SP Plus Corp - Annual Report: 2007 (Form 10-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number: 333-50437

Standard Parking Corporation
(Exact Name of Registrant as Specified in Its Charter)

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 ý

         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 ý

         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 ý    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.

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No ý

         As of June 30, 2007, the aggregate market value of the voting and non-voting common equity held by nonaffiliates of the registrant was approximately $163.2 million, based on the closing price of the common stock as reported on the NASDAQ Global Market.

         As of March 7, 2008, there were 18,374,366 shares of common stock of the registrant outstanding.

         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 22, 2008, are incorporated by reference into Part III of this Form 10-K.

Table of Contents

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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

        This Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 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 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:

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the loss, or renewal on less favorable terms, of management contracts and leases;



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our ability to form and maintain relationships with large real estate owners, managers and developers;



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integration of acquisitions in light of challenges in retaining key employees, synchronizing business processes and efficiently integrating facilities, marketing and operations;



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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;



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availability, terms and deployment of capital;  



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the ability of our majority shareholder to control our major corporate decisions;



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public and private regulations;  



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the ability to obtain performance bonds on acceptable terms to guarantee our performance under certain contracts;



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extraordinary events affecting parking at facilities that we manage, including emergency safety measures, military or terrorist attacks and natural disasters;



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changes in federal and state regulations including those affecting airports, parking lots at airports or automobile use;



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the loss of key employees;  



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changes in general economic and business conditions or demographic trends;  



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development of new, competitive parking-related services; and  



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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. 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

General

        We are a leading national provider of parking facility management services. We provide on-site management services at multi-level and surface parking facilities for all major markets of the parking industry. We manage approximately 2,100 locations, containing over one million parking spaces, in over 330 cities across the United States and Canada. Our diversified client base includes some of the nation's largest private and public owners, managers and developers of major office buildings, residential properties, commercial properties, shopping centers and other retail properties, sports and special event complexes, hotels, and hospitals and medical centers, including properties such as the MET Life Building in New York, the Four Seasons Hotel in Chicago, Harvard Medical School in Boston, Nationwide Arena in Columbus, Westfield Shoppingtown Century City in Los Angeles, and Greenway Plaza in Houston. In addition, we manage 122 parking-related and shuttle bus operations serving 63 airports, including Chicago O'Hare International Airport, Cleveland Hopkins International Airport and Dallas/Fort Worth International Airport.

        Since entering the parking business in 1929, we have focused on providing our clients with superior management services to attract customers. We believe that our management services, coupled with a leading position in our core markets, helps to maximize profitability per parking facility for both us and our clients. We believe that we have created our leading position by providing:

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Ambiance in Parking®, an approach to parking that includes on-site, value-added services and amenities;



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service enhancing information technology, including Client View™, a proprietary client reporting system that allows us to provide our clients with on-line access to site-level financial and operating information;



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comprehensive training programs for on-site employees, including our web-based Standard University ^sm training programs that promote customer service and client retention; and



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an internal audit and contract compliance group to monitor cash and operational controls.

        Moreover, as a public company subject to the requirements of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act, we adhere to accounting, internal control and reporting standards that are more rigorous than those typically followed by our non-public competitors.

        We believe that these factors distinguish us from our competitors and contribute to our high retention rate, which averaged 91% for the year ended December 31, 2007 (which statistic includes the impact of our decision to exit from unprofitable contracts).

        We do not own any parking facilities and, as a result, we assume few of the risks of real estate ownership. We operate our clients' parking 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 client rather than to us. Under lease arrangements, we generally pay either a fixed annual rent, a percentage of gross customer collections, or a combination thereof to the property owner. We collect all revenues 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. As of December 31, 2007, we operated 89% of our locations under management contracts and 11% under leases.

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        We also provide a range of ancillary services to satisfy client needs such as municipal meter collection and valet parking.

Industry Overview

General

        The commercial parking industry comprises a large number of participants. The vast majority of firms are privately held companies, consisting of relatively few nationwide companies and hundreds of small regional or local operators, including a substantial number of companies that provide parking as an ancillary service in connection with property management or ownership. The parking industry from time to time experiences consolidation as smaller operators find that they lack the financial resources, economies of scale and management techniques required to compete with larger providers. We expect this trend will continue and provide larger parking management companies with opportunities to win business and acquire smaller operators.

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 generally charge fees for various ancillary services such as accounting, equipment leasing and consulting. Responsibilities under a management contract include hiring, training and staffing parking personnel, and providing revenue collection, accounting, record-keeping, insurance and facility marketing services. In general, under a management contract, the facility operator is not responsible for structural or mechanical repairs, and typically is not responsible for providing security or guard services. Under typical management contracts, the facility owner is responsible for operating expenses such as taxes, license and permit fees, insurance premiums, payroll and accounts receivable processing and wages of personnel assigned to the facility. However, some management contracts, which are referred to as "reverse" management contracts, usually provide for larger management fees and require the facility operator to pay certain of these costs. Generally under management contracts, the facility owner is responsible for non-routine maintenance, repair costs and capital improvements. Management contracts are typically for a term of one to three years (though the client often reserves the right to terminate, without cause, on 30 days' notice) and may contain a renewal clause.

        Leases.    Under a lease arrangement, the parking facility operator generally pays to the property owner either a fixed annual rent, a percentage of facility revenues, or a combination thereof. The parking facility operator collects all revenues and is responsible for most operating expenses, but is typically not responsible for major maintenance, capital expenditures or real estate taxes. In contrast to management contracts, leases are typically for terms of three to ten years, 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 are cancelable 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.

        Ownership.    Ownership of parking facilities, either independently or through joint ventures, typically requires a larger capital investment and greater potential risks and rewards than managed or leased facilities. All owned facility revenues flow directly to the owner, and the owner has the potential to realize benefits of appreciation in the value of the underlying real estate. The owner of a parking

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facility is responsible for all obligations related to the property, including all structural, mechanical and electrical maintenance and repairs and property taxes. Due to the high cost of real estate in many major urban markets, ownership of parking facilities usually requires large capital investments. Standard Parking does not own any parking facilities.

Industry Growth Dynamics

        A number of opportunities for growth exist for larger parking facility operators, including the following:

        Growth of Large Property Managers, Owners and Developers.    Over the past several years, there has been a substantial increase in the number of national property managers, owners and developers with 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. In order to streamline their business, many of these large national property managers, owners and developers have reduced the number of suppliers with which they conduct business.

        Increased Outsourcing of Parking Management and Related Services.    Growth in the parking management industry has resulted from a continuing 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 management managers, owners and developers as well as cities, municipal authorities, hospitals and universities will increasingly retain parking management companies to operate facilities and provide related services in an effort to focus on their core competencies, reduce operating budgets and increase profitability and efficiency. We believe this trend is expanding to include outsourcing of shuttle bus operations, municipal meter collection and valet parking.

        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:

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broad product and service offerings;



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deeper and more experienced management;



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relationships with large, national property managers, developers and owners;



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efficient cost structure due to economies of scale; and



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financial resources to invest in infrastructure and information systems.

Growth Strategy

        We believe we are well positioned to pursue the following growth strategies:

        Grow Contract Portfolio Within Our Core Markets.    Our strategy is to increase our presence and profitability in our core markets by continuing to provide sophisticated parking services and by capitalizing on our economies of scale and operating efficiency. This concentration of locations gives us the ability to spread administrative overhead costs across a large number of parking facilities in a single market. We plan to continue to maximize our premium service, local market knowledge and management infrastructure to retain existing locations and compete aggressively for new business in these core markets. We regularly review potential acquisition opportunities to enhance our position in our core markets.

        Enhance Client Relationships Through Additional Services.    We believe we can deepen our relationships with existing clients and attract new clients by continuing to offer additional services that

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complement our parking expertise, such as shuttle bus, taxi-dispatch, municipal meter collection, and valet-parking services. By offering these services to our clients, we increase our revenues and gross profit per location and strengthen our client relationships, which should enhance our ability to win new contracts and increase our retention rate.

        Develop New Market Opportunities.    We believe that a significant opportunity exists for us to expand our presence in markets such as university campus parking and hospital parking. In addition to our long-standing relationships with Harvard Medical School, Northwestern University and Northwestern Memorial Hospital, we have more recently expanded our presence in these markets to provide parking services at George Mason University and Boston University. In addition to expanded growth opportunities in the hospital and university markets, we see significant potential within the municipal on-street market, including the prospect of providing enforcement services. We currently provide exclusive meter collection and management services for the Cities of Miami Beach, Florida; Ft. Myers, Florida; Bloomfield, New Jersey; San Mateo, California; Great Falls, Montana and New Orleans, Louisiana.

        Develop New Core Markets.    We believe that numerous opportunities for growth are available by developing new core markets either through new contracts, acquisitions, alliances or partnerships. Our clients generally have a presence in a variety of urban markets where they seek to outsource the management of their parking facilities to a national parking service provider that can assist them in maximizing parking-related profit. One of our strategies is to strengthen our client relationships to facilitate the addition of new locations and our strategic identification and development of new geographic markets.

        Pursue Selective Acquisitions.    We believe that many of our growth strategies can be supplemented by selective small and large acquisitions, including acquisitions in one or more of our core markets, acquisitions expanding the ancillary services we can offer to our clients, and acquisitions in new geographic or vertical markets or new lines of business. We intend to apply a disciplined approach in evaluating acquisition opportunities, with the objective of identifying opportunities that can be consummated at reasonable valuations and that have the potential to enhance our future earnings and cash flow.

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:

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Collection and deposit of daily and monthly parking revenues from all parking customers.



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Daily housekeeping to maintain the facility in a clean and orderly manner.



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Restriping of the parking stalls as necessary.



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Routine maintenance of parking equipment (e.g., ticket dispensing machines, parking gate arms, fee computers).



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Marketing efforts designed to maximize gross parking revenues.



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Delivery of courteous and professional customer relations.



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Painting of walkways, curbs, ceilings, walls or other facility surfaces.

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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:

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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.



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Evaluation and analysis of, and consultation with our clients with respect to, price structures that will optimize our client's revenue objectives.



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Consultation with our clients regarding which of our customer amenities are appropriate and/or desirable for implementation at the client's parking facility.



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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.



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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 ViewSM 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:

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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.



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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.



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For municipalities, we provide basic shuttle bus services, on-street parking meter collection and other forms of parking enforcement services.



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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.

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        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® Audiotape Library. Monthly customers can borrow—free of charge—audio tapes 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® Videotape Library. This amenity builds on the success of our popular Books-To-Go® program. Videotapes 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.

        CarCareSM 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.

        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.

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        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 12,600 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 University^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:

        No single client represented more than 6.5% of revenues or more than 4.4% of our gross profit for the year ended December 31, 2007. For the years ended December 31, 2007 and December 31, 2006, we retained an average of 91% 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™. Client View™ is 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, 2007, we employed approximately 12,600 individuals, including approximately 7,060 full-time and 5,540 part-time employees. As of December 31, 2006, we employed approximately 12,000 individuals, including approximately 6,800 full-time and 5,200 part-time employees. Approximately 22.3% 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.

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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.

        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

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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

        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.

        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.

        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.

        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 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.

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Available Information

        Our Internet address is www.standardparking.com. There we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after we electronically file such material with or furnish it to the SEC. Our SEC reports can be accessed through the investor relations section of our website. The information found on our website is not part of this or any other report we file with or furnish to the SEC.

Intellectual Property

        Standard Parking® and the Standard Parking 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 Client View™, Hand Held Program™, License Plate Inventory Programs™ and ParkStat™ with the United States Copyright Office.

ITEM 1A.    RISK FACTORS

        You should carefully consider the following specific risk factors as well as other information contained or incorporated by reference in this report, as these, 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.

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. In addition, 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 ancillary services we provide under management contracts and leases, including increases in costs or claims associated with, or a reduction in the number of clients obtaining insurance we provide, 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.

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

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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 in the future may include the 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 or that the acquired operations or new contracts will be integrated successfully.

        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.



•

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 shareholders' percentage ownership.



•

Record goodwill and non-amortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges.

        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.

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Failure to manage and successfully integrate acquisitions could materially harm our business, financial condition and results of operations.

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 could have a material adverse effect on our business, financial condition and results of operations.

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 cause the related risks to intensify. We may need to refinance all or a portion of our indebtedness on or before their respective maturities. 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.

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. 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.

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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.

        We frequently contract with clients to hold parking revenues in our account and remit the revenues, minus the operating expenses and our fee, to our clients at the end of the month. Some clients, however, require us to deposit parking revenues 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 revenues into their respective accounts, which would have a material adverse effect on our liquidity and financial condition.

Our ability to expand our business will be dependent upon the availability of adequate capital.

        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. We believe that we will be able to obtain equity or debt capital on acceptable terms. However, we will require the consent of Steamboat Industries LLC 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.

Our parent company, Steamboat Industries LLC, which is controlled by our chairman, controls our major corporate decisions, and the offer or sale of a substantial amount of our common stock by our controlling shareholder could have an adverse impact on the market price of our common stock.

        Our parent company, Steamboat Industries LLC, which is controlled by our chairman, John V. Holten, owns 51% of our outstanding common stock as of December 31, 2007. As a result, Steamboat Industries LLC is able able to control us, the election and removal of the directors on our board of directors, and our management and policies. Steamboat Industries LLC also controls all matters regarding stockholder approval, including the amendment of certain provisions of our Certificate of Incorporation and By-Laws and the approval of fundamental corporate transactions.

        Steamboat Industries LLC has the ability to pledge shares of our common stock as security for its debt obligations. In the event that some or all of such pledged shares are foreclosed upon following default of such debt obligations, Mr. Holten may no longer control a majority of the voting power of our company.

        As of December 31, 2007, we have 21,300,000 shares of common stock authorized, of which only 2,928,692 shares remained unissued. As a result, we require, and expect to require, the consent of Steamboat Industries LLC in order to authorize and issue additional common stock in connection with corporate actions that may be beneficial to our business or to our stockholders, such as increasing the number of shares authorized under our Long-Term Incentive Plan for the retention of management, or in order to pursue acquisitions and mergers in exchange for stock. The ability of our parent company to control our major corporate decisions may harm the market price for our common stock by delaying, deferring or preventing a business combination involving our company, causing us to enter into transactions that are not in the best interests of all stockholders or discouraging third-party investors.

        Steamboat Industries LLC is permitted to sell, dispose of or otherwise enter into other transactions involving significant amounts of our common stock under Rule 144 and other exemptions from registration under the federal securities laws. Steamboat Industries LLC also has transferable registration rights with respect to such common stock. The offer, sale, disposition or other such transactions involving substantial amounts of our common stock by these or other significant

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shareholders, particularly if such offers, sales, dispositions or transactions occur simultaneously or relatively close in time, could have a significant negative impact on our stock price.

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, 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 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 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. A purported class action was recently filed against us alleging violations of the Fair and Accurate Credit Transactions Act. Similar complaints have been filed against many credit card processors.

        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.

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.

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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 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, 2007, approximately 19% 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 revenues and cash flow for both our leased facilities and those facilities we operate under management contracts.

We must comply with 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, management believes that none of these matters, individually or in the aggregate, are reasonably likely to have a material adverse

20

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.

        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.

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.

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.

Economic and demographic trends could materially adversely affect our business.

        Our business operations are located in North America and tend to be concentrated in large urban areas. Our business could be materially adversely affected to the extent that economic or demographic factors result in the movement of white-collar jobs from urban centers to suburbs or even out of North America, increased office vacancies in urban areas or movement toward home office alternatives, or lower consumer spending or employment levels.

Many of our employees are covered by collective bargaining agreements.

        Approximately 22.3% of our employees are represented by labor unions. Approximately 1.0% of our collective bargaining contracts, representing 0.01% of our employees, are up for renewal in 2008. 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 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.

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ITEM 2.    PROPERTIES

Parking Facilities

        We operate parking facilities in 43 states and the District of Columbia in the United States and three provinces of Canada. We do not currently own any parking facilities. The following table summarizes certain information regarding our facilities as of December 31, 2007:

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        We have interests in twelve joint ventures, each of which operates between one and twenty-two parking facilities. We are the general partner of three limited partnerships, each of which operates between one and 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. The lease includes an expansion option for up to 6,000 additional square feet of space, and 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 various claims and legal proceedings that consist principally of lease and contract disputes. We consider these claims and legal proceedings to be routine and incidental to our business, and in the opinion of management, the ultimate liability with respect to these proceedings and claims will not materially affect our financial position, operations or liquidity.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Our board of directors approved an amendment to our Second Amended and Restated Certificate of Incorporation to increase the number of authorized shares of our common stock from 12,100,000 shares to 21,300,000 shares on December 4, 2007. On December 4, 2007, pursuant to written consent, the holders of 9,364,480 shares of our issued and outstanding common stock approved and consented to a charter amendment. No votes were cast against the charter amendment and there were no abstensions or broker non-votes.

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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 Select Global 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 Select Global Market and its predecessor, adjusted for the effect of the 2-for-1 stock split in January 2008.

Holders

        As of December 4, 2007, there were approximately 1,407 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 2007 or 2006. 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

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Stock Repurchases

        The following table contains detail related to our repurchase of common stock based on the date of trade during the quarter ended December 31, 2007. (In thousands except share and per share data)

        In March 2007, the Board of Directors authorized us to repurchase shares of our common stock, on the open market or through private purchases, up to $20.0 million in aggregate. We repurchased certain shares in open market transactions from time to time during the fourth quarter, and our majority shareholder agreed in each case to sell shares equal to its pro-rata ownership at the same price paid by us in each open market purchase.

        In December 2007, the Board of Directors authorized us to repurchase shares of our common stock, on the open market or through private purchases, up to an additional $25.0 million in aggregate.

        During the fourth quarter of 2007 we repurchased 74,052 shares at an average price of $20.43 per share, including average commissions of $0.01 per share, on the open market and our majority shareholder agreed in each case to sell shares equal to its pro-rate ownership of 76,106 shares at an average price of $20.42 per share. In addition, we repurchased 167,544 shares at an average price of $24.22 per share, including average commissions of $0.01 per share, on the open market. The total value of the fourth quarter transactions was $7.1 million. 269,228 shares were retired during the fourth quarter of 2007 and the remaining 48,474 shares were held as treasury stock and retired during the first quarter of 2008.

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ITEM 6.    SELECTED FINANCIAL DATA

        The following table presents selected historical consolidated financial data as of December 31, 2007, 2006 and 2005, 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, 2004 and 2003 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 2007, 2006 and 2005 which are included elsewhere herein. The historical results do not necessarily indicate results expected for any future period.

(1)

2006 results include a reduction in the valuation allowance for net operating loss carryforwards and other deferred tax assets of $23,924.

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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 three 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, 2007, we operated 89% of our locations under management contracts and 11% 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, 2007, 89% of our locations were operated under management contracts and 82% of our gross profit for the year ended December 31, 2007 was derived from management contracts. Only 46% of total revenue (excluding reimbursement of 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

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properties' tenants and visitors. By outsourcing these services, they are able to capture additional profit by leveraging the unique operational skills and controls that an experienced parking management company can offer. Our ability to consistently deliver a uniformly high level of parking and related services and maximize the profit to our clients improves our ability to win contracts and retain existing locations. Our retention rate for the twelve month periods ended December 31, 2007 and December 31, 2006 was 91%, which also reflects our decision not to renew, or to terminate, unprofitable contracts.

        We are also experiencing an increase in our ability to leverage existing relationships to increase the scope of services provided, thereby increasing the profit per location. For the year ended December 31, 2007 compared to the year ended December 31, 2006, we improved average gross profit per location by 4.7% from $38.4 thousand to $40.2 thousand.

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:

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.

Reimbursement of Management Contract Expense

        Reimbursement of management contract expense consists of the direct reimbursement from the property owner for operating expenses incurred under a management contract.

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Cost of Parking Services

        Our cost of parking services consists of the following:

•

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



•

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

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.

Valuation Allowance Related to Long-Term Receivables

        Valuation allowance related to long-term receivables is recorded when there is an extended length of time estimated for collection of long-term receivables.

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 2007 Compared to Fiscal 2006

        Parking services revenue—lease contracts.    Lease contract revenue decreased $8.0 million, or 5.2%, to $145.3 million for the year ended December 31, 2007, compared to $153.3 million in the year-ago

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period. This decrease resulted from reductions in revenue related to contract expirations of $24.9 million, offset by an increase of $9.7 million in revenues from new locations, an increase in same location revenue of $6.6 million and a $0.6 million non-cash gain related to the sale of a contract right in conjunction with one of the acquisitions completed during the third quarter. The increase in same location revenue was due to increases in short-term parking revenue of $5.2 million, or 6.2%, and an increase in monthly parking revenue of $1.4 million, or 3.5%.

        Parking services revenue—management contracts.    Management contract revenue increased $15.5 million, or 14.6%, to $122.1 million for the year ended December 31, 2007, compared to $106.6 million in the year-ago period. This increase resulted from an increase of $16.1 million in revenues from new locations, and an increase in same location revenue of $6.1 million that was partially offset by reductions in revenue attributable to contract expirations of $6.7 million The increase in same location revenue was primarily due to additional fees from reverse management locations and ancillary services and a favorable change in insurance loss experience reserve estimates relating to prior years of $2.5 million.

        Reimbursement of management contract expense.    Reimbursement of management contract expenses increased $10.7 million, or 3.1%, to $356.8 million for the year ended December 31, 2007, compared to $346.1 million in the year-ago period. This increase resulted from additional reimbursements for costs incurred on the behalf of owners.

        Cost of parking services—lease contracts.    Cost of parking services for lease contracts decreased $9.4 million, or 6.8%, to $129.6 million for the year ended December 31, 2007, compared to $139.0 million in the year-ago period. This decrease resulted from reductions in costs attributable to contract expirations of $23.1 million that was partially offset by an increase in costs from new locations of $7.7 million and an increase in same location costs of $6.0 million. The increase in same location costs was due to increases in rent expense of $5.8 million, or 6.8%, due to percentage rental payments from increased revenue, $0.7 million, or 5.3%, for increases in payroll and payroll related expenses, partially offset by a decrease in other operating costs of $0.2 million and a favorable change in insurance loss experience reserve estimates relating to prior years of $0.3 million.

        Cost of parking services—management contracts.    Cost of parking services for management contracts increased $7.2 million, or 16.1%, to $52.2 million for the year ended December 31, 2007, compared to $45.0 million in the year-ago period. This increase resulted from an increase of $11.8 million in costs from new reverse management locations and an increase in same location costs of $0.3 million that was partially offset by reductions in costs attributable to contract expirations of $4.9 million. The increase in same location costs was due to increases in payroll and payroll related costs of $0.8 million, or 3.3%, partially offset by decreases attributable to operating expenses on our reverse management locations of $0.5 million, or 5.5%.

        Reimbursed management contract expense.    Reimbursed management contract expenses increased $10.7 million, or 3.1%, to $356.8 million for the year ended December 31, 2007, compared to $346.1 million in the year-ago period. This increase resulted from additional reimbursed costs incurred on the behalf of owners.

        Gross profit—lease contracts.    Gross profit for lease contracts increased $1.5 million, or 10.4%, to $15.8 million for the year ended December 31, 2007, compared to $14.3 million in the year-ago period. Gross margin for lease contracts increased to 10.9% for the year ended December 31, 2007, compared to 9.3% in the year-ago period. This margin increase was primarily due to decreases in costs related to contract expirations and a $0.6 million non-cash gain related to the sale of a contract right in conjunction with one of the acquisitions completed during the third quarter.

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        Gross profit—management contracts.    Gross profit for management contracts increased $8.3 million, or 13.5%, to $69.9 million for the year ended December 31, 2007, compared to $61.6 million in the year-ago period. Gross margin for management contracts decreased to 57.2% for the year ended December 31, 2007, compared to 57.8% in the year-ago period. This margin decrease was primarily due to increases in costs from new reverse management locations partially offset by a favorable change in insurance loss experience reserve estimates relating to prior years.

        General and administrative expenses.    General and administrative expenses increased $3.6 million, or 8.7%, to $44.8 million for the year ended December 31, 2007, compared to $41.2 million for the year-ago period. This increase resulted from increases in payroll and payroll related expenses of $2.7 million, an increase in legal fees of $0.5 million, an increase in consulting fees of $0.2 million, an increase in training and recruiting of $0.3, partially offset by a decrease in other operating expenses of $0.1 million.

        Interest expense.    Interest expense decreased $1.2 million, or 14.9%, to $7.1 million for the year ended December 31, 2007, compared to $8.3 million in the year-ago period. This decrease resulted primarily from the redemption of the 9¹/4% Senior Subordinated Notes, the refinancing of our senior credit facility reduced borrowings under our senior credit facility and a decrease in interest rates.

        Interest income.    Interest income remained flat at $0.6 million for the year ended December 31, 2007 and December 31, 2006.

        Income tax expense (benefit).    Income tax expense increased $26.2 million, to $11.3 million for the year ended December 31, 2007, compared to a $14.9 million benefit in the year-ago period. In the fourth quarter of 2006 the Company concluded that certain net operating loss carryforwards and other deferred tax assets were more likely than not to be realized and accordingly, reversed the valuation allowance by the amount considered recoverable. The increase in income tax expense is based on an effective tax rate of approximately 39% in 2007 compared to a benefit of approximately 71% in 2006. The change in the Company's effective tax rate resulted from the Company's reversal of the valuation allowance at December 31, 2006.

Segment revenue

        The CEO ("Chief Operating Decision Maker", "CODM") historically has evaluated the Company's operations and reported the enterprise's operating segments by contract types which were aggregated on an enterprise level into a single segment for the purpose of SFAS No. 131. Over the last several quarters, the Company has made a number of organizational changes that have changed the information the CODM receives and how the CODM evaluates the Company's operations. These organizational changes have increased the importance of the Company's reliance on business unit performance. As such, the Company determined in the fourth quarter of 2007 that business units now represent operating segments, as defined by SFAS No. 131, and therefore reports these business units as separate segments.

        The Company is managed based on regions administered by executive vice presidents. Three regions are generally organized geographically with the fourth region encompassing major airports and transportation operations nationwide. The following is a summary of revenues (excluding reimbursement of management contract expenses) by region for the years ended December 31, 2007 and 2006. Information related to prior years has been recast to conform to the new region alignment.

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        Segment revenue information is summarized as follows (in thousands):

(a)

Excludes reimbursement of management contract expenses.

        Region One encompasses Connecticut, District of Columbia, Delaware, Illinois, Massachusetts, Maryland, Maine, North Carolina, New Jersey, New York, Pennsylvania, Rhode Island, Virginia, Vermont, and Wisconsin.

        Region Two encompasses Alabama, British Columbia, Florida, Georgia, Iowa, Indiana, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Missouri, Ohio, Ontario, Tennessee, and Texas.

        Region Three encompasses Arizona, California, Colorado, Hawaii, Nevada, Utah, Washington, and Wyoming.

        Region Four encompasses all major airport and transportation operations nationwide, along with regional general and administrative expenses.

        Other consists of ancillary revenue that is not specifically identifiable to a region.

        Revenue increased $7.5 million, or 2.9% to $267.4 million for the year ended December 31, 2007, compared to $259.9 million in the year-ago period. This increase resulted from an increase of $7.2 million in revenue from Region One, an increase of $4.3 million in revenue from Region Four, an increase of $2.7 million in Region Two, an increase of $1.4 million in Other, partially offset by a decrease in revenue of $8.1 million for Region Three.

        Region One revenue increased $7.2 million, or 9.7% to $81.9 million for the year ended December 31, 2007, compared to $74.7 million in the year-ago period. This increase resulted from an increase of $12.8 million in revenue from new locations, an increase in same location revenue of $2.5 million, partially offset by reductions in revenue attributable to contract expirations of $8.1 million.

        Region Two revenue increased $2.7 million, or 5.7% to $50.7 million for the year ended December 31, 2007, compared to $48.0 million for the year-ago period. This increase resulted from an increase of $3.3 million in revenue from new locations, an increase in same location revenue of $3.2 million, partially offset by reductions in revenue attributable to contract expirations of $3.8 million.

        Region Three revenue decreased $8.1 million, or 12.1% to $59.4 million for the year ended December 31, 2007, compared to $67.5 million for the year-ago period. This decrease resulted from reductions in revenue attributable to contract expirations of $16.9 million, partially offset by an increase of $6.3 million in revenue from new locations, an increase in same location revenue of $1.9 million and a $0.6 million non-cash gain related to the sale of a contract right in conjunction with one of the acquisitions completed during the third quarter.

        Region Four revenue increased $4.3 million, or 6.6% to $69.8 million for the year ended December 31, 2007, compared to $65.5 million in the year-ago period. This increase resulted from an

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increase of $3.3 million in revenue from new locations, an increase in same location revenue of $3.7 million, partially offset by reductions in revenue attributable to contract expirations of $2.7 million.

        Other revenue increased $1.4 million, or 34.0% to $5.6 million for the year ended December 31, 2007, compared to $4.2 million in the year-ago period. This increase resulted from increases in ancillary revenue that is not specifically identifiable to a region.

Fiscal 2006 Compared to Fiscal 2005

Hurricane Katrina

        Our operations were impacted by Hurricane Katrina during the year ended December 31, 2006 compared to the year ended December 31, 2005. We are required to reimburse the owners of the leased and managed locations for property damage of $2.2 million. For the year ended December 31, 2006, we also recorded $0.3 million for the recovery from insurers of recognized losses on nonmonetary assets, which have been reflected as a reduction in cost of sales.

        Parking services revenue—lease contracts.    Lease contract revenue decreased $0.8 million, or 0.5%, to $153.3 million for the year ended December 31, 2006, compared to $154.1 million in the year-ago period. This decrease resulted from a reductions in revenue related to contract expirations of $15.2 million, offset by an increase of $7.3 million in revenues from new locations and an increase in same location revenue of $7.1 million. The increase in same location revenue was due to increases in short-term parking revenue of $4.4 million, or 5.3%, and an increase in monthly parking revenue of $2.7 million, or 6.6%.

        Parking services revenue—management contracts.    Management contract revenue increased $12.7 million, or 13.5%, to $106.6 million for the year ended December 31, 2006, compared to $93.9 million in the year-ago period. This increase resulted from an increase of $11.4 million in revenues from new locations that was partially offset by reductions in revenue attributable to contract expirations of $4.9 million and an increase in same location revenue of $6.2 million. The increase in same location revenue was primarily due to additional fees from reverse management locations and ancillary services.

        Reimbursement of management contract expense.    Reimbursement of management contract expenses increased $7.4 million, or 2.2%, to $346.1 million for the year ended December 31, 2006, compared to $338.7 million for the year-ago period. This increase resulted from additional reimbursements for costs incurred on the behalf of owners.

        Cost of parking services—lease contracts.    Cost of parking services for lease contracts decreased $2.0 million, or 1.4%, to $139.0 million for the year ended December 31, 2006, compared to $141.0 million in the year-ago period. This decrease resulted from reductions in costs attributable to contract expirations of $17.1 million that was partially offset by an increase in costs from new locations of $8.1 million and an increase in same location costs of $7.0 million. The increase in same location costs was due to increases in rent expense of $6.0 million, or 7.1%, due to percentage rental payments from increased revenue, $1.2 million, or 9.0% for increases in payroll and payroll related expenses, partially offset by a decrease in other operating costs of $0.2 million.

        Cost of parking services—management contracts.    Cost of parking services for management contracts increased $7.9 million, or 21.3%, to $45.0 million for the year ended December 31, 2006, compared to $37.1 million in the year-ago period. This increase resulted from an increase of $8.9 million in costs from new reverse management locations and an increase in same location costs of $2.7 million that was partially offset by reductions in costs attributable to contract expirations of $3.7 million.. The increase in same location costs was due to increases in payroll and payroll related

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costs of $3.0 million, partially offset by decreases attributable to operating expenses on our reverse management locations of $0.3 million, or 3.4%.

        Reimbursed management contract expense.    Reimbursed management contract expenses increased $7.4 million, or 2.2%, to $346.1 million for the year ended December 31, 2006, compared to $338.7 million for the year-ago period. This increase resulted from additional reimbursed costs incurred on the behalf of owners.

        Gross profit—lease contracts.    Gross profit for lease contracts increased $1.2 million, or 9.4%, to $14.3 million for the year ended December 31, 2006, compared to $13.1 million for the year-ago period. Gross margin for lease contracts increased to 9.3% at December 31, 2006, compared to 8.5% for the year-ago period. This margin increase was due to decreases in costs related to contract expirations.

        Gross profit—management contracts.    Gross profit for management contracts increased $4.8 million, or 8.4%, to $61.6 million for the year ended December 31, 2006, compared to $56.8 million for the year-ago period. Gross margin for management contracts decreased to 57.8% for the year ended December 31, 2006, compared to 60.5% for the year-ago period. This decrease was primarily due to increases in costs from new reverse management locations.

        General and administrative.    General and administrative expenses increased $2.3 million, or 5.9%, to $41.2 million for the year ended December 31, 2006, compared to $38.9 million for the year-ago period. This increase resulted primarily from increases in payroll and payroll related expenses of $2.4 million, $0.5 million related to the adoption of FAS 123R, Sound Parking operations of $0.5 million, partially offset by a reduction in legal fees of $0.5 million, accounting and audit fees of $0.2 million, outsourcing related to our IT function of $0.2 million and other operating expenses of $0.2 million.

        Valuation allowance related to long-term receivables.    We recorded no additional valuation allowance related to long term receivables for the year ended December 31, 2006, compared to $0.9 million in the year-ago period. The valuation allowance in 2005 related to a long-term receivable for a facility in Minnesota where a breakdown in negotiations to restructure the contract had occurred. The allowance for the entire outstanding receivable was recorded due to the uncertainty of future collection. The contract expired on May 31, 2006 and we have not received any collections on the outstanding amounts. The allowance was written off in 2006.

        Interest expense.    Interest expense decreased $1.1 million, or 11.7%, to $8.3 million for the year ended December 31, 2006, compared to $9.4 million for the year-ago period. This decrease resulted primarily from the redemption of the 9¹/4% Senior Subordinated Notes and the refinancing of our senior credit facility.

        Interest income.    Interest income decreased $0.2 million, or 34.4%, to $0.6 million for the year ended December 31, 2006, compared to $0.8 million for the year-ago period. The decrease resulted primarily from reduction of repayments received in 2006 for interest bearing guarantor payments related to Bradley International Airport.

        Income tax benefit.    Income tax benefit increased $14.9 million, to $14.9 for the year ended December 31, 2006, compared to $14 thousand for the year-ago period. The year ended December 31, 2006 reflects the recognition of a reduction of the valuation allowance for the deferred tax assets of $23.9 million offset by $9.0 million of current and deferred tax expense. We concluded in the fourth quarter of 2006 that certain net operating loss carryforwards and other deferred tax assets are more likely than not to be realized and accordingly, reduced the valuation allowance by the amount we considered recoverable.

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Segment revenue

        The CEO ("Chief Operating Decision Maker", "CODM") historically has evaluated the Company's operations and reported the enterprise's operating segments by contract types which were aggregated on an enterprise level into a single segment for the purpose of SFAS No. 131. Over the last several quarters, the Company has made a number of organizational changes that have changed the information the CODM receives and how the CODM evaluates the Company's operations. These organizational changes have increased the importance of the Company's reliance on business unit performance. As such, the Company determined in the fourth quarter of 2007 that business units now represent operating segments, as defined by SFAS No. 131, and therefore reports these business units as separate segments.

        The Company is managed based on regions administered by executive vice presidents. Three regions are generally organized geographically with the fourth region encompassing major airports and transportation operations nationwide. The following is a summary of revenues (excluding reimbursement of management contract expenses) by region for the years ended December 31, 2006 and 2005. Information related to prior years has been recast to conform to the new region alignment.

        Segment revenue information is summarized as follows (in thousands):

(a)

Excludes reimbursement of management contract expenses.

        Region One encompasses Connecticut, District of Columbia, Delaware, Illinois, Massachusetts, Maryland, Maine, North Carolina, New Jersey, New York, Pennsylvania, Rhode Island, Virginia, Vermont, and Wisconsin.

        Region Two encompasses Alabama, British Columbia, Florida, Georgia, Iowa, Indiana, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Missouri, Ohio, Ontario, Tennessee, and Texas.

        Region Three encompasses Arizona, California, Colorado, Hawaii, Nevada, Utah, Washington, and Wyoming.

        Region Four encompasses all major airport and transportation operations nationwide, along with regional general and administrative expenses.

        Other consists of ancillary revenue that is not specifically identifiable to a region.

        Revenue increased $12.0 million, or 4.8% to $259.9 million for the year ended December 31, 2006, compared to $247.9 million in the year-ago period. This increase resulted from an increase of $7.1 million in revenue from Region Three, an increase of $6.9 million in revenue from Region One, an increase of $0.8 million in Other, partially offset by a decrease of $1.4 million in revenue from Region Two and a decrease in revenue of $1.4 million for Region Four.

        Region One revenue increased $6.9 million, or 10.1% to $74.7 million for the year ended December 31, 2006, compared to $67.8 million in the year-ago period. This increase resulted from an

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increase of $6.4 million in revenue from new locations, an increase in same location revenue of $5.0 million, partially offset by reductions in revenue attributable to contract expirations of $4.5 million.

        Region Two revenue decreased $1.4 million, or 3.0% to $48.0 million for the year ended December 31, 2006, compared to $49.4 million for the year-ago period. This decrease resulted from reductions in revenue attributable to contract expirations of $4.9 million, partially offset by an increase of $2.8 million in revenue from new locations and an increase in same location revenue of $0.7 million.

        Region Three revenue increased $7.1 million, or 11.9% to $67.5 million for the year ended December 31, 2006, compared to $60.4 million for the year-ago period. This increase resulted from an increase of $7.9 million in revenue from new locations, an increase in same location revenue of $3.9 million, partially offset by reductions in revenue attributable to contract expirations of $4.7 million.

        Region Four revenue decreased $1.4 million, or 2.1% to $65.5 million for the year ended December 31, 2006, compared to $66.9 million in the year-ago period. This decrease resulted from reductions in revenue attributable to contract expirations of $5.9 million, partially offset by an increase of $1.7 million in revenue from new locations and an increase in same location revenue of $2.8 million.

        Other revenue increased $0.8 million, or 22.7% to $4.2 million for the year ended December 31, 2006, compared to $3.4 million in the year-ago period. This increase resulted from increases in ancillary revenue that is not specifically identifiable to a region.

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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, 2007 and December 31, 2006. 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.