
    28,085
    
    
    
    (36,329
    )
    
    
    40,048
    
    
    
    
    
    
    
    3,356
    
    
    
    
    
    
    
    3,356Total stockholders equity (deficiency)
    
    
    (28,601
    )
    
    
    1,371
    
    
    
    19,000
    
    
    
    (8,230
    )
    
    
    
    
    
    
    60,029
    
    
    
    
    
    
    
    60,029OtherGoodwill amortization
    
    
    2,284
    
    
    
    
    
    
    
    
    
    
    
    2,284
    
    
    
    493
    
    
    
    1,701
    
    
    
    
    
    
    
    2,194Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 15




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##### 



(2)
    
    The operating loss for 1999 includes a recovery of previously
overprovided amounts for severance of $1.8 million. The operating loss
for 2003 includes a goodwill impairment charge of $33.5 million.(3)
    
    Other income (expense) principally includes interest income, except
that in 2003, it also reflects $1.5 million of other expenses incurred
related to the review of strategic alternatives available to the
Company in the context of a significant shareholders decision to sell
its ownership interest.(4)
    
    There was no amortization of goodwill commencing fiscal 2002. This is
a result of adopting Financial Accounting Statement No. 142, which does
not permit amortization of goodwill, but requires goodwill to be
reviewed annually for any impairment in value. The annual test in 2003
resulted in a determination of the fair value of goodwill in excess of
its carrying value and accordingly an impairment charge of $33.5
million was recorded. The basis of the fair value was the offer by
affiliates of the Gates Group, LLC to purchase the common stock of the
Company, pursuant to a merger agreement signed by the Company in
January 2004.(5)
    
    There were no cash dividends declared on common shares during any of
the periods disclosed in the Selected Financial Data table above.(6)
    
    Results of the FUMI Parking Business for 2000 are for the three months
ended March 31, 2000. 16




---



##### 



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our historical results of operations and
financial condition should be read in conjunction with the Consolidated
Financial Statements and the Selected Financial Data, which are included in
this document. Executive Summary We operate parking facilities under leases, management contracts, and fee
ownership. These three types of arrangements are discussed further in this
report under Item 1. Business. Our results for fiscal 2003 were significantly impacted by the decision of
Gotham Partners, L.P. and its affiliated investment funds to sell its
shareholding in the Company. We incurred $1.5 million in costs during the
year in connection with the review by a Special Committee of the Board of
Directors of the alternatives available to the Company in light of Gothams
decision. On January 22, 2004, we signed a merger agreement with IPK
Acquisition Corporation, an affiliate of The Gates Group, LLC, whereby our
shareholders would be entitled to receive $26.00 in cash per common share,
subject to a downward adjustment to the extent that post-November 30, 2003
transactions costs exceed $1.55 million. As this transaction has not
completed at the date of this annual report, we cannot provide guidance on
the specific impacts the merger will have on our operations or financial
results. However, as structured, the merger would result in us no longer
being a publicly traded company. In our review of the carrying value of goodwill at year-end, we concluded
that, in light of the value that a number of independent bidders placed on
the Company, the carrying value of goodwill exceeded its fair value and we
recorded a goodwill impairment charge of $33.5 million. Our net loss for 2003 was $33.5 million, which includes the $1.5 million of
Special Committee costs and the $33.5 million goodwill impairment charge. On
a pro forma basis, excluding these two items, our pro forma net income for
2003 would be $1.5 million, which compares to net income of $1.9 million in
fiscal 2002. We refer to pro forma earnings because we believe it is a
measure used by some investors as an indicator of our performance excluding
the impact of the transactions and events arising from Gothams decision to
sell its interest in the Company. We believe that excluding the charges
arising from or related to the sale enhances managements and investors
ability to evaluate our historical operating results. This measure should
not be considered in isolation to or as a substitute to net earnings as
determined in accordance with GAAP. For a reconciliation of our pro forma
earning to our net income for the year, please refer to our press release
dated February 13, 2004, which is filed as an exhibit to our Current Report
on Form 8-K filed with the SEC on February 17, 2004. Our revenues consist of parking revenues from leased and owned facilities,
and revenues earned in accordance with the terms of management contracts.
The following table sets out the revenues earned from each of the three
operating arrangements for each of the three years ended December 31, 2003: Year ended December 31,2001
    
    2002
    
    2003(dollars in thousands)Leased Facilities
    
    $
    74,279
    
    
    
    82.0
    %
    
    $
    86,860
    
    
    
    
    
    
    
    79.4
    %
    
    $
    97,185
    
    
    
    80.2
    %Managed Facilities
    
    
    14,601
    
    
    
    16.1
    %
    
    
    20,796
    
    
    
    
    
    
    
    19.0
    %
    
    
    21,963
    
    
    
    18.1
    %Owned Facilities
    
    
    1,668
    
    
    
    1.9
    %
    
    
    1,695
    
    
    
    
    
    
    
    1.6
    %
    
    
    1,982
    
    
    
    1.7
    %Parking and
management contract
revenues
    
    $
    90,548
    
    
    
    100.0
    %
    
    $
    109,351
    
    
    
    
    
    
    
    100.0
    %
    
    $
    121,130
    
    
    
    100.0
    %Reimbursement of
management contract
expenses
    
    
    27,350
    
    
    
    
    
    
    
    30,491
    
    
    
    
    
    
    
    
    
    
    
    33,367Total revenues
    
    $
    117,898
    
    
    
    
    
    
    $
    139,842
    
    
    
    
    
    
    
    
    
    
    $
    154,497
 17




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##### 



The number of facilities operated as at each fiscal year end under each of
these arrangements is as follows: As at December 31,2001
    
    2002
    
    2003Leased Facilities
    
    
    559
    
    
    
    568
    
    
    
    592Managed Facilities
    
    
    1,025
    
    
    
    1,054
    
    
    
    1,080Owned Facilities
    
    
    15
    
    
    
    15
    
    
    
    151,599
    
    
    
    1,637
    
    
    
    1,687
 The performance of our leases, with their high fixed cost component, are
significantly impacted by changes in revenue or operating costs. The poor
winter weather in the first quarter of 2003 in most of Canada and the
Eastern US resulted in lower parking revenues and higher snow clearing
costs. The SARS health crisis in Canada had a negative effect on tourism and
related businesses, depressing parking revenues at hotels and other tourist
destinations. In addition, the general economic weakness in the U.S. and
Canada affected our business in much of 2003. Also, as a significant
component of our business operations are in Canada and transacted in
Canadian dollars, we are exposed to the impact that changes in exchange
rates can have on our US dollar reported results. These events contributed
to our gross margin increasing from $22.2 million for 2002 to $23.3 million
for 2003, as we benefited from an 11% improvement in the Canadian dollar
from 2002 to 2003; a successful appeal of our 2002 business tax assessment
in Calgary, Alberta; and an increase in total revenue of 3.9%, excluding the
foreign currency effect. However, the percentage that our gross margin is of
sales declined from 20.3% in 2002 to 19.1% in 2003, again reflecting the net
impact of the factors described above. During 2003 we generated $6.3 million of cash from operations and used this
to fund $2.3 million of capital expenditures, $0.7 million in acquiring
other long-term assets, $0.6 million of bank debt repayments, and $0.6
million to repay other long-term liabilities. After including $1.6 million
for the effect of changes in exchange rates on cash balances, our cash
balances increased by $3.7 million during the year. We also used our credit facility to entirely fund a $3.0 million advance
license fee in acquiring a ten-year license agreement for the parking at
Miller Park in Milwaukee, Wisconsin. During 2003 we also paid the second annual instalment of $1.1 million to the
vendors of DLC Management, Inc, in accordance with the terms of the
acquisition we completed in 2001. This payment was primarily funded by $1.0
million of cash received in final settlement of a note receivable from the
San Francisco Giants for their share of development costs on the parking
facilities at the PacBell baseball stadium in San Francisco. Results of Operations Year Ended December 31, 2003 Compared to Year Ended December 31, 2002 Total revenues for fiscal 2003 increased $14.7 million, or 10.5%, to $154.5
million from $139.8 million for fiscal 2002. Excluding an increase of $2.9
million in the reimbursement of management contract expenses, which are
directly offset by an equivalent increase in reimbursed management contract
expenses classified within direct costs, there was an increase of $11.8
million in revenues. This was generally as a result of continuing to open
new facilities and from a stronger Canadian dollar. If the Canadian dollar
exchange rate in 2003 had remained the same as it was in 2002, total
revenues for fiscal 2003 would have increased by only $5.4 million, or 3.9%. Revenues from leased facilities for fiscal 2003 increased to $97.2 million
from $86.9 million in fiscal 2002, an increase of $10.3 million, or 11.9 %.
There was an increase of $4.7 million in the United States largely as a
result of opening new locations, notably in Milwaukee, with Miller Park 
the baseball stadium for the Milwaukee Brewers, and in Miami, which
increased its number of leased facilities from six at December 31, 2002 to
fourteen at December 31, 2003. This increase in revenue in the U.S. is net
of a decrease of $4.6 million in Chicago and Minneapolis. The decrease in
these cities was the result of the sale, by a landlord, of a significant
leased facility in Chicago and the subsequent renewal of the agreement by
the new landlord as a management contract effective January 2003, and our
decision not to renew an unprofitable lease in Minneapolis in the fourth
quarter of 2002. These two facilities contributed approximately $6.2
million of leased revenue in fiscal 2002. In Canada, there was a $5.6
million increase in leased revenue, which was largely due to a stronger
Canadian dollar. The average exchange rate for 2003 was C$1.00 = US$0.71,
compared to US$0.64 for 18




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##### 



2002. In local currency terms, however, leased revenue in Canada increased
by only C$0.1 million in 2003, compared to 2002. An increase of C$2.1
million in Toronto, largely from a net increase of two lease locations
during the year, was offset by a decrease of C$2.0 million in other Canadian
cities as a result of severe winter weather in 2003 and a decline in hotel,
tourism and other traffic. Management contract revenues for fiscal 2003 increased by $1.2 million, or
5.6%, to $22.0 million from $20.8 million for fiscal 2002. Of this increase,
approximately $0.8 million is due to the stronger Canadian dollar and $0.4
million to new contracts. The direct costs incurred in providing services under parking and management
contracts in 2003 increased to $97.8 million from $87.2 million in 2002, an
increase of $10.6 million, or 12.3%. Rent expense increased by $7.5
million, or 13.4%, to $63.3 million for 2003 from $55.8 million for 2002.
Rent as a percentage of leased revenues, increased to 65.1% in 2003 from
64.2% in 2002. The increase is due to an increase in Canada in rent as a
percentage of leased revenues. We opened several new lease locations in
Toronto, and as with any new lease we expect that rent as a percentage of
leased revenues will be higher at the start of the lease term. The increase
in other direct costs of $3.2 million, or 10.2%, from $31.4 million to $34.6
million, includes $1.2 million of costs associated with operating the new
contracts at the Mirabel and Dorval airports in Montreal, Quebec and Miller
Park in Milwaukee; $0.6 million for the effect of the stronger Canadian
dollar on other direct costs; an increase in snow clearing and removal costs
of $0.2 million from the harsher winter in 2003; and a discount of $0.1
million granted on the early settlement of the outstanding balance due from
the San Francisco Giants for their share of development costs. The
increases in other direct costs for fiscal 2003 were offset by recoveries of
$0.8 million and $0.3 million for amounts previously accrued in 2002 for
business taxes in Calgary and a property tax assessment, respectively, which
we successfully appealed in 2003. The cost of parking and management
contracts as a percentage of revenue from parking and management contracts
increased to 80.8% in fiscal 2003 from 79.7% in fiscal 2002. In 2003 we were successful in appealing our 2002 business tax assessments
for our operations in Calgary, Alberta. The appeal resulted in City of
Calgary reducing the 2002 assessment by $0.8 million from $1.0 million to
$0.2 million. The City applied the reduction against amounts we owed for
2003 and, at December 31, 2003, there were no amounts owing to the City for
either 2002 or 2003. We are continuing to appeal the 2003 assessments. We
have provided further details of this issue in Part I, Item 3 - Legal
Proceedings. General and administrative expenses increased $1.0 million, or 6.4%, from
$16.2 million for fiscal 2002 to $17.2 million for fiscal 2003. $0.9
million of the increase resulted from the stronger Canadian dollar. The
remainder of the increase largely occurred in our U.S. expansion cities of
Chicago and Miami, and from relocating our U.S. head office to Philadelphia,
offset by a realized foreign exchange gain of $0.1 million. General and
administrative expenses, as a percentage of total revenues, decreased to
11.1% for fiscal 2003 from 11.6% for fiscal 2002. Prior to 2003, we accounted for stock options issued to employees using the
intrinsic value method in accordance with the provisions of APB 25,
Accounting for Stock Issued to Employees, and related interpretations, and
recognized compensation expense to the extent the current market price of
the underlying stock exceeded the exercise price. Effective January 1, 2003,
we adopted the fair value recognition provisions of Statement of Financial
Accounting No. 123 (SFAS 123), Accounting for Stock-Based Compensation,
for stock-based employee compensation. All prior periods presented have
been restated to reflect the compensation costs that would have been
recognized had the recognition provisions of SFAS 123 been applied to all
awards granted to employees after December 15, 1994. The effect of
restating the results for fiscal 2002 is that stock-based compensation
expense for the period, which is included in general and administrative
expenses, increased by $398,000 from a recovery of $65,000, as previously
reported, to an expense of $333,000. As a result of the decision by our principal shareholder, Gotham Partners,
L.P. and its affiliated investment funds (Gotham), to sell its ownership
interest, a Special Committee of the Board of Directors was formed in
January 2003 to explore the alternatives available to the Company. During
2003 we incurred $1.5 million of professional fees related to this review
and these costs are included in other non-operating expenses for the year.
In January 2004, the Company entered into a merger agreement with IPK
Acquisition Corporation, an affiliate of The Gates Group, LLC, and pursuant
to which the Companys shareholders would be entitled to receive $26.00 in
cash per share, subject to downward adjustment in the event that certain of
the Companys transaction costs exceed $1.55 million. We completed our annual review of goodwill in the fourth quarter of 2003 to
determine whether there had been any impairment in its carrying value. Based
on the share price offer in the merger agreement above, details of which
were available at the time of the impairment test, we determined that the
amount of the Companys fair value attributed to goodwill was less than its
carrying value. As a result, we recorded a goodwill impairment charge of
$33.5 million in 2003. 19




---



##### 



Income tax expense for fiscal 2003 includes our current tax liability for
Canadian operating profits, and capital and state taxes, and a deferred tax
recovery for operating losses in the U.S. for fiscal 2003. The deferred tax
recovery has been reduced by a deferred tax expense in Canada as we utilized
the remainder of our previously recognized benefits of net operating losses
for tax purposes in Canada. During the third quarter of 2003, we utilized
all of our net operating losses in Canada, and have now started to incur a
current, rather than a deferred, tax liability for any operating profits in
Canada. We also provided a valuation allowance of $0.5 million in 2003
against the deductibility of $1.5 million in Special Committee expenses, as
these costs are only deductible for tax purposes on a limited basis. Excluding the goodwill impairment charge of $33.5 million in 2003, earnings
for 2003 were $14,000  a decrease of $1.9 million from earnings for 2002 of
$1.9 million. This decrease is primarily due to higher general and
administrative expenses of $1.0 million; higher depreciation and
amortization of $0.2 million; $1.5 million of Special Committee expenses;
and higher income tax expense of $0.6 million; offset by higher gross margin
of $1.1 million; and an improvement in our share of Limited Liability
company results of $0.3 million. Year Ended December 31, 2002 Compared to Year Ended December 31, 2001 Total revenues for fiscal 2002 increased $21.9 million, or 18.6%, to $139.8
million from $117.9 million for fiscal 2001. The increase was due largely
to an increase in revenue on leased facilities in the U.S., and includes the
results for DLC, which was acquired effective July 1, 2001. Revenues from leased facilities for fiscal 2002 increased to $86.9 million
from $74.3 million in fiscal 2001, an increase of $12.6 million, or 16.9%.
There was an increase of $12.9 million in the United States as a result of
starting operations in Atlanta (August 2001) and Chicago (November 2001) and
the acquisition of DLC in Philadelphia (July 2001). However, we have also
experienced a drop in volume and in rates in our established cities of
Minneapolis and Milwaukee as a result of layoffs by businesses operating
downtown and pressure from competitors to lower rates. Consequently, we
decided not to renew a significant lease in Minneapolis in the fourth
quarter of 2002. Revenue from these two cities declined $0.6 million in
2002 from 2001. There was a $0.3 million decrease in leased revenue in
Canada substantially due to a decline in the value of the Canadian dollar
from an average rate for fiscal 2001 of C$1.00 = US$0.65 to US$0.64 for
2002, and to higher traffic volumes in fiscal 2001 as a result of public
transit strikes in Calgary, Alberta and Vancouver, B.C. Leased revenue in
Canada for fiscal 2001 also included the recovery of $0.2 million for taxes
previously provided on parking violation revenue. Management contract revenues for fiscal 2002 increased by $6.2 million, or
42.4%, to $20.8 million from $14.6 million for fiscal 2001. $5.7 million of
the increase was due to a full year of operations from DLC, which was
acquired in July 2001. The cost of parking and management contracts in 2002 increased to $87.2
million from $70.0 million in 2001, an increase of $17.2 million, or 24.5%.
Of this increase, $9.0 million was attributable to higher rent expense and
$8.2 million to other directs costs. Rent expense increased $9.0 million,
or 19.2%, from $46.8 million for 2001 to $55.8 million for 2002. Rent as a
percentage of leased revenues, increased to 64.2% in 2002 from 63.0% for
2001. The increase is due to many of the leases in the U.S. being in the
first or second year of their terms. As we continue to operate these leased
facilities, we would expect growth in revenue to exceed any growth in rent
and, therefore, rent as a percentage of revenues would decline. The
increase in other direct costs of $8.2 million, or 35.0%, from $23.2 million
to $31.4 million, is due to the acquisition of DLC, an increase in our
business taxes in Calgary and the increase in leased revenues. Our business
tax assessment in Calgary for 2002 was approximately $1.0 million, which was
three times the amount of our assessment for 2001 of approximately $0.3
million. Although we appealed the 2002 assessment and were successful with
the appeal in 2003, we recorded the full amount of the original assessment
in 2002. The cost of parking and management contracts as a percentage of
revenues from parking and management contracts increased to 79.7% in fiscal
2002 from 77.3% in fiscal 2001. The increase is due to a higher proportion
of our business in 2002, compared to 2001, being generated in the U.S. where
we are in a start-up phase in many cities. We expect only to be in a
break-even position, or marginally profitable, in these new cities during
their first one or two years of operation. The current weak U.S. economy may
prolong this period, during which we may generate lower than average returns
in these new cities. General and administrative expenses increased $2.3 million, or 16.6%, from
$13.9 million for fiscal 2001 to $16.2 million for fiscal 2002. The
increase in general and administrative expenses is due, in large part, to
including DLC for a full year, which added $1.5 million of general and
administrative expenses and to an additional $0.2 million for cities started
during 2001. General and administrative expenses, as a percentage of total
revenues, decreased to 11.6% for fiscal 2002 compared to 11.8 % for fiscal
2001. 20




---



##### 



Prior to 2003, we accounted for stock options issued to employees using the
intrinsic value method in accordance with the provisions of APB 25,
Accounting for Stock Issued to Employees, and related interpretations, and
recognized compensation expense to the extent the current market price of
the underlying stock exceeded the exercise price. Effective January 1, 2003,
we adopted the fair value recognition provisions of Statement of Financial
Accounting No. 123 (SFAS 123), Accounting for Stock-Based Compensation,
for stock-based employee compensation. All prior periods presented have
been restated to reflect the compensation costs that would have been
recognized had the recognition provisions of SFAS 123 been applied to all
awards granted to employees after December 15, 1994. The effect of
restating the results for fiscal 2002 is that stock-based compensation
expense for the period, which is included in general and administrative
expenses, increased by $398,000 from a recovery of $65,000, as previously
reported, to an expense of $333,000. Restating the results for fiscal 2001
resulted in stock-based compensation expense for the period decreasing by
$454,000 from $780,000, as previously reported, to $326,000. There was no amortization of goodwill in fiscal 2002, compared to $2.2
million for fiscal 2001. This is a result of adopting Financial Accounting
Statement No. 142, which does not permit amortization of goodwill, but
requires goodwill to be reviewed annually for any impairment in value. Interest income decreased $0.1 million from $0.6 million for fiscal 2001 to
$0.5 million for fiscal 2002 principally due to lower prevailing interest
rates. Interest expense of $0.4 million was incurred in fiscal 2002 on the
bank and other indebtedness to finance the DLC acquisition, which was $0.1
million more than the $0.3 million incurred in fiscal 2001. The expense in
2001 was for a partial year as the acquisition of DLC occurred during 2001. Income tax expense for fiscal 2002 includes our current tax liability for
capital and state taxes, and a deferred tax expense as we utilize our
previously recognized benefits of net operating losses for tax purposes in
Canada. The deferred tax expense has been reduced by a deferred tax
recovery for operating losses in the U.S. for fiscal 2002. The net income for 2002 was $1.9 million, an increase of $0.7 million from
the net income for 2001 of $1.2 million. This increase is primarily due to
higher gross margin of $1.7 million; lower depreciation and amortization of
management and lease agreements of $0.1 million; and discontinuation of
goodwill amortization of $2.2 million; offset by higher general and
administrative expenses of $2.3 million; a decrease in net interest income
of $0.2 million and higher income tax expense of $0.8 million. Liquidity and Capital Resources As at December 31, 2003, we had cash and cash equivalents of $18.8 million.
This represents an increase of $3.7 million for fiscal 2003 from the balance
at December 31, 2002. The increase resulted from $6.4 million of cash
generated from operations, $1.8 million provided by financing activities and
$1.6 million for the effect of exchange rate changes on cash; offset by $6.1
million used in investing activities. In fiscal 2003 we utilized the remaining net operating losses that we had in
Canada to offset taxable income. Accordingly, we started to accrue for
income taxes payable in Canada during the year and had accrued $1.4 million
at December 31, 2003 in respect of the portion of profits in Canada for 2003
that were taxable after utilizing the remainder of the net operating losses.
We started paying tax instalments in Canada in the fourth quarter of fiscal
2003 totalling $0.3 million on account of income taxes payable for fiscal
2003. The cash used in investing activities during fiscal 2003 included $3.0
million in respect of an advance license fee under a ten year license
agreement to manage the parking operations at Miller Park in Milwaukee,
Wisconsin. This prepayment is included in other assets and is being
amortized on a straight-line basis over the term of the agreement. We also
paid $1.1 million to the former shareholders of DLC during fiscal 2003. This
was the second of five annual deferred payments and was calculated pursuant
to the Amended and Restated Share Purchase Agreement (Exhibit 10.8) and was
based on the earnings of the acquired operations for the year ended June 30,
2003. We had previously accrued this payment as part of our acquisition.
The difference of $135,000 from the amount previously accrued has been
allocated to goodwill. We also received during fiscal 2003, $1.0 million
from the San Francisco Giants in final settlement of the outstanding balance
due from them of $1.1 million for their share of the parking facility
development costs. The discount of $0.1 million was expensed in fiscal 2003.
The balance was originally to be recovered from any future participation
rent payable to the Giants. 21




---



##### 



At December 31, 2003, we had $5.7 million of bank debt outstanding. We
borrowed $3.0 million under our credit facility during 2003 to fund the
advance license fee for Miller Park. After originally drawing down $6.9
million on the non-revolving loan facility and using $2.4 million for
outstanding letters of credit, we have $10.7 million remaining of a $20.0
million credit facility with HSBC Canada to fund working capital
requirements, acquisitions and other capital investment opportunities. In April 2003, under the terms of the acquisition agreement for the purchase
of E-Z Park Company Ltd., LLC in April 2000, we repaid the note payable of
$0.5 million, including accrued interest, due to the vendor as deferred
consideration. In the next 12 months, we anticipate the working capital necessary to
satisfy current obligations will be generated from operations, available
cash, and our bank facility. Depending on the timing and magnitude of future investment opportunities,
which could be in the form of leased or purchased properties, joint ventures
or acquisitions, we anticipate the cash required to come from operations,
the bank credit facility, or an equity offering. In the future, if we identify investment opportunities requiring cash in
excess of operating cash flows and credit facilities, we may seek additional
sources of capital, including the sale or issuance of our common stock or a
rights offering, or amending our credit facility to obtain additional
indebtedness. No assurances can be given that such increases would be
available at the time needed to complete any such acquisition. Contractual Obligations and Commercial Commitments The following tables summarize our contractual obligations and commercial
commitments as of December 31, 2003: Payments due by period(amounts in thousands)Less than 1Total
    
    year
    
    1-3 years
    
    4-5 years
    
    After 5 yearsBank indebtedness(1)
    
    $
    5,706
    
    
    $
    5,706
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating leases
    
    
    223,053
    
    
    
    53,751
    
    
    
    73,066
    
    
    
    38,062
    
    
    
    58,174Other long-term
obligations(2)
    
    
    3,822
    
    
    
    1,333
    
    
    
    2,017
    
    
    
    118
    
    
    
    354Total contractual
cash obligations
    
    $
    232,581
    
    
    $
    60,790
    
    
    $
    75,083
    
    
    $
    38,180
    
    
    $
    58,528
  (1)
    
    The bank indebtedness has been reflected as payable within one
year as it is repayable on demand. However, it is currently being
repaid in blended monthly instalments of principal and interest of
$105,000 through December 2007, and $43,000 thereafter until June
2010.  (2)
    
    Other long-term obligations include an estimated $2.7 million
payable to the former shareholders of DLC. The amounts ultimately
payable to the former shareholders are calculated relative to the
actual operating results of the acquired business for the three
remaining annual periods ending June 30, 2006 and may differ from
the amount estimated at December 31, 2003 to be payable. Amount of commitment expiration per period(amounts in thousands)Less than 1Total
    
    year
    
    1-3 years
    
    4-5 years
    
    After 5 yearsStandby letters of credit
    
    $
    2,356
    
    
    
    2,356
    
    
    
    
    
    
    
    
    
    
    
    Guarantees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total commercial
commitments
    
    $
    2,356
    
    
    
    2,356
    
    
    
    
    
    
    
    
    
    
    
    
 22




---



##### 



Critical accounting policies Impark is involved in the ownership, management and operation of parking
facilities in the United States and Canada. In preparing the consolidated
financial statements, estimates and judgments are applied that affect the
reported amounts of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities for the reporting periods.
We base our estimates on historical experience and on various other
assumptions that are believed to be reasonable in the circumstances, the
results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily available from other
sources. On an on-going basis, we evaluate areas of estimate or judgment to
ensure they reflect currently available assessments and knowledge. Actual
results may differ from these estimates under different assumptions and
conditions. We believe that the following critical accounting policies affect our more
significant judgments and estimates. The consolidated financial statements reflect our estimates of the value of
goodwill, management agreements and fixed assets arising from historical
transactions. In assessing the underlying value of these assets, we
consider estimates of future cash flows to be generated from the assets over
their estimated useful life. Various factors, including customer demand,
weather, transit use and government policies, could change thereby impacting
these estimates, possibly materially. These factors are substantially
outside of our control. Beginning January 1, 2002, we have accounted for goodwill under the
provisions of SFAS No. 142 Goodwill and Other Intangible Assets. As of
December 31, 2003, we had $18.8 million of goodwill. The determination of
fair value of goodwill, and any impairment loss, utilizes cash flow
projections that assume certain future revenue and costs levels, assumed
earnings multiples based upon current market conditions and other valuation
factors, all of which involve the use of significant judgment and
estimation. Future events may indicate that judgments and estimates that we
made to support the carrying value of goodwill at December 31, 2003 are no
longer appropriate. This could, in turn, result in impairment charges in
the future. Future events that may result in impairment charges include
increases in interest rates, which would impact earnings multiples,
unfavourable economic conditions or other factors, which could decrease
revenues and profitability of existing locations, and changes in the cost
structure of existing facilities. Factors that could potentially have an
unfavourable economic effect on our judgment and estimates include, among
others: changes imposed by government and regulatory agencies, such as
assessment of parking-related taxes; construction or other events that could
change traffic patterns; and terrorism or other catastrophic events. The consolidated financial statements reflect deferred income tax assets
based on our assessment that we are more likely than not to be able to
utilize certain deductions in the future, primarily loss carry-forwards.
Changes in the timing of the recognition and amount of revenues and expenses
in the future may impact our ability to utilize these deductions. The
carrying value of our net deferred tax assets assumes that we will be able
to generate sufficient future taxable income in certain tax jurisdictions,
based on estimates and assumptions. If these estimates and related
assumptions change in the future, we will be required to adjust our deferred
tax valuation allowance. Under the terms of the agreement to acquire DLC, we are required to make
further annual payments to the former shareholders of DLC for each of the
twelve month periods ending June 30, 2004 through 2006. The payments are
calculated relative to the actual operating results of the acquired business
determined in accordance with generally accepted accounting principles.
Each twelve month period calculation is independent and separable from each
other twelve month period calculation. In making this calculation, a
multiple of 6.5 is applied to each future twelve month periods earnings
before interest, taxes, depreciation and amortization (EBITDA) less
depreciation of any new capital expenditure on the acquired parking
facilities, and one-tenth of that amount is payable in cash at that time. At
December 31, 2003 we estimated this liability, based on operating results of
the acquired business for 2003, to be approximately $1.0 million per annum
for each of the periods through June 30, 2006. We have accrued for this
amount in our Consolidated Financial Statements as at December 31, 2003.
The actual amount to be paid for any given year may differ significantly
from our estimate as it depends on the actual operating performance of DLC
and is not subject to any limit. However, the former shareholders of DLC
are required to make up any shortfall, up to $350,000, in the EBITDA of the
acquired business below $1.35 million for any of the twelve month periods
through June 30, 2006. A change of 10% in our estimate of operating results
would result in a change of approximately $0.1 million per annum in the
amount payable to the former shareholders of DLC for each of the periods
through June 30, 2006. 23




---



##### 



New Accounting Pronouncements During 2003, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 150, Accounting for certain
Financial Instruments with Characteristics of both Liabilities and Equity
(SFAS No. 150) and related interpretations. SFAS No. 150 requires that
certain financial instruments issued in the form of shares that are
mandatorily redeemable as well as certain other financial instruments be
classified as liabilities in the financial statements. SFAS No. 150 is
effective for the Companys December 31, 2003 financial statements. As the
Company has no financial instruments with characteristics of both
liabilities and equity or shares which are mandatorily redeemable, adoption
of SFAS 150 had no impact on the consolidated financial statements. FASB has issued Financial Interpretation No. 46 (FIN 46), Consolidation
of Variable Interest Entities, which addresses the consolidation of
variable interest entities (including those referred to as Special-Purpose
Entities). The disclosure and measurement provisions of this
Interpretation, as revised, are effective no later than the end of interim
or annual periods ending after March 15, 2004. The Company is currently
considering whether any of its contractual relationships, including
management and lease agreements, notes receivable and equity method
investments disclosed in these financial statements, will be subject to the
provisions of the Interpretation. Foreign Currency Exposure We operate wholly owned subsidiaries in Canada. Total historical revenues
(excluding reimbursement of management contract expenses) from Canadian
operations amounted to $53.1 million and $60.8 million for fiscal years 2002
and 2003, respectively. We intend to continue to invest in Canadian
facilities, and may identify expansion opportunities in other foreign
countries. Our exposure to foreign currency fluctuations is limited, as our
Canadian dollar revenues to date have been significantly offset by Canadian
dollar operating costs. Our net earnings, before the impairment in goodwill,
in Canada for 2003 were approximately $3.6 million, or approximately C$5.0
million translated at the average exchange rate for 2003 of C$1.00 =
US$0.71. If the exchange rate used in 2003 had been US$0.67 instead of
US$0.71, the effect would be to reduce our net earnings, before the
impairment in goodwill, by approximately $0.2 million. Presently, we have no
formal hedging programs. We would consider implementing a hedging program
if such risk materially increases. Impact of Inflation and Changing Prices Our primary sources of revenues are parking revenues from owned and leased
locations and management contract revenue (net of expense reimbursements).
In the years ended December 31, 2001, 2002 and 2003 inflation had a limited
impact on our operations. Quarterly Results We may experience fluctuations in our income from quarter to quarter due to
fluctuations in revenues and related expenses due to acquisitions,
pre-opening costs, travel and transportation patterns affected by weather
and calendar related events, and local and national economic conditions.
Additionally, we manage the parking for a number of sports stadiums and
arenas and our income can be affected by the relative degree of success of
various sports teams. Information on our quarterly reported revenues, net
earnings (loss) and earnings (loss) per share is disclosed in Note 15 to the
Consolidated Financial Statements in this report. 24




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CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS This Annual Report, including the information incorporated herein by
reference contain certain statements that may be considered forward-looking
statements under the Private Securities Litigation Reform Act of 1995. You
can identify forward-looking statements by the use of the words believe,
expect, anticipate, intend, estimate, assume, will, should, and
other expressions which predict or indicate future events or trends and
which do not relate to historical matters. The Companys actual results
could differ materially from those projected in the forward-looking
statements as a result of, among other factors, the factors discussed below,
our ability to successfully integrate past and future acquisitions, our
ability to form and maintain strategic relationships with certain large real
estate owners, and changes in assumptions used in making such
forward-looking statements. Readers should carefully review the factors
described on below and should not place undue reliance on our forward
looking statements. The Company assumes no obligations to update any
forward-looking statements. We may incur significant expenses in connection with the proposed merger. On January 22, 2004, the Company signed a merger agreement with IPK
Acquisition Corporation, an affiliate of The Gates Group, LLC, pursuant to
which the Companys shareholders would be entitled to receive $26.00 in cash
per share, subject to downward adjustment in the event that certain of the
Companys transaction costs incurred or paid after November 30, 2003 exceed
$1.55 million. We expect to incur significant transaction costs to complete
the merger. We estimate that we will incur an additional $1.2 million in
expenses in addition to those already reflected in our results for the year
ended December 31, 2003. This estimate is based on a number of assumptions
regarding the timing of the merger and the expenses that we will incur to
consummate the merger. No assurances can be made that our actual expenses
will not significantly exceed our estimate. If the merger is not
consummated we may be required to pay a termination fee of $2.0 million and
reimburse expenses of up to $750,000. These costs could have a materially
adverse effect on our future results of operations and on our financial
condition. Our growth strategy may not succeed As part of our business strategy, we intend to pursue acquisitions of other
parking operators. In executing our acquisition strategy, we may be unable
to identify suitable acquisition candidates. In addition, we expect to face
competition from other parking providers for acquisition candidates, making
it more difficult to acquire suitable companies on favorable terms. If we
pursue any acquisition, our management could spend a significant amount of
time and effort in identifying and completing the acquisition. If we
complete an acquisition, we may have to devote a significant amount of
management resources to integrating the acquired business with our existing
business. An acquisition might not produce the revenue or earnings that we
anticipated, and an acquired operation may not perform as expected.
Accordingly, our acquisition efforts may not succeed. In addition, from an
accounting perspective, an acquisition may result in non-recurring charges
or involve significant write-offs of goodwill that could adversely affect
our operating results. To pay for an acquisition, we might use capital stock or cash.
Alternatively, we might borrow money from a bank or other lender. If we use
capital stock, our stockholders may experience dilution. If we use cash or
debt financing, our financial liquidity would be reduced. We cannot be
certain that we will have sufficient access to capital to permit us to
implement our acquisition strategies. We also intend to pursue aggressive growth in targeted major cities in the
United States. However, we may not be able to sign up parking contracts in
these cities due to competition from existing operators or reluctance from
landlords to enter into agreements with an operator who is new in the local
market. Furthermore, if we are able to add new facilities, we may incur
losses on these new locations during the first or second year of operations
as we attempt to achieve projected revenue targets by optimizing parking
rates and marketing the facility. Severe winter weather may adversely affect our business The parking business depends on the free flow of vehicular traffic. Severe
winter weather conditions in Canada and the northern United States could
close or significantly slow roadways. This, in turn, may harm our business
and adversely affect our cash flow by reducing the demand for parking and
increasing our snow removal costs. 25




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Changes in privacy legislation could harm our business by making collections
more difficult and costly City Collection Company Limited (City Collections), an Impark subsidiary,
identifies vehicle owners in Canada through searches based on license plate
numbers. The license plate data are maintained by each province in Canada.
Although most provinces have enacted privacy legislation regulating access
to such data, City Collections has entered into access agreements with
several provinces. Should more restrictive privacy legislation be enacted
it could adversely affect City Collections business. In February 2004, the
provincial government of Alberta terminated our access to motor vehicle
records for the province of Alberta, Canada. We are presently appealing
this decision. If we are unsuccessful in reinstating our access to motor
vehicle records, it could adversely impact our collection efforts and reduce
the revenue we earn from parking violations in Alberta, Canada. In
addition, fees charged for searches of motor vehicle registration are also
set by provincial governments and any increase in these fees will have an
adverse effect on City Collections business. An increase in the cost of insurance claims and changes in the insurance
marketplace could increase our costs We typically have a large number of small property or personal injury
claims. We have insurance to cover the cost of these claims, to the extent
such costs exceed a deductible amount. However, a major increase in the
number and cost of claims to the insurance company could significantly
increase the amount that we pay to insure against these claims. Additionally, due to changes in the insurance marketplace, including changes
related to the terrorist attacks on September 11, 2001, we have experienced
an increase in the premiums we pay for most types of insurance coverage.
Changes in the insurance marketplace, including increased premium costs,
could have a material adverse effect on our future results of operations and
on our financial condition. Currency fluctuations could adversely affect our financial results While our consolidated financial statements are prepared in United States
dollars, many of our operations are conducted in Canadian dollars.
Fluctuations in exchange rates may have a material adverse effect on our
financial results, particularly our operating margins, and could also result
in exchange losses. To date we have not sought to hedge these risks, but
may undertake hedging transactions in the future. We cannot be certain,
however, that any hedging techniques would be successful in preventing or
limiting the adverse financial effects of exchange rate fluctuations. We face risks associated with environmental regulations Various federal, state, provincial and local environmental laws and
regulations impose liabilities on a current or previous owner or operator of
real property for the cost of removal or remediation of hazardous or toxic
substances on the property. These laws typically impose liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of the hazardous or toxic substances. In connection with our
ownership, operation or acquisition of parking facilities, we may be
potentially liable for such costs. Although we are currently not aware of
any material environmental claims pending or threatened against us or any of
our owned or operated parking facilities, we cannot give any assurance that
a material environmental claim will not be asserted against us or against
our owned or operated parking facilities. We could face significant costs
in defending against claims of liability or in remediating a contaminated
property. An increase in government regulation or taxation could harm our business The parking business is subject to a significant degree of government
regulation. The regulations include potentially costly matters such as
requiring improvements to meet civic by-laws, workers compensation
regulations and labor standards, as well as, environmental and other
potentially costly legislation. Any new or increased levels of regulation
could adversely impact our business. The parking industry is also subject to increased taxation from the various
levels of government. Historically, it has been considered as an
environmentally unfriendly industry due to its primary purpose, which is to
park automobiles driven into downtown business districts. Consequently the
parking industry has been the subject of significant taxation including
federal, state and provincial sales taxes, property taxes, business taxes
and federal and provincial/state income taxes. Our business will be
adversely affected by any significant new tax legislation or increased
levels of taxation, any of which could be retroactive. 26




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Various other governmental regulations affect our operation of parking
facilities, both directly and indirectly, including air quality laws,
licensing laws and the Americans with Disabilities Act of 1990. Under the
ADA, all public accommodations, including parking facilities, are required
to meet certain federal requirements related to access and use by disabled
persons. Although we believe that the parking facilities we own and operate
are in substantial compliance with these requirements, a determination that
we or the facility owner is not in compliance with the ADA could result in
the imposition of fines or damage awards against us. In addition, several state, provincial and local laws have been passed in
recent years that encourage car pooling and the use of mass transit,
including, for example, laws prohibiting employers from reimbursing employee
parking expenses. Laws and regulations that reduce the number of cars and
vehicles being driven could hurt our business. We have significant competition from a variety of sources The parking industry is highly competitive. Our competitors range from
small single-lot operators to large regional and national multi-facility
operators, and include municipal and other governmental entities. Some of
our present and potential competitors have or may obtain greater financial
and marketing resources than we have. Furthermore, we compete for qualified
management personnel with other parking facility operators, with property
management companies and with property owners. We may encounter increased
competition in the future. Among other things, increased construction of
parking facilities could limit our ability to attract customers, expand our
business or maintain profitable pricing levels and could decrease our market
share. We compete for acquisitions with other parking facility operators,
real estate developers and real estate investment trusts. We may encounter
increased competition for acquisitions in the future, and this competition
could hurt our ability to complete acquisitions or have the effect of
increasing the prices we must pay for acquisitions. We believe that there will be rapid business consolidation in the parking
services industry. If this occurs and we are unable to participate
successfully in the business consolidation, our business and financial
results could be harmed. A labor strike could hurt our competitiveness A significant number of our employees are members of labor unions. As a
result there is more risk of work stoppages due to strikes, which could
potentially be costly to us because increased labor costs could adversely
affect our ability to retain management contracts and to remain competitive
in the marketplace. The large number of leased facilities increases the risk that we may not be
able to cover the fixed costs of our leased facilities We leased 592 and owned 15 facilities as of December 31, 2003. Although
there is more potential for income from leased and owned facilities than
from management contracts, they also carry more risk if there is a downturn
in property performance or commercial real estate occupancy rates because a
significant part of the costs to operate such facilities typically is fixed.
For example, in the case of leases, there are typically minimum lease
payments, and in the case of owned facilities, there are the normal risks of
ownership and costs of capital. In addition, maintenance and operating
expenses for both leased and owned facilities are borne by us and are not
passed through to the owner, as is the case with management contracts.
Generally, performance of our parking facilities depend, in part, on our
ability to negotiate favorable contract terms, our ability to control
operating expenses, financial conditions prevailing generally and in areas
where parking facilities are located, the nature and extent of competitive
parking facilities in the area, weather conditions and the real estate
market generally. The relative significance of our leases can be viewed in
relation to the term remaining on currently active leases and the extent to
which the direct costs of operating those leased facilities historically
have been covered by revenue generated by the facilities. This is
illustrated by the table below, which groups our leased locations that were
active at December 31, 2003 by the year that the related agreement will
expire, as follows: 27




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Number of
    
 Year ended December 31, 2003Term expires
    
    facilities(1)
    
    
    Revenue
    

    Direct costs(2)
    
    Coverage(3)2004
    

    279
    
    

    $
    28,222
    
    $
    25,633
    
    
    1.102005
    

    95
    
    
    
    13,342
    
    

    12,031
    
    
    1.112006
    

    79
    
    
    
    11,368
    
    

    10,021
    
    
    1.132007

    
    35
    
    
    
    5,892
    
    

    5,699
    
    
    1.032008 and thereafter

    
    104
    
    
    
    35,038
    
    

    33,173
    
    
    1.06Total

    
    592
    
    
    $
    93,862
    

    $
    86,557
    
    
    1.08
  (1)
    
    For leased locations that were open as at December 31, 2003.  (2)
    
    Direct costs included minimum rental payments, contingent payments
based upon a percentage of revenues, property taxes and other
operating expenses.  (3)
    
    Coverage is calculated by dividing Revenue by Direct costs.
Coverage should not be considered in isolation or as a substitute of
measures of performance prepared in accordance with generally
accepted accounting principles. Coverage is not an accepted measure
under generally accepted accounting principles and other companies
will use different measures or different calculations of
profitability. Several of our locations are dependent on sports-related traffic Several of our leased facilities are located beside or in the vicinity of
major sporting arenas. A significant proportion of the revenue earned at
these locations occurs during regular and post-season games. In 2003,
approximately 8% of our revenue was earned from customers attending baseball
games. A player strike or other work stoppage leading to the cancellation of
games, or a reduction in attendance at games, would substantially reduce the
revenue earned at these locations. However, our fixed rent commitments on
these locations would be unchanged. As a result, the profit we earn from
these facilities would decrease significantly. The threat of terrorist activity could affect demand for parking The threat of, or actual, terrorist activity in urban centres in North
America may lead to restrictions on access to streets or buildings in the
downtown areas. This may result in the access to parking facilities being
more difficult, or not permitted at all, which will have an adverse effect
on revenue generated from those facilities. Furthermore, the threat of terrorist activity may affect consumer
confidence. A loss of confidence may lead to the public being less likely to
incur discretionary spending on restaurants, sporting events and theatres,
which in turn means less demand and lower revenues at adjacent parking
facilities. 
 Item 7a. Quantitative and Qualitative Disclosure about Market Risk To December 31, 2003, we have not entered into significant derivative
instruments either for hedging or speculative purposes. As of December 31,
2003, we had no such instruments outstanding. We will periodically hold
excess available cash in cash equivalents, which are short-term deposits at
major financial institutions with terms to maturity at the date of
acquisition of three months or less. Interest Rates : Our primary exposure to market risk consists of changes in interest rates on
cash invested in short-term deposits which are all included in cash
equivalents on our consolidated balance sheet. As of December 31, 2003, we
did not have any cash invested in short-term deposits. Changes in interest
rates could impact our anticipated real rate of return. However, due to the
short-term nature of such investments, the risk of loss to market is not
expected to be significant. 28




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Our bank indebtedness of $5.7 million at December 31, 2003 bears interest at
rates which vary with changes in the London Interbank Offered Rate
(LIBOR). Based on our current borrowing level, a 1% change in LIBOR would
impact net income by less than $0.1 million annually. Foreign Currency Exposure: We operate wholly owned subsidiaries in Canada. Total revenues (excluding
reimbursement of management contract expenses) from Canadian operations
amounted to $60.8 million for the year ended December 31, 2003 as detailed
in Note 14 to the Financial Statements. We intend to continue to invest in
Canadian facilities, and may identify expansion opportunities in other
foreign countries. We believe that our exposure to foreign currency
fluctuations is limited because our Canadian dollar revenues have to date
been significantly offset by Canadian dollar operating costs. Our net
earnings, before the impairment in goodwill, in Canada for 2003 were
approximately $3.6 million, or approximately C$5.0 million translated at the
average exchange rate for 2003 of C$1.00 = US$0.71. If the exchange rate
used in 2003 had been US$0.67 instead of US$0.71, the effect would be to
reduce our net earnings, before the impairment in goodwill, by approximately
$0.2 million. Presently, we have no formal hedging programs, other than
investing any excess Canadian cash in U.S. Treasury bills. We would
consider implementing a hedging program if such risk materially increases. 
 Item 8. Financial Statements and Supplementary Data The consolidated financial statements listed in Item 15(a)1 and 15(a)2 are
included in this report on pages F-1 through F-7. 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None 
 Item 9A. Controls and Procedures As required by Rule 13a-15 under the Securities Exchange Act of 1934, as
amended (the Exchange Act), the Companys management conducted an
evaluation with the participation of the Companys Chief Executive Officer
and Chief Financial Officer, regarding the effectiveness of the Companys
disclosure controls and procedures, as of the end of the last fiscal
quarter. In designing and evaluating the Companys disclosure controls and
procedures, the Company and its management recognize that any controls and
procedures, no matter how well designed and operated, can provide only a
reasonable assurance of achieving the desired control objectives, and
management necessarily was required to apply its judgment in evaluating and
implementing possible controls and procedures. Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that they
believe the Companys disclosure controls and procedures are reasonably
effective to ensure that information required to be disclosed by the Company
in the reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms. We intend to continue
to review and document our disclosure controls and procedures, including our
internal controls and procedures for financial reporting, and we may from
time to time make changes to the disclosure controls and procedures to
enhance their effectiveness and to ensure that our systems evolve with our
business. 29




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Part III 
 Item 10. Directors and Executive Officers of the Registrant Information concerning this Item is incorporated by reference to the
Companys definitive proxy materials for the Companys 2004 Annual Meeting
of Shareholders. 
 Item 11. Executive Compensation Information concerning this Item is incorporated by reference to the
Companys definitive proxy materials for the Companys 2004 Annual Meeting
of Shareholders. 
 Item 12. Security Ownership of Certain Beneficial Owners and Management Information concerning this Item is incorporated by reference to the
Companys definitive proxy materials for the Companys 2004 Annual Meeting
of Shareholders. 
 Item 13. Certain Relationships and Related Transactions Information concerning this Item is incorporated by reference to the
Companys definitive proxy materials for the Companys 2004 Annual Meeting
of Shareholders. 
 Item 14. Principal Accounting Fees and Services Information concerning this Item is incorporated by reference to the
Companys definitive proxy materials for the Companys 2004 Annual Meeting
of Shareholders. 30




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##### 



Part IV 
 Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. Financial Statements The following financial statements are filed as part of this report: PageIndependent Auditors Report
    
    
    F-1Consolidated Financial Statements:Balance Sheets as of December 31, 2003 and 2002
    
    
    F-2Statements of Operations for the years ended December 31, 2003, 2002 and 2001
    
    
    F-3Statements of Stockholders Equity for the years ended December 31, 2003, 2002 and 2001
    
    
    F-4Statement of Cash Flows for the years ended December 31, 2003, 2002 and 2001
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-7
 2. Financial Statements Schedules None Financial statement schedules have been omitted because they are not
applicable. 3. Exhibits Each exhibit listed below in the Index to Exhibits is filed as a part of
this report. Exhibits not incorporated by reference to a prior filing are
designated by an asterisk (*); all exhibits not so designated are
incorporated herein by reference to a prior filing as indicated. 31




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Index to Exhibits Exhibit No.
    
    Description2.1
    
    Memorandum of Understanding regarding the Distribution
between First Union Real Estate Equity and Mortgage Investments
(First Union) and the Registrant (incorporated by reference to
Exhibit 2.1 to the Companys Registration Statement No. 001-15629
on Form 10/A as filed on March 2, 2000).2.2
    
    Agreement and Plan of Merger by and among Imperial Parking
Corporation, Imperial Parking Management, LLC and IPK Acquisition
Corporation, dated January 22, 2004 (incorporated by reference to
Exhibit 2.1 to the Companys Current Report on Form 8-K filed on
January 26, 2004).3.1
    
    Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 to the
Companys Registration Statement No. 001-15629 on Form 10/A as
filed on March 2, 2000).3.2
    
    Amended and Restated By-Laws of the Registrant (incorporated
by reference to Exhibit 3.2 to the Companys Registration
Statement No. 001-15629 on Form 10/A as filed on March 2, 2000).3.3
    
    Certificate of Designations, Preferences and Rights of a
Series of Preferred Stock of Imperial Parking Corporation
classifying and designating the Series A Junior Participating
Cumulative Preferred Stock (incorporated by reference to Exhibit
3.1 to the Companys Form 8-A/A filed on May 15, 2003).4.1
    
    Specimen certificate for shares of common stock of the
Registrant (incorporated by reference to Exhibit 4.1 to the
Companys Registration Statement No. 001-15629 on Form 10/A as
filed on March 2, 2000).4.2
    
    Shareholder Rights Agreement, dated as of May 12, 2003,
between Imperial Parking Corporation and National City Bank, as
Rights Agent (incorporated by reference to Exhibit 4.1 to the
Companys Form 8-A/A filed on May 15, 2003).4.3
    
    Amendment No. 1 to Shareholder Rights Agreement, dated as of
January 22, 2004, between Imperial Parking Corporation and
National City Bank, as Rights Agent (incorporated by reference to
Exhibit 4.2 to the Companys Form 8-A/A filed on January 26,
2004).10.1
    
    2000 Stock Incentive Plan of the Registrant (incorporated by
reference to Exhibit 10.1 to the Companys Registration Statement
No. 001-15629 on Form 10/A as filed on March 2, 2000).10.2
    
    Indemnification Agreement (incorporated by reference to
Exhibit 10.4 to the Companys Registration Statement No. 001-15629
on Form 10/A as filed on March 2, 2000) and First Amendment to
Indemnification Agreement. (Incorporated by reference to Exhibit
10.2 to the Companys Annual Report on Form 10-K as filed on March
26, 2002).10.3
    
    Huntzinger Employment Agreement (incorporated by reference
to Exhibit 10.6 to the Companys Registration Statement No.
001-15629 on Form 10/A as filed on March 21, 2000).10.4
    
    Wallner Employment Agreement (incorporated by reference to
Exhibit 10.7 to the Companys Registration Statement No. 001-15629
on Form 10/A as filed on March 21, 2000).10.5
    
    Newsome Employment Agreement (incorporated by reference to
Exhibit 10.5 to the Companys Annual Report on Form 10-K as filed
on March 27, 2003).10.6
    
    $20.0 million Credit Facility (incorporated by reference to
Exhibit 10.10 to the Companys Annual Report on Form 10-K as filed
on March 28, 2001).10.7
    
    Restricted Stock Agreement for Annual Stock Grant to
Directors (incorporated by reference to Exhibit 10.11 to the
Companys Quarterly Report on Form 10-Q as filed on November 13,
2001).10.8
    
    Amended and Restated Share Purchase Agreement between
Imperial Parking (U.S.), Inc. and the shareholders of DLC
(incorporated by reference to Exhibit 2.1 to the Companys Current
Report on Form 8-K as filed on July 12, 2001).10.9
    
    Standstill Agreement between Gotham Partners and the
Registrant (incorporated by reference to Exhibit 99.2 to the
Companys Current Report on Form 8-K as filed on January 23,
2003).10.10
    
    Gottlin Employment Agreement (incorporated by reference to
Exhibit 10.10 on the Companys Quarterly Report on Form 10-Q as
filed on May 12, 2003).
 32




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##### 



Exhibit No.
    
    Description10.11
    
    Voting Agreement dated January 22, 2004 by and among
Imperial Parking Management, LLC and certain of the Companys
stockholders (incorporated by reference to Exhibit 99.1 to the
Companys Current Report on Form 8-K filed on January 26, 2004).21.1
    
    Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21.1 to the Companys Quarterly Report on Form 10-Q as
filed on November 13, 2003).31.1*
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934 (Attached herewith)31.2*
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934 (Attached herewith)32.1*
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Attached herewith)32.2*
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Attached herewith)


(b) Report on Form 8-K

The following reports were filed on Form 8-K during the quarter ended December
31, 2003.

November 3,
2003     Item 5.
    
    Other Events  Announcement that the Special Committee of the Board of Directors had received indications of
interest from a number of third parties.November 14,
2003      Item 12.
    
    Results of Operations and Financial Condition  Announcement of third quarter earnings.




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##### 



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. IMPERIAL PARKING CORPORATIONDate: March 24, 2004
    By:
    /s/ J. BRUCE NEWSOMEJ. Bruce NewsomeChief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated. Name
    
    Title
    
    Date/s/ CHARLES E. HUNTZINGER

Charles E. Huntzinger
    
    President, Chief Executive Officer
and Director
(Principal Executive Officer)
    
    March 24, 2004/s/ J. BRUCE NEWSOME

J. Bruce Newsome
    
    Senior Vice President, Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
    
    March 24, 2004/s/ WILLIAM A. ACKMAN

William A. Ackman
    
    Chairman of the Board of Directors
    
    March 24, 2004/s/ DANIEL P. FRIEDMAN

Daniel P. Friedman
    
    Vice-Chairman of the Board of Directors
    
    March 24, 2004/s/ TALTON R. EMBRY

Talton R. Embry
    
    Director
    
    March 24, 2004/s/ ARMAND E. LASKY

Armand E. Lasky
    
    Director
    
    March 24, 2004/s/ BETH A. STEWART

Beth A. Stewart
    
    Director
    
    March 24, 2004/s/ MARY ANN TIGHE

Mary Ann Tighe
    
    Director
    
    March 24, 2004/s/ DAVID J. WOODS

David J. Woods
    
    Director
    
    March 24, 2004
 34




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##### 



AUDITORS REPORT TO THE SHAREHOLDERS We have audited the consolidated balance sheets of Imperial Parking Corporation
as at December 31, 2003 and 2002 and the related consolidated statements of
operations, stockholders equity and cash flows for each of the years in the
three year period ended December 31, 2003. These consolidated financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 amounts 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Imperial Parking
Corporation as at December 31, 2003 and 2002 and the results of its operations
and its cash flows for each of the years in the three year period ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America. As discussed in note 2(j) to the consolidated financial statements, effective
January 1, 2002 the Company adopted the provisions of Statement of Financial
Accounts Standards (SFAS) No. 142, Goodwill
and Other Intangible Assets, as
required for goodwill and intangible assets resulting from business
combinations consummated prior to July 1, 2001. As discussed in note 2(p) to
the consolidated financial statements, effective January 1, 2003 the Company
adopted the fair value recognition provisions of SFAS No. 123, Accounting for
Stock Based Compensation, for stock-based employee compensation. Chartered Accountants Vancouver, Canada January 30, 2004 F-1




---



##### 



IMPERIAL PARKING CORPORATION
Consolidated Balance Sheets
(Stated in thousands of United States dollars) December 31, 2003 and 2002 2003
    
    2002(restated -note 2(p))AssetsCurrent assets:Cash and cash equivalents
    
    $
    18,804
    
    
    $
    15,138Accounts receivable
    
    
    7,188
    
    
    
    6,408Current portion of recoverable development costs
    
    
    906
    
    
    
    781Inventory
    
    
    1,229
    
    
    
    960Deposits and prepaid expenses
    
    
    2,494
    
    
    
    1,347Deferred income taxes (note 10)
    
    
    
    
    
    
    1,03430,621
    
    
    
    25,668Recoverable development costs
    
    
    1,680
    
    
    
    2,435Fixed assets (note 4)
    
    
    16,773
    
    
    
    14,350Management and lease agreements (note 5)
    
    
    599
    
    
    
    867Other assets (note 6)
    
    
    6,703
    
    
    
    3,895Goodwill (note 7)
    
    
    18,839
    
    
    
    45,213$
    75,215
    
    
    $
    92,428Liabilities and Stockholders EquityCurrent liabilities:Management accounts payable
    
    $
    7,849
    
    
    $
    5,889Trade accounts payable and other accrued liabilities
    
    
    8,285
    
    
    
    7,479Due to employees and former employees
    
    
    2,908
    
    
    
    2,302Sales and other taxes payable
    
    
    2,988
    
    
    
    1,542Bank indebtedness (note 8)
    
    
    5,706
    
    
    
    3,349Current portion of other long-term liabilities
    
    
    1,052
    
    
    
    1,581Deferred revenue
    
    
    2,441
    
    
    
    1,98531,229
    
    
    
    24,127Other long-term liabilities (note 9)
    
    
    3,783
    
    
    
    4,139Deferred income taxes (note 10)
    
    
    1,949
    
    
    
    2,69036,961
    
    
    
    30,956Stockholders equity (note 11):Common stock $0.01 par value; 10,000,000 shares authorized:1,826,264 (2002 - 1,822,639 shares) shares issued
and outstanding
    
    
    18
    
    
    
    18Additional paid-in capital
    
    
    61,024
    
    
    
    60,674Retained earnings (deficit)
    
    
    (28,952
    )
    
    
    4,560Accumulated other comprehensive loss:Foreign currency translation adjustment
    
    
    6,164
    
    
    
    (3,780
    )38,254
    
    
    
    61,472$
    75,215
    
    
    $
    92,428
 Commitments and contingencies (note 17)
Subsequent events (note 19) See accompanying notes to consolidated financial statements. F-2




---



##### 



IMPERIAL PARKING CORPORATION
Consolidated Statements of Operations
(Stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001 2003
    
    2002
    
    2001(restated  note 2(p))Revenue:Parking and management contract
    
    $
    121,130
    
    
    $
    109,351
    
    
    $
    90,548Reimbursement of management contract expenses
    
    
    33,367
    
    
    
    30,491
    
    
    
    27,350Total revenue
    
    
    154,497
    
    
    
    139,842
    
    
    
    117,898Direct costs:Cost of parking and management contracts
    
    
    97,841
    
    
    
    87,160
    
    
    
    70,027Reimbursed management contract expenses
    
    
    33,367
    
    
    
    30,491
    
    
    
    27,350Total direct costs
    
    
    131,208
    
    
    
    117,651
    
    
    
    97,377Gross margin
    
    
    23,289
    
    
    
    22,191
    
    
    
    20,521Other expenses:General and administrative
    
    
    17,257
    
    
    
    16,219
    
    
    
    13,908Depreciation and amortization of management
and lease agreements
    
    
    2,608
    
    
    
    2,397
    
    
    
    2,523Amortization of goodwill
    
    
    
    
    
    
    
    
    
    
    2,206Equity share of limited liability company losses
    
    
    (147
    )
    
    
    116
    
    
    
    168Goodwill impairment (note 7)
    
    
    33,526
    
    
    
    
    
    
    
    53,244
    
    
    
    18,732
    
    
    
    18,805Operating income (loss)
    
    
    (29,955
    )
    
    
    3,459
    
    
    
    1,716Other income (expense):Interest income
    
    
    437
    
    
    
    514
    
    
    
    577Interest expense
    
    
    (356
    )
    
    
    (420
    )
    
    
    (298
    )Other expense (note 13)
    
    
    (1,453
    )
    
    
    
    
    
    
    (1,372
    )
    
    
    94
    
    
    
    279Earnings (loss) before income taxes
    
    
    (31,327
    )
    
    
    3,553
    
    
    
    1,995Income taxes (note 10):Current
    
    
    1,863
    
    
    
    346
    
    
    
    173Deferred
    
    
    322
    
    
    
    1,284
    
    
    
    6492,185
    
    
    
    1,630
    
    
    
    822Net earnings (loss)
    
    
    (33,512
    )
    
    
    1,923
    
    
    
    1,173Other comprehensive income (loss):Foreign currency translation adjustments
    
    
    9,944
    
    
    
    878
    
    
    
    (3,214
    )Comprehensive income (loss)
    
    $
    (23,568
    )
    
    $
    2,801
    
    
    $
    (2,041
    )Earnings per share (note 12):Basic
    
    $
    (18.35
    )
    
    $
    1.06
    
    
    $
    0.65Diluted
    
    $
    (18.35
    )
    
    $
    1.02
    
    
    $
    0.63
 See accompanying notes to consolidated financial statements. F-3




---



##### 



IMPERIAL PARKING CORPORATION
Consolidated Statements of Stockholders Equity
(Stated in thousands of United States dollars) Years ended December 31, 2003, 2002 and 2001 Additional
    
    Retainedpaid-in
    
    earnings
    
    ForeignCommon stock
    
    capital
    
    (deficit)
    
    currency(restated
    
    (restated
    
    translationNumber
    
    Amount
    
    note 2(p))
    
    note 2(p))
    
    adjustment
    
    TotalBalance, December 31, 2000
    
    
    1,843,000
    
    
    $
    18
    
    
    $
    59,991
    
    
    $
    1,464
    
    
    $
    (1,444
    )
    
    $
    60,029Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,173
    
    
    
    
    
    
    
    1,173Foreign currency translation adjustment in period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,214
    )
    
    
    (3,214
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    732
    
    
    
    
    
    
    
    
    
    
    
    732Options exercised
    
    
    5,875
    
    
    
    
    
    
    
    84
    
    
    
    
    
    
    
    
    
    
    
    84Shares repurchased
    
    
    (30,858
    )
    
    
    
    
    
    
    (543
    )
    
    
    
    
    
    
    
    
    
    
    (543
    )Balance, December 31, 2001
    
    
    1,818,017
    
    
    
    18
    
    
    
    60,264
    
    
    
    2,637
    
    
    
    (4,658
    )
    
    
    58,261Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,923
    
    
    
    
    
    
    
    1,923Foreign currency translation adjustment in period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    878
    
    
    
    878Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    333
    
    
    
    
    
    
    
    
    
    
    
    333Options exercised
    
    
    4,622
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    
    
    
    
    77Balance, December 31, 2002
    
    
    1,822,639
    
    
    
    18
    
    
    
    60,674
    
    
    
    4,560
    
    
    
    (3,780
    )
    
    
    61,472Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,512
    )
    
    
    
    
    
    
    (33,512
    )Foreign currency translation adjustment in period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,944
    
    
    
    9,944Stock-based compensation
    
    
    3,250
    
    
    
    
    
    
    
    344
    
    
    
    
    
    
    
    
    
    
    
    344Options exercised
    
    
    375
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6Total stockholders equity, December 31, 2003
    
    
    1,826,264
    
    
    $
    18
    
    
    $
    61,024
    
    
    $
    (28,952
    )
    
    $
    6,164
    
    
    $
    38,254
 See accompanying notes to consolidated financial statements. F-4




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##### 



IMPERIAL PARKING CORPORATION
Consolidated Statements of Cash Flows
(Stated in thousands of United States dollars) Years ended December 31, 2003, 2002 and 2001 2003
    
    2002
    
    2001(restated  note 2(p))Cash provided by (used in):Operations:Net earnings (loss)
    
    $
    (33,512
    )
    
    $
    1,923
    
    
    $
    1,173Adjustments to reconcile net earnings (loss) to cash
provided by operating activities:Depreciation and amortization of
management and lease agreements
    
    
    2,608
    
    
    
    2,397
    
    
    
    2,523Amortization of goodwill
    
    
    
    
    
    
    
    
    
    
    2,206Recovery of recoverable development costs
    
    
    627
    
    
    
    640
    
    
    
    1,057Equity share of limited liability company losses
    
    
    (147
    )
    
    
    116
    
    
    
    168Non-cash interest expense
    
    
    207
    
    
    
    128
    
    
    
    154Rent expense in excess of lease payments
    
    
    552
    
    
    
    370
    
    
    
    Stock-based compensation
    
    
    344
    
    
    
    333
    
    
    
    326Deferred income taxes
    
    
    322
    
    
    
    1,284
    
    
    
    649Discount on settlement of note receivable
    
    
    100
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    33,526
    
    
    
    
    
    
    
    Changes in non-cash working capital items:Restricted cash
    
    
    
    
    
    
    
    
    
    
    2,688Accounts receivable
    
    
    152
    
    
    
    843
    
    
    
    (1,026
    )Inventory
    
    
    (68
    )
    
    
    (171
    )
    
    
    (80
    )Deposits and prepaid expenses
    
    
    (595
    )
    
    
    (214
    )
    
    
    (126
    )Management accounts payable
    
    
    856
    
    
    
    (591
    )
    
    
    270Trade accounts payable and other
accrued liabilities
    
    
    (362
    )
    
    
    3,082
    
    
    
    879Due to employees and former
employees
    
    
    300
    
    
    
    348
    
    
    
    (486
    )Sales and other taxes payable
    
    
    1,238
    
    
    
    164
    
    
    
    (97
    )Deferred revenue
    
    
    202
    
    
    
    (106
    )
    
    
    4446,350
    
    
    
    10,546
    
    
    
    10,722Investments:Purchase of fixed assets
    
    
    (2,315
    )
    
    
    (1,675
    )
    
    
    (2,624
    )Acquisition of parking business, net of cash
acquired (note 3)
    
    
    (1,108
    )
    
    
    (1,836
    )
    
    
    (4,601
    )Change in other assets
    
    
    (3,741
    )
    
    
    (233
    )
    
    
    (686
    )Increase in recoverable development costs
    
    
    
    
    
    
    (1,491
    )
    
    
    (266
    )Acquisition of management and lease agreements
    
    
    
    
    
    
    (828
    )
    
    
    Settlement of note receivable
    
    
    1,036
    
    
    
    
    
    
    
    (6,128
    )
    
    
    (6,063
    )
    
    
    (8,177
    )
 F-5




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##### 



IMPERIAL PARKING CORPORATION
Consolidated Statements of Cash Flows, (Continued)
(Stated in thousands of United States dollars) Years ended December 31, 2003, 2002 and 2001 2003
    
    2002
    
    2001(restated  note 2(p))Financing:Proceeds from bank indebtedness
    
    
    3,000
    
    
    
    
    
    
    
    3,900Repayment of bank indebtedness
    
    
    (646
    )
    
    
    (552
    )
    
    
    Change in other liabilities
    
    
    (562
    )
    
    
    122
    
    
    
    (75
    )Options exercised
    
    
    6
    
    
    
    77
    
    
    
    84Purchase of common shares
    
    
    
    
    
    
    
    
    
    
    (543
    )1,798
    
    
    
    (353
    )
    
    
    3,366Effect of exchange rate changes on cash and cash
equivalents
    
    
    1,646
    
    
    
    17
    
    
    
    (535
    )Increase in cash and cash equivalents
    
    
    3,666
    
    
    
    4,147
    
    
    
    5,376Cash and cash equivalents, beginning of year
    
    
    15,138
    
    
    
    10,991
    
    
    
    5,615Cash and cash equivalents, end of year
    
    $
    18,804
    
    
    $
    15,138
    
    
    $
    10,991Supplementary information:Interest paid
    
    $
    89
    
    
    $
    129
    
    
    $
    87Income taxes paid
    
    
    825
    
    
    
    402
    
    
    
    254Non-cash transactions:Participation rent payable applied to reduce
note receivable
    
    
    
    
    
    
    829
    
    
    
    
 See accompanying notes to consolidated financial statements. F-6




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  1.
    
    Operations:  Imperial Parking Corporation (the Company) is the corporation, which
resulted from the combination, on March 27, 2000, of the Canadian parking
facilities of First Union Real Estate Equity and Mortgage Investments and
the parking related businesses of First Union Management, Inc.  The Companys operations consist of operating and managing parking
facilities in Canada and the United States and carrying on other parking
related activities.  2.
    
    Significant accounting policies:  (a)
    
    Basis of presentation:  These financial statements are prepared on a consolidated basis to
present the financial positions and results of operations of the Company
and its subsidiaries all of which are wholly owned. The results of
parking business acquired in the year are included in these financial
statements from the date of their acquisition. All significant
intercompany balances and transactions have been eliminated. Limited
liability companies over which the Company exercises significant
influence are accounted for by the equity method.  These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States.  (b)
    
    Use of estimates:  The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant areas requiring the
use of management estimates relate to assessment of the outcome of
contingencies, valuation of goodwill, estimation of the useful lives of
fixed assets and management and lease agreements in determining
depreciation and amortization, and the extent and timing of
recoverability of deferred tax assets. Actual amounts may differ from
the estimates applied in the preparation of these financial statements.  (c)
    
    Cash equivalents:  Cash equivalents includes certificates of deposit and other highly liquid
instruments with original terms to maturity of three months or less when
acquired.  (d)
    
    Inventory:  The Companys inventory consists of equipment parts and supplies and is
recorded at the lower of cost, determined on a first-in, first-out basis,
and replacement cost. F-7




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  2.
    
    Significant accounting policies (continued):  (e)
    
    Fixed assets:  Fixed assets are recorded at cost. Depreciation and amortization is
provided as follows: Asset
    
    Basis
    
    RateBuildings and improvements
    
    straight-line
    
    over 40 yearsFurniture and fixtures
    
    declining-balance
    
    20%Equipment
    
    declining-balance
    
    30%Automotive equipment
    
    declining-balance
    
    30%
  Leasehold improvements are depreciated straight-line over the shorter of
the lease term or the estimated useful life of the asset. Routine
maintenance and repairs are expensed as incurred.  (f)
    
    Management and lease agreements:  Management and lease agreements are recorded at cost and represent the
Companys investment in parking lot agreements. Cost is based upon the
estimated fair value of the agreements at the time of acquisition
determined using the discounted estimated future cash flow from these
agreements. Amortization is provided over the lives of the related
agreements in amounts equal to the discounted future cash flows used to
measure their original cost.  (g)
    
    Impairment of fixed assets and management and lease agreements:  The Company assesses impairment of long-lived assets including certain
identifiable intangibles whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison
of the carrying value of the asset to future 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 by which the
carrying amount of the asset exceeds its fair value. Assets to be
disposed of are reported at the lower of their carrying value or fair
value less costs to sell. F-8




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  2.
    
    Significant accounting policies (continued):  (h)
    
    Asset retirement obligations  Effective January 1, 2003, the Company adopted Statement of Financial
Accounting Standards 143, Accounting for Asset Retirement Obligations
(SFAS 143) which applies to legal obligations associated with the
retirement of a long-lived asset that result from the acquisition,
construction, development and/or the normal operation of a long-lived
asset including leased facilities. Under the new standard, the Company
is required to recognize the fair value of a liability for an asset
retirement obligation in the period in which it incurs a legal
obligation, if a reasonable estimate of fair value can be made. Upon
initial recognition of the liability, the Company capitalizes an asset
retirement cost by increasing the carrying amount of the related
long-lived asset. This asset retirement cost is depreciated over the
life of the related asset. At the end of each period, the liability is
increased to reflect the passage of time (accretion expense) and changes
in estimated future cash flows underlying the initial fair value
measurement (additional asset retirement costs).  As of January 1, 2003 and December 31, 2003, the Company determined that
no material legal obligations associated with the retirement of
long-lived assets, including its owned and leased facilities, existed and
accordingly, no amounts have been accrued. Adoption of this new standard
had no impact on any prior period presented.  (i)
    
    Recoverable development costs:  Recoverable development costs are recoverable from landlords on a
straight-line basis over the term of the related parking lot leases which
range from 1.5 to 9.5 years.  (j)
    
    Goodwill:  Goodwill represents the excess of cost over the value assigned to the net
assets acquired on business acquisitions.  In June 2001, the FASB issued SFAS No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141
specifies criteria that intangible assets acquired in a business
combination must meet to be recognized and reported separately from
goodwill. SFAS No. 142 requires, in part, that recorded goodwill be
tested at least annually for impairment rather than being amortized over
the estimated useful life of the underlying business. The Company
adopted the provisions of SFAS No. 141 as of July 1, 2001, and SFAS No. 142
effective January 1, 2002. Goodwill acquired in a purchase business
combination completed after June 30, 2001, but before SFAS No. 142 was
adopted in full, was not amortized. Goodwill acquired in business
combinations completed before July 1, 2001 continued to be amortized and
tested for impairment prior to the full adoption of SFAS No. 142.
Accordingly, amortization of all goodwill ceased as of January 1, 2002.
Upon adoption of SFAS No. 142, the Company evaluated its existing
intangible assets and goodwill that were acquired in purchase business
combinations, and considered whether any necessary reclassifications were
required in order to conform with the new classification criteria in SFAS
No. 141 for recognition separate from goodwill. No such reclassifications
were required. F-9




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  2.
    
    Significant accounting policies (continued):  (j)
    
    Goodwill (continued):  In connection with goodwill impairment evaluation, SFAS No. 142 requires
the Company to perform an annual assessment of whether there is an
indication that goodwill is impaired. The Company completes its annual
test of impairment on November 30 of each fiscal year. To accomplish
this the Company determines the carrying value of each of its reporting
units by assigning the assets and liabilities, including the existing
goodwill and intangible assets, to those reporting units. The Company
has identified reporting units by geographical operations for Canada and
the United States. Within the United States, separate reporting units
have been identified based on operational characteristics and, as they
are one level below an operating segment, discrete financial information
exists and segment management directly reviews these units. The Company
has determined the fair value of its reporting units and compared them to
each reporting units carrying amount.  The Company determined that the carrying value of the reporting units in
Canada, Cincinnati and Philadelphia exceeded their fair value as at
November 30, 2003. Therefore the Company was required to perform the
second step of the impairment test, which involved allocating the fair
value of each unit amongst its assets and liabilities, including
goodwill. The amount of fair value allocated to goodwill was then
compared to the carrying value of goodwill to determine the amount of any
impairment. This resulted in an impairment of $33.5 million as at
November 30, 2003. See also note 7.  (k)
    
    Income taxes:  Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to (i) differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and (ii) operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. To
the extent that it is not more likely than not that deferred tax assets
will be realized, a valuation allowance is provided.  (l)
    
    Revenue recognition:  Revenue consists of the parking revenue from managed and leased
locations. Revenue from managed locations represent revenue (both fixed
fees and additional payments based upon parking revenue) from facilities
managed for other parties and miscellaneous management fees for
accounting, insurance and other ancillary services such as consulting and
transportation management services. Parking and management contract
revenues are recognized when earned in accordance with the terms of the
agreements. Revenue from leased locations are recognized in accordance
with the terms of the agreements. Deferred revenue primarily represents
revenue received in advance of its due date. F-10




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  2.
    
    Significant accounting policies (continued):  (l)
    
    Revenue recognition (continued):  The Company classifies the reimbursement of costs incurred on behalf of
managed parking facilities as revenue from reimbursement of management
contract expenses, and the costs incurred on behalf of the owners of
managed parking facilities as reimbursed management contract expenses.
These costs relate primarily to payroll and other operating costs of
managed parking facilities where the Company is the manager of the
facility.  (m)
    
    Foreign currency translation:  The functional currency of the Companys operations in the United States
is the United States dollar. For facilities and operations located in
Canada, the functional currency is the Canadian dollar (CDN).  The assets and liabilities of the Canadian operations are translated into
United States dollars at exchange rates in effect at the balance sheet
date. Revenue and expense items are translated at the rates of exchange
prevailing during the year. The gains or losses resulting from these
translations are excluded from the determination of net earnings and
included in the separate foreign currency translation account within
shareholders equity. Other exchange gains and losses are included in
the determination of net earnings.  (n)
    
    Comprehensive income (loss):  To the Company, comprehensive income (loss) consists of net earnings and
the change in the foreign currency translation adjustment amount for the
year. Comprehensive income does not affect the Companys financial
position, results of operations or earnings per share.  (o)
    
    Earnings per share:  Basic earnings per common share is calculated by dividing net earnings by
the weighted average number of common shares outstanding during the year.
Diluted earnings per common share is calculated by adjusting the
weighted average number of outstanding shares by that number which
assumes that the proceeds received on exercise of dilutive securities is
applied to the repurchase of common shares at the average market price
for the period. F-11




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  2.
    
    Significant accounting policies (continued):  (p)
    
    Stock option plan:  The Company has a stock incentive plan pursuant to which the Company
grants stock options to executives and management. Prior to January 1,
2003, the Company accounted for those plans under the recognition and
measurement provisions of APB 25, Accounting for Stock Issued to
Employees, and related interpretations. Stock-based compensation for
fixed stock option plans was recorded at the grant date only if the
current market price of the underlying stock exceeded the exercise price.
Compensation for variable stock option plans was recorded on an ongoing
basis based on the change in intrinsic value of the options.  Effective January 1, 2003, the Company adopted the fair value recognition
provisions of Statement of Financial Accounting Standard No. 123,
Accounting for Stock-Based Compensation (SFAS 123), for stock-based
employee compensation. In accordance with SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure, the Company has
elected to adopt the recognition and measurement provisions of SFAS 123
retroactively and all prior periods presented have been restated to
reflect the compensation costs that would have been recognized had the
recognition provisions of SFAS 123 been applied to all awards granted to
employees.  For the year ended December 31, 2001, adoption of the recognition and
measurement provisions of SFAS 123 resulted in a decrease in stock based
compensation expense of $454,000, a decrease of $454,000 in additional
paid in capital as at December 31, 2001 and an increase of $454,000 in
retained earnings as at December 31, 2001, from the amounts previously
reported. For the year ended December 31, 2002, adoption of the
recognition provisions of SFAS 123 resulted in an increase in stock based
compensation expense of $398,000, a decrease in additional paid in
capital of $56,000 as at December 31, 2002 and an increase of $56,000 in
retained earnings as at December 31, 2002.  (q)
    
    Comparative figures:  Certain comparative figures have been reclassified to conform with the
presentation adopted in the current year.  3.
    
    Acquisition of businesses:  Effective July 1, 2001, the Company acquired all of the issued and
outstanding shares of DLC Management Group, Inc. (DLC) for net cash of
$4.6 million, including acquisition costs of $0.2 million. The former
shareholders of DLC are also entitled to additional cash consideration equal
to a proportion of the actual operating results of the acquired business,
calculated in accordance with the acquisition agreement, for each of the
twelve month periods ending June 30, 2002 through 2006. The present value
of these future payments at July 1, 2001 was estimated to be $4.4 million
and has been included in the cost of the acquisition. The liability for
these payments has been included on the Companys balance sheet in other
long-term liabilities and current portion of other long-term liabilities
as it is more likely than not at December 31, 2003 that these amounts will
be payable. F-12




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  3.
    
    Acquisition of businesses (continued):  The acquisition of DLC has been accounted for by the purchase method and
accordingly the aggregate purchase price, including related costs, has been
allocated to assets acquired and liabilities assumed based on their
estimated fair values as of the acquisition date as follows: Cost of acquisition:Cash
    
    $
    4,601Present value of future payments to former shareholders of DLC (note 9)
    
    
    4,386$
    8,987Working capital, including cash acquired of $259
    
    $
    796Fixed assets
    
    
    558Management and lease agreements
    
    
    344Goodwill
    
    
    7,289$
    8,987
  During the year ended December 31, 2003, the Company paid additional
consideration of $1.0 million, of which $1.1 million was accrued when the
purchase was initially recorded. The excess accrued of $0.1 million was
credited against goodwill during the year ended December 31, 2003. During
the year ended December 31, 2002, the Company paid additional consideration
of $1.8 million, of which $1.2 million was accrued when the purchase was
initially recorded. The remaining $0.6 million of this contingent payment
was included in goodwill during the year ended December 31, 2002.  The results of operations of DLC from July 1, 2001, being the effective date
of acquisition by the Company, are included in these consolidated financial
statements. F-13




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  4.
    
    Fixed assets: Accumulated
    
    Net book2003
    
    Cost
    
    depreciation
    
    valueLand
    
    $
    7,919
    
    
    $
    
    
    
    $
    7,919Buildings and improvements
    
    
    2,392
    
    
    
    348
    
    
    
    2,044Leasehold improvements
    
    
    4,998
    
    
    
    2,788
    
    
    
    2,210Furniture and fixtures
    
    
    515
    
    
    
    245
    
    
    
    270Equipment
    
    
    9,008
    
    
    
    5,013
    
    
    
    3,995Automotive equipment
    
    
    782
    
    
    
    447
    
    
    
    335$
    25,614
    
    
    $
    8,841
    
    
    $
    16,773
 Accumulated
    
    Net book2002
    
    Cost
    
    depreciation
    
    valueLand
    
    $
    6,508
    
    
    $
    
    
    
    $
    6,508Buildings and improvements
    
    
    1,970
    
    
    
    236
    
    
    
    1,734Leasehold improvements
    
    
    4,060
    
    
    
    1,913
    
    
    
    2,147Furniture and fixtures
    
    
    410
    
    
    
    155
    
    
    
    255Equipment
    
    
    6,487
    
    
    
    3,085
    
    
    
    3,402Automotive equipment
    
    
    593
    
    
    
    289
    
    
    
    304$
    20,028
    
    
    $
    5,678
    
    
    $
    14,350
  5.
    
    Management and lease agreements: 2003
    
    2002Cost
    
    $
    2,134
    
    
    $
    1,982Accumulated amortization
    
    
    (1,535
    )
    
    
    (1,115
    )$
    599
    
    
    $
    867
 F-14




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  5.
    
    Management and lease agreements (continued):  Amortization expense related to management and lease agreements for the year
ended December 31, 2003 was $267,000 (2002 - $311,000; 2001 - $300,000).
The estimated annual amortization for each of the next 5 years is as
follows: 2004
    
    $
    1792005
    
    
    1522006
    
    
    1522007
    
    
    1162008
    
    
    $
    599
  Under certain parking management agreements, the Company is committed to pay
fees to landlords based on either a fixed monthly rate, a percentage of
gross parking revenues or a percentage of net income. These fees payable
are recognized in accordance with the terms of the specific agreement.  6.
    
    Other assets: 2003
    
    2002Note receivable (a)
    
    $
    2,087
    
    
    $
    1,890Note receivable (b)
    
    
    
    
    
    
    1,141Lease prepayments (c)
    
    
    5,007
    
    
    
    805Other
    
    
    290
    
    
    
    4197,384
    
    
    
    4,255Current portion
    
    
    681
    
    
    
    360$
    6,703
    
    
    $
    3,895
  (a)
    
    The note, which is denominated in Canadian dollars, is receivable
from a director of a subsidiary of the Company and bears interest at 8%
per annum to April 2004 and 9.25% thereafter. Principal repayments of
$19,000 are required each quarter. In addition, one principal payment
of $0.5 million is required on April 30, 2004 and monthly blended
interest and principal repayments of $14,000 until April 30, 2004 and
$16,000 from May 1, 2004 until the note matures on April 30, 2009. The
note is secured by all issued and outstanding shares of Robbins Parking
Limited.  (b)
    
    The note was receivable from a landlord in connection with the
recovery of deferred development costs, and was repaid in February
2003.  (c)
    
    Lease prepayments are amortized as rent expense over the term of
the related leases. F-15




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  7.
    
    Goodwill: 2003
    
    2002Carrying value, beginning of year
    
    $
    45,213
    
    
    $
    44,259Impairment of goodwill
    
    
    (33,526
    )
    
    
    Adjustments to prior year acquisitions on payment of
contingent payments
    
    
    (135
    )
    
    
    631Effect of exchange rates
    
    
    7,287
    
    
    
    323Carrying value, end of year
    
    $
    18,839
    
    
    $
    45,213
  The Company performed its annual test of impairment of goodwill as at
November 30, 2003. In assessing fair value, the Company considered
information it had received through the Special Committees process to
explore strategic alternatives as described in note 13, and updated its
assessment to reflect the share price offer in the merger agreement signed
by the Company with Imperial Parking Management, LLC and IPK Acquisition
Corporation (note 19). The Company allocated the fair value of the offer
amongst its reporting units. This allocation was made on a basis consistent
with the allocation methodology previously applied in the annual impairment
tests. As a result, the fair value of the reporting units in Canada,
Cincinnati and Philadelphia exceeded their carrying values, which under SFAS
142 required the fair value of each of those units to be allocated amongst
the units identifiable assets and liabilities. The residual amount of fair
value was then allocated to goodwill in each unit and compared to the
corresponding carrying value of the goodwill. As the carrying value of
goodwill in all three units exceeded its calculated fair value, this
resulted in an impairment charge of $33.5 million in 2003.  The amount of the impairment charge was calculated as follows: Fair value of reporting units having goodwill balances
    
    $
    47,484Fair value of net identifiable assets and liabilities of reporting units
with goodwill balances
    
    
    (28,673
    )Indicated fair value of goodwill
    
    
    18,811Carrying value of goodwill
    
    
    52,337Goodwill impairment charge
    
    $
    33,526
 F-16




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  7.
    
    Goodwill (continued):  The effects of adoption of SFAS No. 142 (note 2(j)) on results of operations
for the years ended December 31, 2003, 2002 and 2001 are as follows (in
thousands, except per share data): Year ended December 312003
    
    2002
    
    2001Net earnings (loss):Reported net earnings (loss)
    
    $
    (33,512
    )
    
    $
    1,923
    
    
    $
    1,173Goodwill amortization
    
    
    
    
    
    
    
    
    
    
    2,206Adjusted net earnings (loss)
    
    $
    (33,512
    )
    
    $
    1,923
    
    
    $
    3,379Basic earnings per share:Reported net earnings (loss) per share
    
    $
    (18.35
    )
    
    $
    1.06
    
    
    $
    0.65Goodwill amortization
    
    
    
    
    
    
    
    
    
    
    1.21Adjusted net earnings (loss) per share
    
    $
    (18.35
    )
    
    $
    1.06
    
    
    $
    1.86Diluted earnings per share:Reported net earnings (loss) per share
    
    $
    (18.35
    )
    
    $
    1.02
    
    
    $
    0.63Goodwill amortization
    
    
    
    
    
    
    
    
    
    
    1.18Adjusted net earnings (loss) per share
    
    $
    (18.35
    )
    
    $
    1.02
    
    
    $
    1.81
  8.
    
    Bank indebtedness:  The Company has a credit facility (the Credit Facility) providing for
borrowings of up to $20 million, consisting of a $12.5 million non-revolving
loan; a $5 million revolving credit facility; and $2.5 million for standby
letters of credit. The non-revolving loan facility bears interest at LIBOR
plus 1.625% per annum and is repayable on demand. The revolving credit
facility bears interest at the lending banks prime rate. The amount
outstanding under the Companys Credit Facility as of December 31, 2003 was
$5.7 million with a weighted average interest rate of 2.8% per annum (2002 -
$3.3 million with a weighted average interest rate of 3.4 % per annum).
This amount is comprised of amounts drawn under the non-revolving loan
facility and is currently being repaid in blended monthly payments of
principal and interest of $105,000 through December 2007, and $43,000
thereafter until June 2010. The remaining amount available under the Credit
Facility was $10.7 million at December 31, 2003.  The bank credit facilities are secured by a general assignment by the
Company in favour of the bank, debentures over certain real property,
assignment of rents and leases, securities pledge agreements and assignment
of insurance. Advances require certain conditions precedent to be met and
are subject to the banks written approval. F-17




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  9.
    
    Other long-term liabilities: 2003
    
    2002Present value of future payments to former shareholders
of DLC (a)
    
    $
    2,694
    
    
    $
    3,612Other
    
    
    2,141
    
    
    
    2,1084,835
    
    
    
    5,720Current portion
    
    
    1,052
    
    
    
    1,581$
    3,783
    
    
    $
    4,139
  (a)
    
    The present value of future payments represents the estimated
additional cash consideration required to be paid in future years
pursuant to the DLC purchase agreement (note 3). Interest on the
balance is accrued at 7% per annum.  10.
    
    Income taxes:  Income tax expense (recovery) consists of: Income tax expenseNet earningsbefore tax
    
    Current
    
    Deferred
    
    TotalYear ended December 31, 2003:Canada
    
    $
    (19,613
    )
    
    $
    1,470
    
    
    $
    999
    
    
    $
    2,469United States
    
    
    (11,714
    )
    
    
    393
    
    
    
    (677
    )
    
    
    (284
    )$
    (31,327
    )
    
    $
    1,863
    
    
    $
    322
    
    
    $
    2,185Year ended December 31, 2002:Canada
    
    $
    5,567
    
    
    $
    106
    
    
    $
    2,184
    
    
    $
    2,290United States
    
    
    (2,014
    )
    
    
    240
    
    
    
    (900
    )
    
    
    (660
    )$
    3,553
    
    
    $
    346
    
    
    $
    1,284
    
    
    $
    1,630Year ended December 31, 2001:Canada
    
    $
    3,480
    
    
    $
    86
    
    
    $
    2,192
    
    
    $
    2,278United States
    
    
    (1,485
    )
    
    
    87
    
    
    
    (1,543
    )
    
    
    (1,456
    )$
    1,995
    
    
    $
    173
    
    
    $
    649
    
    
    $
    822
 F-18




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  10.
    
    Income taxes (continued):  Income tax expense attributable to income from continuing operations
differed from the amounts computed by applying the U.S. federal income tax
rate of 35% to earnings before income taxes as a result of the following: 2003
    
    2002
    
    2001Computed expected tax expense
    
    $
    (10,964
    )
    
    $
    1,244
    
    
    $
    698Increase (reduction) in income taxes resulting from:Impact of difference between U.S. federal
and Canadian effective tax rates
    
    
    171
    
    
    
    198
    
    
    
    326Effect of change in enacted tax rates
    
    
    
    
    
    
    
    
    
    
    445Change in valuation allowance
    
    
    508
    
    
    
    (266
    )
    
    
    (829
    )Reduction in deferred income tax liability
on inter-company debt
    
    
    
    
    
    
    
    
    
    
    (5,219
    )Income from Canadian subsidiary taxable
in the United States
    
    
    
    
    
    
    
    
    
    
    4,434Amortization of non-deductible goodwill
    
    
    
    
    
    
    
    
    
    
    954Impairment in non-deductible goodwill
    
    
    11,734
    
    
    
    
    
    
    
    Corporation capital and state tax
    
    
    507
    
    
    
    346
    
    
    
    173Other
    
    
    229
    
    
    
    108
    
    
    
    (160
    )$
    2,185
    
    
    $
    1,630
    
    
    $
    822
  The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 2003 and 2002 are as follows: 2003
    
    2002Deferred tax assets:Loss carry forwards
    
    $
    217
    
    
    $
    1,239Accrued liabilities
    
    
    271
    
    
    
    269Management agreements
    
    
    183
    
    
    
    245Special Committee costs
    
    
    508
    
    
    
    1,179
    
    
    
    1,753Valuation allowance
    
    
    (508
    )
    
    
    Total deferred tax assets
    
    
    671
    
    
    
    1,753Deferred tax liabilities:Long-lived assets, principally due to differences in depreciation
    
    
    (20
    )
    
    
    (292
    )Income from Canadian subsidiary taxable in the United States
    
    
    (2,214
    )
    
    
    (2,758
    )Other assets
    
    
    (386
    )
    
    
    (359
    )Total deferred tax liabilities
    
    
    (2,620
    )
    
    
    (3,409
    )Net deferred tax liability
    
    $
    (1,949
    )
    
    $
    (1,656
    )
 F-19




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  10.
    
    Income taxes (continued): 2003
    
    2002Reflected on consolidated balance sheet:Current deferred asset, net
    
    $
    
    
    
    $
    1,034Non-current deferred liability, net
    
    
    (1,949
    )
    
    
    (2,690
    )Net deferred tax liability
    
    $
    (1,949
    )
    
    $
    (1,656
    )
  In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment.  11.
    
    Stockholders equity:  (a)
    
    Treasury stock:  In January 2001, under a buy back program authorized by the Board of
Directors, the Company repurchased 30,858 shares at a cost of $543,500.
No shares were repurchased during the years ended December 31, 2003 and
2002. As at December 31, 2003, the Company holds a total 315,620 shares
in treasury, which were repurchased in prior years under various buy back
programs, at a cost of $5,240,401.  In September 2001, the Board of Directors increased the authorization
limit for additional repurchases of the Companys outstanding common
stock from $1,250,000 to $2,000,000. As of December 31, 2003, the
Company may repurchase up to $945,500 in common stock pursuant to this
authorization.  (b)
    
    Stock options:  In May 2001, the stockholders of the Company approved the 2000 Stock
Incentive Plan allowing the Company to grant stock options to executives
and management at the date of grant. The plan includes variable stock
options whereby the exercise price of the options increases during the
term of the options. A total of 315,000 shares were reserved for
issuance under the plan. F-20




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  11.
    
    Stockholders equity (continued):  (b)
    
    Stock options (continued):  A summary of the status of the Companys stock option plan as of December
31, 2003 and changes during the three years then ended is presented
below: Weighted averageOptions outstanding
    
    Exercise priceBalance at January 1, 2001
    
    
    
    
    
    $
    Options granted
    
    
    272,652
    
    
    
    13.04Options exercised
    
    
    (5,875
    )
    
    
    14.09Options cancelled/forfeited
    
    
    (2,750
    )
    
    
    12.81Balance at January 1, 2002
    
    
    264,027
    
    
    
    15.71Options granted
    
    
    16,250
    
    
    
    23.91Options exercised
    
    
    (4,622
    )
    
    
    16.20Options cancelled/forfeited
    
    
    (5,250
    )
    
    
    18.05Balance at January 1, 2003
    
    
    270,405
    
    
    
    18.04Options granted
    
    
    10,500
    
    
    
    24.11Options exercised
    
    
    (375
    )
    
    
    16.53Options cancelled/forfeited
    
    
    (5,125
    )
    
    
    19.35Balance at December 31, 2003
    
    
    275,405
    
    
    $
    18.79
  The Company measures employee stock compensation expense in these
consolidated financial statements based on the fair value of the options
at the date of grant.  The Company used the Black-Scholes option pricing model to determine the
fair value of grants made in fiscal 2001, 2002 and 2003. The following
assumptions were applied in determining the pro forma compensation cost: 2003
    
    2002
    
    2001Risk-free interest rate
    
    2.98%
    
    4.07%
    
    4.04%Expected dividend yield
    
    0.00%
    
    0.00%
    
    0.00%Expected option life
    
    5 years
    
    5 years
    
    5 yearsExpected stock price volatility
    
    30.0%
    
    12.0%
    
    22.0%Weighted average fair value of options granted at
market prices
    $
    7.52
    $
    5.11
    $
    3.97
 F-21




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  11.
    
    Stockholders equity (continued):  (b)
    
    Stock options (continued):  The following table summarizes stock options outstanding and exercisable
at December 31, 2003: OutstandingExercisableWeightedaverage remaining
    
    Weighted
    
    
    
    
    
    Weightedcontractual life
    
    average
    
    
    
    
    
    averageExercise price range
    
    Options
    
    (years)
    
    exercise price
    
    Options
    
    exercise price$17.05
    
    
    227,155
    
    
    
    6.3
    
    
    $
    17.05
    
    
    
    209,588
    
    
    $
    17.05$22.57 - $28.44
    
    
    22,750
    
    
    
    7.7
    
    
    
    26.80
    
    
    
    12,516
    
    
    
    26.76$24.86 - $29.54
    
    
    16,500
    
    
    
    8.4
    
    
    
    28.91
    
    
    
    6,417
    
    
    
    28.97$21.50 - $24.40
    
    
    9,000
    
    
    
    9.5
    
    
    
    23.76
    
    
    
    1,145
    
    
    
    23.17275,405
    
    
    
    6.6
    
    
    $
    18.79
    
    
    
    229,666
    
    
    $
    17.94
  12.
    
    Earnings per share:  The following table sets forth the computation of basic and diluted earnings
per share: 2003
    
    2002
    
    2001Earnings
    
    Common
    
    
    
    
    
    Earnings
    
    Common
    
    Per
    
    Earnings
    
    Common
    
    Peravailable
    
    shares
    
    Per share
    
    available
    
    shares
    
    share
    
    available
    
    shares
    
    share($000s)
    
    (000s)
    
    amount
    
    ($000s)
    
    (000s)
    
    amount
    
    ($000s)
    
    (000s)
    
    amountBasic earnings per share:Net earnings (loss)
    
    $
    (33,512
    )
    
    
    1,826
    
    
    $
    (18.35
    )
    
    $
    1,923
    
    
    
    1,821
    
    
    $
    1.06
    
    
    $
    1,173
    
    
    
    1,816
    
    
    $
    0.65Effect of
dilutive stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    (0.04
    )
    
    
    
    
    
    
    50
    
    
    
    (0.02
    )Diluted earnings per share
    
    $
    (33,512
    )
    
    
    1,826
    
    
    $
    (18.35
    )
    
    $
    1,923
    
    
    
    1,886
    
    
    $
    1.02
    
    
    $
    1,173
    
    
    
    1,866
    
    
    $
    0.63
  13.
    
    Other expenses:  In January 2003, a Special Committee of the Companys Board of Directors was
formed for the purpose of exploring strategic alternatives available to the
Company in the context of the decision by Gotham Partners to sell its
ownership interest in the Company. The Special Committee has engaged
professional advisors to assist it in this review. The Company incurred
$1.5 million in professional fees payable to the advisors during the year
ended December 31, 2003 (2002 and 2001 - nil), which have been expensed as
incurred.  As a result of the merger agreement signed by the Company in January 2004
(see note 19), the Company is committed to payments of $0.5 million in 2004
to the financial advisors, and a further payment of $0.25 million to the
advisors upon completion of the merger. F-22




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##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  14.
    
    Business segments:  Senior management of the Company reviews the revenue and overall results of
operations by geographic regions. The following table summarizes the
revenue, operating results and assets for these geographic regions: 2003
    
    2002
    
    2001Canada
    
    U.S.
    
    Total
    
    Canada
    
    U.S.
    
    Total
    
    Canada
    
    U.S.
    
    TotalRevenue (excluding
reimbursement of
expenses)
    
    $
    60,847
    
    
    $
    60,283
    
    
    $
    121,130
    
    
    $
    53,085
    
    
    $
    56,266
    
    
    $
    109,351
    
    
    $
    53,451
    
    
    $
    37,097
    
    
    $
    90,548Total revenue
    
    
    84,787
    
    
    
    69,710
    
    
    
    154,497
    
    
    
    74,593
    
    
    
    65,249
    
    
    
    139,842
    
    
    
    74,938
    
    
    
    42,960
    
    
    
    117,898Depreciation and
amortization
    
    
    1,348
    
    
    
    1,260
    
    
    
    2,608
    
    
    
    1,249
    
    
    
    1,148
    
    
    
    2,397
    
    
    
    3,785
    
    
    
    944
    
    
    
    4,729Goodwill impairment
    
    
    27,435
    
    
    
    6,091
    
    
    
    33,526
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (20,788
    )
    
    
    (9,166
    )
    
    
    (29,955
    )
    
    
    6,063
    
    
    
    (2,604
    )
    
    
    3,459
    
    
    
    3,796
    
    
    
    (2,080
    )
    
    
    1,716Income tax expense
(recovery)
    
    
    2,469
    
    
    
    (284
    )
    
    
    2,185
    
    
    
    2,290
    
    
    
    (660
    )
    
    
    1,630
    
    
    
    2,278
    
    
    
    (1,456
    )
    
    
    822Goodwill
    
    
    15,765
    
    
    
    3,074
    
    
    
    18,839
    
    
    
    35,913
    
    
    
    9,300
    
    
    
    45,213
    
    
    
    35,591
    
    
    
    8,668
    
    
    
    44,259Long-lived assets
    
    
    16,437
    
    
    
    7,638
    
    
    
    24,075
    
    
    
    13,943
    
    
    
    5,169
    
    
    
    19,112
    
    
    
    12,135
    
    
    
    5,837
    
    
    
    17,972Total assets
    
    
    51,404
    
    
    
    23,811
    
    
    
    75,215
    
    
    
    65,734
    
    
    
    26,694
    
    
    
    92,428
    
    
    
    60,870
    
    
    
    28,375
    
    
    
    89,245
  15.
    
    Unaudited quarterly financial information:  The following tables sets forth selected unaudited quarterly information for
the Companys last eight fiscal quarters. Fiscal 2003 Quarter EndDecember 31
    
    September 30
    
    June 30
    
    March 31Revenue (excluding reimbursement
of expenses)
    
    $
    30,457
    
    
    $
    34,100
    
    
    $
    31,595
    
    
    $
    24,978Gross margin
    
    
    6,224
    
    
    
    6,176
    
    
    
    6,407
    
    
    
    4,482Net earnings (loss) for the period
    
    
    (34,054
    )
    
    
    534
    
    
    
    757
    
    
    
    (749
    )Net earnings (loss) per share, basic
    
    
    (18.66
    )
    
    
    0.29
    
    
    
    0.42
    
    
    
    (0.41
    )Net earnings (loss) per share, diluted
    
    
    (18.66
    )
    
    
    0.29
    
    
    
    0.41
    
    
    
    (0.41
    )
 Fiscal 2002 Quarter EndDecember 31
    
    September 30
    
    June 30
    
    March 31(Restated - note 2(p))Revenue (excluding reimbursement
of expenses)
    
    $
    27,610
    
    
    $
    28,615
    
    
    $
    28,317
    
    
    $
    24,809Gross margin
    
    
    4,773
    
    
    
    6,032
    
    
    
    6,612
    
    
    
    4,774Net earnings (loss) for the period
    
    
    401
    
    
    
    560
    
    
    
    1,013
    
    
    
    (51
    )Net earnings (loss) per share, basic
    
    
    0.21
    
    
    
    0.31
    
    
    
    0.56
    
    
    
    (0.03
    )Net earnings (loss) per share, diluted
    
    
    0.21
    
    
    
    0.29
    
    
    
    0.53
    
    
    
    (0.03
    )
 F-23




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##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  16.
    
    Fair value of financial instruments:  The fair values of cash and cash equivalents, accounts receivable,
management agreements payable, trade accounts payable and accrued
liabilities, payable to employees and former employees and sales tax payable
are estimated to equal their carrying value due to their short-term to
maturity or ability for prompt liquidation. The carrying value of the bank
indebtedness and other long-term liabilities approximate their fair values
based on market rates of interest.  The fair value of notes receivable is not readily determinable due to the
nature of the relationship between the Company and the other parties.  17.
    
    Commitments and contingencies:  (a)
    
    Operating lease commitments:  The Company and its subsidiaries conduct a significant portion of their
operations on leased premises under operating leases expiring at various
dates through 2020. Lease agreements provide for minimum payments or
contingent payments based upon either a fixed annual rent, a percentage
of gross customer collections, or a combination thereof to the property
owner. The aggregate annual minimum lease commitments under operating
leases on premises originally for a period of more than one year in each
of the next five years are as follows: 2004
    
    $
    50,5652005
    
    
    38,4772006
    
    
    30,6252007
    
    
    22,5022008
    
    
    14,391
  The Company also leases certain of its office premises, automobiles and
office equipment under long-term operating leases. The aggregate annual
minimum lease payments required under operating leases in each of the
next five years are as follows: 2004
    
    $
    3,1862005
    
    
    2,6832006
    
    
    1,2812007
    
    
    8042008
    
    
    365
  Total minimum and contingent lease payments included in results from
operations for the year ended December 31, 2003 were $64.5 million (2002
 - $57.6 million; 2001 - $48.1 million). F-24




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##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  17.
    
    Commitments and contingencies (continued):  (b)
    
    Contingencies:  (i)
    
    As part of its regular operations, the Company periodically
becomes involved with legal claims or potential claims related to
damage to vehicles or personal injuries for which the Company
carries insurance, or disagreements with individual employees or on
the interpretation of management or lease agreements. In the
opinion of management, the resolution of these matters will not have
a material effect on the financial condition, results of operations,
or cash flows of the Company.  (ii)
    
    Imperial Parking Canada Corporation, a wholly owned
subsidiary of the Company, is a defendant in a lawsuit filed by
Sterling Parking Ltd. (Sterling) in April 2001, in the Queens
Bench of Alberta. The suit involves an alleged breach by Imperial
Parking Canada Corporation of a confidentiality agreement entered
into with Sterling in October 2000 relating to the potential
management of certain Sterling lots in Calgary. The proposed
transaction with Sterling was not completed and Sterling claims in
the lawsuit that Imperial Parking Canada Corporation wrongfully bid
on certain lots and improperly used Sterling confidential
information, all in breach of the confidentiality agreement. The
total damages claimed by Sterling are approximately $8.9 million
(CDN$11.6 million). The Company believes that Sterlings
allegations are largely without merit and that the amount of damages
claimed is far in excess of the actual damages suffered by Sterling,
if any. The parties are currently negotiating a settlement. If a
settlement is not reached, the Company intends to defend itself
vigorously. At December 31, 2003, the Company has accrued its best
estimate of the costs related to this action, but in the event that
the Company is unsuccessful, any damages awarded to Sterling in
excess of the amount accrued could have a material effect on the
Companys financial position and results of operations.  (c)
    
    Letters of credit:  The Company has outstanding letters of credit totalling $2.4
million.  18.
    
    Related parties:  The Company leased two properties from an entity controlled by the Companys
Vice-Chairman and an employee of the Company. The terms of the leases are
up to five years and minimum annual rent for the two properties is $1.4
million, increasing to $1.6 million over the lease terms. Percentage rent
is also payable. The Company also sub-leases a portion of its office
premises in New York City to the same entity, with rent revenue of $0.2
million per annum. The net amount paid in 2003 under the terms of these
leases was $1.4 million (2002 - $1.4 million; 2001 - $1.1 million). In
2003, the Company incurred a combined operating loss of $0.2 million (2002 -
$54,000; 2001 - $110,000 profit) from operating these two properties. F-25




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  18.
    
    Related parties (continued):  The Company leased three properties and operated one property under a
management agreement from entities controlled by a director of the Company.
One of the leased properties was sold to a third party during the year. The
two remaining leased properties have combined minimum annual rent of $0.8
million, increasing to $0.9 million during the terms of the leases, which
are up to 15 years. Under the management agreement, which has a one year
term, the Company is entitled to an annual management fee of $30,000. In
2003, the Company paid $1.5 million (2002 - $3.0 million;
2001 - $2.4
million) under the terms of these agreements. In 2003, the Company incurred
a combined operating loss of $ 0.2 million (2002 -
$0.6 million; 2001 - $0.1
million) from operating these four properties.  The Company operated one property under a management agreement from an
entity controlled by the Chairman of the Company and leased one property
from an entity in which the Chairman has a beneficial interest. The
management agreement was cancelled during the year ended December 31, 2003.
The leased property has minimum annual rent of $60,000 and the lease term is
for one year, although either party may terminate the lease upon 30 days
notice. In 2003, the Company paid $60,000 (2002 - $45,000; 2001 - nil)
under the terms of the lease agreement. In 2003, the Company generated a
combined operating profit of $5,000 (2002 - $10,000; 2001 - nil) from
operating these two properties.  In 1999, the Company entered into a ten year exclusive agreement for outdoor
advertising on its parking facilities in Canada with an entity whose
President at such time was and is now also a director of the Company. The
director is no longer an employee of that entity. In 2003, the Company
received $0.6 million (2002 - $0.5 million; 2001 - $0.4 million) pursuant to
this agreement.  The Company purchased $ 0.5 million (2002 -
$0.6 million; 2001 - $1.0
million) of parking equipment and supplies from a subsidiary of an entity
whose chairman, in 2002 and 2001, was also the Companys Chairman.  Management believes that the transactions above have been on terms no less
favourable to the Company than those that could have been obtained from
unaffiliated persons at the time the transactions were entered into. The
Board of Directors also approved all of the above transactions.  19.
    
    Subsequent event:  On January 22, 2004 the Company entered into a merger agreement with
Imperial Parking Management, LLC, an affiliate of The Gates Group, LLC, and
IPK Acquisition Corporation pursuant to which the Companys shareholders
would be entitled to receive $26.00 in cash per share, subject to downward
adjustment in the event that certain of the Companys transaction costs
incurred or paid after November 30, 2003 exceed $1.55 million. F-26




---



##### 



IMPERIAL PARKING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts stated in thousands of United States dollars, except per share amounts) Years ended December 31, 2003, 2002 and 2001  20.
    
    Recent accounting pronouncements:  (a)
    
    During 2003, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard No. 150, Accounting
for certain Financial Instruments with Characteristics of both
Liabilities and Equity(SFAS No. 150) and related interpretations.
SFAS No. 150 requires that certain financial instruments issued in the
form of shares that are mandatorily redeemable as well as certain other
financial instruments be classified as liabilities in the financial
statements. SFAS No. 150 is effective for the Companys December 31,
2003 financial statements. As the Company has no financial instruments
with characteristics of both liabilities and equity or shares which are
mandatorily redeemable, adoption of SFAS 150 had no impact on the
consolidated financial statements.  (b)
    
    FASB has issued Financial Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, which addresses the
consolidation of variable interest entities (including those referred
to as Special-Purpose Entities). The provisions of this
Interpretation, as revised, are effective to the Company in the three
months ending March 31, 2004. The Company is currently considering
whether any of its contractual relationships, including management and
lease agreements, notes receivable and equity method investments
disclosed in these financial statements, will be subject to the
provisions of the Interpretation. F-27