SP Plus Corporation
STANDARD PARKING CORP (Form: 10-K, Received: 03/12/2010 17:01:36)
Table of Contents

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Form 10-K
 
     
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the fiscal year ended December 31, 2009
Or
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from          to          
 
Commission file number: 333-50437
Standard Parking Corporation
(Exact Name of Registrant as Specified in Its Charter)
 
     
Delaware
  16-1171179
(State or Other Jurisdiction of
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)
 
Securities registered pursuant to Section 12(b) of the Act:
 
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Title of Each Class)
 
THE NASDAQ STOCK MARKET LLC
(Name of Each Exchange on which Registered)
 
Securities registered pursuant to Section 12(g) of the Act:
NONE
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  o      No  þ
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  o      No  þ
 
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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ      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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  o      No  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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  o Accelerated filer  þ 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 Act).  Yes  o      No  þ
 
As of June 30, 2009, the aggregate market value of the voting and non-voting common equity held by nonaffiliates of the registrant was approximately $248.8 million, based on the closing price of the common stock as reported on the NASDAQ Global Select Market.
 
As of March 1, 2010, there were 15,410,428 shares of common stock of the registrant outstanding.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the registrant’s definitive proxy statement to be delivered to shareholders in connection with the Annual Meeting of Stockholders to be held on April 28, 2010, are incorporated by reference into Part III of this Form 10-K.
 


 

 
Table of Contents
 
         
  Business   5
  Risk Factors   15
  Properties   23
  Legal Proceedings   24
 
PART II
  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   24
  Selected Financial Data   25
  Management’s Discussion and Analysis of Financial Condition and Results of Operations   26
  Quantitative and Qualitative Disclosures About Market Risk   42
  Financial Statements and Supplementary Data   42
  Controls and Procedures   42
 
PART III
  Directors, Executive Officers and Corporate Governance   43
  Executive Compensation   44
  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   44
  Certain Relationships and Related Transactions, and Director Independence   44
  Principal Accountant Fees and Services   44
 
PART IV
  Exhibits and Financial Statement Schedules   45
  77
  79
  EX-10.14
  EX-10.14.1
  EX-10.30
  EX-21.1
  EX-23
  EX-31.1
  EX-31.2
  EX-31.3
  EX-32


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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Form 10-K and the information incorporated by reference herein includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. The statements contained in this Form 10-K, including information we incorporate by reference, that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties.
 
We have used the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and similar terms and phrases, including references to assumptions in this Form 10-K, including information we incorporate by reference, to identify forward-looking statements. These forward-looking statements are made based on our management’s expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. These uncertainties and factors could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:
 
  •  the weak economy and recent turmoil in the credit markets and financial services industry, including their impact on our results and our ability to give accurate guidance;
 
  •  changes in general economic and business conditions or demographic trends;
 
  •  the financial difficulties or bankruptcy of our major clients, including the impact on our ability to collect receivables;
 
  •  availability, terms and deployment of capital;
 
  •  the loss, or renewal on less favorable terms, of management contracts and leases;
 
  •  our ability to renew our insurance policies on acceptable terms, the extent to which our clients choose to obtain insurance coverage through us and our ability to successfully manage self-insured losses;
 
  •  adverse litigation judgments or settlements resulting from legal or other proceedings in which we may be involved;
 
  •  seasonal trends, particularly in the first quarter of each year;
 
  •  the impact of public and private regulations;
 
  •  our ability to form and maintain relationships with large real estate owners, managers and developers;
 
  •  integration of future acquisitions in light of challenges in retaining key employees, synchronizing business processes, efficiently integrating facilities, marketing and operations, deriving the expected acquisition synergies or budgeting the actual costs or benefits of acquisitions;
 
  •  the ability to obtain performance bonds on acceptable terms to guarantee our performance under certain contracts;
 
  •  extraordinary events affecting parking at facilities that we manage, including emergency safety measures, military or terrorist attacks and natural disasters;
 
  •  changes in federal and state regulations including those affecting airports, parking lots at airports or automobile use;
 
  •  the loss of key employees;
 
  •  development of new, competitive parking-related services; and
 
  •  the other factors discussed under Item 1A, “Risk Factors,” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-K.
 
All of our forward-looking statements should be considered in light of these factors. All of our forward-looking statements speak only as of the date they were made, and we undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events or otherwise, except as may be required under applicable securities laws and regulations.


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NOTE
 
On December 4, 2007, our board of directors declared a 2-for-1 stock split in the form of a 100% common stock dividend to stockholders of record as of the close of business on January 8, 2008, which was distributed on January 17, 2008. All share and per share data included in this Form 10-K have been adjusted to reflect this stock split.


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PART I
 
ITEM 1.    BUSINESS
 
Our Company
 
We are one of the largest and most diversified providers of outsourced parking facility management services in the United States and Canada. Our services include a comprehensive set of on-site parking management and ground transportation services, which consist of training, scheduling and supervising all service personnel as well as providing customer service, marketing, maintenance and accounting and revenue control functions necessary to facilitate the operation of our clients’ parking facilities. We also provide a range of ancillary services such as airport shuttle operations, taxi and livery dispatch services and municipal meter revenue collection and enforcement services. We strive to be the #1 or #2 provider in each of the core markets in which we operate. As a given geographic market achieves a threshold operational size, we typically will establish a local office in order to promote increased operating efficiency. We rely on both organic growth and acquisitions to increase our client base and leverage our fixed corporate and administrative costs within each major metropolitan area. Our clients choose to outsource with us in order to attract, service and retain customers, gain access to the breadth and depth of our service and process expertise, leverage our significant technology capabilities and enhance their parking facility revenue, profitability and cash flow. As of December 31, 2009, we managed approximately 2,100 parking facility locations containing over one million parking spaces in approximately 335 cities, operated 145 parking-related service centers serving 63 airports, operated a fleet of approximately 405 shuttle buses and employed a professional staff of approximately 12,000 people.
 
We have provided parking services since 1929. Our history and resulting experience have allowed us to develop and standardize a rigorous system of processes and controls that enable us to deliver consistent, transparent, value-added and high quality parking facility management services. We serve a variety of industries and have end-market specific specialization in airports, healthcare facilities, hotels, municipalities and government facilities, commercial real estate, residential communities, retail and colleges and universities. We recently began to market and offer our end-market specific services under our new SP Plus ® brand. The professionals dedicated to each of our SP Plus ® markets and service lines possess subject matter expertise that enables them to meet the specific demands of their clients. Additionally, we complement our core services and help to differentiate our clients’ parking facilities by offering to their customers Ambiance in Parking ® , an approach to parking facility management that includes a comprehensive package of amenity and customer service programs. These programs not only make the parking experience more enjoyable, but also convey a sense of the client’s sensitivity to and appreciation for the needs of its parking customers. In doing so, we believe the programs serve to enhance the value of the parking properties themselves.
 
We have also dedicated significant resources to human capital management, providing comprehensive training for our employees, delivered primarily through the use of our web-based Standard University SM learning management system, which promotes customer service and client retention in addition to providing our employees with continued training and career development opportunities. Our focus on customer service and satisfaction is a key driver of our high location retention rate, which was approximately 89% for the year ended December 31, 2008 and 87% for the year ended December 31, 2009.
 
We operate our clients’ facilities through two types of arrangements: management contracts and leases. As of December 31, 2009, we operated approximately 90% of our locations under management contracts, and for the year ended December 31, 2009, we derived approximately 88% of our gross profit under management contracts. As of December 31, 2009, we operated approximately 10% of our locations under leases, and for the year ended December 31, 2009, we derived approximately 12% of our gross profit under 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 client rather than to us.
 
  •  Under a lease, we generally pay to the property owner either a fixed annual rent, a percentage of gross customer collections, or a combination of both. Under a lease, we collect all revenue and are responsible for most operating expenses, but typically we are not responsible for major maintenance, capital expenditures or real estate taxes.
 
Our focus on recurring, predominantly fixed-fee management contracts provides us with a measure of insulation from broader economic cycles and enhance our visibility and relative predictability because our management contract revenue does not fluctuate materially in relation to variations in parking volumes. Additionally, we are positioned to benefit from improving macroeconomic conditions and increased parking volumes through our exposure to lease contracts. We believe our revenue model and contract structure mix provides a competitive advantage when compared with competitors in our industry.
 
Our revenue is derived from a broad and diverse group of clients, industry end-markets and geographies. Our clients include some of the nation’s largest private and public owners, managers and developers of major office buildings, residential properties, commercial properties, shopping centers and other retail properties, sports and special event complexes, hotels, and


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hospitals and medical centers. No single client accounted for more than 6.4% of our revenue or more than 5.7% of our gross profit for the year ended December 31, 2009. Additionally, we have built a diverse geographic footprint that as of December 31, 2009 included operations in 41 states and the District of Columbia, and municipalities, including New York, Los Angeles, Chicago, Boston, Washington D.C. and Houston, among others, and four Canadian provinces. Our strategy is focused on building scale and leadership positions in large, strategic markets in order to leverage the advantages of scale across a larger number of parking locations in a single market. We strive to be the #1 or #2 provider in each of the core markets in which we operate.
 
One of the key differentiators in our industry is the effective use of technology, which is of increasing importance to our clients. Our commitment to the application of technology in the parking facility management industry has resulted in the creation of a proprietary product, Client View TM , which is an on-demand system that enables our clients, at their convenience, to directly access and download their monthly financial statements and detailed back-up reports. Additionally, we believe we are a leader in the field of introducing automation and technology as part of our parking facility operations, having been among the first to introduce airport credit card lanes, apply bar code decal technology and adopt various electronic payment options such as electronic fund transfer (EFT) payments and pay-on-foot machine (ATM) technology. We believe that automation and technology can enhance customer convenience, improve cash management and increase overall profitability for our clients, as well as allow us to add new locations and expand our operations into new markets more effectively.
 
Industry Overview
 
Overview
 
The parking industry is large and fragmented and includes companies that provide temporary parking spaces for vehicles on an hourly, daily, weekly, or monthly basis along with providing various ancillary services. A substantial number of companies in the industry offer parking services as a non-core operation in connection with property management or ownership, and the vast majority of companies in the industry are small, private and operate a single parking facility. As such, the industry remains highly fragmented with the top three operators, including Standard Parking, having less than a 30% market share. The industry experiences consolidation from time to time, as smaller operators find that they lack the financial resources, economies of scale and management techniques required to compete with larger national providers. We expect this trend to continue and will provide larger parking management companies with opportunities to expand their businesses and acquire smaller operators.
 
Industry Operating Arrangements
 
Parking facilities operate under three general types of arrangements:
 
  •  management contracts;
 
  •  leases; and
 
  •  ownership.
 
The general terms and benefits of these three types of arrangements are as follows:
 
Management Contracts.   Under a management contract, the facility operator generally receives a base monthly fee for managing the facility and may receive an incentive fee based on the achievement of facility performance objectives. Facility operators also generally charge fees for various ancillary services such as accounting, equipment leasing and consulting. Primary responsibilities under a management contract include hiring, training and staffing parking personnel, and providing revenue collection, accounting, record-keeping, insurance and facility marketing services. Under a typical management contract, the facility operator is not responsible for structural or mechanical repairs, or for providing security or guard services. The facility owner usually is responsible for operating expenses associated with the facility’s operation, such as taxes, license and permit fees, insurance costs, payroll and accounts receivable processing and wages of personnel assigned to the facility, although some management contracts, typically referred to as “reverse” management contracts, require the facility operator to pay certain of these cost categories but provide for payment to the operator of a larger management fee. Under a management contract, the facility owner usually is responsible for non- routine maintenance, repair costs and capital improvements. Management contracts are typically for a term of one to three years (although the contracts may often be terminated, without cause, on 30 days’ notice or less) and may contain a renewal clause. As of December 31, 2009, we operated approximately 90% of our locations under management contracts, and for the year ended December 31, 2009, we derived approximately 88% of our gross profit under management contracts.
 
Leases.   Under a lease, the parking facility operator generally pays to the property owner either a fixed base rent, percentage rent that is tied to the facility’s financial performance, or a combination of both. The parking facility operator collects all revenue and is responsible for most operating expenses, but typically is not responsible for major maintenance, capital expenditures or real estate taxes. In contrast to management contracts, leases typically are for terms of three to ten years,


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often contain a renewal term, and provide for a fixed payment to the facility owner regardless of the facility’s operating earnings. However, many of these leases may be cancelled by the client for various reasons, including development of the real estate for other uses. Some leases may be cancelled by the client on as little as 30 days’ notice without cause. Leased facilities generally require a longer commitment and a larger capital investment by the parking facility operator than do managed facilities. As of December 31, 2009, we operated approximately 10% of our locations under leases, and for the year ended December 31, 2009, we derived approximately 12% of our gross profit under leases.
 
Ownership.   Ownership of parking facilities, either independently or through joint ventures, entails greater potential risks and rewards than either managed or leased facilities. All owned facility revenue flows directly to the owner, and the owner has the potential to realize benefits of appreciation in the value of the underlying real estate. Ownership of parking facilities usually requires large capital investments, and the owner is responsible for all obligations related to the property, including all structural, mechanical and electrical maintenance and repairs and property taxes. We do not own any parking facilities.
 
Industry Growth Dynamics
 
A number of industry trends should facilitate growth for larger outsourced commercial parking facility management providers, including the following:
 
Opportunities From Large Property Managers, Owners and Developers.   As a result of past industry consolidation, there is a significant number of national property managers, owners and developers that own or manage multiple locations. Sophisticated property owners consider parking a profit center that experienced parking facility management companies can maximize. This dynamic favors larger parking facility operators that can provide specialized, value-added professional services with nationwide coverage.
 
Outsourcing of Parking Management and Related Services.   Growth in the parking management industry has resulted from a trend by parking facility owners to outsource the management of their parking and related operations to independent operators. We believe that entities such as large property managers, owners and developers, as well as cities, municipal authorities, hospitals and universities, in an effort to focus on their core competencies, reduce operating budgets and increase efficiency and profitability, will continue and perhaps increase the practice of retaining parking management companies to operate facilities and provide related services, including shuttle bus operations, municipal meter collection and valet parking.
 
Vendor Consolidation.   Based on interactions with our clients, we believe that many parking facility owners and managers are evaluating the benefits of reducing the number of parking facility management relationships they maintain. We believe this is a function of the need to reduce costs associated with interacting with a large number of third-party suppliers coupled with the need to foster closer inter-company relationships. By limiting the number of outsourcing vendors, companies will benefit from suppliers who will invest the time and effort to understand every facet of the client’s business and industry and who can effectively manage and handle all aspects of their daily requirements. We believe a trend towards vendor consolidation can benefit a company like ours, given our national footprint and scale, extensive experience, broad process capabilities and a demonstrated ability to create value for our clients.
 
Industry Consolidation.   The parking management industry is highly fragmented, with hundreds of small regional or local operators. We believe national parking facility operators have a competitive advantage over local and regional operators by reason of their:
 
  •  broad product and service offerings;
 
  •  deeper and more experienced management;
 
  •  relationships with large, national property managers, developers and owners;
 
  •  efficient cost structure due to economies of scale; and
 
  •  financial resources to invest in infrastructure and information systems.
 
Our Competitive Strengths
 
We believe we have the following key competitive strengths:
 
Leading Market Position with a Unique Value Proposition.   We are one of the largest and most diversified providers of outsourced parking facility management services in the United States and Canada. We strive to be the #1 or #2 provider in each of the core markets in which we operate. We recently began to market and offer many of our services under our new SP Plus ® brand, which reflects our ability to provide customized solutions and meet the varied demands of our diverse end-markets and supplement them with Ambiance in Parking ® , a comprehensive package of amenity and customer service programs. We believe our ability to offer a comprehensive range of services on a national basis is a significant competitive advantage and allows our


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clients to attract, service and retain customers, gain access to the breadth and depth of our service and process expertise, leverage our significant technology capabilities and enhance their parking facility revenue, profitability and cash flow.
 
Our Scale and Diversification.   As of December 31, 2009, we managed approximately 2,100 parking facility locations containing over one million parking spaces in approximately 335 cities, operated 145 parking-related service centers serving 63 airports, operated a fleet of approximately 405 shuttle buses and employed a professional staff of approximately 12,000 people. We benefit from diversification across our client base, industry end-markets and geographic locations.
 
  •  Client Base.   Our clients include some of the nation’s largest private and public owners, managers and developers of major office buildings, residential properties, commercial properties, shopping centers and other retail properties, sports and special event complexes, hotels, and hospitals and medical centers. No single client accounted for more than 6.4% of our revenue or more than 5.7% of our gross profit for the year ended December 31, 2009.
 
  •  Industry End-Markets.   We believe that our industry end-market diversification allows us to minimize our exposure to industry-specific seasonality and volatility. We believe that the breadth of end-markets we serve and the depth of services we offer to those end-markets provide us with a broader base of customers that we can target.
 
  •  Geographic Locations.   We have a diverse geographic footprint that included operations in 41 states and the District of Columbia and four Canadian provinces as of December 31, 2009. We strive to be the #1 or #2 provider in each of the core markets in which we operate, and our strategy is focused on building size and leadership positions in large, strategic markets in order to leverage the advantages of scale across a larger number of parking locations in a single market.
 
Additionally, our scale has enabled us to significantly enhance our operating efficiency over the past several years by standardizing processes and managing overhead costs.
 
Stable Client Relationships.   We have a track record of providing our clients and parking customers with a consistent, value-added and high quality parking facility management experience, as reflected by our high location retention rate, which was approximately 89% for the year ended December 31, 2008 and 87% for the year ended December 31, 2009. These statistics include the impact of our decision to exit from unprofitable contracts. As our clients continue to outsource the management of their parking operations and look to consolidate the number of their outsourcing providers, we believe this trend can benefit companies like ours, which has a national footprint and scale, extensive experience, broad process capabilities, and a demonstrated ability to create value for our clients.
 
Established Platform for Future Growth.   We have invested resources and developed a national infrastructure and technology platform which is complemented by significant management expertise that allows us to scale our business for future growth effectively and efficiently. We have the ability to transition into a new location very quickly, from the simplest to the most complex operation, and have experience working with incumbent facility managers to effect smooth and efficient takeovers and integrate new locations seamlessly into our operations.
 
Visible and Predictable Business Model.   We believe that our business model provides us with a measure of insulation from broader economic cycles because approximately 88% of our gross profit for the year ended December 31, 2009 was generated from fixed-fee and reverse management fee management contracts that for the most part are not dependent upon the level of utilization of those parking facilities. Additionally, because we do not own any parking facilities, we have few of the risks of real estate ownership. We benefit further from visibility provided by a recurring revenue model reinforced by contract retention rates that have approximated 90% over the past five years.
 
Highly Capital Efficient Business with Attractive Cash Flow Characteristics.   Our business generates attractive cash flow due to negative working capital dynamics and our low capital expenditure requirements. For the fiscal year December 31, 2008, we generated approximately $29.3 million of cash flow from operating activities, and our capital expenditures for the purpose of leasehold improvements and equipment were $6.3 million. For the fiscal year ended December 31, 2009, we generated approximately $21.8 million of cash flow from operating activities, and during the same period our capital expenditures for the purpose of leasehold improvements and equipment were $3.5 million.
 
Focus on Operational Excellence and Human Capital Management.   The company’s culture and training programs place a continuing focus on excellence in the execution of all aspects of day-to-day parking facility operation. This focus is reflected in our ability to deliver to our clients a professional, high-quality product through well-trained, service-oriented personnel, which we believe differentiates us from our competitors. To support our focus on operational excellence, we manage our human capital through a comprehensive, structured program that evaluates the competencies and performance of all of our key operations and administrative support personnel on an annual basis. Based on those evaluations, we create detailed developmental plans designed to provide our personnel with the skills and tools needed to perform their current duties effectively and to prepare themselves for future growth and advancement. We have also dedicated significant resources to human capital management, providing comprehensive training for our employees, delivered primarily through the use of our web-based Standard


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University SM learning management system, which promotes customer service and client retention in addition to providing our employees with continued training and career development opportunities.
 
Experienced Management Team.   Our current senior management team has a proven track record of growing our existing business organically and consistently integrating acquisitions. The team combines over 190 years of industry experience, including an average of approximately 20 years with us or with our acquired companies.
 
Our Growth Strategy
 
Building on these competitive strengths, we believe we are well-positioned to execute on the following growth strategies:
 
Grow Our Portfolio of Contracts in Existing Geographic Markets.   Our strategy is to capitalize on economies of scale and operating efficiencies by expanding our contract portfolio in our existing geographic markets, especially in our core markets. We market our services in each of our existing geographic markets with the goal of becoming the #1 or #2 provider in that market. As a given geographic market achieves a threshold operational size, we typically will establish a local office in order to promote increased operating efficiency by enabling local managers to use a common staff for recruiting, training and human resources support. This concentration of operating locations allows for increased operating efficiency and superior levels of customer service and retention through the accessibility of local managers and support resources. We rely on both organic growth and acquisitions to increase our client base and leverage our fixed corporate and administrative costs within each major metropolitan area.
 
Increase Penetration in Our Current Vertical End-Markets.   We believe that a significant opportunity exists for us to expand our presence into certain industry end-markets, such as colleges and universities, hospitals and medical centers as well as municipalities. In order to effectively target these new markets, we have implemented a go-to-market strategy of aligning our business by vertical end-markets and branding our domain expertise through our SP Plus ® market designations to highlight the specialized expertise and services that we provide to meet the needs of each particular industry and customer. This combination, in turn, allows us to deliver high quality and consistent services for our clients, enhances customer loyalty and allows us to further leverage our service capabilities, technology platform and regional and market-based management structure.
 
Expand and Cross-Sell Additional Services to Drive Incremental Revenue.   We believe we have significant opportunities to strengthen our relationships with existing clients and to attract new clients by continuing to cross-sell value-added services that complement our core parking operations. These services include shuttle bus operations, taxi and livery dispatch services, concierge-type ground transportation, on-street parking meter collection and facility maintenance services. We also are evaluating new service opportunities, such as security services, that would leverage our core competency of managing large networks of geographically dispersed employees. To better reflect these broader competencies, we developed our new SP Plus ® brand, which emphasizes our specialized market expertise and distinguish our service lines from the traditional parking services we provide. Our SP Plus ® brand includes market designations such as SP Plus ® Airport Services, SP Plus ® Healthcare Services, SP Plus ® Hotel Services, SP Plus ® Municipal Services, SP Plus ® Office Services, SP Plus ® Residential Services, SP Plus ® Retail Services and SP Plus ® University Services, which reflect the market-specific subject matter expertise that enables our professionals to meet the varied demands of those environments. Because our capabilities range beyond parking facility management, our SP Plus ® Transportation and SP Plus ® Maintenance brands more clearly distinguish those service lines from the traditional parking services that we provide under our Standard Parking brand. By offering this wide assortment of ancillary services, we are able to broaden the scope of our client relationships and thus increase our clients’ reliance and dependency on our services, which in turn results in enhanced client retention rates and higher revenue and gross profit per location.
 
Expand Our Geographic Platform.   We believe that opportunities exist to develop new geographic markets either through new contract wins, acquisitions, alliances or partnerships. Clients who outsource the management of their parking operations often have a presence in a variety of urban markets and seek to outsource the management of their parking facilities to a national provider. We intend to leverage relationships with existing clients that have locations in multiple markets as one potential entry point into developing new core markets. Additionally, we may continue to pursue acquisitions as a means of gaining critical mass in a new market.
 
Achieve Incremental Revenue Through Parking Data.   We expect to achieve incremental revenue through our participation as one of the founding partners of Parking Data Ventures (PDV), a limited liability company that sells licenses to use a database, compiled from more than 20 of the largest parking companies operating more than 10,000 parking facilities in North America, that provides parking information to consumers via the Internet and mobile data devices. PDV offers what is believed to be the largest, highest-quality database of proprietary parking facility information available throughout North America, including a parking facility’s entry points, hours of operation, accepted forms of payment, normalized pricing schedule, height restrictions and amenities provided. Real-time payment and reservation functionality may be enabled in the future. PDV is actively licensing its parking database directly to Internet portals, navigation device providers and wireless carriers that are seeking to enhance their local search and location-based service applications.


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Continued Focus on Management Contracts and Operational Efficiencies to Further Improve Profitability.   We continue to focus on the growth of lower-risk management contracts, which are inherently more predictable. We have invested substantial resources in information technology and have identified a number of internal initiatives to consolidate various corporate functions and improve our processes and service offerings. In addition, we will continue to evaluate and improve our human capital management to ensure a consistent and high-level of service for our clients. These efficiency measures have improved our cost structure and enhanced our financial strength, which we believe will continue to yield future benefits.
 
Pursue Opportunistic, Accretive Acquisitions.   The outsourced parking management industry remains highly fragmented and presents a significant opportunity for us. Given the scale in our operating platform, we have a demonstrated ability to successfully identify, acquire and integrate accretive tuck-in acquisitions. For example, in July 2009, we acquired the assets of Gameday Management Group, U.S., an Orlando-based company that plans the operation of transportation and parking systems for major stadium and sporting events. Gameday has provided its transportation and traffic management services for high-profile events, including Super Bowls XXX-XLIV, the Daytona 500 and the 2009 Presidential Inauguration, and will be providing its services at the upcoming Vancouver Winter Olympic Games. This acquisition, which will be transitioned into our SP Plus ® brand, will enable us to provide our stadium and special event clients with transportation and parking planning expertise that can meet their most complex needs. We also expect to leverage Gameday’s expertise into new parking and transportation opportunities in the future. Among the assets acquired is Gameday’s Click and Park SM online parking and traffic management system, which enables parking customers to reserve and pay for parking online in advance of an event. The addition of this capability to our product line is an example of how we are integrating technology into a changing parking industry. We will continue to selectively pursue acquisition opportunities that help us acquire scale or enhance our service capabilities.
 
We also provide a range of ancillary services to satisfy client needs such as municipal meter collection and valet parking.
 
Services
 
As a professional parking management company, we provide a comprehensive, turn-key package of parking services to our clients. Under a typical management contract structure, we are responsible for providing and supervising all personnel necessary to facilitate daily parking operations including cashiers, porters, valet attendants, managers, bookkeepers, and a variety of maintenance, marketing, customer service, and accounting and revenue control functions. By way of example, our typical day-to-day operating duties, whether performed using our own personnel or subcontracted vendors, include:
 
  •  Collection and deposit of daily and monthly parking revenues from all parking customers.
 
  •  Daily housekeeping to maintain the facility in a clean and orderly manner.
 
  •  Restriping of the parking stalls as necessary.
 
  •  Routine maintenance of parking equipment ( e.g. , ticket dispensing machines, parking gate arms, fee computers).
 
  •  Marketing efforts designed to maximize gross parking revenues.
 
  •  Delivery of courteous and professional customer relations.
 
  •  Painting of walkways, curbs, ceilings, walls or other facility surfaces.
 
  •  Snow removal from sidewalks and driveways.
 
The scope of our management services typically also includes a number of functions that support the basic daily facility operations, such as:
 
  •  Preparation of an annual operating budget reflecting our estimates of the annual gross parking revenues that the facility will generate from its parking customers, as well as the costs and expenses to be incurred in connection with the facility’s operation.
 
  •  Evaluation and analysis of, and consultation with our clients with respect to, price structures that will optimize our client’s revenue objectives.
 
  •  Consultation with our clients regarding which of our customer amenities are appropriate and/or desirable for implementation at the client’s parking facility.
 
  •  Implementation of a wide range of operational and revenue control processes and procedures, including internal audit procedures, designed to maximize and protect the facility’s parking revenues. Compliance with our mandated processes and procedures is supervised by dedicated internal audit and contract compliance groups.
 
  •  Consultation with our clients regarding any recommended modifications in facility design or traffic flow, or the installation of new or updated parking equipment, designed both to enhance the ease and convenience of the parking experience for the parking customers and to maximize facility profitability.


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  •  Monthly reporting to our clients regarding the facility’s operating results. For those clients who wish to directly access their financial reporting information on-line, we offer the use of our proprietary Client View SM client reporting system, which provides on-line access to site-level financial and operating information.
 
Ancillary Services
 
Beyond the conventional parking facility management services described above, we also offer an expanded range of ancillary services. For example:
 
  •  At various airports throughout the United States, we provide shuttle bus vehicles and the drivers to operate them in support of on-airport car rental operations as well as private off-airport parking locations.
 
  •  At certain airports, we provide ancillary ground transportation services, such as taxi and livery dispatch services, as well as concierge-type ground transportation information and support services for arriving passengers.
 
  •  For municipalities, we provide basic shuttle bus services, on-street parking meter collection and other forms of parking enforcement services.
 
  •  Within the medical center and hospital market, we provide valet parking and shuttle bus services.
 
Amenities and Customer Service Programs
 
We offer a comprehensive package of amenity and customer service programs, branded as Ambiance in Parking ® , that can be provided to our customers, many at nominal or no cost to the client. These programs not only make the parking experience more enjoyable, but also convey a sense of the client’s sensitivity to and appreciation of the needs of its parking customers. In doing so, we believe the programs serve to enhance the value of the parking properties themselves.
 
Musical Theme Floor Reminder System.   Our musical theme floor reminder system is designed to help customers remember the garage level on which they parked. A different song is played on each floor of the parking garage. Each floor also displays distinctive signage and graphics that correspond with the floor’s theme. For example, in one parking facility with U.S. colleges as a theme, a different college logo is displayed, and that college’s specific fight song is heard, on each parking level. Other parking facilities have themes such as famous recording artists, musical instruments, and professional sports teams.
 
Books-To-Go ® CD Library.   Monthly customers can borrow — free of charge — audio CD to which they can listen as they drive to and from work. A wide selection of fiction, non-fiction and business titles is maintained in the facility office.
 
Films-To-Go ® DVD Library.   This amenity builds on the success of our popular Books-To-Go ® program. DVDs of many popular movie titles are stocked in the parking facility office and made available free of charge to monthly customers. The movie selections are updated on a regular basis.
 
Little Parkers ® Child-Friendly Facilities.   This amenity creates a family atmosphere at the parking facility. Customers may use baby changing stations installed in the public restrooms. Kids appreciate the distribution of free toys such as bubble bottles, coloring books and stuffed animals.
 
Complimentary Driver Assistance Services.   Parking facility attendants provide a wide range of complimentary services to customers with car problems. Assistance can include charging weak batteries, inflating/changing tires, cleaning windshields and refilling windshield washer fluid. Attendants also can help customers locate their vehicles and escort them to their cars.
 
Standard Equipment & Technology Upgrade Program ® Services (SETUP ® ).   Standard Parking provides clients with a complete turnkey solution to managing all phases of new equipment projects, from initial design to installation to ongoing maintenance. Our design team will suggest a complete solution intended to return to our clients the greatest value for their investment based upon consideration of a wide array of choices as to both equipment (such as Pay-On-Foot, Automated Vehicle Identification and Automated Credit/Debit Card machine technology) and services (procurement, project management, installation and maintenance).
 
Standard Road Assist ® Emergency Services.   Parking customers experiencing vehicle problems beyond weak batteries and low tire pressure call our toll-free number to receive, on a pay-per-use basis, a basic package of emergency services, including towing up to five miles, jump starting, flat tire changing, fuel delivery, extracting a vehicle from the side of the road and lock-out service. The emergency services are provided at the parking facility or anywhere on the road.
 
CarCare Maintenance Services.   A car service vendor will pick-up a customer’s car from the parking facility, contact the customer with an estimate, service the car during normal working hours and return it to the facility before the end of the business day.


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ParkNet ® Traffic Information System.   The system provides customers with continuously updated traffic reports on a site-specific basis so that drivers can learn not only about traffic conditions on the area highways, but also about conditions in the immediate vicinity of the parking facility.
 
Automated Teller Machines.   On-site ATM machines provide customers access to cash from bankcards and credit cards. We arrange for the installation of the machine, operated and maintained by an outside vendor. The parking facility realizes supplemental income from a fixed monthly rent and a share of usage transaction fees.
 
Complimentary Courtesy Umbrellas and Flashlights.   Courtesy umbrellas are loaned to customers on rainy days. A similar lending program can be implemented to provide flashlights in emergency situations or power outages.
 
Complimentary Services/Customer Appreciation Days.   Our clients select from a variety of complimentary services that we provide as a special way of saying “thank you” to our parking customers. Depending on client preferences, coffee, donuts and/or newspapers occasionally are provided to customers during the morning rush hour. On certain holidays, candy, with wrappers that can be customized with the facility logo, can be distributed to customers as they exit. We also can distribute personalized promotional items, such as ice scrapers and key-chains.
 
Business Development
 
Our efforts to attract new clients are primarily concentrated in and coordinated by a dedicated business development group, whose background and expertise is in the field of sales and marketing, and whose financial compensation is determined to a significant extent by their business development success. This business development group is responsible for forecasting sales, maintaining a pipeline of prospective and existing clients, initiating contacts with such clients, and then following through to coordinate meetings involving those clients and the appropriate members of our operations hierarchy. By concentrating our sales efforts through this dedicated group, we enable our operations personnel to focus on achieving excellence in our parking facility operations and maximizing our clients’ parking profits and our own profitability.
 
We also place a specific focus on marketing and client relationship efforts that pertain to those clients having a large regional or national presence. Accordingly, we assign a dedicated executive to those clients to address any existing portfolio issues, as well as to reinforce existing — and develop new — account relationships and to take any other action that may further our business development interests.
 
Operations
 
We maintain regional and city offices throughout the United States and Canada in order to support approximately 12,000 employees and approximately 2,100 locations. These offices serve as the central bases through which we provide the employees to staff our parking facilities as well as the on-site and support management staff to oversee those operations. Our administrative staff accountants are based in those same offices and facilitate the efficient, accurate and timely production and delivery to our clients of our monthly reports. Having these all-inclusive operations and accounting teams located in regional and city offices throughout the United States and Canada allows us to add new locations quickly and in a cost-efficient manner. To facilitate the training of our facility personnel throughout the country, we have created Standard University sm , the foundation of all our formal training programs that span a wide range of topics including soft skills, technology, software, leadership skills and operating procedures. Courses are deployed using a multitude of methods including classroom sessions, web-based sessions, and self-managed, computer-based training. Standard Universit y sm is available to our employees on a 24/7 basis so they may access training and information when they need it.
 
Our overall basic corporate functions in the areas of finance, human resources, risk management, legal, purchasing and procurement, general administration, strategy and information and technology are based in our Chicago corporate office. The Chicago corporate office also supports and promotes consistency throughout our field operations by developing and administering our operational, financial and administrative policies, practices and procedures.


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Clients and Properties
 
Our client base includes a diverse cross-section of public and private owners, developers and managers of real estate. A list of some of our clients, and the types of properties for which we operate their parking, include:
 
     
Client / Property
  Property Type
 
American Museum of Natural History
  Museum
Brookfield Properties, Ltd. 
  Office
Chicago O’Hare International and Chicago Midway Airports
  Airport
Crescent Real Estate Equities Company
  Office
Four Seasons Hotel
  Hotel
Hartford Bradley International Airport
  Airport
Harvard Medical School
  University/Medical
JMB Realty Corporation
  Office
JPMorgan Chase Bank, NA
  Retail
Nationwide Realty Investors Ltd. 
  Office and Special event
Westfield Properties Shoppingtowns
  Retail
 
No single client represented more than 6.4% of revenues or more than 5.7% of our gross profit for the year ended December 31, 2009. For the years ended December 31, 2009 and December 31, 2008, we retained an average of 87% and 89%, respectively, of our locations (which statistic includes the impact of our decision to exit from unprofitable contracts).
 
Information Technology
 
We believe that automation and technology can enhance customer convenience, lower labor costs, improve cash management and increase 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 adopt electronic fund transfer (EFT) payment options, pay-on-foot (ATM) technology and bar code decal technology.
 
To promote internal efficiency, we have created advanced information systems that connect local offices across the country to our corporate headquarters. These systems support accounting, financial management and reporting practices, general operating procedures, training, employment policies, cash controls and marketing procedures. Our commitment to the application of technology in the parking management business has resulted in the creation of a proprietary product, Client View tm , an Internet-based system that gives our clients the flexibility and convenience to access and download their monthly financials and detailed back-up reports. We believe that our standardized processes and controls enhance our ability to successfully add new locations and expand our operations into new markets.
 
Employees
 
As of December 31, 2009, we employed approximately 11,970 individuals, including approximately 7,110 full-time and 4,860 part-time employees. As of December 31, 2008, we employed approximately 13,320 individuals, including approximately 7,690 full-time and 5,630 part-time employees. Approximately 28% of our employees are covered by collective bargaining agreements. No single collective bargaining agreement covers a material number of employees. We believe that our employee relations are good.
 
Insurance
 
We purchase comprehensive liability insurance covering certain claims that occur at parking facilities we lease or manage. The primary amount of such coverage is $2.0 million per occurrence and $2.0 million in the aggregate per facility for our garage liability and garage keepers legal liability coverages. In addition, we purchase workers’ compensation insurance for all eligible employees and umbrella/excess liability coverage. Under our various liability and workers’ compensation insurance policies, we are obligated to reimburse the insurance carrier for the first $250,000 of any loss. As a result, we are, in effect, self-insured for all claims up to that deductible level. We utilize a third-party administrator to process and pay claims. We also purchase property insurance that provides coverage for loss or damage to our property and in some cases our clients’ property, as well as business interruption coverage for lost operating income and certain associated expenses. The deductible applicable to any given loss under our property insurance policy varies based upon the insured values and the peril that causes the loss. We also purchase group health insurance with respect to eligible full-time employees and family members (whether such employees work at leased or managed facilities) and are fully-insured for all covered expenses. We believe that our insurance coverage is adequate and consistent with industry practice.


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Because of the size of the operations covered and our claims experience, we purchase insurance policies at prices that we believe represent a discount to the prices that would typically be charged to parking facility owners on a stand-alone basis. The clients for whom we operate parking facilities pursuant to management contracts have the option of purchasing their own liability insurance policies (provided that we are named as an additional insured pursuant to an additional insured endorsement), but historically most of our clients have chosen to obtain insurance coverage by being named as additional insureds under our master liability insurance policies. Pursuant to our management contracts we charge to such clients an allocated portion of our insurance-related costs at rates that we believe are competitive. A material reduction or increase in the number of clients who obtain their insurance coverage by being named as additional insureds under our liability policies could have a material effect on our operating income. In addition, a material change in insurance costs due to a change in the number or severity of claims, or an increase in claims costs or premiums paid by us, could have a material effect on our operating income.
 
Competition
 
The parking industry is fragmented and highly competitive, with limited barriers to entry. We face direct competition for additional facilities to manage or lease, while our facilities themselves compete with nearby facilities for our parking customers and in the labor market generally for qualified employees. Moreover, the construction of new parking facilities near our existing facilities can adversely affect our business. There are only a few national parking management companies that compete with us. We also face competition from numerous smaller, locally owned independent parking operators, as well as from developers, hotels, national financial services companies and other institutions that manage their own parking facilities as well as facilities owned by others. Many municipalities and other governmental entities also operate their own parking facilities, potentially eliminating those facilities as management or lease opportunities for us. Some of our present and potential competitors have or may obtain greater financial and marketing resources than us, which may negatively impact our ability to retain existing contracts and gain new contracts. We face significant competition in our efforts to provide ancillary services such as shuttle bus services and on-street parking enforcement because several large companies specialize in these services.
 
Seasonality
 
During the first quarter of each year, seasonality impacts our performance with regard to moderating revenues, with the reduced levels of travel most clearly reflected in the parking activity associated with our airport and hotel businesses as well as increases in certain costs of parking services, such as snow removal, both of which negatively affect gross profit. Although our revenues and profitability are affected by the seasonality of the business, general and administrative costs are relatively stable throughout the fiscal year. See Item 6, “Selected Financial Data,” for further information.
 
Regulation
 
Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs 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 the operation of parking facilities, we may be potentially liable for any such costs. In addition, from time to time we are involved in environmental issues at certain of our locations or in connection with our operations. While it is difficult to predict the ultimate outcome of any of these matters, based on information currently available, management believes that none of these matters, individually or in the aggregate, are reasonably likely to have a material adverse effect on our financial position, results of operations, or cash flows. 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.
 
Our business is not otherwise substantially affected by direct governmental regulation, although both municipal and state authorities sometimes directly regulate parking facilities. We are affected by laws and regulations (such as zoning ordinances) that are common to any business that deals with real estate and by regulations (such as labor and tax laws) that affect companies with a large number of employees. In addition, several state and local laws have been passed in recent years that encourage car pooling and the use of mass transit. Laws and regulations that reduce the number of cars and vehicles being driven could adversely impact our business.
 
We collect and remit sales/parking taxes and file tax returns for and on behalf of ourselves and our clients. We are affected by laws and regulations that may impose a direct assessment on us for failure to remit sales/parking taxes or to file tax returns for ourselves and on behalf of our clients.
 
Various other governmental regulations affect our operation of parking facilities, both directly and indirectly, including the ADA. Under the ADA, all public accommodations, 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


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persons. When negotiating management contracts and leases with clients, we generally require that the property owner contractually assume responsibility for any ADA liability in connection with the property. There can be no assurance, however, that the property owner has assumed such liability for any given property and there can be no assurance that we would not be held liable despite assumption of responsibility for such liability by the property owner. Management believes that the parking facilities we operate are in substantial compliance with ADA requirements.
 
Regulations by the Federal Aviation Administration may affect our business. The FAA generally prohibits parking within 300 feet of airport terminals during times of heightened alert. The 300 foot rule and new regulations may prevent us from using a number of existing spaces during heightened security alerts at airports. Reductions in the number of parking spaces may reduce our gross profit and cash flow for both our leased facilities and those facilities we operate under management contracts.
 
Corporate Information
 
Our headquarters are located at 900 N. Michigan Avenue, Suite 1600, Chicago, Illinois 60611-1542. Our telephone number is (312) 274-2000. Our Standard Parking brand’s web site address is www.standardparking.com and our SP Plus ® brand’s website address is www.spplus.com. Our periodic reports and other information filed with or furnished to the SEC are available free of charge through our web site promptly after those reports and other information are electronically filed with or furnished to the SEC. Information contained on our web site or any other web site is not incorporated by reference into this or any other report we file with or furnish to the SEC, and you should not consider information contained on our web site or any other web site to be a part of this or any other report we file with or furnish to the SEC.
 
Intellectual Property
 
Standard Parking ® and the Standard Parking logo and SP Plus ® and the SP Plus logo, are service marks registered with the United States Patent and Trademark Office. In addition, we have registered the names and, as applicable, the logos of all of our material subsidiaries and divisions as service marks with the United States Patent and Trademark Office or the equivalent state registry, including the right to the exclusive use of the name Central Park in the Chicago metropolitan area. We invented the Multi-Level Vehicle Parking Facility musical Theme Floor Reminder System, and obtained trademark registrations for our proprietary parker programs, such as Books-to-Go ® , Films-To-Go ® , Little Parkers ® and Ambiance in Parking ® and our comprehensive training program, Standard University sm . We have also registered the copyright rights in our proprietary software, such as Click and Park tm , Click and Ride tm , Client View tm , Hand Held Program tm , License Plate Inventory Programs tm and ParkStat tm with the United States Copyright Office.
 
ITEM 1A.    RISK FACTORS
 
You should carefully consider the specific risk factors described below together with all other information contained in or incorporated by reference into this report, as these risks, among others, are important factors that could cause our actual results to differ from our historical results. It is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete statement of all potential risks or uncertainties applicable to our business.
 
The weak economy and turmoil in the credit markets and the financial services industry may reduce demand for our services, lower our earnings and harm our operations.
 
Recently, the credit markets and the financial services industry have been experiencing a period of unprecedented turmoil and upheaval characterized by the bankruptcy, failure, collapse or sale of various financial institutions and an unprecedented level of intervention from the United States government. While the ultimate outcome of these events cannot be predicted, they may have a material adverse effect on us and our costs of borrowing. These events could also adversely impact the availability of financing to our clients and therefore our ability to collect amounts due from them, or cause such clients to terminate their contracts with us completely.
 
Adverse economic and demographic trends could materially adversely affect our business.
 
The U.S. Department of Labor has reported that since December 2007, the number of unemployed persons has increased by 7.3 million to 14.8 million, and the unemployment rate has doubled to 9.7% as of February 2010. High domestic unemployment, coupled with the recent recession and weak economy, have contributed to reduced discretionary spending by consumers and slowed or reduced economic activity by businesses in the United States and most major global economies compared to 2007 levels.
 
Our business operations are located in North America and tend to be concentrated in large urban areas. Many of our customers are workers who commute by car to their places of employment in these urban centers. Our business could be materially adversely affected to the extent that weak economic conditions or demographic factors have resulted in the elimination of jobs and rising unemployment in these large urban areas. In addition, increased unemployment levels, the


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movement of white-collar jobs from urban centers to suburbs or out of North America entirely, increased office vacancies in urban areas, movement toward home office alternatives, or lower consumer spending could reduce consumer demand for our services.
 
Weak economic conditions could also lead to a decline in parking at airports and commercial facilities, including facilities owned by retail operators and hotels. In particular, reductions in parking at leased facilities can lower our profit because a decrease in revenue would be exacerbated by fixed costs that we must pay under our leases. As of December 31, 2009, we operated 10% of our locations under leases, and for the year ended December 31, 2009, we derived 12% of our gross profit under leases.
 
If adverse economic conditions reduce discretionary spending, business travel or other economic activity that fuels demand for our services, our earnings could be reduced. Adverse changes in local and national economic conditions could also depress prices for our services or cause our clients to cancel their agreements to purchase our services.
 
The financial difficulties or bankruptcy of one or more of our major clients could adversely affect our results.
 
Future revenue and our ability to collect accounts receivable depend, in part, on the financial strength of our clients. We estimate an allowance for accounts we do not consider collectible, and this allowance adversely impacts profitability. In the event that our clients experience financial difficulty, become unable to obtain financing or seek bankruptcy protection, including as a result of the recent turmoil in the credit markets, our profitability would be further impacted by our failure to collect accounts receivable in excess of the estimated allowance. Additionally, our future revenue would be reduced by the loss of these clients or by the cancellation of leases or management contracts by clients in bankruptcy.
 
The weak economy could negatively impact results and our ability to give accurate guidance.
 
From time-to-time we may publicly provide earnings or other forms of guidance, which reflect our predictions about future revenue, operating costs and capital structure, among other factors. These predictions may be significantly impacted by estimates, as well as other factors that are beyond our control, and may not turn out to be correct due to the unknown consequences of a weak economy and a prolonged recovery. Actual results for all estimates could differ materially from the estimates and assumptions that we use, which could have a material adverse effect on our financial condition, results of operations and cash flows.
 
Our working capital and liquidity may be adversely affected if a significant number of our clients require us to deposit all parking revenue into their respective accounts.
 
We frequently contract with clients to hold parking revenue in our account and remit the revenue, minus the operating expenses and our fee, to our clients at the end of the month. Some clients, however, require us to deposit parking revenue in their accounts on a daily basis. This type of arrangement requires us to pay costs as they are incurred and receive reimbursement and our management fee after the end of the month. There can be no assurance that a significant number of clients will not switch to the practice of requiring us to deposit all parking revenue into their respective accounts, which would have a material adverse effect on our liquidity and financial condition.
 
Our management contracts and leases expose us to certain risks.
 
The loss or renewal on less favorable terms of a substantial number of management contracts or leases could have a material adverse effect on our business, financial condition and results of operations. Because certain management contracts and leases are with state, local and quasi-governmental entities, changes to certain governmental entities’ approaches to contracting regarding parking facilities could affect such contracts. A material reduction in the operating income associated with the integrated services we provide under management contracts and leases could have a material adverse effect on our business, financial condition and results of operations. To the extent that management contracts and leases are cancelable without cause, most of these contracts would also be cancelable in the event of our clients’ bankruptcy, despite the automatic stay provisions under bankruptcy law.
 
In addition, we are particularly exposed to increases in costs for locations that we operate under leases because we are generally responsible for all the operating expenses of our leased locations. An increase in cost of parking services could reduce our gross profit derived from locations that we operate under leases.
 
Our indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations.
 
We cannot assure you that cash flow from operations, combined with additional borrowings under the senior credit facility and any future credit facility will be available in an amount sufficient to enable us to repay our indebtedness, or to fund other liquidity needs. We and our subsidiaries may be able to incur substantial additional indebtedness in the future, which could


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cause the related risks to intensify. We may need to refinance all or a portion of our indebtedness on or before their respective maturities. Recently, the credit markets and the financial services industry experienced a period of unprecedented turmoil characterized by the failure or sale of various financial institutions and an unprecedented level of intervention from the United States government. These events could have a material adverse effect on us and our costs of borrowings. As a result, we cannot assure you that we will be able to refinance any of our indebtedness, including our senior credit facility, on commercially reasonable terms or at all. If we are unable to refinance our debt, we may default under the terms of our indebtedness, which could lead to an acceleration of the debt. We do not expect that we could repay all of our outstanding indebtedness if the repayment of such indebtedness was accelerated.
 
We may be unable to renew our insurance coverage and we do not maintain insurance coverage for all possible risks.
 
Our liability and worker’s compensation insurance coverage expires on an annual basis. There can be no assurance that our insurance carriers will in fact be willing to renew our coverage at any rate at the expiration date. We maintain a comprehensive portfolio of insurance policies to help protect us against loss or damage incurred from a wide variety of insurable risks. Each year, we review with our professional insurance advisers whether the insurance policies and associated coverages that we maintain are sufficient to adequately protect us from the various types of risk to which we are exposed in the ordinary course of business. That analysis takes into account various pertinent factors such as the likelihood that we would incur a material loss from any given risk as well as the cost of obtaining insurance coverage against any such risk. While we believe that we maintain a comprehensive portfolio of insurance that is consistent with customary business practices and adequately protects us from the risks that we typically face in the ordinary course of our business, there can be no assurance that we may not sustain a material loss for which we do not maintain any, or adequate insurance coverage.
 
Our business would be harmed if fewer clients obtain liability insurance coverage through us.
 
Many of our clients have historically chosen to obtain liability insurance coverage for the locations we manage by being named as additional insureds under our master insurance policies. Clients do, however, have the option of purchasing such insurance independently, as long as we are named as an additional insured pursuant to an additional insured endorsement. We purchase insurance policies at prices that we believe represent a discount to the prices that would typically be charged to parking facility owners on a stand-alone basis. Pursuant to our management contracts, we allocate a portion of our risk management costs, at rates we believe are competitive, to those clients who choose to obtain their insurance coverage by being named as additional insureds under our insurance policies. A material reduction in the number of clients who choose to obtain their insurance coverage from us in that manner, or a reduction in amounts payable to us for such coverage, could have a material adverse effect on our business, financial condition and results of operations.
 
Additional funds would need to be reserved for future insurance losses if such losses are worse than expected.
 
We provide liability and worker’s compensation insurance coverage consistent with our obligations to our clients under our various management contracts and leases. We are obligated to reimburse our insurance carrier for each loss incurred in the current policy year up to the amount of a deductible specified in our insurance policies. The deductible for our various liability and workers’ compensation policies is $250,000. We also purchase property insurance that provides coverage for loss or damage to our property, and in some cases our clients’ property, as well as business interruption coverage for lost operating income and certain associated expenses. The deductible applicable to any given loss under our property insurance policy varies based upon the insured values and the peril that causes the loss. Our financial statements reflect our funding of all such obligations based upon guidance and evaluation we have received from third-party insurance professionals. There can be no assurance, however, that the ultimate amount of our obligations will not exceed the amount presently funded or accrued, in which case we would need to set aside additional funds to reserve for any such excess. Changes in insurance reserves as a result of periodic evaluations of the liabilities can cause swings in our operating results that may not be indicative of the operations of our ongoing business. Additionally, our obligations could increase if we receive a greater number of insurance claims or if the severity of, or the administrative costs associated with, those claims generally increases. A material increase in insurance costs due to a change in the number or severity of claims, claims costs or premiums paid by us could have a material adverse effect on our operating income.
 
Adverse litigation judgments or settlements resulting from legal proceedings in which we may be involved in the normal course of our business could affect our operations and financial condition.
 
In the normal course of business, we are from time to time involved in various legal proceedings. We do not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on our financial position; however, the outcome of these legal proceedings cannot be predicted. It is possible that an unfavorable outcome of some or all of the matters, including claims related to the recent changes in our Board of Directors, could cause us to incur substantial liabilities that may have a material adverse effect upon our financial condition and results of operations. Any


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significant adverse litigation judgments or settlements could have a negative effect on our business, financial condition and results of operations.
 
Because our business is affected by seasonal trends, typically in the first quarter of each year, our results can fluctuate from period to period, which could make it difficult to evaluate our business or cause instability in the market price of our common stock.
 
We periodically have experienced fluctuations in our quarterly results arising from a number of factors, including the following:
 
  •  reduced levels of travel during the first quarter of each year, which is reflected in lower revenue from airport and hotel parking; and
 
  •  increases in certain costs of parking services, such as snow removal.
 
These factors can reduce our gross profit in the first quarter. As a result, our revenue and earnings in the second, third and fourth quarters tend to be higher than revenue and earnings in the first quarter. Accordingly, you should not consider our first quarter results as indicative of results to be expected for any other quarter or for any full fiscal year. Fluctuations in our results could make it difficult to evaluate our business or cause instability in the market price of our common stock.
 
We operate in a very competitive business environment.
 
Competition in the field of parking facility management is intense. The market is fragmented and is served by a variety of entities ranging from single lot operators to large regional and national multi-facility operators, as well as municipal and other governmental entities that choose not to outsource their parking operations. Competitors may be able to adapt more quickly to changes in customer requirements, or devote greater resources to the promotion and sale of their products. Many of our competitors also have long-standing relationships with our clients. Providers of parking facility management services have traditionally competed on the basis of cost and service. As we have worked to establish ourselves as one of the principal members of the industry, we compete predominately on the basis of high levels of service and strong relationships. We may not be able to, or may choose not to, compete with certain competitors on the basis of price. As a result, a greater proportion of our clients may switch to other service providers or self-manage during an economic downturn.
 
Our ability to expand our business will be dependent upon the availability of adequate capital and economic conditions.
 
The rate of our expansion will depend in part upon the availability of adequate capital, which in turn will depend in large part upon cash flow generated by our business and the availability of equity and debt capital. The weak economy and restrictive lending practices may make it more difficult to grow our number of profitable locations and our ability to obtain equity or debt capital on acceptable terms. However, we will require the consent of stockholders holding a majority of shares in order to authorize and issue additional shares of common stock above the current number of shares of authorized capital stock, which may be required in connection with any future acquisitions. In addition, our senior credit facility contains provisions that restrict our ability to incur additional indebtedness and/or make substantial investments or acquisitions. As a result, we cannot assure you that we will be able to finance our current growth strategy.
 
We must comply with public and private regulations that may impose significant costs on us.
 
Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in such property. These 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 the operation of parking facilities, we may be potentially liable for such costs. In addition, from time to time we are involved in environmental issues at certain of locations or in connection with our operations. While it is difficult to predict the ultimate outcome of any of these matters, based on information currently available, our management believes that none of these matters, individually or in the aggregate, is reasonably likely to have a material adverse effect on our financial position, results of operations, or cash flows. The cost of defending against claims of liability, or remediation of a contaminated property, could have a material adverse effect on our business, financial condition and results of operations. In addition, several state and local laws have been passed in recent years that encourage car pooling and the use of mass transit. Laws and regulations that reduce the number of cars and vehicles being driven could adversely impact our business.
 
In connection with certain transportation services provided to our clients, including shuttle bus operations, we provide the vehicles and the drivers to operate these transportation services. The U.S. Department of Transportation and various state agencies exercise broad powers over these transportation services, including, licensing and authorizations, safety and insurance requirements. Our employee drivers must also comply with the safety and fitness regulations promulgated by the Department


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Transportation, including those related to drug and alcohol testing and service hours. We may become subject to new and more restrictive federal and state regulations. Compliance with such regulations could hamper our ability to provide qualified drivers and increase our operating costs.
 
We are also subject to consumer credit laws and credit card industry rules and regulations relating to the processing of credit card transactions, including the Fair and Accurate Credit Transactions Act and the Payment Card Data Security Standard. This law and these industry standards impose substantial financial penalties for non-compliance.
 
In addition, we are subject to laws generally applicable to businesses, including but not limited to federal, state and local regulations relating to wage and hour matters, employee classification, mandatory healthcare benefits, unlawful workplace discrimination and whistle blowing. Any actual or alleged failure to comply with any regulation applicable to our business or any whistle-blowing claim, even if without merit, could result in costly litigation, regulatory action or otherwise harm our business, financial condition and results of operations.
 
We collect and remit sales/parking taxes and file tax returns for and on behalf of ourselves and our clients. We are affected by laws and regulations that may impose a direct assessment on us for failure to remit sales/parking taxes and filing of tax returns for ourselves and on behalf of our clients.
 
We believe that our public and private client base is becoming more concentrated.
 
Because national property owners, managers and developers and other property management companies tend to own or manage multiple properties, our ability to provide parking services for a large number of properties becomes dependent on our relationships with these entities. As this ownership concentration continues, such clients become more significant to our business. The loss of one of these large clients or the sale of properties they own to clients of our competitors could have a material adverse effect on our business, financial condition and results of operations. Additionally, large clients with extensive portfolios have greater negotiating power with respect to our management contracts and leases, which could adversely affect our profit margins.
 
In order to raise additional revenue, a number of state and municipal governments have either sold or entered into long-term leases of public assets or may be contemplating such transactions. The assets that are the subject of such transactions have included government-owned parking garages located in downtown commercial districts and parking operations at airports. The sale or long-term leasing of such government-owned parking assets to our competitors or clients of our competitors could have a material adverse effect on our business, financial condition and results of operations.
 
The failure to successfully complete or integrate acquisitions or new contracts could have a negative impact on our business.
 
We may pursue both small and large acquisitions in our business or in new lines of business on a selective basis, and we may be in discussions or negotiations with one or more of these acquisitions or new contract candidates simultaneously. There can be no assurance that suitable acquisitions or new contract candidates will be identified, that such acquisitions or new contracts will be consummated, that the acquired operations or new contracts will be integrated successfully or that we will be able to derive all of the expected synergies of acquired operations or contracts.
 
Acquisitions involve numerous risks, including (but not limited to) the following:
 
  •  Difficulties in integrating the operations, systems, technologies and personnel of the acquired companies, particularly companies with large and widespread operations.
 
  •  Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions.
 
  •  Difficulties in entering markets or businesses in which we have no or limited direct prior experience and in which competitors have stronger market positions.
 
  •  Insufficient revenue to offset increased expenses associated with acquisitions.
 
  •  The potential loss of key employees, customers and other business partners of the companies we acquire following and continuing after announcement of acquisition plans and their actual consummation.
 
Acquisitions may also cause us to:
 
  •  Use a substantial portion of our cash resources or incur a substantial amount of debt.
 
  •  Temporarily increase costs, including general and administrative cost, required to integrate acquisitions or large contract portfolios.


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  •  Significantly increase our non-cash amortization expense.
 
  •  Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition.
 
  •  Assume liabilities.
 
  •  Issue common stock that would dilute our current stockholders’ percentage ownership.
 
  •  Record goodwill and non-amortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges.
 
The actual costs or benefits of our acquisitions could differ from the expected costs or benefits, and any such differences could materially adversely affect our business. Mergers and acquisitions of companies are inherently risky and subject to many factors outside of our control and no assurance can be given that our previous or future acquisitions will be successful and will not materially adversely affect our business, financial condition and results of operations. Failure to manage and successfully integrate acquisitions could materially harm our business, financial condition and results of operations.
 
The sureties for our performance bond program may elect not to provide us with new or renewal performance bonds for any reason.
 
As is customary in the industry, a surety provider can refuse to provide a bond principal with new or renewal surety bonds. If any existing or future surety provider refuses to provide us with surety bonds, there can be no assurance that we would be able to find alternate providers on acceptable terms, or at all. Our inability to provide surety bonds could also result in the loss of existing contracts. Failure to find a provider of surety bonds, and our resulting inability to bid for new contracts or renew existing contracts, could have a material adverse effect on our business and financial condition.
 
Our business may be harmed as a result of extraordinary natural disasters.
 
In 2005 Hurricane Katrina caused significant disruption to our operations in New Orleans and the U.S. Gulf Coast region, which adversely impacted our operating results for this region. To the extent that we experience similar weather related events in the U.S. Gulf Coast Region or in other geographical areas where we operate, or experience other extraordinary natural events, such as earthquakes, our operating results may be adversely impacted.
 
Our business may be harmed as a result of terrorist attacks and the related increase in government regulation of airports and reduced air travel.
 
Any terrorist attacks, particularly in the United States or Canada, may negatively impact our business, financial condition and results of operations. Attacks have resulted in, and may continue to result in, increased government regulation of airlines and airport facilities, including imposition of minimum distances between parking facilities and terminals, resulting in the elimination of currently managed parking facilities, and increased security checks of employees and passengers at airport facilities. We derive a significant percentage of our gross profit from parking facilities and parking related services in and around airports. For the year ended December 31, 2009, approximately 23% of gross profit was derived from those operations. The Federal Aviation Administration generally prohibits parking within 300 feet of airport terminals during periods of heightened security. While the prohibition is not currently in effect, there can be no assurance that this governmental prohibition will not again be reinstated. The existing regulations governing parking within 300 feet of airport terminals or future regulations may prevent us from using certain parking spaces. Reductions in the number of parking spaces and air travelers may reduce our revenue and cash flow for both our leased facilities and those facilities we operate under management contracts.
 
The operation of our business is dependent upon key personnel.
 
Our success is, and will continue to be, substantially dependent upon the continued services of our executive management team. The loss of the services of one or more of the members of our executive management team could have a material adverse effect on our financial condition and results of operations. Although we have entered into employment agreements with, and historically have been successful in retaining the services of, our executive management, there can be no assurance that we will be able to retain them in the future. In addition, our continued growth depends upon our ability to attract and retain skilled operating managers and employees.
 
Many of our employees are covered by collective bargaining agreements.
 
Approximately 28% of our employees are represented by labor unions. Approximately 22% of our collective bargaining contracts, representing approximately 3.7% of our employees, are up for renewal in 2010. There can be no assurance that we will be able to renew existing labor union contracts on acceptable terms. Employees could exercise their rights under the labor


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union contract, which could include a strike or walk-out. In such cases, there are no assurances that we would be able to staff sufficient employees for our short-term needs. Any such labor strike or our inability to negotiate a satisfactory contract upon expiration of the current agreements could have a negative effect on our business, financial condition and results of operations.
 
We make contributions to multiemployer benefit plans on behalf of certain employees covered by collective bargaining agreements and could be responsible for paying unfunded liabilities incurred by such benefit plans, which amount could be material.
 
John V. Holten, our past chairman and former majority stockholder, may dispute our decision to terminate his employment with us, which could result in legal or other proceedings that could affect our operations and financial condition or divert the attention of our management or our board of directors from our business.
 
On October 5, 2009, we terminated Mr. Holten’s employment as chairman of our board of directors and we determined not to make any further payments or provide any further benefits to Mr. Holten. We took this action because we believed that, under applicable law, the terms of the agreement and the process by which Mr. Holten caused the agreement to be executed and extended on our behalf were unfair to us and that the agreement was not in the best interests of our stockholders.
 
Mr. Holten has advised us that he disputes the termination of his employment agreement and our determination that he is not entitled to any further payments or benefits under the agreement, and that he may assert a claim or claims against us relating to the termination of the agreement. We believe we have valid defenses to any claim by Mr. Holten, but we are unable to state whether the likelihood of an unfavorable outcome of any dispute is probable or remote. We are also unable to provide an estimate of the range or amount of potential loss if the outcome of any dispute or the settlement of any dispute is unfavorable to us. However, an unfavorable outcome or the settlement of any dispute related to the termination of Mr. Holten’s employment agreement with us could affect our operations and financial condition or divert the attention of our management or our board of directors from our business. We intend to contest vigorously any claim by Mr. Holten.
 
Mr. Holten currently remains a member of our board of directors.
 
Provisions of our second amended and restated certificate of incorporation, as amended, and third amended and restated by-laws and in Delaware corporate law may prevent or discourage an acquisition of our company that would benefit our stockholders.
 
Provisions in our second amended and restated certificate of incorporation, as amended, and third amended and restated by-laws and in Delaware corporate law may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt that is opposed by our management and board of directors. For example, our second amended and restated certificate of incorporation, as amended, and third amended and restated by-laws provide for the inability of stockholders to call special meetings, to increase the size of the board of directors, requires stockholders to give advance notice for director nominations and authorizes the issuance of common stock without stockholder approval. In addition, as a Delaware corporation, we are subject to certain Delaware anti-takeover provisions, including the application of Section 203 of the DGCL, which generally restricts our ability to engage in a business combination with any holder of 15% or more of our capital stock. Our board of directors could rely on provisions in our second amended and restated certificate of incorporation, as amended, and third amended and restated by-laws and in Delaware law to delay, deter or prevent a change of control of our company, including through transactions, and, in particular, unsolicited transactions, that some or all of our stockholders might consider to be desirable and through which some or all of our stockholders may obtain a premium for their shares.
 
If securities analysts do not publish research or reports about our business or if they downgrade their evaluations of our stock or estimates of our earnings, the price of our stock could decline.
 
The trading market for our common stock depends in part on the research, reports, expectations or other evaluations that industry or financial analysts publish about us or our business. If one or more of the analysts covering us downgrade their estimates or evaluations of our stock or our earnings, or if we fail to meet such expectations, the price of our stock could decline. If one or more of these analysts cease coverage of our company, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.
 
The market price of our common stock may be particularly volatile, and our stockholders may be unable to resell their shares at a profit.
 
The market price of our common stock has been subject to significant fluctuations and may continue to fluctuate or decline. In the 52 weeks prior to the date of this report, the closing prices of our common stock have ranged from a low of $13.90 to a high of $20.31. The price of our common stock that will prevail in the market may be higher or lower than the price you pay, depending on many factors, some of which are beyond our control and may not be related to our operating


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performance. These fluctuations could cause you to lose all or part of your investment in our common stock. Factors that could cause fluctuations in the trading price of our common stock include the following:
 
  •  the weak economy and turmoil in the credit markets and financial services industry, including their impact on our results and our ability to give accurate guidance;
 
  •  changes in general economic and business conditions or demographic trends;
 
  •  the financial difficulties or bankruptcy of our major clients, including the impact on our ability to collect receivables;
 
  •  availability, terms and deployment of capital;
 
  •  the loss, or renewal on less favorable terms, of management contracts and leases;
 
  •  our ability to renew our insurance policies on acceptable terms, the extent to which our clients choose to obtain insurance coverage through us and our ability to successfully manage self-insured losses;
 
  •  adverse litigation judgments or settlements from legal or other proceedings in which we may be involved; and
 
  •  seasonal trends, particularly in the first quarter of each year;
 
  •  the impact of public and private regulations;
 
  •  our ability to form and maintain relationships with large real estate owners, managers and developers;
 
  •  integration of future acquisitions in light of challenges in retaining key employees, synchronizing business processes, efficiently integrating facilities, marketing and operations, deriving the expected acquisition synergies or budgeting the actual costs or benefits of acquistions;
 
  •  the ability to obtain performance bonds on acceptable terms to guarantee our performance under certain contracts;
 
  •  extraordinary events affecting parking at facilities that we manage, including emergency safety measures, military or terrorist attacks and natural disasters;
 
  •  changes in federal and state regulations including those affecting airports, parking lots at airports or automobile use;
 
  •  the loss of key employees; and
 
  •  development of new, competitive parking-related services.
 
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. If our stock price is volatile, we may become the target of securities litigation. Securities litigation could result in substantial costs and divert our management’s attention and resources from our business.


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ITEM 2.    PROPERTIES
 
Parking Facilities
 
We operate parking facilities in 41 states and the District of Columbia in the United States and four provinces of Canada. We do not currently own any parking facilities. The following table summarizes certain information regarding our facilities as of December 31, 2009:
 
                                                     
        # of Locations   # of Spaces
States/Provinces
  Airports and Urban Cities   Airport   Urban   Total   Airport   Urban   Total
 
Alabama
  Airports and Birmingham     3       1       4       1,562             1,562  
Alberta
  Calgary, Edmonton           21       21             15,663       15,663  
Arizona
  Phoenix           20       20             13,501       13,501  
British Columbia
  Vancouver           1       1             701       701  
California
  Airports, Beverly Hills, Encino,
Glendale, Long Beach, Los Angeles,
Sacramento, San Francisco, San Jose,
Santa Monica and Woodland Hills
    3       666       669       5,403       202,161       207,564  
Colorado
  Airports, Aurora, Colorado Springs,
and Denver
    8       54       62       40,857       35,289       76,146  
Connecticut
  Airports     8             8       7,941             7,941  
Delaware
  Wilmington           1       1             473       473  
District of Columbia
  Washington, DC           15       15             5,329       5,329  
Florida
  Airports, Coral Gables, Ft. Myers,
Miami, Miami Beach, Orlando and
Tampa
    3       72       75       14,956       38,124       53,080  
Georgia
  Airports and Atlanta     15       20       35       31,491       20,643       52,134  
Hawaii
  Airports, Aiea, Honolulu, Lahaina
and Waipahu
    3       41       44       2,393       16,447       18,840  
Idaho
  Airport     1             1       915             915  
Illinois
  Airports, Chicago and Hoffman
Estates
    13       211       224       37,366       103,673       141,039  
Indiana
  Airport     1             1       2,305             2,305  
Kansas
  Bonner Springs, Kansas City
and Topeka
          6       6             13,817       13,817  
Kentucky
  Airports and Lexington     6       2       8       16,748             16,748  
Louisiana
  Airport, Metairie and New Orleans     1       22       23       1,708       12,836       14,544  
Maine
  Airports and Portland     3       3       6       2,288       1,890       4,178  
Manitoba
  Winnipeg           4       4             552       552  
Maryland
  Baltimore and Towson           20       20             13,217       13,217  
Massachusetts
  Boston, Cambridge, Chestnut Hill
and Hopkinton
          103       103             31,482       31,482  
Michigan
  Airports and Detroit     7       1       8       12,665             12,665  
Minnesota
  Airport, Minneapolis and St. Paul     1       21       22       620       7,741       8,361  
Missouri
  Airports and Kansas City     7       118       125       25,802       37,213       63,015  
Montana
  Airports, Great Falls     3       3       6       3,645             3,645  
Nebraska
  Airports     2             2       1,307             1,307  
Nevada
  Las Vegas           4       4             200       200  
New Jersey
  Hoboken, Jersey City, Paterson
and Wayne
          28       28             16,615       16,615  
New Mexico
  Airport     1             1                   0  
New York
  Airports, Bronx, Buffalo and New York City     7       58       65       11,565       38,156       49,721  
North Carolina
  Airport and Charlotte     1       15       16       1,403       10,477       11,880  
North Dakota
  Airports     2             2       2,181             2,181  
Ohio
  Airports, Akron, Cincinnati,
Cleveland, Columbus and Lakewood
    9       123       132       10,695       90,404       101,099  
Ontario
  Airport, Hamilton, London, North
York and Toronto
    1       80       81       2,075       43,383       45,458  
Oregon
  Airports     8             8       16,304             16,304  
Pennsylvania
  Airports     2             2       1,690             1,690  
Rhode Island
  Airports     5             5       8,380             8,380  
South Dakota
  Airports     3             3       1,940             1,940  
Tennessee
  Airport, Memphis and Nashville     1       13       14       647       3,198       3,845  
Texas
  Airports, Austin, Dallas, Fort Worth
and Houston
    5       94       99       8,512       81,680       90,192  
Utah
  Salt Lake City           5       5             3,080       3,080  
Virginia
  Airports, Alexandria, Arlington, Fairfax and Richmond     7       45       52       9,702       35,953       45,655  
Washington
  Airports, Bellevue and Seattle     2       83       85       822       15,722       16,544  
Wisconsin
  Airports and Milwaukee     3       6       9       4,384       1,967       6,351  
Wyoming
  Casper and Mills           4       4             1,840       1,840  
                                                     
    Totals     145       1,984       2,129       290,272       913,427       1,203,699  
                                                     


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We have interests in twelve joint ventures, each of which operates between one and thirty parking facilities. We are the general partner of one limited partnership, which operates nine parking facilities. For additional information, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Operating Facilities.”
 
Office Leases
 
We lease approximately 24,000 square feet of office space for our corporate offices in Chicago, Illinois. The lease expires in 2013. We have a right of first opportunity on an additional 24,000 square feet. We believe that the leased facility, together with our expansion options, is adequate to meet current and foreseeable future needs.
 
We also lease regional offices. These lease agreements generally include renewal and expansion options, and we believe that these facilities are adequate to meet our current and foreseeable future needs.
 
ITEM 3.    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.
 
PART II
 
ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market Information
 
Our common stock is traded on the NASDAQ Global Select Market under the symbol “STAN.” The following table sets forth, for the periods indicated, the high and low sales prices for our common stock as reported on the NASDAQ Global Select Market and its predecessor, adjusted for the effect of the 2-for-1 stock split in January 2008.
 
                                 
    2009   2008
    Sales Price   Sales Price
Quarter Ended
  High   Low   High   Low
 
March 31
  $ 20.31     $ 14.83     $ 23.50     $ 17.47  
June 30
  $ 16.85     $ 13.90     $ 21.72     $ 17.95  
September 30
  $ 17.96     $ 15.59     $ 23.74     $ 18.11  
December 31
  $ 18.00     $ 15.52     $ 21.31     $ 15.09  
 
Holders
 
As of March 1, 2010, there were approximately 3,785 holders of our common stock, based on the number of record holders of our common stock and an estimate of the number of individual participants represented by security position listings.
 
Dividends
 
We did not pay a cash dividend in respect of our common stock in 2009 or 2008. By the terms of our senior credit facility, we are restricted from paying cash dividends on our capital stock while such facility is in effect.
 
There are no restrictions on the ability of our wholly owned subsidiaries to pay cash dividends to us.
 
Securities Authorized for Issuance Under Equity Compensation Plans
 
                         
    Number of
          Number of Securities
 
    Securities
          Remaining Available
 
    to be Based
    Weighted-Average
    for Future Issuance Under
 
    Upon Exercise of
    Exercise Price of
    Equity Compensation Plans
 
    Outstanding Options,
    Outstanding Options,
    (Excluding Securities
 
    Warrants and Rights
    Warrants and Rights
    Reflected in Column (a))
 
Plan Category
  (a)     (b)     (c)  
 
Equity compensation plans approved by securities holders
    1,306,007     $ 2.08       113,558  
Equity compensation plans not approved by securities holders
                 
                         
Total
    1,306,007     $ 2.08       113,558  
                         


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Stock Repurchases
 
In July 2008 our Board of Directors authorized us to repurchase shares of our common stock, on the open market or through private purchases, up to $60 million in aggregate. As of December 31, 2008, $22.9 million remained available for repurchase under this authorization.
 
During the first quarter of 2009, we repurchased 93,600 shares from third-party shareholders at an average price of $18.23 per share, including average commissions of $0.03 per share, on the open market. Our former majority shareholder, an affiliate of John V. Holten, one of our directors, sold 119,701 shares to us in the first quarter of 2009 at an average price of $18.20 per share. The total value of the first quarter transactions was $3.9 million. We retired 200,650 shares during the first quarter of 2009 and retired and the remaining 12,651 shares in April 2009.
 
We did not make any share repurchases in the second, third and forth quarters of 2009.
 
ITEM 6.    SELECTED FINANCIAL DATA
 
The following table presents selected historical consolidated financial data as of December 31, 2009, 2008 and 2007, derived from our audited consolidated financial statements, which are included elsewhere herein. The table also presents selected historical consolidated financial data as of December 31, 2006 and 2005 derived from our audited consolidated financial statements, which are not included herein. The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Result of Operations” and the historical consolidated financial statements and notes thereto for years 2009, 2008 and 2007 which are included elsewhere herein. The historical results do not necessarily indicate results expected for any future period.
 
                                         
    Year Ended December 31,  
    2009     2008     2007     2006     2005  
    (In thousands)  
 
Statement of Operations Data:
                                       
Parking services revenue:
                                       
Lease contracts
  $ 140,441     $ 154,311     $ 145,327     $ 153,336     $ 154,099  
Management contracts
    153,382       145,828       119,612       106,554       93,876  
Reimbursed management contract expense
    401,671       400,621       356,782       346,055       338,679  
                                         
Total revenue
    695,494       700,760       621,721       605,945       586,654  
Cost of parking services:
                                       
Lease contracts
    130,897       140,058       129,550       139,043       141,037  
Management contracts
    84,167       69,285       49,726       44,990       37,101  
Reimbursed management contract expense
    401,671       400,621       356,782       346,055       338,679  
                                         
Total cost of parking services
    616,735       609,964       536,058       530,088       516,817  
Gross profit:
                                       
Lease contracts
    9,544       14,253       15,777       14,293       13,062  
Management contracts
    69,215       76,543       69,886       61,564       56,775  
                                         
Total gross profit
    78,759       90,796       85,663       75,857       69,837  
General and administrative expenses(1)
    44,707       47,619       44,796       41,228       39,822  
Depreciation and amortization
    5,828       6,059       5,335       5,638       6,427  
                                         
Operating income
    28,224       37,118       35,532       28,991       23,588  
Interest expense
    6,012       6,476       7,056       8,296       9,398  
Interest income
    (268 )     (173 )     (610 )     (552 )     (841 )
                                         
      5,744       6,303       6,446       7,744       8,557  
                                         
Income before income taxes
    22,480       30,815       29,086       21,247       15,031  
Income tax expense (benefit)(2)
    8,265       11,622       11,267       (14,880 )     (14 )
                                         
Net income
    14,215       19,193       17,819       36,127       15,045  
Less: Net income attributable to noncontrolling interest(3)
    123       148       446       376       326  
                                         
Net income attributable to Standard Parking Corporation
  $ 14,092     $ 19,045     $ 17,373     $ 35,751     $ 14,719  
                                         
Balance Sheet Data (at end of year):
                                       
Cash and cash equivalents
  $ 8,256     $ 8,301     $ 8,466     $ 8,058     $ 10,777  
Total assets
    240,505       229,241       215,388       212,528       201,353  
Total debt
    113,211       125,064       80,363       85,665       92,108  
Convertible redeemable preferred stock, series D
                            1  
Common stockholders’ equity
    14,749       1,017       39,339       41,253       24,412  


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(1) Includes for 2005 $900 for valuation allowance related to long-term receivables.
 
(2) Income tax expense (benefit) for 2006 includes a reduction in the valuation allowance for net operating loss carryforwards and other deferred tax assets of $23,924.
 
(3) Reflects the retrospective adoption, effective January 1, 2009, of Financial Accounting Standards Board Accounting Standards Codification Topic 810, Consolidation (formerly FAS 160) (“ASC 810”). Upon adoption of ASC 810, we reclassified minority interests in our consolidated balance sheet from accrued expenses to noncontrolling interests in the equity section. Additionally, we changed the way noncontrolling interests are presented within the consolidated statement of income such that the statement of income reflects results attributable to both our interests and noncontrolling interests. While the accounting provisions of ASC 810 are being applied prospectively beginning January 1, 2009, the presentation and disclosure requirements have been applied retrospectively. The results attributable to our interests did not change upon the adoption of ASC 810.
 
ITEM 7.    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 “Selected Financial Data” and our consolidated financial statements and the related notes included elsewhere herein. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth in Item 1A “Risk Factors” and elsewhere herein.
 
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 revenues 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 revenues 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 December 31, 2009, we operated 90% of our locations under management contracts and 10% under leases.
 
In evaluating our financial condition and operating performance, management’s primary focus is on our gross profit, total general and administrative expense and general and administrative expense 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 December 31, 2009, 90% of our locations were operated under management contracts and 88% of our gross profit for the year ended December 31, 2009 was derived from management contracts. Only 52% of total revenue (excluding reimbursed management contract expenses), 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 expense, 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 potential 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


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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 periods ended December 31, 2009 and December 31, 2008 was 87% and 89%, respectively, which also reflects our decision not to renew, or terminate, unprofitable contracts.
 
For the year ended December 31, 2009 compared to the year ended December 31, 2008, average gross profit per location decreased 9.8% from $41.0 thousand to $37.0 thousand, primarily due to the economic recession, a negative fluctuation in prior years insurance reserve adjustments, the tentative settlement of and the legal fees related to the California labor code case, in addition to the Hurricane Katrina settlement received in 2008 that did not recur in 2009.
 
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 years indicated:
 
                         
    December 31,
  December 31,
  December 31,
    2009   2008   2007
 
Managed facilities
    1,921       1,986       1,893  
Leased facilities
    208       229       238  
                         
Total facilities
    2,129       2,215       2,131  
                         
 
Revenue
 
We recognize parking services revenue from lease and management contracts as the related services are provided. Substantially all of our revenues come from the following two sources:
 
  •  Parking services revenue — lease contracts.   Parking services revenues 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, development fees, gains on sales of contracts, 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 revenues do 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 clients 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 Expense
 
Reimbursed of management contract expense 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.


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  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.
 
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, chairman of the board 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.
 
Seasonality
 
During the first quarter of each year, seasonality impacts our performance with regard to moderating revenues, with the reduced levels of travel most clearly reflected in the parking activity associated with our airport and hotel businesses as well as increases in certain costs of parking services, such as snow removal, both of which negatively affect gross profit. Although our revenues and profitability are affected by the seasonality of the business, general and administrative costs are relatively stable throughout the fiscal year. See Item 6, “Selected Financial Data,” for further information.
 
Results of Operations
 
Fiscal 2009 Compared to Fiscal 2008
 
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 expense) by region for the years ended December 31, 2009 and 2008. Information related to prior years has been recast to conform to the current regional alignment.
 
Region One encompasses Delaware, District of Columbia, Florida, Georgia, Illinois, Kansas, Maine, Maryland, Massachusetts, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Rhode Island, Tennessee, Vermont, Virginia, and Wisconsin.
 
Region Two encompasses our Canadian operations, event and transportation planning, and our technology based parking and traffic management systems.
 
Region Three encompasses 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 reserve adjustments related to prior years.


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The following tables present the material factors that impact our financial statements on an operating segment basis.
 
Segment revenue information is summarized as follows:
 
                                                                                                                 
    Year Ended December 31,  
    Region One     Region Two     Region Three     Region Four     Other     Total     Variance  
    2009     2008     2009     2008     2009     2008     2009     2008     2009     2008     2009     2008     Amount     %  
    (In millions)  
 
Lease contract revenue:
                                                                                                               
New location
  $ 4.4     $ 2.7     $ 2.1     $ 0.9     $ 2.2     $     $ 0.6     $     $     $     $ 9.3     $ 3.6     $ 5.7       158.3  
Contract expirations
    2.9       7.9             0.6       1.0       8.4                   0.1       0.1       4.0       17.0       (13.0 )     (76.5 )
Same location
    60.9       63.1       0.5       0.7       14.9       16.1       38.7       41.6                   115.0       121.5       (6.5 )     (5.3 )
Conversions
    0.5       1.9                   1.0                   2.2                   1.5       4.1       (2.6 )     (63.4 )
Acquisitions
    10.3       7.7                   0.3       0.4                               10.6       8.1       2.5       30.9  
                                                                                                                 
Total lease contract revenue
  $ 79.0     $ 83.3     $ 2.6     $ 2.2     $ 19.4     $ 24.9     $ 39.3     $ 43.8     $ 0.1     $ 0.1     $ 140.4     $ 154.3     $ (13.9 )     (9.0 )
                                                                                                                 
Management contract revenue:
                                                                                                               
New location
  $ 4.1     $ 1.7     $ 0.3     $     $ 7.1     $ 2.7     $ 2.7     $ 0.7     $     $     $ 14.2     $ 5.1     $ 9.1       178.4  
Contract expirations
    4.0       13.1             0.3       2.1       7.7       0.5       1.4                   6.6       22.5       (15.9 )     (70.7 )
Same location
    41.1       39.6       9.3       3.4       38.6       36.7       29.1       29.5       (0.4 )     (0.3 )     117.7       108.9       8.8       8.1  
Conversions
    0.1                               0.1       0.1                         0.2       0.1       0.1       100.0  
Acquisitions
    4.1       3.0       3.6             7.0       6.2                               14.7       9.2       5.5       59.8  
                                                                                                                 
Total management contract revenue
  $ 53.4     $ 57.4     $ 13.2     $ 3.7     $ 54.8     $ 53.4     $ 32.4     $ 31.6     $ (0.4 )   $ (0.3 )   $ 153.4     $ 145.8     $ 7.6       5.2  
                                                                                                                 
 
Parking services revenue — lease contracts.   Lease contract revenue decreased $13.9 million, or 9.0%, to $140.4 million for the year ended December 31, 2009, compared to $154.3 million in the year-ago period. The decrease resulted primarily from contract expirations exceeding increases in revenue from new locations, and fewer leased contracts that converted from management contracts during the current year, partially offset by increases in revenue from our acquisitions. Same location revenue for those facilities, which as of December 31, 2009 have been operational a minimum of 24 months, decreased 5.3%. The decrease in same location revenue was due to decreases in short-term parking revenue of $4.3 million, or 5.1%, and a decrease in monthly parking revenue of $2.2 million, or 5.9%. Revenue associated with contract expirations relates to contracts that expired during the current period. In addition, we recorded $1.4 million in 2008 related to the Hurricane Katrina settlement, which was included in contract expirations.
 
Parking services revenue — management contracts.   Management contract revenue increased $7.6 million, or 5.2%, to $153.4 million for the year ended December 31, 2009, compared to $145.8 million in the year-ago period. The increase resulted primarily from new locations and acquisitions, which was partially offset by the decrease in revenue from contract expirations. Same locations revenue for those facilities, which as of December 31, 2009 have been operational a minimum of 24 months, increased 8.1%. In 2008, we recorded $0.2 million related to the Hurricane Katrina settlement, which was included in contract expirations.
 
Reimbursed management contract expense.   Reimbursed management contract expenses increased $1.1 million, or 0.3%, to $401.7 million for the year ended December 31, 2009, compared to $400.6 million in the year-ago period. This increase resulted from additional reimbursements for costs incurred on behalf of owners.
 
Regions one, two, three and four recorded a decrease in same location revenue and contract expirations, partially offset by increases in revenue from new locations. Same location revenue decreased compared to prior year primarily due to a reduction in short-term and monthly parking revenue. Contract expirations in region three includes the $1.4 million Hurricane Katrina settlement received in 2008 that did not recur in 2009.
 
Regions one, two, three and four recorded increases in management contract revenue from new locations compared to the prior year. Regions one, two and three recorded increases in management contract revenue from same locations and acquisitions compared to the prior year, primarily due to the addition of new services to existing contracts. These increases were partially offset by decreases in contract expirations primarily in region one. Revenue associated with contract expirations relates to the contracts that expired during the current period. Contract expirations in region three includes the $0.2 million Hurricane Katrina settlement received in 2008 that did not recur in 2009.


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Segment cost of parking services information is summarized as follows:
 
                                                                                                                 
    Year Ended December 31,  
    Region One     Region Two     Region Three     Region Four     Other     Total     Variance  
    2009     2008     2009     2008     2009     2008     2009     2008     2009     2008     2009     2008     Amount     %  
    (In millions)  
 
Cost of parking services lease contracts:
                                                                                                               
New location
  $ 4.8     $ 2.7     $ 1.9     $ 0.9     $ 2.0     $     $ 0.5     $     $     $     $ 9.2     $ 3.6     $ 5.6       155.6  
Contract expirations
    2.8       7.4                   1.0       6.8                               3.8       14.2       (10.4 )     (73.2 )
Same location
    56.1       58.0       0.7       0.7       13.3       14.2       36.4       38.5       0.1       0.1       106.6       111.5       (4.9 )     (4.4 )
Conversions
    0.5       1.8                   0.9                   1.7                   1.4       3.5       (2.1 )     (60.0 )
Acquisitions
    9.6       6.9                   0.3       0.4                               9.9       7.3       2.6       35.6  
                                                                                                                 
Total cost of parking services lease contracts
  $ 73.8     $ 76.8     $ 2.6     $ 1.6     $ 17.5     $ 21.4     $ 36.9     $ 40.2     $ 0.1     $ 0.1     $ 130.9     $ 140.1     $ (9.2 )     (6.6 )
                                                                                                                 
Cost of parking services management contracts:
                                                                                                               
New location
  $ 1.5     $ 0.7     $ 0.6     $     $ 3.6     $ 1.3     $ 1.4     $ 0.5     $     $     $ 7.1     $ 2.5     $ 4.6       184.0  
Contract expirations
    2.9       7.9             0.1       1.4       3.8       0.3       0.7                   4.6       12.5       (7.9 )     (63.2 )
Same location
    19.0       17.7       5.3       (0.2 )     22.7       16.5       15.3       16.3             (2.2 )     62.3       48.1       14.2       29.5  
Conversions
                                                                                   
Acquisitions
    2.2       1.4       2.5             5.5       4.8                               10.2       6.2       4.0       64.5  
                                                                                                                 
Total cost of parking services management contracts
  $ 25.6     $ 27.7     $ 8.4     $ (0.1 )   $ 33.2     $ 26.4     $ 17.0     $ 17.5     $     $ (2.2 )   $ 84.2     $ 69.3     $ 14.9       21.5  
                                                                                                                 
 
Cost of parking services — lease contracts.   Cost of parking services for lease contracts decreased $9.2 million, or 6.6%, to $130.9 million for the year ended December 31, 2009, compared to $140.1 million in the year-ago period. The decrease resulted primarily from decreases in costs from contract expirations and fewer locations that converted from management contracts during the current year, which more than offset the increases in new locations. Same locations costs for those facilities which as of December 31, 2009 have been operational a minimum of 24 months decreased 4.4%. Same location costs decreased $4.1 million due to rent expense, primarily as a result of contingent rental payments on the decrease in revenue for same locations, $0.6 million due to payroll and payroll related and $0.2 million related to other operating costs.
 
Cost of parking services — management contracts.   Cost of parking services for management contracts increased $14.9 million, or 21.5%, to $84.2 million for the year ended December 31, 2009, compared to $69.3 million in the year-ago period. The increase resulted from new locations and acquisitions which more than offset the decrease in costs from contract expirations. There was no impact on costs for those management contracts which converted to a lease contract. Same location costs for those facilities, which as of December 31, 2009 have been operational a minimum of 24 months, increased 29.5%. Same location increase in operating expenses for management contracts primarily resulted from negative fluctuations in prior years insurance reserve adjustments, increases in costs associated with reverse management contracts where we are responsible for certain expenses in return for a larger management fee, and the cost of providing management services, in addition to $3.1 million attributable to the tentative settlement and legal fees related to a California labor code case.
 
Reimbursed management contract expense.   Reimbursed management contract expense increased $1.1 million, or 0.3%, to $401.7 million for the year ended December 31, 2009, compared to $400.6 million in the year-ago period. This increase resulted from additional reimbursed cost incurred on the behalf of owners.
 
Regions one, three and four experienced decreases in cost of parking services lease contracts related to same locations. Same location costs decreased primarily due to decreases in rent expense primarily as a result of contingent rental payments on the decrease in revenue for same locations and a reduction in payroll and payroll related. Regions one and three experienced declines in contract expirations. Cost associated with contract expirations related to contracts that expired during the current period.
 
Cost of parking services management contracts primarily increased due to costs associated with reverse management contracts and the cost of providing management services for same and new locations. Included in region three same locations is $3.1 million attributable to the tentative settlement and legal fees related to a California labor code case recorded in 2009. The other region amounts in same location costs primarily represent prior year insurance reserve adjustments.


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Segment gross profit/gross profit percentage information is summarized as follows:
 
                                                                                                                 
    Year Ended December 31,  
    Region One     Region Two     Region Three     Region Four     Other     Total     Variance  
    2009     2008     2009     2008     2009     2008     2009     2008     2009     2008     2009     2008     Amount     %  
    (In millions)  
 
Gross profit lease contracts:
                                                                                                               
New location
  $ (0.4 )   $     $ 0.2     $     $ 0.2     $     $ 0.1     $     $     $     $ 0.1     $     $ 0.1        
Contract expirations
    0.1       0.5             0.6             1.6                   0.1       0.1       0.2       2.8       (2.6 )     (92.9 )
Same location
    4.8       5.1       (0.2 )           1.6       1.9       2.3       3.1       (0.1 )     (0.1 )     8.4       10.0       (1.6 )     (16.0 )
Conversions
          0.1                   0.1                   0.5                   0.1       0.6       (0.5 )     (83.3 )
Acquisitions
    0.7       0.8                                                       0.7       0.8       (0.1 )     (12.5 )
                                                                                                                 
Total gross profit lease contracts
  $ 5.2     $ 6.5     $     $ 0.6     $ 1.9     $ 3.5     $ 2.4     $ 3.6     $     $     $ 9.5     $ 14.2     $ (4.7 )     (33.1 )
                                                                                                                 
    (Percentages)
Gross profit percentage lease contracts:
                                                                                                               
New location
    (9.1 )           9.5             9.1             16.7                         1.1                        
Contract expirations
    3.4       6.3             100.0             19.0                   100.0       100.0       5.0       16.5                  
Same location
    7.9       8.1       (40.0 )           10.7       11.8       5.9       7.5                   7.3       8.2                  
Conversions
          5.3                   10.0                   22.7                   6.7       14.6                  
Acquisitions
    6.8       10.4                                                       6.6       9.9                  
                                                                                                                 
Total gross profit percentage
    6.6       7.8             27.3       9.8       14.1       6.1       8.2                   6.8       9.2                  
                                                                                                                 
    (In millions)
Gross profit management contracts:
                                                                                                               
New location
  $ 2.6     $ 1.0     $ (0.3 )   $     $ 3.5     $ 1.4     $ 1.3     $ 0.2     $     $     $ 7.1     $ 2.6     $ 4.5       173.1  
Contract expirations
    1.1       5.2             0.2       0.7       3.9       0.2       0.7                   2.0       10.0       (8.0 )     (80.0 )
Same location
    22.1       21.9       4.0       3.6       15.9       20.2       13.8       13.2       (0.4 )     1.9       55.4       60.8       (5.4 )     (8.9 )
Conversions
    0.1                               0.1       0.1                         0.2       0.1       0.1       100.0  
Acquisitions
    1.9       1.6       1.1             1.5       1.4                               4.5       3.0       1.5       50.0  
                                                                                                                 
Total gross profit management contracts
  $ 27.8     $ 29.7     $ 4.8     $ 3.8     $ 21.6     $ 27.0     $ 15.4     $ 14.1     $ (0.4 )   $ 1.9     $ 69.2     $ 76.5     $ (7.3 )     (9.5 )
                                                                                                                 
    (Percentages)
Gross profit percentage management contracts:
                                                                                                               
New location
    63.4       58.8       (100.0 )           49.3       51.9       48.1       28.6                   50.0       51.0                  
Contract expirations
    27.5       39.7             66.7       33.3       50.6       40.0       50.0                   30.3       44.4                  
Same location
    53.8       55.3       43.0       105.9       41.2       55.0       47.4       44.7       100.0       (633.3 )     47.1       55.8                  
Conversions
    100.0                               100.0       100.0                         100.0       100.0                  
Acquisitions
    46.3       53.3       30.6             21.4       22.6                               30.6       32.6                  
                                                                                                                 
Total gross profit percentage
    52.1       51.7       36.4       102.7       39.4       50.6       47.5       44.6       100.0       (633.3 )     45.1       52.5                  
                                                                                                                 
 
Gross profit — lease contracts.   Gross profit for lease contracts decreased $4.7 million, or 33.1%, to $9.5 million for the year ended December 31, 2009, compared to $14.2 million in the year-ago period. Gross profit percentage for lease contracts decreased to 6.8% for the year ended December 31, 2009, compared to 9.2% in the year-ago period. Gross profit lease contracts decreases on same locations were primarily the result of decreased short-term and monthly parking revenue as described under parking services revenue leased contracts. Gross profit lease contracts decreases on conversions were primarily the result of fewer leased contracts that converted from management contracts during the current year.
 
Gross profit — management contracts.   Gross profit for management contracts decreased $7.3 million, or 9.5%, to $69.2 million for the year ended December 31, 2009, compared to $76.5 million in the year-ago period. Gross profit percentage for management contracts decreased to 45.1% for the year ended December 31, 2009, compared to 52.5% in the year-ago period. Gross profit for management contracts decreases were primarily the result of our same locations and our contract expirations. Gross profit management contracts decreases on same locations were primarily the result of increased costs resulting from negative fluctuations in prior year insurance reserve adjustments, increases in costs associated with reverse management contracts where we are responsible for certain expenses in return for a larger management fee, and the cost of providing management services, in addition to $3.1 million attributable to the tentative settlement and legal fees related to a California labor code case.
 
Regions one, two, three and four experienced declines in gross profit lease contracts due to same locations primarily due to a decline in short-term and monthly parking revenue that exceeded the decline in costs. Region three experienced a decline in gross profit contract expirations due to the Hurricane Katrina settlement recorded in revenue for 2008 that did not recur in 2009.
 
Regions three and four experienced declines in gross profit management contracts related to same locations, which is primarily due to an increase in costs associated with reverse management contracts and the cost of providing management services, in addition to the tentative settlement and legal fees related to a California labor code case in region three that was


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recorded in cost of parking services in 2009. Region three experienced a decline in gross profit contract expirations due to the Hurricane Katrina settlement recorded in revenue in 2008 that did not recur in 2009.
 
Segment general and administrative expenses information is summarized as follows:
 
                                                                                                                 
    December 31,  
    Region One     Region Two     Region Three     Region Four     Other     Total     Variance  
    2009     2008     2009     2008     2009     2008     2009     2008     2009     2008     2009     2008     Amount     %  
    (In millions)  
 
General and administrative expenses
  $ 8.6     $ 8.9     $ 2.4     $ 2.5     $ 11.5     $ 11.0     $ 3.2     $ 3.1     $ 19.0     $ 22.1     $ 44.7     $ 47.6     $ (2.9 )     (6.1 )
                                                                                                                 
 
General and administrative expenses.   General and administrative expenses decreased $2.9 million, or 6.1%, to $44.7 million for the year ended December 31, 2009, compared to $47.6 million in the year-ago period. This decrease resulted from decreases in net payroll and payroll related expenses of $2.4 million, a decrease in travel of $0.5 million, a decrease in computer expenses of $0.7 million, an increase in cost recovery of $0.6 million, a decrease of $0.4 million related to outsourcing fees, decreases in other costs of $0.4 million, which was partially offset by $1.7 million incurred in connection with the Company’s transfer and secondary offering of its former controlling shareholder’s shares, and $0.4 million related to the Hurricane Katrina settlement received in 2008 that did not recur in 2009.
 
General and administrative expenses on a segment basis represent direct administrative costs for each region. The other region consists primarily of the corporate headquarters. The other region decreased primarily due to payroll and payroll related expenses, partially offset by fees incurred in connection with the Company’s transfer and secondary offering of its former controlling shareholder’s shares. Region one decreased primarily due to payroll and payroll related and legal fees, partially offset by computer expenses. Region two decreased primarily due to payroll and payroll related expenses. Region three increased primarily due to legal fees, partially offset by the Hurricane Katrina settlement received in 2008 that did not recur in 2009. Region four increased slightly due to payroll and payroll related expenses.
 
Interest expense.   Interest expense decreased $0.5 million, or 7.7%, to $6.0 million for the year ended December 31, 2009, as compared to $6.5 million in the year-ago period. This decrease resulted primarily from a decrease in borrowings.
 
Interest income.   Interest income was $0.3 million for the year ended December 31, 2009 and did not change significantly from the year-ago period.
 
Income tax expense.   Income tax expense decreased $3.3 million, or 28.4%, to $8.3 million for the year ended December 31, 2009, as compared to $11.6 million in the year-ago period. This decrease resulted principally from taxes on decreased earnings as well as a reduction in our effective tax rate. The effective tax rate for the year ended December 31, 2009 was 36.8% compared to 37.7% for the year-ago period.
 
Results of Operations
 
Fiscal 2008 Compared to Fiscal 2007
 
Segments
 
The following tables present the material factors that impact our financial statements on an operating segment basis.
 
Segment revenue information is summarized as follows:
 
                                                                                                                 
    Year Ended December 31,  
    Region One     Region Two     Region Three     Region Four     Other     Total     Variance  
    2008     2007     2008     2007     2008     2007     2008     2007     2008     2007     2008     2007     Amount     %  
    (In millions)  
 
Lease contract revenue:
                                                                                                               
New location
  $ 7.4     $ 2.2     $ 0.9     $     $ 1.0     $ 0.3     $     $     $     $     $ 9.3     $ 2.5     $ 6.8       272.0  
Contract expirations
    1.0       3.3       0.6       1.1       2.4       3.8             0.5       0.1       0.1       4.1       8.8       (4.7 )     (53.4 )
Same location
    65.0       62.3       0.7       0.7       20.3       20.1       41.6       41.6                   127.6       124.7       2.9       2.3  
Conversions
    2.1       2.2                   0.8       3.3       2.2       2.8                   5.1       8.3       (3.2 )     (38.6 )
Acquisitions
    7.8       0.8                   0.4       0.2                               8.2       1.0       7.2       720.0  
                                                                                                                 
Total lease contract revenue
  $ 83.3     $ 70.8     $ 2.2     $ 1.8     $ 24.9     $ 27.7     $ 43.8     $ 44.9     $ 0.1     $ 0.1     $ 154.3     $ 145.3     $ 9.0       6.2  
                                                                                                                 
Management contract revenue:
                                                                                                               
New location
  $ 9.7     $ 3.3     $ 0.3     $ 0.1     $ 7.7     $ 2.3     $ 7.5     $ 2.4     $     $     $ 25.2     $ 8.1     $ 17.1       211.1  
Contract expirations
    5.2       12.5             (0.5 )     2.9       5.3       0.1       0.3                   8.2       17.6       (9.4 )     (53.4 )
Same location
    39.4       35.8       3.4       3.1       36.4       33.2       24.0       21.9       (0.3 )     (2.2 )     102.9       91.8       11.1       12.1  
Conversions
    0.1       0.2                   0.2                                     0.3       0.2       0.1       50.0  
Acquisitions
    3.0       0.3                   6.2       1.6                               9.2       1.9       7.3       384.2  
                                                                                                                 
Total management contract revenue
  $ 57.4     $ 52.1     $ 3.7     $ 2.7     $ 53.4     $ 42.4     $ 31.6     $ 24.6     $ (0.3 )   $ (2.2 )   $ 145.8     $ 119.6     $ 26.2       21.9  
                                                                                                                 


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Parking services revenue — lease contracts.   Lease contract revenue increased $9.0 million, or 6.2%, to $154.3 million for the year ended December 31, 2008, compared to $145.3 million in the year-ago period. The increase resulted primarily from our acquisitions, revenue from new locations exceeding decreases in revenue from contract expirations and fewer leased contracts that converted from management contracts during the current year. Same location revenue for those facilities, which as of December 31, 2008 have been operational a minimum of 24 months, increased 2.3%. Revenue associated with contract expirations relates to contracts that expired during the current period. In addition, we recorded $1.4 million in 2008 related to the Hurricane Katrina settlement, which was included in contract expirations.
 
Parking services revenue — management contracts.   Management contract revenue increased $26.2 million, or 21.9%, to $145.8 million for the year ended December 31, 2008, compared to $119.6 million in the year-ago period. The increase resulted primarily from new locations and acquisitions which more than offset the decrease in revenue from contract expirations. Same locations revenue for those facilities, which as of December 31, 2008 have been operational a minimum of 24 months, increased 12.1%. In addition, we recorded $0.2 million related to the Hurricane Katrina settlement, which was included in contract expirations.
 
Reimbursed management contract expense.   Reimbursed management contract expenses increased $43.8 million, or 12.3%, to $400.6 million for the year ended December 31, 2008, compared to $356.8 million in the year-ago period. This increase resulted from additional reimbursements for costs incurred on behalf of owners.
 
Regions one, two and three recorded an increase in new location leases, and region one experienced increases in same location revenue at a rate that approximated our average. The client base for region four currently prefers the structure of management contracts to lease contracts, therefore no new lease contracts were operational in 2008 and 2007.
 
Regions one, two, three and four recorded management contract new business revenue that exceeded any decreases in revenue from contract expirations. Same location revenue increased in region one due to several contracts adding ancillary services.
 
Segment cost of parking services information is summarized as follows:
 
                                                                                                                 
    Year Ended December 31,  
    Region One     Region Two     Region Three     Region Four     Other     Total     Variance  
    2008     2007     2008     2007     2008     2007     2008     2007     2008     2007     2008     2007     Amount     %  
    (In millions)  
 
Cost of parking services lease contracts:
                                                                                                               
New location
  $ 7.2     $ 2.1     $ 0.9     $     $ 0.9     $ 0.3     $     $     $     $     $ 9.0     $ 2.4     $ 6.6       275.0  
Contract expirations
    1.0       2.9             (0.6 )     1.0       2.8             0.4             0.3       2.0       5.8       (3.8 )     (65.5 )
Same location
    59.7       56.4       0.7       0.8       18.3       18.4       38.5       37.9       0.1       (0.4 )     117.3       113.1       4.2       3.7  
Conversions
    2.0       1.9                   0.8       3.1       1.7       2.4                   4.5       7.4       (2.9 )     (39.2 )
Acquisitions
    6.9       0.7                   0.4       0.2                               7.3       0.9       6.4       711.1  
                                                                                                                 
Total cost of parking services lease contracts
  $ 76.8     $ 64.0     $ 1.6     $ 0.2     $ 21.4     $ 24.8     $ 40.2     $ 40.7     $ 0.1     $ (0.1 )   $ 140.1     $ 129.6     $ 10.5       8.1  
                                                                                                                 
Cost of parking services management contracts:
                                                                                                               
New location
  $ 5.6     $ 2.4     $ 0.1     $     $ 3.4     $ 1.0     $ 6.0     $ 2.3     $     $     $ 15.1     $ 5.7     $ 9.4       164.9  
Contract expirations
    3.5       6.9             0.7       1.3       2.6       0.2       0.4                   5.0       10.6       (5.6 )     (52.8 )
Same location
    17.2       13.4       (0.2 )     0.2       16.8       13.7       11.3       9.5       (2.2 )     (4.6 )     42.9       32.2       10.7       33.2  
Conversions
                            0.1                                     0.1             0.1        
Acquisitions
    1.4                         4.8       1.2                               6.2       1.2       5.0       416.7  
                                                                                                                 
Total cost of parking services management contracts
  $ 27.7     $ 22.7     $ (0.1 )   $ 0.9     $ 26.4     $ 18.5     $ 17.5     $ 12.2     $ (2.2 )   $ (4.6 )   $ 69.3     $ 49.7     $ 19.6       39.4  
                                                                                                                 
 
Cost of parking services — lease contracts.   Cost of parking services for lease contracts increased $10.5 million, or 8.1%, to $140.1 million for the year ended December 31, 2008, compared to $129.6 million in the year-ago period. The increase resulted primarily from new locations and acquisitions which more than offset the decreases in costs from contract expirations and fewer locations that converted from management contracts during the current year. Same locations costs for those facilities which as of December 31, 2008 have been operational a minimum of 24 months increased 3.7%. Same location rent expense for lease contracts increased primarily as a result of contingent rental payments on the increase in revenue for same locations. The increase in other operating costs for lease contracts primarily result from increases in snow removal costs and garage supplies.
 
Cost of parking services — management contracts.   Cost of parking services for management contracts increased $19.6 million, or 39.4%, to $69.3 million for the year ended December 31, 2008, compared to $49.7 million in the year-ago


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period. The increase resulted primarily from new locations and acquisitions which more than offset the decrease in costs from contract expirations. There was no impact on costs for those management contracts which converted to a lease contract. Same location costs for those facilities, which as of December 31, 2008 have been operational a minimum of 24 months, increased 33.2%. Same location increase in operating expenses for management contracts primarily result from increases in snow removal costs and garage supplies.
 
Reimbursed management contract expense.   Reimbursed management contract expense increased $43.8 million, or 12.3%, to $400.6 million for the year ended December 31, 2008, compared to $356.8 million in the year-ago period. This increase resulted from additional reimbursed cost incurred on the behalf of owners.
 
Region one has the highest proportion of lease contracts and this region covers states that are impacted to a greater extent by weather related costs such as snow removal costs, which are our responsibility.
 
Regions one, three and four experienced same location increases in cost that approximated the aggregate amount, with no significant variances between them. The other region amounts in same location costs primarily represent prior year insurance reserve adjustments.
 
Segment lease contract gross profit/gross profit percentage information is summarized as follows:
 
                                                                                                                 
    Year Ended December 31,  
    Region One     Region Two     Region Three     Region Four     Other     Total     Variance  
    2008     2007     2008     2007     2008     2007     2008     2007     2008     2007     2008     2007     Amount     %  
    (In millions)  
 
Gross profit lease contracts:
                                                                                                               
New location
  $ 0.2     $ 0.1     $     $     $ 0.1     $     $     $     $     $     $ 0.3     $ 0.1     $ 0.2       200.0  
Contract expirations
          0.4       0.6       1.7       1.4       1.0             0.1       0.1       (0.2 )     2.1       3.0       (0.9 )     (30.0 )
Same location
    5.3       5.9             (0.1 )     2.0       1.7       3.1       3.7       (0.1 )     0.4       10.3       11.6       (1.3 )     (11.2 )
Conversions
    0.1       0.3                         0.2       0.5       0.4                   0.6       0.9       (0.3 )     (33.3 )
Acquisitions
    0.9       0.1                                                       0.9       0.1       0.8       800.0  
                                                                                                                 
Total gross profit lease contracts
  $ 6.5     $ 6.8     $ 0.6     $ 1.6     $ 3.5     $ 2.9     $ 3.6     $ 4.2           $ 0.2     $ 14.2     $ 15.7     $ (1.5 )     (9.6 )
                                                                                                                 
    (Percentages)
Gross profit percentage lease contracts:
                                                                                                               
New location
    2.7       4.5                   10.0                                     3.2       4.0                  
Contract expirations
          12.1       100.0       154.5       58.3       26.3             20.0       100.0       (200.0 )     51.2       34.1                  
Same location
    8.2       9.5             (14.3 )     9.9       8.5       7.5       8.9                   8.1       9.3                  
Conversions
    4.8       13.6                         6.1       22.7       14.3                   11.8       10.8                  
Acquisitions
    11.5       12.5                                                       11.0       10.0                  
                                                                                                                 
Total gross profit percentage
    7.8       9.6       27.3       88.9       14.1       10.5       8.2       9.4             200.0       9.2       10.8                  
                                                                                                                 
    (In millions)
Gross profit management contracts:
                                                                                                               
New location
  $ 4.1     $ 0.9     $ 0.2     $ 0.1     $ 4.3     $ 1.3     $ 1.5     $ 0.1     $     $     $ 10.1     $ 2.4     $ 7.7       320.8  
Contract expirations
    1.7       5.6             (1.2 )     1.6       2.7       (0.1 )     (0.1 )                 3.2       7.0       (3.8 )     (54.3 )
Same location
    22.2       22.4       3.6       2.9       19.6       19.5       12.7       12.4       1.9       2.4       60.0       59.6       0.4       0.7  
Conversions
    0.1       0.2                   0.1                                     0.2       0.2              
Acquisitions
    1.6       0.3                   1.4       0.4                               3.0       0.7       2.3       328.6  
                                                                                                                 
Total gross profit management contracts
  $ 29.7     $ 29.4     $ 3.8     $ 1.8     $ 27.0     $ 23.9     $ 14.1     $ 12.4     $ 1.9     $ 2.4     $ 76.5     $ 69.9     $ 6.6       9.4  
                                                                                                                 
    (Percentages)
Gross profit percentage management contracts:
                                                                                                               
New location
    42.3       27.3       66.7       100.0       55.8       56.5       20.0       4.2                   40.1       29.6                  
Contract expirations
    32.7       44.8             240.0       55.2       50.9       (100.0 )     (33.3 )                 39.0       39.8                  
Same location
    56.3       62.6       105.9       93.5       53.8       58.7       52.9       56.6       (633.3 )     (109.1 )     58.3       64.9                  
Conversions
    100.0       100.0                   50.0                                     66.7       100.0                  
Acquisitions
    53.3       100.0                   22.6       25.0                               32.6       36.8                  
                                                                                                                 
Total gross profit percentage
    51.7       56.4       102.7       66.7       50.6       56.4       44.6       50.4       (633.3 )     (109.1 )     52.5       58.4                  
                                                                                                                 


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Gross profit — lease contracts.   Gross profit for lease contracts decreased $1.5 million, or 9.6%, to $14.2 million for the year ended December 31, 2008, compared to $15.7 million in the year-ago period. Gross profit percentage for lease contracts decreased to 9.2% for the year ended December 31, 2008, compared to 10.8% in the year-ago period. Gross profit lease contracts decreases on same locations were primarily the result of increases in other operating costs as described under the cost of parking services lease contracts. Gross profit percentage on acquisitions were higher than our average for lease contracts however, were not sufficient to offset the decline in same locations.
 
Gross profit — management contracts.   Gross profit for management contracts increased $6.6 million, or 9.4%, to $76.5 million for the year ended December 31, 2008, compared to $69.9 million in the year-ago period. Gross profit percentage for management contracts decreased to 52.5% for the year ended December 31, 2008, compared to 58.4% in the year-ago period. Gross profit for management contracts increases were primarily the result of our new locations and our acquisitions. Gross profit percentage on same locations accounted for most of the decline on a percentage basis.
 
Gross profit for lease contracts for regions one and four experienced declines in same location profit primarily due to the increase in operating costs.
 
Gross profit for management contracts increased in regions one, two, three and four primarily due to the addition of new locations and gross margin from same locations being comparable to the prior year. In addition, acquisitions were a positive contributor to our results. The other region declined in gross profit percentage due to changes in prior years insurance reserve activity.
 
Segment general and administrative expenses information is summarized as follows:
 
                                                                                                                 
    December 31,  
    Region One     Region Two     Region Three     Region Four     Other     Total     Variance  
    2008     2007     2008     2007     2008     2007     2008     2007     2008     2007     2008     2007     Amount     %  
    (In millions)  
 
General and administrative expenses
  $ 8.9     $ 7.8     $ 2.5     $ 2.6     $ 11.0     $ 11.8     $ 3.1     $ 3.0     $ 22.1     $ 19.6     $ 47.6     $ 44.8     $ 2.8       6.2  
                                                                                                                 
 
General and administrative expenses.   General and administrative expenses increased $2.8 million, or 6.2%, to $47.6 million for the year ended December 31, 2008, compared to $44.8 million in the year-ago period. This increase resulted from increases in payroll and payroll related expenses of $1.7 million, increases resulting from acquisitions of $1.2 million and a $0.1 decrease in other operating expenses, which included $0.4 million from the Hurricane Katrina settlement.
 
General and administrative expenses on a segment basis represent direct administrative costs for each region. The other region consists primarily of the corporate headquarters. The increase in region one is due primarily to our investment in additional business development infrastructure.
 
Interest expense.   Interest expense decreased $0.6 million, or 8.5%, to $6.5 million for the year ended December 31, 2008, as compared to $7.1 million in the year-ago period. This decrease resulted primarily from the decrease in the borrowing rate on our senior credit facility.
 
Interest income.   Interest income decreased $0.4 million, or 66.7%, to $0.2 million for the year ended December 31, 2008, as compared to $0.6 million in the year-ago period. This decrease resulted from reduction of repayments received in 2007 for interest bearing guarantor payments related to Bradley International Airport.
 
Income tax expense.   Income tax expense increased $0.3 million, or 2.7%, to $11.6 million for the year ended December 31, 2008, as compared to $11.3 million in the year-ago period. This increase resulted from taxes on increased earnings partially offset by a reduction in our effective tax rate. The effective tax rate for the year ended December 31, 2008 was 37.9% compared to 39.3% for the year-ago period.


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Unaudited Quarterly Results
 
The following table sets forth our unaudited quarterly consolidated statement of income data for the years ended December 31, 2009 and December 31, 2008. The unaudited quarterly information has been prepared on the same basis as the annual financial information and, in management’s opinion, includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the information for the quarters presented. Historically, our revenues and operating results have varied from quarter to quarter and are expected to continue to fluctuate in the future. These fluctuations have been due to a number of factors, including: general economic conditions in our markets; additions of contracts; expiration and termination of contracts; conversion of lease contracts to management contracts; conversion of management contracts to lease contracts and changes in terms of contracts that are retained. The operating results for any historical quarter are not necessarily indicative of results for any future period.
 
                                                                 
    2009 Quarters Ended     2008 Quarters Ended  
    March 31     June 30     September 30     December 31     March 31     June 30     September 30     December 31  
    (Unaudited)     (Unaudited)  
    ($ in thousands)  
 
Parking services revenue:
                                                               
Lease contracts
  $ 34,700     $ 35,687     $ 35,576     $ 34,478     $ 37,694     $ 40,003     $ 38,634     $ 37,980  
Management contracts
    38,293       37,311       39,266       38,512       35,880       36,415       36,858       36,675  
Reimbursed management contract expense
    102,558       97,595       97,480       104,038       99,451       99,317       101,919       99,934  
                                                                 
Total revenue
    175,551       170,593       172,322       177,028       173,025       175,735       177,411       174,589  
Cost of parking services:
                                                               
Lease contracts
    32,949       32,932       32,899       32,117       34,893       34,711       35,506       34,948  
Management contracts
    20,391       19,938       20,696       23,142       17,046       18,162       16,510       17,567  
Reimbursed management contract expense
    102,558       97,595       97,480       104,038       99,451       99,317       101,919       99,934  
                                                                 
Total cost of parking services
    155,898       150,465       151,075       159,297       151,390       152,190       153,935       152,449  
Gross profit:
                                                               
Lease contracts
    1,751       2,755       2,677       2,361       2,801       5,292       3,128       3,032  
Management contracts
    17,902       17,373       18,570       15,370       18,834       18,253       20,348       19,108  
                                                                 
Total gross profit
    19,653       20,128       21,247       17,731       21,635       23,545       23,476       22,140  
General and administrative expenses
    12,761       10,320       11,295       10,331       11,411       12,029       12,017       12,162  
Depreciation and amortization
    1,487       1,413       1,582       1,346       1,371       1,579       1,539       1,570  
                                                                 
Operating income
    5,405       8,395       8,370       6,054       8,853       9,937       9,920       8,408  
Other expense (income):
                                                               
Interest expense
    1,436       1,528       1,546       1,502       1,518       1,086       1,777       2,095  
Interest income
    (67 )     (95 )     (54 )     (52 )     (42 )     (41 )     (106 )     16  
                                                                 
      1,369       1,433       1,492       1,450       1,476       1,045       1,671       2,111  
Income before income taxes
    4,036       6,962       6.878       4,604       7,377       8,892       8,249       6,297  
Income tax expense
    1,574       2,692       2,654       1,345       2,978       3,612       3,144       1,888  
                                                                 
Net income
    2,462       4,270       4,224       3,259     $ 4,399       5,280     $ 5,105     $ 4,409  
Less: Net income (loss) attributable to noncontrolling interest
    64       42       38       (21 )     122       3       (4 )     27  
                                                                 
Net income attributable to Standard Parking Corporation
  $ 2,398     $ 4,228     $ 4,186     $ 3,280     $ 4,277     $ 5,277     $ 5,109     $ 4,382  
                                                                 
Common stock data:
                                                               
Common stock data(1):
                                                               
Net income per share:
                                                               
Basic
  $ 0.15     $ 0.28     $ 0.27     $ 0.21     $ 0.24     $ 0.29     $ 0.30     $ 0.27  
Diluted
    0.15       0.27       0.27       0.21       0.23       0.29       0.29       0.27  
Weighted average shares outstanding:
                                                               
Basic
    15,296,282       15,251,310       15,277,601       15,346,452       18,122,846       17,891,155       17,244,932       16,041,375  
Diluted
    15,628,952       15,601,643       15,696,136       15,755,494       18,534,770       18,265,653       17,694,208       16,430,630  
 
 
(1) Share and per share amounts have been retroactively adjusted for the effect of the 2-for-1 stock split in January 2008. See Note A for additional information.


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Liquidity and Capital Resources
 
Outstanding Indebtedness
 
On December 31, 2009, we had total indebtedness of approximately $113.2 million, a decrease of $11.9 million from December 31, 2008. The $113.2 million includes:
 
  •  $109.9 million under our senior credit facility; and
 
  •  $3.3 million of other debt including capital lease obligations and obligations on seller notes and other indebtedness.
 
We believe that our cash flow from operations, combined with additional borrowing capacity under our senior credit facility, which amounted to $15.8 million at December 31, 2009, will be sufficient to enable us to pay our indebtedness, or to fund other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before their respective maturities. We believe that we will be able to refinance our indebtedness on commercially reasonable terms.
 
Senior Credit Facility
 
On July 15, 2008, we amended and restated our credit facility.
 
The $210.0 million revolving senior credit facility will expire in July 2013. The revolving senior credit facility includes a letter of credit sub-facility with a sublimit of $50.0 million.
 
Our 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%.
 
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.
 
At December 31, 2009, we had $16.9 million of letters of credit outstanding under the senior credit facility, borrowings against the senior credit facility aggregated $109.9 million and we had $15.8 million available under the senior credit facility.
 
Interest Rate Cap Transactions
 
We do not enter into derivative instruments for any purpose other than cash flow hedging purposes.
 
In 2006 we entered into an interest rate cap transaction with Bank of America, which allowed us to limit our exposure on a portion of our borrowings under our senior credit facility. Under the rate cap transaction, we received payments from Bank of America each quarterly period to the extent that the prevailing three month LIBOR during that period exceeded our cap rate of 5.75%. The rate cap transaction capped our LIBOR interest rate on a notional amount of $50.0 million at 5.75% for a total of 36 months. The rate cap transaction began as of August 4, 2006 and was settled each quarter on a date that coincided with our quarterly interest payment dates under our senior credit facility. This rate cap transaction was classified as a cash flow hedge, and we calculated the effectiveness of the hedge on a quarterly basis. The ineffective portion of the cash flow hedge was recognized in current period earnings as an increase of interest expense.
 
Total changes in the fair value of the rate cap transaction for the twelve months ended December 31, 2009 were immaterial. The rate cap transaction expired on August 4, 2009.
 
Stock Repurchases
 
In July 2008 our Board of Directors authorized us to repurchase shares of our common stock, on the open market or through private purchases, up to $60.0 million in aggregate. As of December 31, 2008, $22.9 million remained available for repurchase under this authorization.
 
During the first quarter of 2009, we repurchased 93,600 shares from third-party shareholders at an average price of $18.23 per share, including average commissions of $0.03 per share, on the open market. Our former majority shareholder sold


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119,701 shares to us in the first quarter of 2009 at an average price of $18.20 per share. The total value of the first quarter transactions was $3.9 million. We retired 200,650 shares during the first quarter of 2009 and retired the remaining 12,651 shares in April 2009.
 
We did not make any share repurchases in the second, third, and fourth quarters of 2009.
 
As of December 31, 2009, $19.0 million remained available for repurchase under the July 2008 authorization by the Board of Directors.
 
Letters of Credit
 
At December 31, 2009, we have provided letters of credit totaling $16.5 million to our casualty insurance carriers to collateralize our casualty insurance program.
 
As of December 31, 2009, we provided $0.4 million in letters of credit to collateralize other obligations.
 
Deficiency Payments
 
Pursuant to our obligations with respect to the parking garage operations at Bradley International Airport, we are required to make certain payments for the benefit of the State of Connecticut and for holders of special facility revenue bonds. The deficiency payments represent contingent interest bearing advances to the trustee to cover operating cash flow requirements. The 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 December 31, 2009, we have a receivable of $9.6 million, comprised 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.
 
We made deficiency payments (net of repayments received) of $3.6 million in the year ended December 31, 2009 compared to deficiency payments (net of repayments received) of $1.8 million made in the year ended December 31, 2008. We did not receive deficiency repayments from the trustee for interest or premium income in the year ended December 31, 2009 compared to $18 thousand received for premium income in the year ended December 31, 2008 (See Note O to our consolidated financial statements).
 
Capital Leases
 
We incurred no new capital lease obligations for the years ended December 31, 2009 and 2008.
 
Lease Commitments
 
We have minimum lease commitments of $31.1 million for fiscal 2010. The leased properties generate sufficient cash flow to meet the base rent payment.
 
Daily Cash Collections
 
As a result of day-to-day activity at our parking locations, we collect significant amounts of cash. Lease contract revenue is generally deposited into our local bank accounts, with a portion remitted to our clients in the form of rental payments according to the terms of the leases. Under management contracts, some clients require us to deposit the daily receipts into one of our local bank accounts, with the cash in excess of our operating expenses and management fees remitted to the clients at negotiated intervals. Other clients require us to deposit the daily receipts into client accounts and the clients then reimburse us for operating expenses and pay our management fee subsequent to month-end. Some clients require a segregated account for the receipts and disbursements at locations. Our working capital and liquidity may be adversely affected if a significant number of our clients require us to deposit all parking revenues into their respective accounts.
 
Our liquidity also fluctuates on an intra-month and intra-year basis depending on the contract mix and timing of significant cash payments. Additionally, our ability to utilize cash deposited into our local accounts is dependent upon the availability and movement of that cash into our corporate account. For all these reasons, from time to time, we carry a significant cash balance, while also utilizing our senior credit facility.
 
Net Cash Provided by Operating Activities
 
Our primary sources of funds are cash flows from operating activities and changes in working capital. Net cash provided by operating activities totaled $21.8 million for 2009, compared to $29.6 million for 2008. Cash provided during 2009 included $27.5 million from operations which was offset by a net decrease in working capital of $5.7 million The decrease in working capital resulted primarily from an increase in notes and accounts receivable by $1.9 million which primarily related to an


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increase in business from new locations and our acquisitions, an increase in other assets by $1.8 million which primarily related to an increase in the cash surrender values related to the non-qualified deferred compensation plan and deposits, an increase in prepaid assets by $2.2 million which primarily related to increases in prepaid insurance and prepaid taxes, an increase in accounts payable by $2.0 million which primarily resulted from the timing on payments to our clients and new business that are under management contracts as described under “Daily Cash Collections”, and a decrease in accrued liabilities by $1.8 million which primarily related to a settlement of a payout accrued for a prior year acquisition.
 
Our primary sources of funds are cash flows from operating activities and changes in working capital. Net cash provided by operating activities totaled $29.6 million for 2008, compared to $36.7 million for 2007. Cash provided during 2008 included $34.4 million from operations which was offset by a net decrease in working capital of $4.8 million. The decrease in working capital resulted primarily from an increase in notes and accounts receivable by $4.8 million which primarily related to an increase in business from new locations and our acquisitions, an increase in other assets by $3.0 million which primarily related to deposits made in conjunction with new business proposals that are refundable and advances to clients for their facility improvements that are reimbursed to us over a contractual term, an increase in accounts payable by $3.5 million which primarily resulted from the timing on payments to our clients and new business that are under management contracts as described under “Daily Cash Collections”, and a decrease in accrued liabilities by $1.0 million which primarily related to accrued rent that decreased due to conversions to management contracts, new contract terms that lowered the contingency rent amount for a higher fixed amount and timing of payment obligations.
 
Net Cash Used in Investing Activities
 
Net cash used in investing activities totaled $7.1 million in 2009 compared to $13.0 million in 2008. Cash used in investing activities for 2009 included business acquisitions of $2.5 million, capital expenditures of $3.5 million for capital investments needed to secure and/or extend lease facilities, investment in information system enhancements and infrastructure, cost of contract purchases of $0.9 million and $0.3 million for contingent payments on previously acquired contracts, which was partially offset by $0.1 million of proceeds from the sale of assets.
 
Net cash used in investing activities totaled $13.0 million in 2008 compared to $10.7 million in 2007. Cash used in investing activities for 2008 included business acquisitions of $6.3 million, capital expenditures of $6.3 million for capital investments needed to secure and/or extend lease facilities, investment in information system enhancements and infrastructure, cost of contract purchases of $0.6 million and $0.1 million for contingent payments on previously acquired contracts, which was partially offset by $0.3 million of proceeds from the sale of assets.
 
Net Cash Used in Financing Activities
 
Net cash used in financing activities totaled $15.0 million in 2009 compared to $16.2 million in 2008. Cash used in financing activities for 2009 included $3.9 million used to repurchase our common stock, $1.0 million used for payments on capital leases, $10.8 million use for payments on senior credit facility, $0.1 million used for payments on other long-term borrowings, $.1 million distributed to noncontrolling interest, offset by $0.4 million in proceeds from the exercise of stock options and $0.5 million in excess tax benefits related to stock option exercises.
 
Net cash used in financing activities totaled $16.2 million in 2008 compared to $25.9 million in 2007. Cash used in financing activities for 2008 included $60.0 million used to repurchase our common stock, $2.3 million used for payments of debt issuance costs, $1.6 million used for payments on capital leases, $0.1 million used for payments on other long-term borrowings $0.2 million on distributions to noncontrolling interest, offset by $46.4 million in proceeds from our senior credit facility, $0.7 million in proceeds from the exercise of stock options and $0.9 million in excess tax ben