SP Plus Corp - Quarter Report: 2010 September (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

STANDARD PARKING CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)		16-1171179 (I.R.S. Employer Identification No.)

900 N. Michigan Avenue, Suite 1600
Chicago, Illinois 60611-1542
(Address of Principal Executive Offices, Including Zip Code)

(312) 274-2000
(Registrant’s Telephone Number, Including Area Code)

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

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

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

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

As of October 29, 2010, there were 15,717,318 shares of common stock of the registrant outstanding.

 

 

STANDARD PARKING CORPORATION
FORM 10-Q INDEX

Part I. Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009			3
Condensed Consolidated Statements of Income (Unaudited) for the three months ended September 30, 2010 and 2009 and the nine months ended September 30, 2010 and 2009			4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2010 and 2009			5
Notes to Condensed Consolidated Interim Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3. Quantitative and Qualitative Disclosures about Market Risk			32
Item 4. Controls and Procedures			32
Part II. Other Information
Item 1. Legal Proceedings			33
Item 6. Exhibits			33
Signatures			34
Index to Exhibits			35
Exhibit 31.1
Exhibit 31.2
Exhibit 31.3
Exhibit 32.1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

STANDARD PARKING CORPORATION

		September 30, 2010				December 31, 2009
		(Unaudited)				(see Note)
ASSETS
Current assets:
Cash and cash equivalents		$	7,404			$	8,256
Notes and accounts receivable, net			53,146				44,490
Prepaid expenses and supplies			3,212				5,401
Deferred taxes			3,457				3,457
Total current assets			67,219				61,604
Leasehold improvements, equipment and construction in progress, net			16,910				17,175
Advances and deposits			6,395				4,904
Long-term receivables, net			12,982				10,325
Intangible and other assets, net			8,462				6,765
Cost of contracts, net			13,115				12,879
Goodwill			128,320				126,853
Total assets		$	253,403			$	240,505
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	48,356			$	48,502
Accrued and other current liabilities			40,173				33,156
Current portion of long-term borrowings			664				662
Total current liabilities			89,193				82,320
Deferred taxes			9,937				8,151
Long-term borrowings, excluding current portion			96,848				112,549
Other long-term liabilities			26,532				22,808
Standard Parking Corporation’s stockholders’ equity:
Preferred stock, par value $.01 per share; 5,000,000 shares authorized and no shares issued			—				—
Common stock, par value $.001 per share; 50,000,000 shares authorized; 15,695,864 and 15,385,428 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively			16				15
Additional paid-in capital			96,167				91,793
Accumulated other comprehensive (loss) income			(37	)			313
Accumulated deficit			(65,183	)			(77,372	)
Total Standard Parking Corporation stockholders’ equity			30,963				14,749
Noncontrolling interest			(70	)			(72	)
Total equity			30,893				14,677
Total liabilities and stockholders’ equity		$	253,403			$	240,505

See Notes to Condensed Consolidated Interim Financial Statements.

STANDARD PARKING CORPORATION

		Three Months Ended								Nine Months Ended
		September 30, 2010				September 30, 2009				September 30, 2010				September 30, 2009
Parking services revenue:
Lease contracts		$	35,713			$	35,576			$	102,991			$	105,963
Management contracts			43,713				39,266				125,869				114,870
			79,426				74,842				228,860				220,833
Reimbursed management contract revenue			101,500				97,480				308,312				297,632
Total revenue			180,926				172,322				537,172				518,465
Cost of parking services:
Lease contracts			32,714				32,899				95,702				98,780
Management contracts			24,357				20,696				68,899				61,025
			57,071				53,595				164,601				159,805
Reimbursed management contract expense			101,500				97,480				308,312				297,632
Total cost of parking services			158,571				151,075				472,913				457,437
Gross profit:
Lease contracts			2,999				2,677				7,289				7,183
Management contracts			19,356				18,570				56,970				53,845
Total gross profit			22,355				21,247				64,259				61,028
General and administrative expenses (1)			11,549				11,295				35,327				34,376
Depreciation and amortization			1,527				1,582				4,557				4,482
Operating income			9,279				8,370				24,375				22,170
Other expenses (income):
Interest expense			1,286				1,546				4,174				4,510
Interest income			(56	)			(54	)			(161	)			(216	)
			1,230				1,492				4,013				4,294
Income before income taxes			8,049				6,878				20,362				17,876
Income tax expense			3,124				2,654				7,992				6,920
Net income			4,925				4,224				12,370				10,956
Less: Net income attributable to noncontrolling interest			89				38				181				144
Net income attributable to Standard Parking Corporation		$	4,836			$	4,186			$	12,189			$	10,812
Common stock data:
Net income per share:
Basic		$	0.31			$	0.27			$	0.79			$	0.71
Diluted		$	0.30			$	0.27			$	0.77			$	0.69
Weighted average shares outstanding:
Basic			15,651,586				15,277,601				15,526,061				15,274,214
Diluted			15,993,631				15,696,136				15,893,282				15,659,351

See Notes to Condensed Consolidated Interim Financial Statements.

STANDARD PARKING CORPORATION

		Nine Months Ended
		September 30, 2010				September 30, 2009
Operating activities:
Net income		$	12,370			$	10,956
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization			4,545				4,173
Loss on sale and abandonment of assets			50				286
Amortization of debt issuance costs			478				481
Non-cash stock-based compensation			1,770				1,754
Excess tax benefit related to stock option exercises			(1,185	)			(136	)
Provisions (reversal) for losses on accounts receivable			102				(174	)
Deferred income taxes			1,786				4,295
Change in operating assets and liabilities			(4,149	)			(6,856	)
Net cash provided by operating activities			15,767				14,779
Investing activities:
Acquisitions			—				(2,500	)
Purchase of leasehold improvements and equipment			(2,168	)			(2,820	)
Cost of contracts purchased			(522	)			(904	)
Proceeds from sale of assets			3				39
Capitalized interest			(107	)			—
Contingent purchase payments			(104	)			(259	)
Net cash used in investing activities			(2,898	)			(6,444	)
Financing activities:
Repurchase of common stock			—				(3,885	)
Proceeds from exercise of stock options			1,450				125
Tax benefit related to stock option exercises			1,185				136
Earn-out payments			(529	)			–
Payments on senior credit facility			(15,200	)			(3,600	)
Distribution to noncontrolling interest			(179	)			(148	)
Payments on long-term borrowings			(95	)			(90	)
Payments on debt issuance costs			(30	)			(30	)
Payments on capital leases			(404	)			(775	)
Net cash used in financing activities			(13,802	)			(8,267	)
Effect of exchange rate changes on cash and cash equivalents			81				272
(Decrease) increase in cash and cash equivalents			(852	)			340
Cash and cash equivalents at beginning of period			8,256				8,301
Cash and cash equivalents at end of period		$	7,404			$	8,641
Supplemental disclosures:
Cash paid during the period for:
Interest		$	3,975			$	4,516
Income taxes			4,925				2,449

See Notes to Condensed Consolidated Interim Financial Statements.

STANDARD PARKING CORPORATION

1. Basis of Presentation

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

In the opinion of management, all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair presentation of the financial position and results of operations have been included. Operating results for the three-month and nine-month periods ended September 30, 2010 are not necessarily indicative of the results that might be expected for any other interim period or the fiscal year ending December 31, 2010. The financial statements presented in this report should be read in conjunction with the consolidated financial statements and footnotes thereto included in our 2009 Annual Report on Form 10-K filed March 12, 2010.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and variable interest entities in which the Company is the primary beneficiary. Noncontrolling interest recorded in the consolidated statement of income is the interest in consolidated VIEs not controlled by the Company. We have interests in eleven joint ventures and one limited liability company. The eleven joint ventures each operate between one and thirty parking facilities. The limited liability company collects and distributes parking facility data for a fee. Of the twelve variable interest entities, six are consolidated into our financial statements, and six are single purpose entities where the Company is not the primary beneficiary and therefore has a noncontrolling interest as power is shared. Investments in variable interest entities where the Company is not the primary beneficiary are accounted for under the equity method. All significant intercompany profits, transactions and balances have been eliminated in consolidation.

Financial Instruments

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

Interest Rate Caps

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

On February 22, 2010, we entered into interest rate cap agreements with Wells Fargo Bank N.A. (“Wells Fargo”) and Fifth Third Bank (“Fifth Third”), allowing us to limit our exposure on a portion of our borrowings under our senior credit facility (“Rate Cap Transactions”). Pursuant to two separate letter agreements between the Company and Wells Fargo and Fifth Third, respectively, we will receive payments from Wells Fargo and Fifth Third each quarterly period to the extent that the prevailing three month LIBOR during that period exceeds our cap rate of 3.25%. The Rate Cap Transactions are effective March 31, 2010, and will settle each quarter on a date that is intended to coincide with our quarterly interest payment dates under our senior credit facility. The Rate Cap Transactions cap our LIBOR interest rate on a notional amount of $50,000 at 3.25% for a total of 39 months. These Rate Cap Transactions are classified as a cash flow hedge, and we calculate the effectiveness of the hedge on a quarterly basis. The ineffective portion of the cash flow hedge is recognized in current period earnings as an increase of interest expense. The fair value of the interest rate cap at September 30, 2010 is $88 and is included in prepaid expenses.

2. Common and Preferred Stock

On April 28, 2010, our stockholders approved the charter amendment increasing the Company’s number of shares of common stock authorized for issuance under the certificate of incorporation by 28,700,000 shares, and increasing the number of shares of preferred stock from ten to 5,000,000. The amount of total authorized capital stock following the amendment is 55,000,000 shares, which includes 50,000,000 shares of common stock with a $0.001 par value and 5,000,000 shares of preferred stock with a $0.01 par value. The amendment was filed with the State of Delaware on April 29, 2010.

3. Stock-Based Compensation

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

The Company has an amended and restated Long-Term Incentive Plan that was adopted in conjunction with our initial public offering. On February 27, 2008, our Board approved an amendment to our Long-Term Incentive Plan, subject to shareholder approval, that increased the maximum number of shares of common stock available for awards under the Long-Term Incentive Plan from 2,000,000 to 2,175,000 and extended the Plan’s termination date. Our shareholders approved this Plan amendment on April 22, 2008, and the Plan now terminates twenty years from the date of such approval, or April 22, 2028. Forfeited and expired options under the Plan become generally available for reissuance. At September 30, 2010, 117,902 shares remained available for award under the Plan.

Stock Options and Grants

We use the Black-Scholes option pricing model to estimate the fair value of each option grant as of the date of grant. The volatilities are based on the 90 day historical volatility of our common stock as of the grant date. The risk free interest rate is based on zero-coupon U.S. government issues with a remaining term equal to the expected life of the option. For options granted prior to 2008, the expected life for options was calculated using the simplified method. The simplified method was calculated as the vesting term plus the contractual term divided by two.

There were no options granted during the nine months ended September 30, 2010 and 2009. A total of 9,534 options expired in the third quarter with a weighted average exercise price of $17.03. The option expirations are due to out-of-the-money options that were not exercised prior to their expiration date. The expired options were returned to the pool of shares generally available for future use under the Long-Term Incentive Plan as of September 30, 2010.

On April 28, 2010, we authorized vested stock grants to certain directors totaling 12,892 shares. The total value of the grant was $220 and is included in general and administrative expenses. On September 22, 2010, we authorized vested stock grants to certain directors totaling 1,504 shares. The total value of the grant was $25 and is included in general and administrative expenses.

The Company recognized no stock-based compensation expense related to stock options for the nine months ended September 30, 2010, as all options previously granted were fully vested. The Company recognized no stock-based compensation expense related to stock options for the three months ended September 30, 2009 and $30 of stock-based compensation expense for nine months ended September 30, 2009. As of September 30, 2010, there were no unrecognized compensation costs related to unvested options.

Performance-Based Incentive Program

In December 2006, the Board of Directors adopted a performance-based incentive program under our Long-Term Incentive Plan. This program provided participating executives with the opportunity to earn a combination of stock (50%) and cash (50%) if certain performance targets for pre-tax income and pre-tax free cash flow were achieved. During 2007, certain participating executives became entitled to performance restricted stock based on the stock price at the commencement of the three-year performance cycle (2007-2009), and as a result, 29,698 shares were issued subject to vesting upon the achievement of the performance goals. The plan was completed as of December 31, 2009, at which time a total of 17,677 shares had been released free of restrictions in accordance with the achievement of the cumulative program performance goals. The remaining 12,021 shares were not awarded under the performance-based incentive program and were returned to the pool of shares generally available for future use under the Long-Term Incentive Plan as of September 30, 2010.

We record stock-based compensation expense for awards with performance conditions based on the probable outcome of that performance condition. The Company recognized no stock-based compensation expense and no cash compensation expense related to the performance-based incentive program for the nine months ended September 30, 2010. The Company recognized $11 and $32 of stock-based compensation expense and $11 and $32 of cash compensation expense related to the performance-based incentive program for the three and nine months ended September 30, 2009, respectively, which is included in general and administrative expenses.

Restricted Stock Units

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

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

The Company recognized $508 and $1,525 of stock-based compensation expense related to the restricted stock units for the three and nine months ended September 30, 2010, respectively, which is included in general and administrative expenses. The Company recognized $505 and $1,527 of stock-based compensation expense related to restricted stock units for the three and nine months ended September 30, 2009, respectively, which is included in general and administrative expenses. As of September 30, 2010, there was $8,340 of unrecognized stock-based compensation costs, net of estimated forfeitures, related to the restricted stock units that are expected to be recognized over a weighted average period of approximately 7.0 years.

4. Net Income Per Common Share

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

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

		Three Months Ended September 30								Nine Months Ended September 30
		2010				2009				2010				2009
Weighted average common basic shares outstanding			15,651,586				15,277,601				15,526,061				15,274,214
Effect of dilutive stock options and restricted stock units			342,045				418,535				367,221				385,137
Weighted average common diluted shares outstanding			15,993,631				15,696,136				15,893,282				15,659,351
Net income per share:
Basic		$	0.31			$	0.27			$	0.79			$	0.71
Diluted		$	0.30			$	0.27			$	0.77			$	0.69

There were 9,534 and 19,068 anti-dilutive options excluded in the computation of diluted earnings per share for the three and nine months ended September 30, 2010 and September 30, 2009, respectively, because the options’ exercise prices were greater than the average market price of the common stock.

For the three and nine months ended September 30, 2009, 15,961 shares of performance-based restricted stock were not included in the computation of weighted diluted common share amounts because the number of shares ultimately issued was contingent on the Company’s performance goals, which were not achieved as of that date. The plan was completed as of December 31, 2009, and during the second quarter of 2010, all non-awarded shares were returned to the pool of shares generally available for future use under the Long-Term Incentive Plan.

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

5. Recently Issued Accounting Pronouncements

Accounting Standards Net Yet Adopted

In October 2009, the Financial Accounting Standards Board (“FASB”) issued updated accounting guidance that amends the guidance related to revenue recognition-multiple-element arrangements. The standards enable companies to account for certain products and services (deliverables) separately rather than as a combined unit. This accounting guidance provides amendments to the criteria for separating deliverables, measuring and allocating arrangement consideration to one or more units of accounting. The amendments also establish a selling price hierarchy for determining the selling price of a deliverable. Significantly enhanced disclosures are also required to provide information about a vendor’s multiple-deliverable revenue arrangements, including information about the nature and terms, significant deliverables, and its performance within arrangements. The amendments also require providing information about the significant judgments made and changes to those judgments and about how the application of the relative selling-price method affects the timing or amount of revenue recognition. The amendments are effective prospectively for revenue arrangements entered into or materially modified in the fiscal years beginning on or after June 15, 2010. A company may adopt the new standard retroactively and early application is permitted. The Company currently does not have any multiple-element arrangements.

Accounting Standards Adopted

In June 2009, the FASB updated the accounting standards related to the consolidation of variable interest entities. This new guidance requires a qualitative approach to identifying a controlling financial interest in a VIE, and requires an ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. The updated accounting guidance is effective for annual reporting periods beginning after November 15, 2009. The Company’s adoption of this updated accounting guidance on January 1, 2010 did not impact the financial condition or results of operations of the Company.

In January 2010, the FASB issued a new accounting standard which requires new disclosures and clarifies certain existing disclosure requirements about fair value measurements. The majority of the provisions of this update are effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of this standard did not have a material impact on the Company’s financial statements.

6. Acquisitions

2009 Acquisitions

On July 1, 2009, the Company acquired substantially all of the assets of Gameday Management Group U.S. for a purchase price in the amount of $7,590, of which $2,450 was paid in cash, net of a hold back of $50, and $5,090 of potential earn-out payments of which $529 have been paid as of September 30, 2010. Gameday Management, based in Orlando, Florida, plans and operates transportation and parking systems for major stadiums and sporting events. Among the assets acquired is Gameday’s Click and Park online parking and traffic management system, which enables customers to purchase reserved parking online in advance of an event. The acquisition represents an acquisition of a business and was accounted for using the purchase method of accounting. This acquisition is not considered material to the Company.

The purchase price allocation in intangible assets with finite lives is $3,830 and goodwill is $3,760. The Company engaged a third-party valuation firm to assist in determining the fair value analysis of certain assets acquired and the contingent consideration. The Company financed the acquisition through additional term borrowings under the senior credit facility and existing cash. The results of operations of this acquisition are included in the Company’s consolidated statement of income from the date of acquisition.

The Company expensed acquisition related costs of $25 in 2010 and $178 in 2009. These costs are included in general and administrative expenses in the income statement.

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

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

		Ranges of Estimated
		useful life		September 30, 2010				December 31, 2009
				(Unaudited)
Equipment		2-10 years		$	30,423			$	28,568
Leasehold improvements		Shorter of lease term or economic life up to 10 years			9,578				9,708
Construction in progress					6,013				7,543
					46,014				45,819
Less accumulated depreciation and amortization					(29,104	)			(28,644	)
Leasehold improvements, equipment and construction in progress, net				$	16,910			$	17,175

Depreciation expense was $932 and $2,797 for the three and nine months ended September 30, 2010, respectively, and $991 and $2,921 for the three and nine months ended September 30, 2009, respectively. Depreciation includes losses on sale and abandonment of leasehold improvements and equipment of $13 and $50 for the three and nine months ended September 30, 2010, respectively, and $93 and $286 for the three and nine months ended September 30, 2009, respectively.

8. Cost of Contracts, Net

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

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

		September 30, 2010				December 31, 2009
		(Unaudited)
Cost of contracts		$	20,302			$	18,885
Accumulated amortization			(7,187	)			(6,006	)
Cost of contracts, net		$	13,115			$	12,879

During 2010, we retired fully amortized contracts in the amount of $168 that had expired.

Amortization expense related to cost of contracts was $546 and $1,349 for the three and nine months ended September 30, 2010, respectively, and $560 and $1,359 for the three and nine months ended September 30, 2009, respectively. The weighted average useful life is 9.4 years for 2010 and 9.0 years for 2009.

9. Goodwill

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

The following table reflects the changes in the carrying amounts of goodwill by reported segment for the nine months ended September 30, 2010 (unaudited).

		Region				Region				Region				Region
		One				Two				Three				Four				Total
Balance as of January 1, 2010		$	61,849			$	7,200			$	35,227			$	22,577			$	126,853
Adjustments to purchase price*			—				1,260				—				—				1,260
Contingency payments related to acquisitions			93				—				11				—				104
Foreign currency translation			—				103				—				—				103
Balance as of September 30, 2010		$	61,942			$	8,563			$	35,238			$	22,577			$	128,320

10. Long-Term Receivables, Net

		Amount Outstanding
		September 30, 2010				December 31, 2009
		(Unaudited)
Bradley International Airport
Deficiency payments		$	12,263			$	9,606
Other Bradley related, net			3,203				3,203
Valuation allowance			(2,484	)			(2,484	)
Total long-term receivables, net		$	12,982			$	10,325

Agreement

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

The parking garage was financed on April 6, 2000 through the issuance of $53,800 of State of Connecticut special facility revenue bonds, representing $47,700 non-taxable Series A bonds and a separate taxable issuance of $6,100 Series B bonds. The Series B bonds were retired on July 1, 2006 according to the terms of the indenture. The Bradley agreement provides that we deposit with a trustee for the bondholders all gross revenues collected from operations of the surface and garage parking, and from these gross revenues, the trustee pays debt service on the special facility revenue bonds outstanding, operating and capital maintenance expenses of the surface and garage parking facilities excluding our management fee discussed below, and specific annual guaranteed minimum payments to the State. Principal and interest on the Bradley special facility revenue bonds increase from approximately $3,600 in lease year 2002 to approximately $4,500 in lease year 2025. Annual guaranteed minimum payments to the State will increase from approximately $8,300 in lease year 2002 to approximately $13,200 in lease year 2024. The annual minimum guaranteed payment to the State by the trustee for the nine months ended September 30, 2010 and 2009 was $7,439 and $7,269, respectively.

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

The following is the list of Guaranteed Payments:

•

Garage and surface operating expenses,

•

Principal and interest on the special facility revenue bonds,

•

Trustee expenses

•

Major maintenance and capital improvement deposits; and

•

State Minimum Guarantee.

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

Deficiency Payments

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

In the nine months ended September 30, 2010, we made deficiency payments of $2,657 and we did not record or receive any interest and premium income deficiency repayments from the trustee. In the nine months ended September 30, 2009, we made deficiency payments of $2,800 and we did not record or receive any interest and premium income related to deficiency repayments from the trustee. The receivable from the trustee for interest and premium income related to deficiency repayments was $0 as of September 30, 2010 and September 30, 2009.

The deficiency payments, if any, are recorded as a receivable by us for which we are reimbursed from time to time as provided in the trust agreement. As of September 30, 2010 and December 31, 2009, we have a receivable of $12,263 and $9,606, respectively, compromised of cumulative deficiency payments to the trustee, net of reimbursements. We believe these advances to be fully recoverable and therefore have not recorded a valuation allowance for them. We do not guarantee the payment of any principal or interest on any debt obligations of the State of Connecticut or the trustee.

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

The following table reconciles the beginning and ending balance of the receivable for each period presented:

		September 30, 2010				December 31, 2009
		(Unaudited)
Deficiency payments:
Balance at beginning of period		$	9,606			$	5,961
Deficiency payments made			2,657				3,645
Deficiency repayment received			—				—
Balance at end of period			12,263				9,606
Other Bradley related			3,203				3,203
Valuation allowance			(2,484	)			(2,484	)
Total long-term receivables		$	12,982			$	10,325

Compensation

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

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

Cumulative management fees of $4,650 have not been recognized as of September 30, 2010 and no management fee income was recognized during the nine months ending September 30, 2010 and 2009.

11. Borrowing Arrangements

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

		Amount Outstanding
		Due Date		September 30, 2010				December 31, 2009
				(Unaudited)
Revolving senior credit facility		June 2013		$	94,650			$	109,850
Capital lease obligations		Various			1,652				2,056
Obligations on seller notes and other		Various			1,210				1,305
					97,512				113,211
Less current portion					664				662
				$	96,848			$	112,549

Senior Credit Facility

On July 15, 2008, we amended and restated our credit facility.

The $210,000 revolving senior credit facility will expire June 29, 2013. In addition, the revolving senior credit facility includes a letter of credit sub-facility with a sublimit of $50,000 and a swing line sub-facility with a sublimit of $10,000.

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

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

We are in compliance with all of our financial covenants as of September 30, 2010.

The weighted average interest rate on our senior credit facility at September 30, 2010 and December 31, 2009 was 2.8% and 3.2%, respectively. The rate includes all outstanding LIBOR contracts, interest rate cap effect and letters of credit. The weighted average interest rate on outstanding borrowings, not including letters of credit, was 2.8% and 3.3% at September 30, 2010 and December 31, 2009, respectively.

At September 30, 2010, we had $16,884 of letters of credit outstanding under the senior credit facility, borrowings against the senior credit facility aggregated $94,650, and we had $40,164 available under the senior credit facility.

We have entered into various financing agreements, which were used for the purchase of equipment.

12. Stock Repurchases

In July 2008, our Board of Directors authorized us to repurchase shares of our common stock, on the open market or through private purchases, up to $60,000 in aggregate.

During the first quarter of 2009, we repurchased 213,301 shares at an average price of $18.21 per share, including average commissions of $0.01 per share, on the open market. The total value of the first quarter transactions was $3,884. We retired 200,650 shares during the first quarter of 2009, and retired the remaining 12,651 shares in April 2009.

We did not make any share repurchases subsequent to the first quarter of 2009. As of September 30, 2010, $18,973 remained available for repurchase under the July 2008 authorization by the Board of Directors.

13. Business Unit Segment Information

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

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

Our business is managed based on regions administered by executive vice presidents. Regions one and three are generally organized geographically. The following is a summary of revenues (excluding reimbursed management contract revenue) and gross profit by regions for the three and nine months ended September 30, 2010 and 2009. Information related to prior periods has been recast to conform to the current region alignment.

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

		For the three months ended																For the nine months ended
		September 30,				Gross				September 30,				Gross				September 30,				Gross				September 30,				Gross
		2010				Margin				2009				Margin				2010				Margin				2009				Margin
Revenues:
Region One
Lease contracts		$	20,253							$	20,557							$	55,598							$	59,877
Management contracts			12,142								13,428								36,123								40,407
Total Region One			32,395								33,985								91,721								100,284
Region Two
Lease contracts			508								665								1,815								1,953
Management contracts			5,776								4,046								18,723								8,864
Total Region Two			6,284								4,711								20,538								10,817
Region Three
Lease contracts			5,638								4,796								15,764								14,580
Management contracts			13,272								13,982								38,589								41,412
Total Region Three			18,910								18,778								54,353								55,992
Region Four
Lease contracts			9,297								9,550								29,782								29,486
Management contracts			12,496								7,916								32,369								24,278
Total Region Four			21,793								17,466								62,151								53,764
Other
Lease contracts			17								8								32								67
Management contracts			27								(106	)							65								(91	)
Total Other			44								(98	)							97								(24	)
Reimbursed revenue			101,500								97,480								308,312								297,632
Total revenues		$	180,926							$	172,322							$	537,172							$	518,465
Gross Profit
Region One
Lease contracts		$	1,628				8	%		$	1,633				8	%		$	3,390				6	%		$	4,140				7	%
Management contracts			7,073				58	%			7,223				54	%			20,401				56	%			21,083				52	%
Total Region One			8,701								8,856								23,791								25,223
Region Two
Lease contracts			33				6	%			(30	)			(5	)%			167				9	%			11				1	%
Management contracts			1,713				30	%			1,390				34	%			5,467				29	%			3,198				36	%
Total Region Two			1,746								1,360								5,634								3,209
Region Three
Lease contracts			540				10	%			458				10	%			1,340				9	%			1,289				9	%
Management contracts			6,130				46	%			6,249				45	%			18,360				48	%			18,455				45	%
Total Region Three			6,670								6,707								19,700								19,744
Region Four
Lease contracts			762				8	%			654				7	%			2,285				8	%			1,762				6	%
Management contracts			4,335				35	%			3,850				49	%			12,214				38	%			11,754				48	%
Total Region Four			5,097								4,504								14,499								13,516
Other
Lease contracts			36				212	%			(38	)			(475	)%			107				334	%			(19	)			(28	)%
Management contracts			105				389	%			(142	)			(134	)%			528				812	%			(645	)			(709	)%
Total Other			141								(180	)							635								(664	)
Total gross profit			22,355								21,247								64,259								61,028
General and administrative expenses			11,549								11,295								35,327								34,376
General and administrative expense percentage of gross profit			52	%							53	%							55	%							56	%
Depreciation and amortization			1,527								1,582								4,557								4,482
Operating income			9,279								8,370								24,375								22,170
Other expenses (income):
Interest expense			1,286								1,546								4,174								4,510
Interest income			(56	)							(54	)							(161	)							(216	)
			1,230								1,492								4,013								4,294
Income before income taxes			8,049								6,878								20,362								17,876
Income tax expense			3,124								2,654								7,992								6,920
Net income			4,925								4,224								12,370								10,956
Less: Net income attributable to noncontrolling interest			89								38								181								144
Net income attributable to Standard Parking Corporation		$	4,836							$	4,186							$	12,189							$	10,812

Region One encompasses operations in Delaware, District of Columbia, Florida, Georgia, Illinois, Kansas, Maine, Maryland, Massachusetts, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Rhode Island, Tennessee, Vermont, Virginia, and Wisconsin.

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

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

Region Four encompasses all major airport and transportation operations nationwide.

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

The CODM does not evaluate segments using discrete asset information.

14. Comprehensive Income

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

		For the three months ended								For the nine months ended
		September 30, 2010				September 30, 2009				September 30, 2010				September 30, 2009
Net income		$	4,925			$	4,224			$	12,370			$	10,956
Revaluation of interest rate cap			(71	)			—				(431	)			—
Effect of foreign currency translation			114				329				81				272
Comprehensive income			4,968				4,553				12,020				11,228
Less: comprehensive income attributable to noncontrolling interest			89				38				181				144
Comprehensive income attributable to Standard Parking Corporation		$	4,879			$	4,515			$	11,839			$	11,084

15. Income Taxes

For the three months ended September 30, 2010, the Company recognized income tax expense of $3,124 on pre-tax earnings of $8,049 compared to $2,654 income tax expense on pre-tax earnings of $6,878 for the three months ended September 30, 2009. For the nine months ended September 30, 2010, the Company recognized income tax expense of $7,992 on pre-tax earnings of $20,362 compared to $6,920 income tax expense on pre-tax earnings of $17,876 for the nine months ended September 30, 2009. Income tax expense is based on a projected annual effective tax rate of approximately 39.2% for the nine months ended September 30, 2010 compared to approximately 38.7% for the nine months ended September 30, 2009. The change in the Company’s effective tax rate resulted primarily from an increase in unrepatriated Canadian earnings.

As of September 30, 2010, the Company has not identified any uncertain tax positions that would have a material impact on the Company’s financial position. The Company recognizes potential interest and penalties related to uncertain tax positions, if any, in income tax expense.

The tax years that remain subject to examination for the Company’s major tax jurisdictions at September 30, 2010 are shown below:

2004 – 2009		United States — federal income tax
2003 – 2009		United States — state and local income tax
2006 – 2009		Canada

16. Legal Proceedings

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

As previously disclosed in our Form 10-Q for the quarterly period ended March 31, 2010, John V. Holten, a former director and former indirect controlling shareholder of the Company, filed a lawsuit against us. On May 20, 2010, we filed an answer to this lawsuit, denying Mr. Holten’s claim for breach of his employment agreement. We asserted a separate counterclaim seeking a declaratory judgment that Mr. Holten’s employment agreement is voidable and void. The counterclaim further seeks, among other relief, restitution of all payments made to Mr. Holten and his affiliates pursuant to his employment agreement. Mr. Holten has not answered the counterclaim as of the date this report was filed.

17. Fair Value Measurement

The Company applies the accounting standards for fair value measurements and disclosures for its financial assets and financial liabilities. The guidance requires disclosures about assets and liabilities measured at fair value. The Company’s financial assets relate to the interest rate cap of $88 and the Company’s financial liabilities relate to contingent earn-out payments of $4,496.

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

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

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

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

The significant inputs used to derive the fair value of the amounts due to seller include financial forecasts of future operating results, the probability of reaching the forecast and the associated discount rate. The probability of the contingent consideration ranges from 25% to 95%, with a weighted average discount rate of 14%. The following table sets forth the Company’s financial assets and liabilities measured at fair value on a recurring basis and the basis of measurement at September 30, 2010:

		Total Fair Value
		Measurement				Level 1				Level 2				Level 3
Assets:
Interest Rate Cap		$	88			$	—			$	88			$	—
Liabilities:
Due to seller		$	(4,496	)		$	—			$	—			$	(4,496	)

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

		Due to Seller
Balance per final purchase price allocation		$	(5,090	)
Contingent earn-out payments-payments made to seller			529
Contingent earn-out payments-change in fair value			65
Balance at September 30, 2010		$	(4,496	)

For the nine month period ended September 30, 2010, the Company recorded adjustments to the original contingent consideration obligation recorded upon the acquisition of Gameday Management Group U.S. The adjustments were the result of using revised forecasts and updated fair value measurements that adjusted the Company’s potential earn-out payments related to the purchase of this business.

For the nine month period ended September 30, 2010, the Company recognized a benefit of $65 in general and administrative expenses in the statement of income due to the change in fair value measurements using a level three valuation technique.

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

The following discussion of our results of operations should be read in conjunction with the consolidated financial statements and the notes thereto contained in this Quarterly Report on Form 10-Q and the consolidated financial statements and the notes thereto included in our Annual Report on our Form 10-K for the year ended December 31, 2009.

Overview

Our Business

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

We operate our clients’ properties through two types of arrangements: management contracts and leases. Under a management contract, we typically receive a base monthly fee for managing the facility, and we may also receive an incentive fee based on the achievement of facility performance objectives. We also receive fees for ancillary services. Typically, all of the underlying revenue and expenses under a standard management contract flow through to our clients rather than to us. However, some management contracts, which are referred to as “reverse” management contracts, usually provide for larger management fees and require us to pay various costs. Under lease arrangements, we generally pay to the property owner either a fixed annual rent, a percentage of gross customer collections or a combination thereof. We collect all revenue under lease arrangements and we are responsible for most operating expenses, but we are typically not responsible for major maintenance, capital expenditures or real estate taxes. Margins for lease contracts vary significantly, not only due to operating performance, but also due to variability of parking rates in different cities and varying space utilization by parking facility type and location. As of September 30, 2010, we operated approximately 90% of our locations under management contracts and approximately 10% of our locations under leases. For the nine months ended September 30, 2010, we derived approximately 89% of our gross profit under management contracts and approximately 11% of our gross profit under leases.

In evaluating our financial condition and operating performance, management’s primary focus is on our gross profit, total general and administrative expenses and general and administrative expenses as a percentage of our gross profit. Although the underlying economics to us of management contracts and leases are similar, the manner in which we are required to account for them differs. Revenue from leases includes all gross customer collections derived from our leased locations (net of parking tax), whereas revenue from management contracts only includes our contractually agreed upon management fees and amounts attributable to ancillary services. Gross customer collections at facilities under management contracts, therefore, are not included in our revenue. Accordingly, while a change in the proportion of our operating agreements that are structured as leases versus management contracts may cause significant fluctuations in reported revenue and expense of parking services, that change will not artificially affect our gross profit. For example, as of September 30, 2010, we operated approximately 90% of our locations under management contracts, and for the nine months ended September 30, 2010, we derived approximately 89% of our gross profit under management contracts. Only approximately 55% of total revenue (excluding reimbursed management contract revenue), however, was from management contracts because under those contracts the revenue collected from parking customers belongs to our clients. Therefore, gross profit and total general and administrative expenses, rather than revenue, are management’s primary focus.

General Business Trends

We believe that sophisticated commercial real estate developers and property managers and owners recognize the opportunity for parking and related services to be a profit generator rather than a cost center. Often, the parking experience makes both the first and the last impressions on their properties’ tenants and visitors. By outsourcing these services, they are able to capture additional profit by leveraging the unique operational skills and controls that an experienced parking management company can offer. Our ability to consistently deliver a uniformly high level of parking and related services and maximize the profit to our clients improves our ability to win contracts and retain existing locations. Our location retention rate for the twelve-month period ended September 30, 2010 was approximately 87%, compared to approximately 90% for the twelve-month period ended September 30, 2009, which also reflects our decision not to renew, or to terminate, unprofitable contracts.

For the three months ended September 30, 2010 compared to the three months ended September 30, 2009, average gross profit per location increased by 6.2% from $9.7 thousand to $10.3 thousand due primarily to cost savings on non-operating items and increased profit on our 2009 acquisition.

Summary of Operating Facilities

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

		September 30, 2010				December 31, 2009				September 30, 2009
Managed facilities			1,959				1,921				1,976
Leased facilities			211				208				220
Total facilities			2,170				2,129				2,196

Revenue

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

•

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

•

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

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

Reimbursed Management Contract Revenue

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

Cost of Parking Services

Our cost of parking services consists of the following:

•

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

•

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

Reimbursed Management Contract Expense

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

Gross Profit

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

General and Administrative Expenses

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

Depreciation and Amortization

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

Seasonality

During the first quarter of each year, seasonality impacts our performance with regard to moderating revenue, 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 revenue and profitability are affected by the seasonality of the business, general and administrative costs are relatively stable throughout the fiscal year.

Results of Operations

Segments

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

Our business is managed based on regions administered by executive vice presidents. The following is a summary of revenues (excluding reimbursed management contract revenue) by region for the three and nine months ended September 30, 2010 and 2009. Information related to prior years has been recast to conform to the new region alignment.

Region One encompasses Delaware, District of Columbia, Florida, Georgia, Illinois, Kansas, Maine, Maryland, Massachusetts, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Rhode Island, Tennessee, Vermont, Virginia, and Wisconsin.

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

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

Region Four encompasses all major airport and transportation operations nationwide.

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

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

Three Months ended September 30, 2010 Compared to Three Months ended September 30, 2009

Segment revenue information is summarized as follows:

		Three Months Ended September 30,
		Region One								Region Two								Region Three								Region Four								Other								Total								Variance
		2010				2009				2010				2009				2010				2009				2010				2009				2010				2009				2010				2009				Amount				%
		(in millions)
Lease contract revenue:
New location		$	1.5			$	—			$	—			$	—			$	1.1			$	—			$	—			$	—			$	—			$	—			$	2.6			$	—			$	2.6				100.0
Contract expirations			—				1.7				—				0.2				—				0.3				—				0.2				—				—				—				2.4				(2.4	)			(100.0	)
Same location			18.8				18.9				0.5				0.5				4.5				4.4				9.3				8.8				—				—				33.1				32.6				0.5				1.5
Conversions			—				—				—				—				—				—				—				0.6				—				—				—				0.6				(0.6	)			(100.0	)
Total lease contract revenue		$	20.3			$	20.6			$	0.5			$	0.7			$	5.6			$	4.7			$	9.3			$	9.6			$	—			$	—			$	35.7			$	35.6			$	0.1				0.3
Management contract revenue:
New location		$	0.9			$	0.1			$	1.0			$	0.2			$	0.9			$	—			$	4.9			$	—			$	—			$	—			$	7.7			$	0.3			$	7.4				2466.7
Contract expirations			0.1				1.7				—				—				0.1				1.3				—				0.1				—				—				0.2				3.1				(2.9	)			(93.5	)
Same location			11.1				11.7				4.8				3.9				12.3				12.6				7.5				7.8				—				(0.1	)			35.7				35.9				(0.2	)			(0.6	)
Conversions			—				—				—				—				—				—				0.1				—				—				—				0.1				—				0.1				100.0
Total management contract revenue		$	12.1			$	13.5			$	5.8			$	4.1			$	13.3			$	13.9			$	12.5			$	7.9			$	—			$	(0.1	)		$	43.7			$	39.3			$	4.4				11.2