SP Plus Corporation
STANDARD PARKING CORP (Form: 10-Q, Received: 08/09/2012 16:17:19)

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2012

 

Commission file number: 000-50796

 


 

STANDARD PARKING CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

 

(State or Other Jurisdiction of

 

16-1171179

Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

900 N. Michigan Avenue, Suite 1600

Chicago, Illinois 60611-1542

(Address of Principal Executive Offices, Including Zip Code)

 

(312) 274-2000

(Registrant’s Telephone Number, Including Area Code)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES  x   NO  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES  x   NO  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  o

 

Accelerated filer  x

 

 

 

Non-accelerated filer  o

 

Smaller reporting company  o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  o   NO  x

 

As of August 6, 2012, there were 15,668,128 shares of common stock of the registrant outstanding.

 

 

 



Table of Contents

 

STANDARD PARKING CORPORATION

 

FORM 10-Q I NDEX

 

Part I. Financial Information

 

Item 1. Financial Statements:

3

Condensed Consolidated Balance Sheets as of June 30, 2012 (Unaudited) and December 31, 2011

3

Condensed Consolidated Statements of Income (Unaudited) for the three months ended June 30, 2012 and 2011 and the six months ended June 30, 2012 and 2011

4

Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three months ended June 30, 2012 and 2011 and the six months ended June 30, 2012 and 2011

5

Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2012 and 2011

6

Notes to Condensed Consolidated Interim Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3. Quantitative and Qualitative Disclosures about Market Risk

38

Item 4. Controls and Procedures

38

Part II. Other Information

 

Item 1. Legal Proceedings

39

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

39

Item 6. Exhibits

39

Signatures

42

 

2



Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

STANDARD PARKING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for share and per share data)

 

 

 

June 30, 2012

 

December 31, 2011

 

 

 

(Unaudited)

 

(see Note)

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

9,055

 

$

13,220

 

Notes and accounts receivable, net

 

57,071

 

46,396

 

Prepaid expenses and supplies

 

3,020

 

2,419

 

Deferred taxes

 

2,745

 

2,745

 

Total current assets

 

71,891

 

64,780

 

Leasehold improvements, equipment and construction in progress, net

 

16,417

 

16,732

 

Advances and deposits

 

4,564

 

5,261

 

Long-term receivables, net

 

15,094

 

14,177

 

Intangible and other assets, net

 

9,893

 

9,420

 

Cost of contracts, net

 

13,304

 

14,286

 

Goodwill

 

132,483

 

132,417

 

Total assets

 

$

263,646

 

$

257,073

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

54,583

 

$

44,747

 

Accrued and other current liabilities

 

35,273

 

41,304

 

Current portion of long-term borrowings

 

723

 

754

 

Total current liabilities

 

90,579

 

86,805

 

Deferred taxes

 

14,474

 

12,981

 

Long-term borrowings, excluding current portion

 

70,945

 

81,259

 

Other long-term liabilities

 

30,462

 

26,386

 

Standard Parking Corporation’s stockholders’ equity:

 

 

 

 

 

Preferred stock, par value $.01 per share; 5,000,000 shares authorized and no shares issued

 

 

 

Common stock, par value $.001 per share; 50,000,000 shares authorized; 15,668,128 and 15,464,864 shares issued and outstanding as of June 30, 2012 and December 31, 2011, respectively

 

15

 

15

 

Additional paid-in capital

 

93,820

 

92,662

 

Accumulated other comprehensive loss

 

(312

)

(318

)

Accumulated deficit

 

(36,281

)

(42,632

)

Total Standard Parking Corporation stockholders’ equity

 

57,242

 

49,727

 

Noncontrolling interest

 

(56

)

(85

)

Total equity

 

57,186

 

49,642

 

Total liabilities and stockholders’ equity

 

$

263,646

 

$

257,073

 

 


Note:

The balance sheet at December 31, 2011 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

 

See Notes to Condensed Consolidated Interim Financial Statements.

 

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Table of Contents

 

STANDARD PARKING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except for share and per share data, unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30, 2012

 

June 30, 2011

 

June 30, 2012

 

June 30, 2011

 

Parking services revenue:

 

 

 

 

 

 

 

 

 

Lease contracts

 

$

42,414

 

$

37,193

 

$

79,958

 

$

72,398

 

Management contracts

 

44,372

 

42,343

 

92,336

 

88,297

 

 

 

86,786

 

79,536

 

172,294

 

160,695

 

Reimbursed management contract revenue

 

104,160

 

100,126

 

208,097

 

201,250

 

Total revenue

 

190,946

 

179,662

 

380,391

 

361,945

 

Cost of parking services:

 

 

 

 

 

 

 

 

 

Lease contracts

 

38,000

 

34,286

 

73,387

 

67,785

 

Management contracts

 

24,018

 

23,215

 

52,510

 

50,707

 

 

 

62,018

 

57,501

 

125,897

 

118,492

 

Reimbursed management contract expense

 

104,160

 

100,126

 

208,097

 

201,250

 

Total cost of parking services

 

166,178

 

157,627

 

333,994

 

319,742

 

Gross profit:

 

 

 

 

 

 

 

 

 

Lease contracts

 

4,414

 

2,907

 

6,571

 

4,613

 

Management contracts

 

20,354

 

19,128

 

39,826

 

37,590

 

Total gross profit

 

24,768

 

22,035

 

46,397

 

42,203

 

General and administrative expenses (1)

 

14,868

 

11,597

 

29,913

 

22,779

 

Depreciation and amortization

 

1,807

 

1,677

 

3,535

 

3,210

 

Operating income

 

8,093

 

8,761

 

12,949

 

16,214

 

Other expenses (income):

 

 

 

 

 

 

 

 

 

Interest expense

 

1,132

 

1,180

 

2,262

 

2,349

 

Interest income

 

(135

)

(113

)

(205

)

(173

)

 

 

997

 

1,067

 

2,057

 

2,176

 

Income before income taxes

 

7,096

 

7,694

 

10,892

 

14,038

 

Income tax expense

 

2,856

 

3,066

 

4,384

 

5,545

 

Net income

 

4,240

 

4,628

 

6,508

 

8,493

 

Less: Net income attributable to noncontrolling interest

 

85

 

85

 

157

 

171

 

Net income attributable to Standard Parking Corporation

 

$

4,155

 

$

4,543

 

$

6,351

 

$

8,322

 

Common stock data:

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.27

 

$

0.29

 

$

0.41

 

$

0.53

 

Diluted

 

$

0.26

 

$

0.28

 

$

0.40

 

$

0.52

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

15,665,263

 

15,834,622

 

15,614,868

 

15,812,910

 

Diluted

 

15,900,659

 

16,164,114

 

15,860,668

 

16,155,272

 

 


(1)

Non-cash stock based compensation expense of $502 and $863 for the three and six months ended June 30, 2012, respectively, and $817 and $1,313 for the three and six months ended June 30, 2011, respectively, is included in general and administrative expenses.

 

See Notes to Condensed Consolidated Interim Financial Statements.

 

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STANDARD PARKING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30, 2012

 

June 30, 2011

 

June 30, 2012

 

June 30, 2011

 

Net income

 

$

4,240

 

$

4,628

 

$

6,508

 

$

8,493

 

Other comprehensive (expense) income

 

(80

)

(85

)

6

 

(21

)

Comprehensive income

 

4,160

 

4,543

 

6,514

 

8,472

 

Less: comprehensive income attributable to noncontrolling interest

 

85

 

85

 

157

 

171

 

Comprehensive income attributable to Standard Parking Corporation

 

$

4,075

 

$

4,458

 

$

6,357

 

$

8,301

 

 

See Notes to Condensed Consolidated Interim Financial Statements.

 

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STANDARD PARKING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except for share and per share data, unaudited)

 

 

 

Six Months Ended

 

 

 

June 30, 2012

 

June 30, 2011

 

Operating activities:

 

 

 

 

 

Net income

 

$

6,508

 

$

8,493

 

Adjustments to reconcile net income to net cash provided by operations:

 

 

 

 

 

Depreciation and amortization

 

3,496

 

3,238

 

Loss (gain) on sale and abandonment of assets

 

41

 

(36

)

Amortization of debt issuance costs

 

311

 

304

 

Non-cash stock-based compensation

 

863

 

1,313

 

Excess tax benefit related to stock option exercises

 

(221

)

(220

)

Provisions for losses on accounts receivable

 

92

 

95

 

Deferred income taxes

 

1,493

 

1,477

 

Change in operating assets and liabilities

 

(2,903

)

3,838

 

Net cash provided by operating activities

 

9,680

 

18,502

 

Investing activities:

 

 

 

 

 

Purchase of leasehold improvements and equipment

 

(1,863

)

(1,836

)

Cost of contracts purchased

 

(237

)

(272

)

Proceeds from sale of assets

 

15

 

79

 

Capitalized interest

 

(8

)

(36

)

Contingent purchase payments

 

(46

)

(231

)

Net cash used in investing activities

 

(2,139

)

(2,296

)

Financing activities:

 

 

 

 

 

Proceeds from exercise of stock options

 

154

 

143

 

Repurchase of common stock

 

 

(431

)

Earn-out payments made

 

(1,525

)

 

Tax benefit related to stock option exercises

 

221

 

220

 

Payments on senior credit facility

 

(10,000

)

(11,200

)

Distribution to noncontrolling interest

 

(128

)

(174

)

Payments on long-term borrowings

 

(71

)

(67

)

Payments on capital leases

 

(274

)

(264

)

Net cash used in financing activities

 

(11,623

)

(11,773

)

Effect of exchange rate changes on cash and cash equivalents

 

(83

)

47

 

(Decrease) increase in cash and cash equivalents

 

(4,165

)

4,480

 

Cash and cash equivalents at beginning of period

 

13,220

 

7,305

 

Cash and cash equivalents at end of period

 

$

9,055

 

$

11,785

 

Supplemental disclosures:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

1,779

 

$

2,105

 

Income taxes

 

2,813

 

3,692

 

 

See Notes to Condensed Consolidated Interim Financial Statements.

 

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Table of Contents

 

STANDARD PARKING CORPORATION

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(In thousands except for share and per share data, unaudited)

 

1. Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of Standard Parking Corporation have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements.

 

In the opinion of management, all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair presentation of the financial position and results of operations have been included. Operating results for the six month period ended June 30, 2012 are not necessarily indicative of the results that might be expected for any other interim period or the fiscal year ending December 31, 2012. The financial statements presented in this report should be read in conjunction with the consolidated financial statements and footnotes thereto included in our 2011 Annual Report on Form 10-K filed March 15, 2012.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and variable interest entities in which the Company is the primary beneficiary. Noncontrolling interest recorded in the consolidated statement of income is the interest in consolidated VIEs which are not controlled by the Company. We have interests in thirteen joint ventures and one limited liability company. The thirteen joint ventures each operate between one and thirty parking facilities. The limited liability company was formed to collect and distribute parking facility data for a fee. Of the fourteen variable interest entities, seven are consolidated into our financial statements, and seven are single purpose entities where the Company is not the primary beneficiary and therefore the Company does not control these entities as power is shared. Investments in variable interest entities where the Company is not the primary beneficiary are accounted for under the equity method and are not material to the Company’s consolidated financial statements. All significant intercompany profits, transactions and balances have been eliminated in consolidation.

 

Financial Instruments

 

The carrying values of cash and cash equivalents, notes and accounts receivable and accounts payable are reasonable estimates of their fair value due to the short-term nature of these financial instruments. Long-term debt, including capital lease obligations, has a carrying value that approximates fair value because these instruments bear interest at market rates.

 

Interest Rate Caps

 

We do not enter into derivative instruments for any purpose other than cash flow hedging purposes.

 

On February 22, 2010, we entered into interest rate cap agreements with Wells Fargo Bank N.A. (“Wells Fargo”) and Fifth Third Bank (“Fifth Third”), allowing us to limit our exposure on a portion of our borrowings under our senior credit facility (“Rate Cap Transactions”). Pursuant to two separate letter agreements between the Company and Wells Fargo and Fifth Third, respectively, we will receive payments from Wells Fargo and Fifth Third each quarterly period to the extent that the prevailing three month LIBOR during that period exceeds our cap rate of 3.25%. The Rate Cap Transactions became effective March 31, 2010, and settle each quarter on a date that is intended to coincide with our quarterly interest payment dates under our senior credit facility. The Rate Cap Transactions cap our LIBOR interest rate on a notional amount of $50,000 at 3.25% for a total of 39 months. These Rate Cap Transactions are classified as a cash flow hedge, and we calculate the effectiveness of the hedge on a quarterly basis. The ineffective portion of the cash flow hedge is recognized in current period earnings as an increase of interest expense. The fair value of the interest rate cap at June 30, 2012 is $1 and is included in prepaid expenses and supplies.

 

2. Stock-Based Compensation

 

We measure share-based compensation expense at the grant date, based on the fair value of the award, and the expense is recognized over the requisite employee service period (the vesting period) for awards expected to vest (considering estimated forfeitures).

 

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The Company has an amended and restated Long-Term Incentive Plan that was adopted in conjunction with our initial public offering. On April 22, 2008, our shareholders approved an amendment to our Long-Term Incentive Plan that increased the maximum number of shares of common stock available for awards under the Long-Term Incentive Plan from 2,000,000 to 2,175,000 and extended the Plan’s termination date. The Plan now terminates twenty years from the date of such approval, or April 22, 2028. Forfeited and expired options under the Plan become generally available for reissuance. At June 30, 2012, 108,498 shares remained available for award under the Plan.

 

Stock Options and Grants

 

We use the Black-Scholes option pricing model to estimate the fair value of each option grant as of the date of grant. The volatilities are based on the 90-day historical volatility of our common stock as of the grant date. The risk free interest rate is based on zero-coupon U.S. government issues with a remaining term equal to the expected life of the option.

 

There were no options granted during the six months ended June 30, 2012 and 2011. The Company recognized no stock-based compensation expense related to stock options for the six months ended June 30, 2012 and 2011, as all options previously granted were fully vested. As of June 30, 2012, there were no unrecognized compensation costs related to unvested options.

 

On April 25, 2012, the Company authorized vested stock grants to certain directors totaling 12,995 shares. The total value of the grant, based on the fair value of the stock on the grant date, was $245 and is included in general and administrative expenses.

 

Restricted Stock Units

 

In March 2008, the Company’s Compensation Committee and the Board of Directors authorized a one-time grant of 750,000 restricted stock units that subsequently were awarded to members of our senior management team on July 1, 2008. In November 2008, an additional 5,000 restricted stock units were awarded. The restricted stock units vest primarily in one-third installments on each of the tenth, eleventh and twelfth year anniversaries of the grant date. The restricted stock unit agreements provide for accelerated vesting upon the recipient reaching their retirement age.

 

The fair value of restricted stock units is determined using the fair value of our common stock on the date of the grant, and compensation expense is recognized over the vesting period. In accordance with the guidance related to share-based payments, we estimated forfeitures at the time of the grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate pre-vesting forfeitures and record stock-based compensation expense only for those awards that are expected to vest.

 

During the first six months of 2012, 146,000 restricted stock units vested and no restricted stock units were forfeited.

 

The Company recognized $257 and $618 of stock-based compensation expense related to the restricted stock units for the three and six months ended June 30, 2012, respectively, which is included in general and administrative expenses. The Company recognized $572 and $1,068 of stock-based compensation expense related to the restricted stock units for the three and six months ended June 30, 2011, respectively, which is included in general and administrative expenses. As of June 30, 2012, there was $5,465 of unrecognized stock-based compensation costs, net of estimated forfeitures, related to the restricted stock units that are expected to be recognized over a weighted average remaining period of approximately 6.4 years.

 

3. Net Income Per Common Share

 

Companies are required to present basic and diluted earnings per share. Basic net income per share is computed by dividing net income by the weighted daily average number of shares of common stock outstanding during the period. Diluted net income per share is based upon the weighted daily average number of shares of common stock outstanding for the period plus dilutive potential common shares, including stock options and restricted stock units using the treasury-stock method.

 

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Table of Contents

 

A reconciliation of the weighted average basic common shares outstanding to the weighted average diluted common shares outstanding is as follows (unaudited):

 

 

 

Three Months Ended
June 30

 

Six Months Ended
June 30

 

 

 

2012

 

2011

 

2012

 

2011

 

Weighted average common basic shares outstanding

 

15,665,263

 

15,834,622

 

15,614,868

 

15,812,910

 

Effect of dilutive stock options and restricted stock units

 

235,396

 

329,492

 

245,800

 

342,362

 

Weighted average common diluted shares outstanding

 

15,900,659

 

16,164,114

 

15,860,668

 

16,155,272

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.27

 

$

0.29

 

$

0.41

 

$

0.53

 

Diluted

 

$

0.26

 

$

0.28

 

$

0.40

 

$

0.52

 

 

There were 9,534 anti-dilutive options excluded in the computation of diluted earnings per share for the three and six months ended June 30, 2011 because the options’ exercise prices were greater than the average market price of the common stock. There were no anti-dilutive options for the three and six months ended June 30, 2012.

 

There are no additional securities that could dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share, other than those disclosed.

 

4. Recently Issued Accounting Pronouncements

 

In September 2011, the FASB issued updated accounting guidance related to testing goodwill for impairment. The amendments provide entities with the option of performing a qualitative assessment before performing the first step of the two-step impairment test. If entities determine, on the basis of qualitative factors, it is not more likely than not that the fair value of the reporting unit is less than or greater than the carrying amount, then performing the two-step impairment test would be unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform the second step of the goodwill impairment test to measure the amount of the impairment loss, if any. The amendment also provides entities with the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to the first step of the two-step impairment test. This guidance is effective for interim and annual periods beginning after December 15, 2011. We test for impairment annually during the fourth quarter of the fiscal year. Although the Company has not yet performed the annual impairment test for fiscal year 2012, we do not believe that its adoption will have a material effect on the Company’s financial position, results of operations or cash flows.

 

On January 1, 2012, we adopted the updated accounting guidance related to the presentation of comprehensive income. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, comprehensive income must be reported in either a single continuous statement of comprehensive income, which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. The adoption of this amendment did not have a material effect on our Consolidated Financial Statements as the amendment impacts presentation only; we have elected to present the components of total comprehensive income and components of net income in two separate consecutive statements.

 

On January 1, 2012, we adopted the amended provisions of fair value measurement and disclosure requirements. The guidance amends certain accounting and disclosure requirements related to fair value measurements to ensure that fair value has the same meaning in U.S. GAAP and in IFRS and that their respective fair value measurement and disclosure requirements are the same. This amendment changes certain fair value measurement principles and enhances disclosure requirements, particularly for level 3 fair value measurements. See Note 14 of the Notes to Unaudited Condensed Consolidated Financial Statements for disclosures related to fair value measurements.

 

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5. Leasehold Improvements, Equipment and Construction in Progress, Net

 

A summary of leasehold improvements, equipment, and construction in progress and related accumulated depreciation and amortization is as follows:

 

 

 

Ranges of Estimated
useful life

 

June 30, 2012

 

December 31, 2011

 

 

 

 

 

(Unaudited)

 

 

 

Equipment

 

2-5 years

 

$

12,097

 

$

12,021

 

Software

 

3-10 years

 

13,144

 

12,643

 

Vehicles

 

4 years

 

9,199

 

9,405

 

Other

 

10 years

 

2,503

 

2,464

 

Leasehold improvements

 

Shorter of lease term or economic life up to 10 years

 

9,386

 

9,732

 

Construction in progress

 

 

 

3,016

 

2,255

 

 

 

 

 

49,345

 

48,520

 

Less accumulated depreciation and amortization

 

 

 

(32,928

)

(31,788

)

Leasehold improvements, equipment and construction in progress, net

 

 

 

$

16,417

 

$

16,732

 

 

Depreciation expense was $1,121 and $2,163 for the three and six months ended June 30, 2012, respectively, and $1,016 and $1,947 for the three and six months ended June 30, 2011, respectively. Depreciation includes gains on sale and abandonment of leasehold improvements and equipment of $44 and $48 for the three and six months ended June 30, 2012, respectively, and losses on the sale and abandonment of leasehold improvements and equipment of $47 and $36 for the three and six months ended June 30, 2011, respectively.

 

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6. Cost of Contracts, Net

 

Cost of contracts represents the contractual rights associated with providing parking services at a managed or leased facility. Cost consists of either capitalized payments made to third parties or the value ascribed to contracts acquired through acquisition. Cost of contracts is amortized over the estimated life of the contracts, including anticipated renewals and terminations.

 

The balance of cost of contracts is comprised of the following:

 

 

 

June 30, 2012

 

December 31, 2011

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

Cost of contracts

 

$

24,433

 

$

24,203

 

Accumulated amortization

 

(11,129

)

(9,917

)

Cost of contracts, net

 

$

13,304

 

$

14,286

 

 

Amortization expense related to cost of contracts was $611 and $1,219 for the three and six months ended June 30, 2012, respectively, and $570 and $1,137 for the three and six months ended June 30, 2011 respectively. The weighted average useful life is 9.7 years for 2012 and 9.5 years for 2011.

 

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7. Goodwill

 

Goodwill is assigned to reporting units based upon the specific Region where the assets are acquired and associated goodwill resided.

 

The following table reflects the changes in the carrying amounts of goodwill by reported segment for the six months ended June 30, 2012 (unaudited).

 

 

 

Region
One

 

Region
Two

 

Region
Three

 

Region
Four

 

Total

 

Balance as of January 1, 2012

 

$

65,965

 

$

8,600

 

$

35,275

 

$

22,577

 

$

132,417

 

Contingent payments related to acquisitions

 

46

 

 

 

 

46

 

Foreign currency translation

 

 

20

 

 

 

 

 

20

 

Balance as of June 30, 2012

 

$

66,011

 

$

8,620

 

$

35,275

 

$

22,577

 

$

132,483

 

 

8. Long-Term Receivables, Net

 

 

 

Amount Outstanding

 

 

 

June 30, 2012

 

December 31, 2011

 

 

 

(Unaudited)

 

 

 

Deficiency payments:

 

 

 

 

 

Balance at the beginning of the year

 

$

13,407

 

$

12,070

 

Deficiency payments made

 

1,002

 

1,716

 

Deficiency payments received

 

(85

)

(379

)

Balance at the end of the period

 

14,324

 

13,407

 

Other Bradley related, net

 

3,203

 

3,203

 

Valuation allowance

 

(2,484

)

(2,484

)

Total Bradley receivables

 

$

15,043

 

$

14,126

 

Other long-term receivables

 

51

 

51

 

Total long-term receivables

 

$

15,094

 

$

14,177

 

 

Agreement

 

We entered into a 25-year agreement with the State of Connecticut that expires on April 6, 2025, under which we operate the surface parking and 3,500 garage parking spaces at Bradley International Airport located in the Hartford, Connecticut metropolitan area. The Company manages the facility for which it is expected to receive a management fee.

 

The parking garage was financed on April 6, 2000 through the issuance of $53,800 of State of Connecticut special facility revenue bonds, representing $47,700 non-taxable Series A bonds and a separate taxable issuance of $6,100 Series B bonds. The Series B bonds were retired on July 1, 2006 according to the terms of the indenture. The Bradley agreement provides that we deposit with a trustee for the bondholders all gross revenues collected from operations of the surface and garage parking, and from these gross revenues, the trustee pays debt service on the special facility revenue bonds outstanding, operating and capital maintenance expenses of the surface and garage parking facilities excluding our management fee discussed below, and specific annual guaranteed minimum payments to the State. Principal and interest on the Bradley special facility revenue bonds increase from approximately $3,600 in lease year 2002 to approximately $4,500 in lease year 2025. Annual guaranteed minimum payments to the State will increase from approximately $8,300 in lease year 2002 to approximately $13,200 in lease year 2024. The annual minimum guaranteed payment to the State by the trustee for the six months ended June 30, 2012 and 2011 was $5,134 and $5,028, respectively.

 

All of the cash flow from the parking facilities is pledged to the security of the special facility revenue bonds and is collected and deposited with the bond trustee. Each month the bond trustee makes certain required monthly distributions, which are characterized as “Guaranteed Payments.” To the extent the monthly gross receipts generated by the parking facilities are not sufficient for the trustee to make the required Guaranteed Payments, we are obligated to deliver the deficiency amount to the trustee. Additionally, the Guaranteed Payments are required to be paid before we are reimbursed for deficiency payments or management fees.

 

The following is the list of Guaranteed Payments:

 

·              Garage and surface operating expenses,

 

·              Principal and interest on the special facility revenue bonds,

 

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·              Trustee expenses,

 

·              Major maintenance and capital improvement deposits, and

 

·              State Minimum Guarantee.

 

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However, to the extent there is a cash surplus in any month during the term of the lease, we have the right to be repaid the principal amount of any and all deficiency payments previously made, together with actual interest expenses and a premium, not to exceed 10% of the initial deficiency payment. We calculate and record interest income and premium income in the period the associated deficiency payment is received from the trustee.

 

Deficiency Payments

 

To the extent that monthly gross receipts are not sufficient for the trustee to make the required payments, we are obligated pursuant to our agreement to deliver the deficiency amount to the trustee within three business days of being notified. We are responsible for these deficiency payments regardless of the amount of utilization for the Bradley parking facilities. The deficiency payments represent contingent interest bearing advances to the trustee to cover operating cash flow requirements. To the extent sufficient funds are available in the appropriate fund, the trustee is then directed by the State to reimburse us for deficiency payments up to the amount of the calculated surplus.

 

In the six months ended June 30, 2012, we made deficiency payments (net of repayments received) of $917.  In addition, we received $85 of interest income on deficiency repayments and we did not record or receive any premium income related to deficiency payments from the trustee. In the six months ended June 30, 2011, we made deficiency payments (net of repayments received) of $170 and received $54 in premium income and did not record or receive any interest income related to deficiency repayments from the trustee. There was no receivable from the trustee for interest and premium income related to deficiency repayments as of June 30, 2012 and 2011.

 

The deficiency payments, if any, are recorded as a receivable by us for which we are reimbursed from time to time as provided in the trust agreement. As of June 30, 2012 and December 31, 2011, we have a receivable of $14,324 and $13,407, respectively, compromised of cumulative deficiency payments to the trustee, net of reimbursements. We believe these advances to be fully recoverable and therefore have not recorded a valuation allowance for them. We do not guarantee the payment of any principal or interest on any debt obligations of the State of Connecticut or the trustee.

 

The Construction, Financing and Operating Special Facility Lease Agreement, which governs reimbursement of Guarantor Payments, places no time restriction or limits on our right to reimbursement.

 

Compensation

 

In addition to the recovery of certain general and administrative expenses incurred, our agreement provides for an annual management fee payment that is based on three operating profit tiers calculated for each year during the term of the agreement. The management fee is further apportioned 60% to us and 40% to an un-affiliated entity. To the extent that funds are available for the trustee to make a distribution, the annual management fee is paid when sufficient cash is available after the Guaranteed Payments (as defined in our agreement) are paid, and after the repayment of all deficiency payments, including accrued interest and premium. However, our right to the management fee accrues each year during the term of the agreement and is paid when sufficient cash is available for the trustee to make a distribution.

 

The annual management fee is paid after the repayment of all deficiency payments, including accrued interest and premium. Therefore, due to the existence and length of time for repayment of the deficiency amounts to the Company, no management fees have been recognized. Management fees will be recognized in accordance with SAB 104 when “collectability is reasonably assured.”

 

Cumulative management fees of $5,700 have not been recognized as of June 30, 2012, and no management fee income was recognized during the six months ending June 30, 2012 and 2011.

 

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9. Borrowing Arrangements

 

Long-term borrowings, in order of preference, consist of:

 

 

 

Amount Outstanding

 

 

 

Due Date

 

June 30, 2012

 

December 31, 2011

 

 

 

 

 

(Unaudited)

 

 

 

Revolving senior credit facility

 

October 2013

 

$

70,000

 

$

80,000

 

Capital lease obligations

 

Various

 

699

 

972

 

Obligations on seller notes and other

 

Various

 

969

 

1,041

 

Total

 

 

 

71,668

 

82,013

 

Less current portion

 

 

 

723

 

754

 

Long-term borrowings excluding current portion

 

 

 

$

70,945

 

$

81,259

 

 

Senior Credit Facility

 

On July 15, 2008, we amended and restated our credit facility. As of May 31, 2012, the Company entered into an amendment to extend the termination date from June 29, 2013 to October 1, 2013.

 

The $210,000 revolving senior credit facility includes a letter of credit sub-facility with a sublimit of $50,000 and a swing line sub-facility with a sublimit of $10,000. The $50,000 letter of credit sub-facility does not limit the maximum actual borrowings on the revolving senior credit facility.

 

This revolving senior credit facility bears interest, at our option, at either (1) LIBOR plus an applicable LIBOR margin of between 2.00% and 3.50% depending on the ratio of our total funded indebtedness to our EBITDA from time to time (“Total Debt Ratio”) or (2) the Base Rate (as defined below) plus an applicable Base Rate Margin of between 0.50% and 2.00% depending on our Total Debt Ratio. We may elect interest periods of one, two, three or six months for LIBOR based borrowings. The Base Rate is the greater of (i) the rate publicly announced from time to time by Bank of America, N.A. as its “prime rate”, or (ii) the overnight federal funds rate plus 0.50%.

 

Certain financial covenants limit the Company’s capacity to fully draw on its $210,000 revolving credit facility. Our senior credit facility includes a fixed charge ratio covenant, a total debt to EBITDA ratio covenant, a limit on our ability to incur additional indebtedness, issue preferred stock or pay dividends, and certain other restrictions on our activities. We are required to repay borrowings under our senior credit facility out of the proceeds of future issuances of debt or equity securities and asset sales, subject to certain customary exceptions. Our senior credit facility is secured by substantially all of our assets and all assets acquired in the future (including a pledge of 100% of the stock of our existing and future domestic guarantor subsidiaries and 65% of the stock of our existing and future foreign subsidiaries).

 

We are in compliance with all of our financial covenants as of June 30, 2012.

 

The weighted average interest rate on our senior credit facility at June 30, 2012 and December 31, 2011 was 2.6% and 2.5%, respectively. The rate includes all outstanding LIBOR contracts, interest rate cap effect and letters of credit. The weighted average interest rate on outstanding borrowings, not including letters of credit, was 2.6% at June 30, 2012 and December 31, 2011.

 

At June 30, 2012, we had $17,823 of letters of credit outstanding under the senior credit facility, borrowings against the senior credit facility aggregated $70,000, and we had $58,057 available under the senior credit facility.

 

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10. Business Unit Segment Information

 

An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses, and about which separate financial information is regularly evaluated by our chief operating decision maker, in deciding how to allocate resources. Our chief operating decision maker is the Company’s President and Chief Executive Officer.

 

Each of the operating segments is directly responsible for revenue and expenses related to their operations including direct regional administrative costs. Finance, information technology, human resources, and legal are shared functions that are not allocated back to the four operating segments. The CODM assesses the performance of each operating segment using information about its revenue and operating income (loss) before interest, taxes, and depreciation and amortization, but does not evaluate segments using discrete asset information. There are no inter-segment transactions and the Company does not allocate interest and other income, interest expense, depreciation and amortization or taxes to operating segments. The accounting policies for segment reporting are the same as for the Company as a whole.

 

Our business is managed based on regions administered by executive vice presidents. The following is a summary of revenues (excluding reimbursed management contract revenue) and gross profit by regions for the three and six months ended June 30, 2012 and 2011. Information related to prior periods has been recast to conform to the current region alignment.

 

The Company has provided this business unit segment information for all comparable prior periods. Segment information is summarized as follows (in thousands):

 

 

 

For the three months ended

 

For the six months ended

 

 

 

June 30,
2012

 

Gross
Margin

 

June 30,
2011

 

Gross
Margin

 

June 30,
2012

 

Gross
Margin

 

June 30,
2011

 

Gross
Margin

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Region One

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

$

20,957

 

 

 

$

20,649

 

 

 

$

40,576

 

 

 

$

39,591

 

 

 

Management contracts

 

13,843

 

 

 

13,340

 

 

 

26,916

 

 

 

26,595

 

 

 

Total Region One

 

34,800

 

 

 

33,989

 

 

 

67,492

 

 

 

66,186

 

 

 

Region Two

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

1,142

 

 

 

682

 

 

 

2,304

 

 

 

1,340

 

 

 

Management contracts

 

3,744

 

 

 

3,911

 

 

 

14,147

 

 

 

12,658

 

 

 

Total Region Two

 

4,886

 

 

 

4,593

 

 

 

16,451

 

 

 

13,998

 

 

 

Region Three

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

9,613

 

 

 

5,809

 

 

 

15,539

 

 

 

11,498

 

 

 

Management contracts

 

14,452

 

 

 

12,847

 

 

 

26,804

 

 

 

24,953

 

 

 

Total Region Three

 

24,065

 

 

 

18,656

 

 

 

42,343

 

 

 

36,451

 

 

 

Region Four

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

10,702

 

 

 

10,048

 

 

 

21,539

 

 

 

19,963

 

 

 

Management contracts

 

12,213

 

 

 

12,025

 

 

 

24,224

 

 

 

23,772

 

 

 

Total Region Four

 

22,915

 

 

 

22,073

 

 

 

45,763

 

 

 

43,735

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

 

 

 

5

 

 

 

 

 

 

6

 

 

 

Management contracts

 

120

 

 

 

220

 

 

 

245

 

 

 

319

 

 

 

Total Other

 

120

 

 

 

225

 

 

 

245

 

 

 

325

 

 

 

Reimbursed revenue

 

104,160

 

 

 

100,126

 

 

 

208,097

 

 

 

201,250

 

 

 

Total revenues

 

$

190,946

 

 

 

$

179,662

 

 

 

$

380,391

 

 

 

$

361,945

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Region One

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

$

1,439

 

7

%

$

1,741

 

8

%

$

2,220

 

5

%

$

2,295

 

6

%

Management contracts

 

7,679

 

55

%

7,420

 

56

%

14,536

 

54

%

14,130

 

53

%

Total Region One

 

9,118

 

 

 

9,161

 

 

 

16,756

 

 

 

16,425

 

 

 

Region Two

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

82

 

7

%

49

 

7

%

108

 

5

%

152

 

11

%

Management contracts

 

1,093

 

29

%

1,211

 

31

%

3,676

 

25

%

2,957

 

23

%

Total Region Two

 

1,175

 

 

 

1,260

 

 

 

3,784

 

 

 

3,109

 

 

 

Region Three

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

923

 

10

%

599

 

10

%

1,529

 

10

%

1,160

 

10

%

Management contracts

 

5,959

 

41

%

6,145

 

48

%

11,262

 

42

%

11,930

 

48

%

Total Region Three

 

6,882

 

 

 

6,744

 

 

 

12,791

 

 

 

13,090

 

 

 

Region Four

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

809

 

8

%

656

 

7

%

1,568

 

7

%

1,230

 

6

%

Management contracts

 

4,324

 

35

%

4,009

 

33

%

8,285

 

34

%

8,156

 

34

%

Total Region Four

 

5,133

 

 

 

4,665

 

 

 

9,853

 

 

 

9,386

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease contracts

 

1,161

 

%

(138

)

(2,760

)%

1,146

 

%

(224

)

(3,733

)%

Management contracts

 

1,299

 

1,083

%

343

 

156

%

2,067

 

844

%

417

 

131

%

Total Other

 

2,460

 

 

 

205

 

 

 

3,213

 

 

 

193

 

 

 

Total gross profit

 

24,768

 

 

 

22,035

 

 

 

46,397

 

 

 

42,203

 

 

 

General and administrative expenses

 

14,868

 

 

 

11,597

 

 

 

29,913

 

 

 

22,779

 

 

 

General and administrative expense percentage of gross profit

 

60

%

 

 

53

%

 

 

64

%

 

 

54

%

 

 

Depreciation and amortization

 

1,807

 

 

 

1,677

 

 

 

3,535

 

 

 

3,210

 

 

 

Operating income

 

8,093

 

 

 

8,761

 

 

 

12,949

 

 

 

16,214

 

 

 

Other expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

1,132

 

 

 

1,180

 

 

 

2,262

 

 

 

2,349

 

 

 

Interest income

 

(135

)

 

 

(113

)

 

 

(205

)

 

 

(173

)

 

 

 

 

997

 

 

 

1,067

 

 

 

2,057

 

 

 

2,176

 

 

 

Income before income taxes

 

7,096

 

 

 

7,694

 

 

 

10,892

 

 

 

14,038

 

 

 

Income tax expense

 

2,856

 

 

 

3,066

 

 

 

4,384

 

 

 

5,545

 

 

 

Net income

 

4,240

 

 

 

4,628

 

 

 

6,508

 

 

 

8,493

 

 

 

Less: Net income attributable to noncontrolling interest

 

85

 

 

 

85

 

 

 

157

 

 

 

171

 

 

 

Net income attributable to Standard Parking Corporation

 

$

4,155

 

 

 

$

4,543

 

 

 

$

6,351

 

 

 

$

8,322

 

 

 

 

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Region One encompasses operations in Alabama, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, and Wisconsin.

 

Region Two encompasses our Canadian operations, event planning and transportation, and our technology-based parking and traffic management systems.

 

Region Three encompasses operations in Arizona, California, Colorado, Hawaii, Louisiana, Nevada, Texas, Utah, Washington, and Wyoming.

 

Region Four encompasses all major airport and transportation operations nationwide.

 

Other consists of ancillary revenue that is not specifically identifiable to a region and insurance reserve adjustments related to prior years.

 

The CODM does not evaluate segments using discrete asset information.

 

11. Comprehensive Income

 

Comprehensive income consists of the following components, net of tax (unaudited):

 

 

 

For the three months ended

 

For the six months ended

 

 

 

June 30, 2012

 

June 30, 2011

 

June 30, 2012

 

June 30, 2011

 

Net income

 

$

4,240

 

$

4,628

 

$

6,508

 

$

8,493

 

Effective portion of interest rate cap

 

53

 

(39

)

89

 

(68

)

Effect of foreign currency translation

 

(133

)

(46

)

(83

)

47

 

Comprehensive income

 

4,160

 

4,543

 

6,514

 

8,472

 

Less: comprehensive income attributable to noncontrolling interest

 

85

 

85

 

157

 

171

 

Comprehensive income attributable to Standard Parking Corporation

 

$

4,075

 

$

4,458

 

$

6,357

 

$

8,301

 

 

12. Income Taxes

 

For the three months ended June 30, 2012, the Company recognized income tax expense of $2,856 on pre-tax earnings of $7,096 compared to $3,066 income tax expense on pre-tax earnings of $7,694 for the three months ended June 30, 2011. For the six months ended June 30, 2012, the Company recognized income tax expense of $4,384 on pre-tax earnings of $10,892 compared to $5,545 income tax expense on pre-tax earnings of $14,038 for the six months ended June 30, 2011. Income tax expense is based on a projected effective tax rate of approximately 40.2% for the six months ended June 30, 2012 compared to approximately 39.5% for the six months ended June 30, 2011. The Company’s effective tax rate increased due to the expiration of Work Opportunity Tax Credit (WOTC) Program and other similar tax credit programs on December 31, 2011.

 

As of June 30, 2012, the Company has not identified any uncertain tax positions that would have a material impact on the Company’s financial position. The Company recognizes potential interest and penalties related to uncertain tax positions, if any, in income tax expense.

 

The tax years that remain subject to examination for the Company’s major tax jurisdictions at June 30, 2012 are shown below:

 

2005 – 2010

United States — federal income tax

2005 – 2010

United States — state and local income tax

2008 – 2011

Canada

 

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13. Legal Proceedings

 

We are subject to litigation in the normal course of our business. The outcomes of legal proceedings and claims brought against us and other loss contingencies are subject to significant uncertainty. We accrue a charge against income when our management determines that it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we accrue for the authoritative judgments or assertions made against us by government agencies at the time of their rendering regardless of our intent to appeal. In determining the appropriate accounting for loss contingencies, we consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss. We regularly evaluate current information available to us to determine whether an accrual should be established or adjusted. Estimating the probability that a loss will occur and estimating the amount of a loss or a range of loss involves significant judgment.

 

14. Fair Value Measurement

 

The Company applies the accounting standards for fair value measurements and disclosures for its financial assets and financial liabilities. The standard requires disclosures about assets and liabilities measured at fair value. The Company’s financial assets relate to the interest rate cap of $1 and the Company’s financial liabilities relate to contingent earn-out payments of $4,605 as of June 30, 2012.

 

The accounting guidance for fair value measurements and disclosures includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on observable or unobservable inputs to valuation techniques that are used to measure fair value. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels:

 

·              Level 1: Inputs are quoted prices in active markets for identical assets or liabilities.

 

·              Level 2: Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable and market-corroborated inputs, which are derived principally from or corroborated by observable market data.

 

·              Level 3: Inputs that are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

 

The significant inputs used to derive the fair value of the amounts due to seller include financial forecasts of future operating results, the probability of reaching the forecast and the associated discount rate. The probability of the contingent consideration ranges from 5% to 95%, with a weighted average discount rate of 12%. The following table sets forth the Company’s financial assets and liabilities measured at fair value on a recurring basis and the basis of measurement at June 30, 2012 and December 31, 2011:

 

 

 

Total Fair Value
Measurement at
June 30, 2012

 

Level 1

 

Level 2

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

Interest Rate Cap

 

$

1

 

$

 

$

1

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

Due to seller

 

$

(4,605

)

$

 

$

 

$

(4,605

)

 

 

 

Total Fair Value
Measurement at
December 31, 2011

 

Level 1

 

Level 2

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

Interest Rate Cap

 

$

8

 

$

 

$

8

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

Due to seller

 

$

(6,498

)

$

 

$

 

$

(6,498

)

 

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Table of Contents

 

The following table provides a reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs (Level 3):

 

 

 

Due to Seller

 

Balance at December 31, 2011

 

$

(6,498

)

Contingent earn-out payments-payments made to seller

 

1,525

 

Contingent earn-out payments-change in fair value

 

368

 

Balance at June 30, 2012

 

$

(4,605

)

 

For the six months ended June 30, 2012, the Company recorded adjustments to the original contingent consideration obligation recorded upon the acquisition of Gameday Management Group U.S and Expert Parking. The adjustments were the result of using revised forecasts and updated fair value measurements that adjusted the Company’s potential earn-out payments related to the purchase of these businesses.

 

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For the three and six months ended June 30, 2012, the Company recognized a benefit of $169 and $368, respectively, which is included in general and administrative expenses in the statement of income due to the change in fair value measurements using level three valuation techniques.

 

15. Stock Repurchases

 

In June 2011, our Board of Directors authorized us to repurchase shares of our common stock, on the open market, up to $20,000 in aggregate and cancelled a prior authorization from 2008.

 

2012 Stock Repurchases

 

There were no stock repurchases for the six months ended June 30, 2012. As of June 30, 2012, $12,467 remained available for stock repurchases under the June 2011 authorization by the Board of Directors.

 

2011 Stock Repurchases

 

During the second quarter of 2011, we repurchased 27,803 shares from third-party shareholders at an average price of $15.52 per share, including average commissions of $0.03 per share, on the open market. The total value of the second quarter transactions was $431. At June 30, 2011, 27,803 shares were held as treasury stock. In July 2011 we returned the shares to authorized and unissued.

 

16. Agreement and Plan of Merger with Central Parking Corporation

 

Agreement and Plan of Merger

 

On February 28, 2012, the Company, KCPC Holdings, Inc., a Delaware corporation (“Central”) and the ultimate parent of Central Parking Corporation, a Tennessee corporation, Hermitage Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), and Kohlberg CPC Rep, L.L.C, in its capacity as the Stockholders’ Representative, entered into an Agreement and Plan of Merger (the “Merger Agreement”), providing for the merger of Merger Sub with and into Central, with Central surviving as a wholly owned subsidiary of the Company (the “Merger”).

 

Pursuant to the Merger Agreement and subject to the terms and conditions thereof, at the effective time of the Merger, the stockholders of Central (the “Central Stockholders”) will, in aggregate, be entitled to receive 6,161,334 shares of common stock of the Company (“Company Stock”), subject to reduction under specified circumstances as provided in the Merger Agreement (the “Stock Consideration”). In addition, each Central Stockholder will be entitled to receive a pro rata portion of $27,000 of total cash consideration (subject to adjustment as provided in the Merger Agreement) to be paid on the third anniversary of the closing of the Merger, to the extent not used to satisfy the Central Stockholders’ indemnity obligations that may arise under the Merger Agreement (the “Cash Consideration” and together with the Stock Consideration, the “Merger Consideration”).

 

The Merger Agreement contains customary representations, warranties and covenants of the Company and Central, including, among others, covenants of each of the Company and Central not to engage in certain significant actions without the prior written consent of the other party ( e.g., declaring dividends and incurring additional indebtedness).

 

Pursuant to the Merger Agreement, the Central Stockholders have agreed to indemnify the Company for a number of items, including, among others, adverse consequences resulting from breaches of representations, warranties and covenants and certain identified liabilities. These indemnification obligations are in certain cases limited to claims that in the aggregate exceed a specified “deductible” amount and, in the aggregate, do not exceed a specified “cap” amount.

 

Additionally, the Merger Agreement provides that, immediately after the closing of the Merger, the Company will increase the size of the Company’s board of directors (the “Company Board”) from five to eight members and will appoint individuals designated by the Stockholders’ Representative on behalf of the Central Stockholders to fill those vacancies. Following the Merger, the Stockholders’ Representative (as defined in the Merger Agreement), on behalf of the Central Stockholders, will continue to have rights to designate members to the Company Board in accordance with the Merger Agreement.

 

The Merger Agreement and the other transactions contemplated by the Merger Agreement have been approved by each of the Company Board, the board of directors of Central and the Central Stockholders. Additionally, pursuant to NASDAQ listing standards, which require stockholder approval prior to the issuance of securities in connection with the acquisition of stock of another company if the issuance would constitute more than 20% of the total number of shares of common stock outstanding before the issuance, the stockholders of the Company (the “Company Stockholders”) must approve the issuance

 

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Table of Contents

 

of Stock Consideration before the Merger and the other transactions contemplated by the Merger Agreement can be consummated.

 

The Company will hold a special meeting at which the Company Stockholders will be asked to consider and vote upon the proposal to approve the issuance of the Stock Consideration in the Merger.

 

In addition to obtaining the approval of the Company Stockholders as described above, the consummation of the Merger is subject to various closing conditions, including, among others, antitrust and other regulatory clearances and the consummation of the financing as discussed below.

 

The Merger Agreement also contains certain termination rights for both the Company and Central, and further provides that, upon termination of the Merger Agreement under specified circumstances, a party would be required to pay the other party’s fees and expenses in an amount not to exceed $6,000 or, in one case, a termination fee of $7,500 payable by the Company to Central.

 

The Merger Agreement provides that, on the closing date of the Merger, the Company will enter into a registration rights agreement (the “Registration Rights Agreement”) with the Central Stockholders which will require the Company to file a shelf registration statement, registering for public sale by the Central Stockholders the Company Stock acquired by them at the closing of the Merger. The Registration Rights Agreement will also provide the Central Stockholders with piggyback registration rights with respect to underwritten public offerings that the Company may effect for its own account or for the benefit of other selling stockholders.

 

The foregoing description of the Merger Agreement and the Merger does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 28, 2012.

 

Commitment Letter

 

Bank of America, N.A., Wells Fargo Bank, N.A., and JPMorgan Chase Bank, together with certain other financial institutions (collectively, the “Lenders”), have provided a senior debt commitment letter and related joinders, each dated February 28, 2012, to provide the Company with $450,000 in senior secured credit facilities consisting of (i) a $200,000 five year revolving credit facility and (ii) a $250,000 term loan facility. In conjunction with the Merger, the Company will assume approximately $210,000 of Central’s debt, net of cash acquired, which will be repaid at closing using the proceeds of the $450,000 senior credit facilities. In addition, the proceeds from these borrowings will be used by the Company to finance in part the Merger, the costs and expenses related to the Merger and the ongoing working capital and other general corporate purposes of the Company. The obligations of the Lenders to provide the debt financing under the senior debt commitment letter is subject to a number of conditions that the Company believes are customary for financings of this type. The termination date for the commitments under the senior debt commitment letter is October 31, 2012, subject to extension by the Lenders.

 

The foregoing description of the Commitment Letter does not purport to be complete and is qualified in its entirety by reference to the Commitment Letter, a copy of which is attached as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on February 28, 2012.

 

17. Subsequent events

 

A special meeting of the Company’s stockholders will be held on September 11, 2012 at 8:30 a.m., Chicago time, to vote on a proposal to approve the issuance of the Company’s common stock in connection with the Central Parking merger. Only stockholders of record of the Company’s common stock at the close of business on July 19, 2012, the record date, are entitled to vote at the special meeting. The proposed merger is conditional upon approval of the proposal by the Company’s stockholders at the special meeting and also remains subject to antitrust review, consummation of financing and other customary closing conditions. The Company continues to expect the transaction to close by the end of the Company’s third fiscal quarter. For further information, see the Company’s definitive proxy statement filed with the SEC on August 3, 2012 in connection with the special meeting of stockholders.

 

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Table of Contents

 

Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion of our results of operations should be read in conjunction with the consolidated financial statements and the notes thereto contained in this Quarterly Report on Form 10-Q and the consolidated financial statements and the notes thereto included in our Annual Report on our Form 10-K for the year ended December 31, 2011.

 

Important Information Regarding Forward-Looking Statements

 

This Form 10-Q contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements regarding the proposed merger of the Company and the parent of Central Parking Corporation (“Central”), and the other expectations, beliefs, plans, intentions and strategies of the Company.  We have tried to identify these statements by using words such as “expect,” “anticipate,” “believe, “could,” “should,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” and “will” and similar terms and phrases, but such words, terms and phrases are not the exclusive means of identifying such statements.  These forward-looking statements are made based on management’s expectations and beliefs concerning future events and are subject to uncertainties and factors relating to operations and the business environment, all of which are difficult to predict and many of which are beyond management’s control.  Actual results, performance and achievements could differ materially from those expressed in, or implied by, these forward-looking statements due to a variety of risks, uncertainties and other factors, including, but not limited to, the following:  the risk that the proposed business combination transaction is not completed on a timely basis or at all; the ability to integrate Central into our business successfully and the amount of time and expense spent and incurred in connection with the integration; the risk that the economic benefits, cost savings and other synergies that we anticipate as a result of the transaction are not fully realized or take long to realize than expected; the risk that the Company or Central may be unable to obtain antitrust or other regulatory clearance required for the transaction, or that required antitrust or other regulatory clearance may delay the transaction or result in the imposition of conditions that could adversely affect the operations of the combined company or cause the parties to abandon the transaction; intense competition; the loss, or renewal on less favorable terms, of management contracts and leases; and changes in general economic and business conditions or demographic trends.

 

For a detailed discussion of factors that could affect our future operating results, please see our filings with the Securities and Exchange Commission, including the disclosures under “Risk Factors” in those filings.  Except as expressly required by the federal securities laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances, future events or for any other reason.

 

Recent events

 

Merger Agreement

 

On February 28, 2012, the Company, KCPC Holdings, Inc., a Delaware corporation (“Central”) and the ultimate parent of Central Parking Corporation, a Tennessee corporation, Hermitage Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), and Kohlberg CPC Rep, L.L.C, in its capacity as the Stockholders’ Representative, entered into an Agreement and Plan of Merger (the “Merger Agreement”), providing for the merger of Merger Sub with and into Central, with Central surviving as a wholly owned subsidiary of the Company (the “Merger”).

 

Pursuant to the Merger Agreement and subject to the terms and conditions thereof, at the effective time of the Merger, the stockholders of Central (the “Central Stockholders”) will, in aggregate, be entitled to receive 6,161,334 shares of common stock of the Company (“Company Stock”), subject to reduction under specified circumstances as provided in the Merger Agreement (the “Stock Consideration”). In addition, each Central Stockholder will be entitled to receive a pro rata portion of $27,000 of total cash consideration (subject to adjustment as provided in the Merger Agreement) to be paid on the third anniversary of the closing of the Merger, to the extent not used to satisfy the Central Stockholders’ indemnity obligations that may arise under the Merger Agreement (the “Cash Consideration” and together with the Stock Consideration, the “Merger Consideration”).

 

The Merger Agreement contains customary representations, warranties and covenants of the Company and Central, including, among others, covenants of each of the Company and Central not to engage in certain significant actions without the prior written consent of the other party (e.g., declaring dividends and incurring additional indebtedness).

 

Pursuant to the Merger Agreement, the Central Stockholders have agreed to indemnify the Company for a number of items, including, among others, adverse consequences resulting from breaches of representations, warranties and covenants and certain identified liabilities. These indemnification obligations are in certain cases limited to claims that in the aggregate exceed a specified “deductible” amount and, in the aggregate, do not exceed a specified “cap” amount.

 

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Table of Contents

 

Additionally, the Merger Agreement provides that, immediately after the closing of the Merger, the Company will increase the size of the Company’s board of directors (the “Company Board”) from five to eight members and will appoint individuals designated by the Stockholders’ Representative on behalf of the Central Stockholders to fill those vacancies. Following the Merger, the Stockholders’ Representative (as defined in the Merger Agreement), on behalf of the Central Stockholders, will continue to have rights to designate members to the Company Board in accordance with the Merger Agreement.

 

The Merger Agreement and the other transactions contemplated by the Merger Agreement have been approved by each of the Company Board, the board of directors of Central and the Central Stockholders. Additionally, pursuant to NASDAQ listing standards, which require stockholder approval prior to the issuance of securities in connection with the acquisition of stock of another company if the issuance would constitute more than 20% of the total number of shares of common stock outstanding before the issuance, the stockholders of the Company (the “Company Stockholders”) must approve the issuance of Stock Consideration before the Merger and the other transactions contemplated by the Merger Agreement can be consummated.

 

As described in the Company’s preliminary proxy statement filed on April 27, 2012, the Company will hold a special meeting at which the Company Stockholders will be asked to consider and vote upon the proposal to approve the issuance of the Stock Consideration in the Merger.

 

In addition to obtaining the approval of the Company Stockholders as described above, the consummation of the Merger is subject to various closing conditions, including, among others, antitrust and other regulatory clearances and the consummation of the financing as discussed below.

 

The Merger Agreement also contains certain termination rights for both the Company and Central, and further provides that, upon termination of the Merger Agreement under specified circumstances, a party would be required to pay the other party’s fees and expenses in an amount not to exceed $6,000 or, in one case, a termination fee of $7,500 payable by the Company to Central.

 

The Merger Agreement provides that, on the closing date of the Merger, the Company will enter into a registration rights agreement (the “Registration Rights Agreement”) with the Central Stockholders which will require the Company to file a shelf registration statement, registering for public sale by the Central Stockholders the Company Stock acquired by them at the closing of the Merger. The Registration Rights Agreement will also provide the Central Stockholders with piggyback registration rights with respect to underwritten public offerings that the Company may effect for its own account or for the benefit of other selling stockholders.

 

The foregoing description of the Merger Agreement and the Merger does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 28, 2012.

 

Commitment Letter

 

Bank of America, N.A., Wells Fargo Bank, N.A., and JPMorgan Chase Bank, together with certain other financial institutions (collectively, the “Lenders”), have provided a senior debt commitment letter and related joinders, each dated February 28, 2012, to provide the Company with $450,000 in senior secured credit facilities consisting of (i) a $200,000 five year revolving credit facility and (ii) a $250,000 term loan facility. In conjunction with the Merger, the Company will assume approximately $210,000 of Central’s debt, net of cash acquired, which will be repaid at closing using the proceeds of the $450,000 senior credit facilities. In addition, the proceeds from these borrowings will be used by the Company to finance in part the Merger, the costs and expenses related to the Merger and the ongoing working capital and other general corporate purposes of the Company. The obligations of the Lenders to provide the debt financing under the senior debt commitment letter is subject to a number of conditions that the Company believes are customary for financings of this type. The termination date for the commitments under the senior debt commitment letter is October 31, 2012, subject to extension by the Lenders.

 

The foregoing description of the Commitment Letter does not purport to be complete and is qualified in its entirety by reference to the Commitment Letter, a copy of which is attached as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on February 28, 2012.

 

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Table of Contents

 

Overview

 

Our Business

 

We manage parking facilities in urban markets and at airports across the United States and in four Canadian provinces. We do not own any facilities, but instead enter into contractual relationships with property owners or managers.

 

We operate our clients’ properties through two types of arrangements: management contracts and leases. Under a management contract, we typically receive a base monthly fee for managing the facility, and we may also receive an incentive fee based on the achievement of facility performance objectives. We also receive fees for ancillary services. Typically, all of the underlying revenue and expenses under a standard management contract flow through to our clients rather than to us. However, some management contracts, which are referred to as “reverse” management contracts, usually provide for larger management fees and require us to pay various costs. Under lease arrangements, we generally pay to the property owner either a fixed annual rent, a percentage of gross customer collections or a combination thereof. We collect all revenue under lease arrangements and we are responsible for most operating expenses, but we are typically not responsible for major maintenance, capital expenditures or real estate taxes. Margins for lease contracts vary significantly, not only due to operating performance, but also due to variability of parking rates in different cities and varying space utilization by parking facility type and location. As of June 30, 2012, we operated approximately 91% of our locations under management contracts and approximately 9% of our locations under leases. For the six months ended June 30, 2012, we derived approximately 86% of our gross profit under management contracts and approximately 14% of our gross profit under leases.

 

In evaluating our financial condition and operating performance, management’s primary focus is on our gross profit, total general and administrative expenses and general and administrative expenses as a percentage of our gross profit. Although the underlying economics to us of management contracts and leases are similar, the manner in which we are required to account for them differs. Revenue from leases includes all gross customer collections derived from our leased locations (net of parking tax), whereas revenue from management contracts only includes our contractually agreed upon management fees and amounts attributable to ancillary services. Gross customer collections at facilities under management contracts, therefore, are not included in our revenue. Accordingly, while a change in the proportion of our operating agreements that are structured as leases versus management contracts may cause significant fluctuations in reported revenue and expense of parking services, that change will not artificially affect our gross profit. For example, as of June 30, 2012, we operated approximately 91% of our locations under management contracts, and for the six months ended June 30, 2012, we derived approximately 86% of our gross profit under management contracts. Only approximately 54% of total revenue (excluding reimbursed management contract revenue), however, was from management contracts because under those contracts the revenue collected from parking customers belongs to our clients. Therefore, gross profit and total general and administrative expenses, rather than revenue, are management’s primary focus.

 

General Business Trends

 

We believe that sophisticated commercial real estate developers and property managers and owners recognize the opportunity for parking and related services to be a profit generator rather than a cost center. Often, the parking experience makes both the first and the last impressions on their properties’ tenants and visitors. By outsourcing these services, they are able to capture additional profit by leveraging the unique operational skills and controls that an experienced parking management company can offer. Our ability to consistently deliver a uniformly high level of parking and related services and maximize the profit to our clients improves our ability to win contracts and retain existing locations. Our location retention rate for the twelve-month period ended June 30, 2012 was approximately 90%, compared to approximately 91% for the twelve-month period ended June 30, 2011, which also reflects our decision not to renew, or to terminate, unprofitable contracts.

 

For the six months ended June 30, 2012 compared to the six months ended June 30, 2011, average gross profit per location increased by 8% from $19.9 thousand to $21.5 thousand due primarily to an increase in same location gross profit and a favorable health insurance dividend related to 2011.

 

Summary of Operating Facilities

 

We focus our operations in core markets where a concentration of locations improves customer service levels and operating margins. The following table reflects our facilities operated at the end of the periods indicated:

 

 

 

June 30, 2012

 

December 31, 2011

 

June 30, 2011

 

Managed facilities

 

1,971

 

1,953

 

1,913

 

Leased facilities

 

187

 

201

 

211

 

Total facilities

 

2,158

 

2,154

 

2,124

 

 

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Table of Contents

 

Revenue

 

We recognize parking services revenue from lease and management contracts as the related services are provided. Substantially all of our revenue comes from the following two sources:

 

·              Parking services revenue—lease contracts . Parking services revenue related to lease contracts consist of all revenue received at a leased facility, including parking receipts (net of parking tax), consulting and real estate development fees, gains on sales of contracts and payments for exercising termination rights.

 

·              Parking services revenue—management contracts. Management contract revenue consists of management fees, including both fixed and performance-based fees, and amounts attributable to ancillary services such as accounting, equipment leasing, payments received for exercising termination rights, consulting, developmental fees, gains on sales of contracts, as well as insurance and other value-added services with respect to managed locations. We believe we generally purchase required insurance at lower rates than our clients can obtain on their own because we effectively self-insure for all liability and worker’s compensation claims by maintaining a large per-claim deductible. As a result, we have generated operating income on the insurance provided under our management contracts by focusing on our risk management efforts and controlling losses. Management contract revenue does not include gross customer collections at the managed locations as this revenue belongs to the property owner rather than to us. Management contracts generally provide us with a management fee regardless of the operating performance of the underlying facility.

 

Conversions between type of contracts (lease or management) are typically determined by our client and not us. Although the underlying economics to us of management contracts and leases are similar, the manner in which we account for them differs substantially.

 

Reimbursed Management Contract Revenue

 

Reimbursed management contract revenue consists of the direct reimbursement from the property owner for operating expenses incurred under a management contract, which is reflected in our revenue.

 

Cost of Parking Services

 

Our cost of parking services consists of the following:

 

·              Cost of parking services—lease contracts. The cost of parking services under a lease arrangement consists of contractual rental fees paid to the facility owner and all operating expenses incurred in connection with operating the leased facility. Contractual fees paid to the facility owner are generally based on either a fixed contractual amount or a percentage of gross revenue or a combination thereof. Generally, under a lease arrangement we are not responsible for major capital expenditures or real estate taxes.

 

·              Cost of parking services—management contracts. The cost of parking services under a management contract is generally the responsibility of the facility owner. As a result, these costs are not included in our results of operations. However, our reverse management contracts, which typically provide for larger management fees, do require us to pay for certain costs.

 

Reimbursed Management Contract Expense

 

Reimbursed management contract expense consists of direct reimbursed costs incurred on behalf of property owners under a management contract, which is reflected in our cost of parking services.

 

Gross Profit

 

Gross profit equals our revenue less the cost of generating such revenue. This is the key metric we use to examine our performance because it captures the underlying economic benefit to us of both lease contracts and management contracts.

 

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Table of Contents

 

General and Administrative Expenses

 

General and administrative expenses include salaries, wages, payroll taxes, insurance, travel and office related expenses for our headquarters, field offices, supervisory employees, and board of directors.

 

Depreciation and Amortization

 

Depreciation is determined using a straight-line method over the estimated useful lives of the various asset classes or in the case of leasehold improvements, over the initial term of the operating lease or its useful life, whichever is shorter. Intangible assets determined to have finite lives are amortized over their remaining useful life.

 

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Table of Contents

 

Results of Operations

 

Segments

 

An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses, and about which separate financial information is regularly evaluated by our chief operating decision maker, in deciding how to allocate resources. Our chief operating decision maker is our president and chief executive officer.

 

Our business is managed based on regions administered by executive vice presidents. The following is a summary of revenues (excluding reimbursed management contract revenue) by region for the three and six months ended June 30, 2012 and 2011.

 

Region One encompasses operations in Alabama, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, and Wisconsin.

 

Region Two encompasses our Canadian operations, event planning and transportation, and our technology-based parking and traffic management systems.

 

Region Three encompasses operations in Arizona, California, Colorado, Hawaii, Louisiana, Nevada, Texas, Utah, Washington, and Wyoming.

 

Region Four encompasses all major airport and transportation operations nationwide.

 

Other consists of ancillary revenue that is not specifically identifiable to a region and insurance reserve adjustments related to prior years.

 

The following tables present the material factors that impact our financial statements on an operating segment basis.

 

Three Months ended June 30, 2012 Compared to Three Months ended June 30, 2011

 

Segment revenue information is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

 

Region One

 

Region Two

 

Region Three

 

Region Four

 

Other

 

Total

 

Variance

 

 

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

 

Amount

 

%

 

 

 

(in millions)

 

Lease contract revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New location

 

$

0.6

 

$

0.1

 

$

0.4

 

$

 

$

4.0

 

$

 

$

 

$

 

$

 

$

 

$

5.0

 

$

0.1

 

$

4.9

 

4,900.0

 

Contract expirations

 

0.1

 

1.1

 

 

 

 

0.5

 

 

 

 

 

0.1

 

1.6

 

(1.5

)

(93.8

)

Same location

 

20.0

 

19.1

 

0.7

 

0.7

 

5.6

 

5.3

 

10.7

 

10.1

 

 

 

37.0

 

35.2

 

1.8

 

5.1

 

Conversions

 

0.3

 

0.3

 

 

 

 

 

 

 

 

 

0.3

 

0.3

 

 

 

Total lease contract revenue

 

$

21.0

 

$

20.6

 

$

1.1

 

$

0.7

 

$

9.6

 

$

5.8

 

$

10.7

 

$

10.1

 

$

 

$

 

$

42.4

 

$

37.2

 

$

5.2

 

14.0

 

Management contract revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New location

 

$

1.4

 

$

 

$

1.3

 

$

 

$

0.9

 

$

0.1

 

$

0.3

 

$

 

$

 

$

 

$

3.9

 

$

0.1

 

$

3.8

 

3,800.0

 

Contract expirations

 

0.1

 

1.6

 

 

0.8

 

0.1

 

0.8

 

 

0.3

 

 

 

0.2

 

3.5

 

(3.3

)

(94.3

)

Same location

 

12.2

 

11.6

 

2.4

 

3.1

 

13.5

 

11.9

 

12.0

 

11.8

 

0.1

 

0.2

 

40.2

 

38.6

 

1.6

 

4.1

 

Conversions

 

0.1

 

0.1

 

 

 

 

 

 

 

 

 

0.1

 

0.1

 

 

 

Total management contract revenue

 

$

13.8

 

$

13.3

 

$

3.7

 

$

3.9

 

$

14.5

 

$

12.8

 

$

12.3

 

$

12.1

 

$

0.1

 

$

0.2

 

$

44.4

 

$

42.3

 

$

2.1

 

5.0

 

 

Parking services revenue — lease contracts. Lease contract revenue increased $5.2 million, or 14.0%, to $42.4 million for the three months ended June 30, 2012, compared to $37.2 million for the three months ended June 30, 2011. The increase resulted primarily from increases in revenue from new locations, partially offset by decreases in revenue from contract expirations. Same location revenue for those facilities, which as of June 30, 2012 are the comparative periods for the two years presented, increased 5.1%. The increase in same location revenue was due to increases in short-term parking revenue of $1.5 million, or 6.3%, and increases in monthly parking revenue of $0.3 million, or 3.0%. Revenue associated with contract expirations relates to contracts that expired during the current period.

 

Parking services revenue — management contracts. Management contract revenue increased $2.1 million, or 5.0%, to $44.4 million for the three months ended June 30, 2012, compared to $42.3 million for the three months ended June 30, 2011. The increase resulted primarily from increases in revenue from new locations, which was offset by the decrease in contract expirations. Same locations revenue for those facilities, which as of June 30, 2012 are the comparative periods for the two years presented, increased 4.1%, primarily due to increased fees from reverse management locations and ancillary services.

 

Reimbursed management contract revenue. Reimbursed management contract revenue increased $4.0 million, or 4.0%, to $104.2 million for the three months ended June 30, 2012, compared to $100.1 million for the three months ended June 30, 2011. This increase resulted from additional reimbursements for costs incurred on behalf of owners.

 

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Table of Contents

 

Lease contract revenue increased primarily due to new locations in regions one, two and three combined with same location revenue in regions one, three and four. This was partially offset by decreases in contract expirations regions one and three. Same location revenue increases for the aforementioned regions were primarily due to increases in short-term and monthly parking revenue.

 

Management contract revenue increased primarily due to new locations in all four operating regions, combined with same location revenue in regions one, three and four. This was partially offset by contract expirations in all four operating regions, combined with same location revenue in regions two and other. The increases in same location revenue were primarily due to an increase in fees from reverse management locations and ancillary services. For comparability purposes, revenue associated with contract expirations relate to the contracts that expired during the current period.

 

Segment cost of parking services information is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

 

Region One

 

Region Two

 

Region Three

 

Region Four

 

Other

 

Total

 

Variance

 

 

 

2012