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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 11/02/23 SP Plus Corp. 10-Q 9/30/23 87:12M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 3.33M
2: EX-10.1 Material Contract HTML 65K
3: EX-10.2 Material Contract HTML 41K
4: EX-31.1 Certification -- §302 - SOA'02 HTML 29K
5: EX-31.2 Certification -- §302 - SOA'02 HTML 29K
6: EX-31.3 Certification -- §302 - SOA'02 HTML 29K
7: EX-32 Certification -- §906 - SOA'02 HTML 30K
13: R1 Cover page HTML 77K
14: R2 Condensed Consolidated Balance Sheets HTML 159K
15: R3 Condensed Consolidated Balance Sheets HTML 47K
(Parenthetical)
16: R4 Condensed Consolidated Statements of Income HTML 109K
17: R5 Condensed Consolidated Statements of Comprehensive HTML 54K
Income
18: R6 Condensed Consolidated Statements of Stockholders' HTML 111K
Equity
19: R7 Condensed Consolidated Statements of Cash Flows HTML 114K
20: R8 Significant Accounting Policies and Practices HTML 65K
21: R9 Acquisitions HTML 104K
22: R10 Leases HTML 221K
23: R11 Revenue HTML 123K
24: R12 Legal and Other Commitments and Contingencies HTML 27K
25: R13 Other Intangible Assets, net HTML 115K
26: R14 Goodwill HTML 76K
27: R15 Borrowing Arrangements HTML 68K
28: R16 Stock Repurchase Program HTML 64K
29: R17 Stock-Based Compensation HTML 101K
30: R18 Net Income per Common Share HTML 75K
31: R19 Comprehensive Loss HTML 177K
32: R20 Segment Information HTML 194K
33: R21 Subsequent Events HTML 30K
34: R22 Significant Accounting Policies and Practices HTML 90K
(Policies)
35: R23 Acquisitions (Tables) HTML 91K
36: R24 Leases (Tables) HTML 223K
37: R25 Revenue (Tables) HTML 111K
38: R26 Other Intangible Assets, net (Tables) HTML 117K
39: R27 Goodwill (Tables) HTML 78K
40: R28 Borrowing Arrangements (Tables) HTML 57K
41: R29 Stock Repurchase Program (Tables) HTML 60K
42: R30 Stock-Based Compensation (Tables) HTML 89K
43: R31 Net Income per Common Share (Tables) HTML 72K
44: R32 Comprehensive Loss (Tables) HTML 180K
45: R33 Segment Information (Tables) HTML 185K
46: R34 Significant Accounting Policies and Practices - HTML 95K
Narrative (Details)
47: R35 Acquisitions - Narrative (Details) HTML 82K
48: R36 Acquisitions - Schedule of Estimated Fair Values HTML 62K
of Assets Acquired and Liabilities Assumed
(Details)
49: R37 Acquisitions - Schedule of Other Assets Acquired HTML 49K
were Recorded at their Estimated Fair Value
(Details)
50: R38 Leases - Narrative (Details) HTML 27K
51: R39 Leases - Schedule of Components of ROU Assets and HTML 50K
Lease Liabilities (Details)
52: R40 Leases - Schedule of Components of Lease Cost HTML 41K
(Details)
53: R41 Leases - Schedule of Components of Lease Cost HTML 31K
(Parenthetical) (Details)
54: R42 Leases - Schedule of Maturities of Lease HTML 92K
Liabilities (Details)
55: R43 Leases - Schedule of Supplemental Cash Flow HTML 36K
Information Related to Leases (Details)
56: R44 Revenue - Narrative (Details) HTML 31K
57: R45 Revenue - Schedule of Performance Obligations HTML 45K
(Details)
58: R46 Revenue - Schedule of Performance Obligations HTML 27K
(Details 1)
59: R47 Revenue - Schedule of Contract Asset and HTML 33K
Liabilities (Details)
60: R48 Revenue - Schedule of Contract Assets Balances HTML 31K
(Details)
61: R49 Revenue - Schedule of Contract Liabilities HTML 31K
Balances (Details)
62: R50 Revenue - Schedule of Cost of Contracts Expense HTML 26K
(Details)
63: R51 Other Intangible Assets, net - Components of HTML 50K
Intangible Assets, Net (Details)
64: R52 Other Intangible Assets, net - Summary of HTML 27K
Amortization of Other Intangible Assets (Details)
65: R53 Goodwill - Schedule of Changes in Carrying Amounts HTML 47K
of Goodwill (Details)
66: R54 Borrowing Arrangements - Schedule of Long-Term HTML 43K
Borrowing (Details)
67: R55 Borrowing Arrangements - Schedule of Long-Term HTML 29K
Borrowing (Parenthetical) (Details)
68: R56 Borrowing Arrangements - Narrative (Details) HTML 72K
69: R57 Stock Repurchase Program - Narrative (Details) HTML 38K
70: R58 Stock Repurchase Program - Summary of Share HTML 31K
Repurchase Activity (Details)
71: R59 Stock Repurchase Program - Summary of Remaining HTML 30K
Authorized Repurchase Amounts (Details)
72: R60 Stock-Based Compensation - Narrative (Details) HTML 73K
73: R61 Stock-Based Compensation - Restricted and HTML 48K
Performance Stock Units Rollforward (Details)
74: R62 Stock-Based Compensation - Schedule of HTML 39K
Compensation Expense (Details)
75: R63 Net Income per Common Share - Basic and Diluted HTML 53K
Net Income per Common Share and Weighted Average
Common Shares Outstanding (Details)
76: R64 Net Income per Common Share - Narrative (Details) HTML 26K
77: R65 Comprehensive Loss - Components of Other HTML 47K
Comprehensive Loss and Income Tax Benefit
Allocated (Details)
78: R66 Comprehensive Loss - Components of Accumulated HTML 43K
Other Comprehensive Loss (Details)
79: R67 Comprehensive Loss - Reclassifications from HTML 45K
Accumulated Other Comprehensive Loss (Details)
80: R68 Segment Information - Schedule of Segment HTML 67K
Information by Regions (Details)
81: R69 Segment Information - Schedule of Segment HTML 31K
Information by Regions (Parenthetical) (Details)
82: R70 Subsequent Events - Narrative (Details) HTML 34K
85: XML IDEA XML File -- Filing Summary XML 155K
83: XML XBRL Instance -- sp-20230930_htm XML 3.20M
84: EXCEL IDEA Workbook of Financial Report Info XLSX 147K
11: EX-101.CAL XBRL Calculations -- sp-20230930_cal XML 214K
12: EX-101.DEF XBRL Definitions -- sp-20230930_def XML 596K
10: EX-101.LAB XBRL Labels -- sp-20230930_lab XML 1.40M
9: EX-101.PRE XBRL Presentations -- sp-20230930_pre XML 1.01M
8: EX-101.SCH XBRL Schema -- sp-20230930 XSD 193K
86: JSON XBRL Instance as JSON Data -- MetaLinks 496± 775K
87: ZIP XBRL Zipped Folder -- 0000950170-23-058158-xbrl Zip 372K
| 10-Q |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM i 10-Q
i ☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i September 30, i 2023 /
Or
i ☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: i 000-50796
i SP Plus Corporation
(Exact Name of Registrant as Specified in Its Charter)
i Delaware |
|
i 16-1171179 |
(State or Other Jurisdiction of |
|
(I.R.S. Employer Identification No.) |
Incorporation or Organization) |
|
|
i 200 E. Randolph Street, Suite 7700
i Chicago, i Illinois i 60601-7702
(Address of Principal Executive Offices, Including Zip Code)
( i 312) i 274-2000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
i Common Stock, $0.001 par value per share |
i SP |
i The Nasdaq Stock Market LLC |
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. i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
i Large Accelerated Filer |
☒ |
Accelerated Filer |
☐ |
Non-accelerated Filer |
☐ |
Smaller Reporting Company |
i ☐ |
|
|
Emerging Growth Company |
i ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No i ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class |
Outstanding at November 1, 2023 |
||
Common Stock, $0.001 par value per share |
i 19,649,611 |
|
Shares |
SP PLUS CORPORATION
2 |
|
2 |
|
2 |
|
3 |
|
4 |
|
5 |
|
7 |
|
8 |
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. Quantitative and Qualitative Disclosures about Market Risk |
32 |
33 |
|
|
|
34 |
|
34 |
|
34 |
|
35 |
|
35 |
|
35 |
|
35 |
|
36 |
|
|
|
37 |
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SP Plus Corporation
Condensed Consolidated Balance Sheets
(millions, except for share and per share data) |
|
|
|
|
||||
|
|
(unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
i 38.5 |
|
|
$ |
i 12.4 |
|
Accounts receivable, net |
|
|
i 184.4 |
|
|
|
i 167.7 |
|
Prepaid expenses and other current assets |
|
|
i 13.1 |
|
|
|
i 16.7 |
|
Total current assets |
|
|
i 236.0 |
|
|
|
i 196.8 |
|
Property and equipment, net |
|
|
i 66.0 |
|
|
|
i 60.2 |
|
Right-of-use assets |
|
|
i 173.7 |
|
|
|
i 166.9 |
|
Goodwill |
|
|
i 544.2 |
|
|
|
i 543.2 |
|
Other intangible assets, net |
|
|
i 62.3 |
|
|
|
i 68.9 |
|
Deferred income taxes |
|
|
i 42.5 |
|
|
|
i 44.4 |
|
Other noncurrent assets |
|
|
i 43.6 |
|
|
|
i 41.0 |
|
Total noncurrent assets |
|
|
i 932.3 |
|
|
|
i 924.6 |
|
Total assets |
|
$ |
i 1,168.3 |
|
|
$ |
i 1,121.4 |
|
Liabilities and stockholders’ equity |
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
i 142.7 |
|
|
$ |
i 133.4 |
|
Accrued and other current liabilities |
|
|
i 128.9 |
|
|
|
i 137.6 |
|
Short-term lease liabilities |
|
|
i 56.4 |
|
|
|
i 60.2 |
|
Current portion of long-term borrowings |
|
|
i 14.7 |
|
|
|
i 12.4 |
|
Total current liabilities |
|
|
i 342.7 |
|
|
|
i 343.6 |
|
Long-term borrowings, excluding current portion |
|
|
i 345.1 |
|
|
|
i 331.8 |
|
Long-term lease liabilities |
|
|
i 154.9 |
|
|
|
i 158.5 |
|
Other noncurrent liabilities |
|
|
i 73.5 |
|
|
|
i 61.8 |
|
Total noncurrent liabilities |
|
|
i 573.5 |
|
|
|
i 552.1 |
|
Total liabilities |
|
$ |
i 916.2 |
|
|
$ |
i 895.7 |
|
Stockholders’ equity |
|
|
|
|
|
|
||
Preferred stock, par value $ i i 0.01 / per share; i i 5,000,000 / shares authorized as of September 30, 2023 and December 31, 2022, respectively; i i i i no / / / shares issued or outstanding |
|
$ |
i — |
|
|
$ |
i — |
|
Common stock, par value $ i i 0.001 / per share; i i 50,000,000 / shares authorized as of September 30, 2023 and December 31, 2022; i 23,444,353 and i 19,649,611 shares issued and outstanding as of September 30, 2023, respectively, and i 23,276,329 and i 19,767,287 shares issued and outstanding as of December 31, 2022, respectively |
|
|
i — |
|
|
|
i — |
|
Treasury stock, at cost; i 3,794,742 and i 3,509,042 shares as of September 30, 2023 and December 31, 2022, respectively |
|
|
( i 130.5 |
) |
|
|
( i 120.0 |
) |
Additional paid-in capital |
|
|
i 281.1 |
|
|
|
i 274.2 |
|
Accumulated other comprehensive loss |
|
|
( i 2.0 |
) |
|
|
( i 1.8 |
) |
Retained earnings |
|
|
i 103.5 |
|
|
|
i 73.6 |
|
Total SP Plus Corporation stockholders’ equity |
|
|
i 252.1 |
|
|
|
i 226.0 |
|
Noncontrolling interests |
|
|
— |
|
|
|
( i 0.3 |
) |
Total stockholders’ equity |
|
|
i 252.1 |
|
|
|
i 225.7 |
|
Total liabilities and stockholders’ equity |
|
$ |
i 1,168.3 |
|
|
$ |
i 1,121.4 |
|
See Notes to Condensed Consolidated Financial Statements.
2
SP Plus Corporation
Condensed Consolidated Statements of Income
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||
(millions, except for share and per share data) (unaudited) |
|
|
|
|
|
|
|
||||||||
Services revenue |
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
$ |
i 153.5 |
|
|
$ |
i 134.9 |
|
$ |
i 446.6 |
|
|
$ |
i 382.6 |
|
Lease type contracts |
|
|
i 74.9 |
|
|
|
i 72.2 |
|
|
i 219.4 |
|
|
|
i 205.4 |
|
|
|
|
i 228.4 |
|
|
|
i 207.1 |
|
|
i 666.0 |
|
|
|
i 588.0 |
|
Reimbursed management type contract revenue |
|
|
i 232.3 |
|
|
|
i 197.3 |
|
|
i 662.2 |
|
|
|
i 547.2 |
|
Total services revenue |
|
|
i 460.7 |
|
|
|
i 404.4 |
|
|
i 1,328.2 |
|
|
|
i 1,135.2 |
|
Cost of services (exclusive of depreciation and amortization) |
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
|
i 99.9 |
|
|
|
i 89.9 |
|
|
i 295.8 |
|
|
|
i 252.7 |
|
Lease type contracts |
|
|
i 60.9 |
|
|
|
i 59.0 |
|
|
i 178.4 |
|
|
|
i 166.9 |
|
|
|
|
i 160.8 |
|
|
|
i 148.9 |
|
|
i 474.2 |
|
|
|
i 419.6 |
|
Reimbursed management type contract expense |
|
|
i 232.3 |
|
|
|
i 197.3 |
|
|
i 662.2 |
|
|
|
i 547.2 |
|
Total cost of services (exclusive of depreciation and amortization) |
|
|
i 393.1 |
|
|
|
i 346.2 |
|
|
i 1,136.4 |
|
|
|
i 966.8 |
|
General and administrative expenses |
|
|
i 37.6 |
|
|
|
i 27.2 |
|
|
i 100.0 |
|
|
|
i 78.4 |
|
Depreciation and amortization |
|
|
i 9.0 |
|
|
|
i 7.2 |
|
|
i 26.2 |
|
|
|
i 20.5 |
|
Operating income |
|
|
i 21.0 |
|
|
|
i 23.8 |
|
|
i 65.6 |
|
|
|
i 69.5 |
|
Other expense (income) |
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
i 7.4 |
|
|
|
i 3.9 |
|
|
i 21.5 |
|
|
|
i 12.2 |
|
Interest income |
|
|
— |
|
|
|
( i 0.1 |
) |
|
( i 0.2 |
) |
|
|
( i 0.4 |
) |
Total other expenses |
|
|
i 7.4 |
|
|
|
i 3.8 |
|
|
i 21.3 |
|
|
|
i 11.8 |
|
Earnings before income taxes |
|
|
i 13.6 |
|
|
|
i 20.0 |
|
|
i 44.3 |
|
|
|
i 57.7 |
|
Income tax expense |
|
|
i 3.5 |
|
|
|
i 4.9 |
|
|
i 11.6 |
|
|
|
i 15.0 |
|
Net income |
|
|
i 10.1 |
|
|
|
i 15.1 |
|
|
i 32.7 |
|
|
|
i 42.7 |
|
Less: Net income attributable to noncontrolling interests |
|
|
i 0.9 |
|
|
|
i 0.8 |
|
|
i 2.8 |
|
|
|
i 2.3 |
|
Net income attributable to SP Plus Corporation |
|
$ |
i 9.2 |
|
|
$ |
i 14.3 |
|
$ |
i 29.9 |
|
|
$ |
i 40.4 |
|
Common stock data |
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per common share |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
i 0.47 |
|
|
$ |
i 0.69 |
|
$ |
i 1.52 |
|
|
$ |
i 1.92 |
|
Diluted |
|
$ |
i 0.46 |
|
|
$ |
i 0.68 |
|
$ |
i 1.50 |
|
|
$ |
i 1.90 |
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
i 19,649,611 |
|
|
|
i 20,744,813 |
|
|
i 19,660,930 |
|
|
|
i 21,054,095 |
|
Diluted |
|
|
i 19,910,308 |
|
|
|
i 20,977,667 |
|
|
i 19,874,165 |
|
|
|
i 21,223,982 |
|
See Notes to Condensed Consolidated Financial Statements.
3
SP Plus Corporation
Condensed Consolidated Statements of Comprehensive Income
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||
(millions) (unaudited) |
|
|
|
|
|
|
|
||||||||
Net income |
|
$ |
i 10.1 |
|
|
$ |
i 15.1 |
|
$ |
i 32.7 |
|
|
$ |
i 42.7 |
|
Reclassification of de-designated interest rate collars |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
i 0.5 |
|
Foreign currency translation loss |
|
|
( i 0.9 |
) |
|
|
( i 0.6 |
) |
|
( i 0.2 |
) |
|
|
( i 0.7 |
) |
Comprehensive income |
|
|
i 9.2 |
|
|
|
i 14.5 |
|
|
i 32.5 |
|
|
|
i 42.5 |
|
Less: Comprehensive income attributable to noncontrolling interests |
|
|
i 0.9 |
|
|
|
i 0.8 |
|
|
i 2.8 |
|
|
|
i 2.3 |
|
Comprehensive income attributable to SP Plus Corporation |
|
$ |
i 8.3 |
|
|
$ |
i 13.7 |
|
$ |
i 29.7 |
|
|
$ |
i 40.2 |
|
See Notes to Condensed Consolidated Financial Statements.
4
SP Plus Corporation
Condensed Consolidated Statements of Stockholders' Equity
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
(millions, except share data) (unaudited) |
|
Number |
|
|
Par |
|
|
Additional |
|
|
Accumulated |
|
|
Retained Earnings |
|
|
|
Treasury |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||
Balance at January 1, 2023 |
|
|
i 23,276,329 |
|
|
$ |
— |
|
|
$ |
i 274.2 |
|
|
$ |
( i 1.8 |
) |
|
$ |
i 73.6 |
|
|
|
$ |
( i 120.0 |
) |
|
$ |
( i 0.3 |
) |
|
$ |
i 225.7 |
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 8.4 |
|
|
|
|
— |
|
|
|
i 0.9 |
|
|
|
i 9.3 |
|
|
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.2 |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 0.2 |
|
|
Issuance of restricted stock units |
|
|
i 148,806 |
|
|
|
— |
|
|
|
( i 0.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.4 |
) |
|
Non-cash stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 2.2 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 2.2 |
|
|
Noncontrolling interests buyout |
|
|
— |
|
|
|
— |
|
|
|
( i 0.7 |
) |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
( i 0.7 |
) |
|
Repurchases of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
( i 10.5 |
) |
|
|
— |
|
|
|
( i 10.5 |
) |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
( i 0.5 |
) |
|
|
( i 0.5 |
) |
|
Balance at March 31, 2023 |
|
|
i 23,425,135 |
|
|
$ |
— |
|
|
$ |
i 275.3 |
|
|
$ |
( i 1.6 |
) |
|
$ |
i 82.0 |
|
|
|
$ |
( i 130.5 |
) |
|
$ |
i 0.1 |
|
|
$ |
i 225.3 |
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 12.3 |
|
|
|
|
— |
|
|
|
i 1.0 |
|
|
|
i 13.3 |
|
|
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.5 |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 0.5 |
|
|
Issuance of restricted stock units |
|
|
i 558 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of stock grants |
|
|
i 18,660 |
|
|
|
— |
|
|
|
i 0.6 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 0.6 |
|
|
Non-cash stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 2.6 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 2.6 |
|
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
( i 0.9 |
) |
|
|
( i 0.9 |
) |
|
Balance at June 30, 2023 |
|
|
i 23,444,353 |
|
|
$ |
— |
|
|
$ |
i 278.5 |
|
|
$ |
( i 1.1 |
) |
|
$ |
i 94.3 |
|
|
|
$ |
( i 130.5 |
) |
|
$ |
i 0.2 |
|
|
$ |
i 241.4 |
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 9.2 |
|
|
|
|
— |
|
|
|
i 0.9 |
|
|
|
i 10.1 |
|
|
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.9 |
) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.9 |
) |
|
Non-cash stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 2.7 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 2.7 |
|
|
Noncontrolling interests buyout |
|
|
— |
|
|
|
— |
|
|
|
( i 0.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.1 |
) |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
( i 1.1 |
) |
|
|
( i 1.1 |
) |
|
Balance at September 30, 2023 |
|
|
i 23,444,353 |
|
|
$ |
— |
|
|
$ |
i 281.1 |
|
|
$ |
( i 2.0 |
) |
|
$ |
i 103.5 |
|
|
|
$ |
( i 130.5 |
) |
|
$ |
— |
|
|
$ |
i 252.1 |
|
|
See Notes to Condensed Consolidated Financial Statements.
5
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
(millions, except share data) (unaudited) |
|
Number |
|
|
Par |
|
|
Additional |
|
|
Accumulated |
|
|
Retained Earnings |
|
|
Treasury |
|
|
Noncontrolling |
|
|
Total |
|
||||||||
Balance at January 1, 2022 |
|
|
i 23,224,459 |
|
|
$ |
— |
|
|
$ |
i 267.5 |
|
|
$ |
( i 2.8 |
) |
|
$ |
i 28.4 |
|
|
$ |
( i 70.6 |
) |
|
$ |
( i 0.4 |
) |
|
$ |
i 222.1 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 10.7 |
|
|
|
— |
|
|
|
i 0.6 |
|
|
|
i 11.3 |
|
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.1 |
|
Reclassification of de-designated interest rate collars |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.4 |
|
Issuance of restricted stock units |
|
|
i 37,235 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-cash stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 1.8 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 1.8 |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.5 |
) |
|
|
( i 0.5 |
) |
Balance at March 31, 2022 |
|
|
i 23,261,694 |
|
|
$ |
— |
|
|
$ |
i 269.3 |
|
|
$ |
( i 2.3 |
) |
|
$ |
i 39.1 |
|
|
$ |
( i 70.6 |
) |
|
$ |
( i 0.3 |
) |
|
$ |
i 235.2 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 15.4 |
|
|
|
— |
|
|
|
i 0.9 |
|
|
|
i 16.3 |
|
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.2 |
) |
Reclassification of de-designated interest rate collars |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.1 |
|
Issuance of stock grants |
|
|
i 14,635 |
|
|
|
— |
|
|
|
i 0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.4 |
|
Non-cash stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 2.2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 2.2 |
|
Repurchases of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 5.6 |
) |
|
|
— |
|
|
|
( i 5.6 |
) |
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.7 |
) |
|
|
( i 0.7 |
) |
Balance at June 30, 2022 |
|
|
i 23,276,329 |
|
|
$ |
— |
|
|
$ |
i 271.9 |
|
|
$ |
( i 2.4 |
) |
|
$ |
i 54.5 |
|
|
$ |
( i 76.2 |
) |
|
$ |
( i 0.1 |
) |
|
$ |
i 247.7 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 14.3 |
|
|
|
— |
|
|
|
i 0.8 |
|
|
|
i 15.1 |
|
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.6 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.6 |
) |
Non-cash stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 2.2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 2.2 |
|
Repurchases of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 22.0 |
) |
|
|
— |
|
|
|
( i 22.0 |
) |
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.8 |
) |
|
|
( i 0.8 |
) |
Balance at September 30, 2022 |
|
|
i 23,276,329 |
|
|
$ |
— |
|
|
$ |
i 274.1 |
|
|
$ |
( i 3.0 |
) |
|
$ |
i 68.8 |
|
|
$ |
( i 98.2 |
) |
|
$ |
( i 0.1 |
) |
|
$ |
i 241.6 |
|
See Notes to Condensed Consolidated Financial Statements.
6
SP Plus Corporation
Condensed Consolidated Statements of Cash Flows
|
|
Nine Months Ended |
|
|||||
(millions) (unaudited) |
|
|
|
|
||||
Operating activities |
|
|
|
|
|
|
||
Net income |
|
$ |
i 32.7 |
|
|
$ |
i 42.7 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
i 26.2 |
|
|
|
i 20.5 |
|
Non-cash stock-based compensation |
|
|
i 8.1 |
|
|
|
i 6.6 |
|
Provisions for credit losses on accounts receivable |
|
|
i 1.1 |
|
|
|
i — |
|
Deferred income taxes |
|
|
i 2.3 |
|
|
|
i 4.7 |
|
Other |
|
|
( i 3.0 |
) |
|
|
i 1.1 |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( i 17.9 |
) |
|
|
( i 13.6 |
) |
Prepaid expenses and other current assets |
|
|
i 3.6 |
|
|
|
i 17.8 |
|
Accounts payable |
|
|
i 9.1 |
|
|
|
i 10.2 |
|
Accrued liabilities and other |
|
|
( i 8.7 |
) |
|
|
( i 14.4 |
) |
Net cash provided by operating activities |
|
|
i 53.5 |
|
|
|
i 75.6 |
|
Investing activities |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( i 17.0 |
) |
|
|
( i 16.5 |
) |
Acquisition of business |
|
|
( i 3.1 |
) |
|
|
— |
|
Acquisition of other intangible assets |
|
|
— |
|
|
|
( i 1.8 |
) |
Proceeds from sale of equipment |
|
|
— |
|
|
|
i 0.2 |
|
Noncontrolling interest buyout |
|
|
( i 2.3 |
) |
|
|
i — |
|
Net cash used in investing activities |
|
|
( i 22.4 |
) |
|
|
( i 18.1 |
) |
Financing activities |
|
|
|
|
|
|
||
Proceeds from credit facility revolver |
|
|
i 345.5 |
|
|
|
i 336.4 |
|
Payments on credit facility revolver |
|
|
( i 326.6 |
) |
|
|
( i 363.1 |
) |
Proceeds from credit facility term loan |
|
|
— |
|
|
|
i 17.2 |
|
Payments on credit facility term loan |
|
|
( i 3.7 |
) |
|
|
( i 5.5 |
) |
Payments of debt issuance costs |
|
|
— |
|
|
|
( i 2.5 |
) |
Payments on other long-term borrowings |
|
|
( i 5.7 |
) |
|
|
( i 7.7 |
) |
Payments of withholding taxes on share-based compensation |
|
|
( i 0.4 |
) |
|
|
i — |
|
Distributions to noncontrolling interests |
|
|
( i 2.5 |
) |
|
|
( i 2.0 |
) |
Repurchases of common stock |
|
|
( i 11.1 |
) |
|
|
( i 26.9 |
) |
Net cash used in financing activities |
|
|
( i 4.5 |
) |
|
|
( i 54.1 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
( i 0.5 |
) |
|
|
( i 0.7 |
) |
Increase in cash and cash equivalents |
|
|
i 26.1 |
|
|
|
i 2.7 |
|
Cash and cash equivalents at beginning of year |
|
|
i 12.4 |
|
|
|
i 15.7 |
|
Cash and cash equivalents at end of period |
|
$ |
i 38.5 |
|
|
$ |
i 18.4 |
|
Supplemental disclosures |
|
|
|
|
|
|
||
Cash paid (received) during the period for |
|
|
|
|
|
|
||
Interest |
|
$ |
i 20.7 |
|
|
$ |
i 11.6 |
|
Income taxes, net |
|
$ |
i 7.1 |
|
|
$ |
( i 9.8 |
) |
See Notes to Condensed Consolidated Financial Statements.
7
SP Plus Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Significant Accounting Policies and Practices
SP Plus Corporation (the "Company") develops and integrates technology with operations management and support to deliver mobility solutions that enable the efficient and time-sensitive movement of people, vehicles and personal travel belongings. The Company is committed to providing solutions that make every moment matter for a world on the go while meeting the objectives of the Company's diverse client base in North America and Europe, which includes aviation, commercial, hospitality and institutional clients. The Company typically enters into contractual agreements with property owners or managers as opposed to owning facilities.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures normally included in the financial statements have been condensed or omitted as permitted by such rules and regulations.
All adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair presentation have been included. Operating results during the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for any other interim period or the fiscal year ending December 31, 2023. The financial statements presented in this report should be read in conjunction with the Company’s annual Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2022 filed on February 24, 2023 with the Securities and Exchange Commission.
Principles of Consolidation
The unaudited Condensed Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries, and Variable Interest Entities ("VIEs") in which the Company is the primary beneficiary. The Company is the primary beneficiary of a VIE when the Company has the power to direct activities that most significantly affect the economic performance of the VIE. If the Company is not the primary beneficiary in a VIE and has significant influence, the Company accounts for the investment in the VIE as an equity method investment. As of September 30, 2023 and December 31, 2022, assets related to consolidated VIEs were $ i 58.1 million and $ i 57.1 million, respectively, which were primarily related to right-of-use (“ROU”) assets and property and equipment, net. As of September 30, 2023 and December 31, 2022, liabilities related to consolidated VIEs were $ i 45.9 million and $ i 50.9 million, respectively, which were primarily related to operating and finance lease liabilities. All intercompany profits, transactions and balances have been eliminated in consolidation.
/Cash and Cash Equivalents
Cash equivalents represent funds temporarily invested in money market instruments with maturities of three months or less. Cash equivalents are stated at cost, which approximates fair value. Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements were $ i 0.7 million and $ i 0.6 million as of September 30, 2023 and December 31, 2022, respectively, and were included in Cash and cash equivalents within the Condensed Consolidated Balance Sheets.
/Allowance for Doubtful Accounts
Accounts receivable, net of the allowance for doubtful accounts, represents the Company’s estimate of the amount that ultimately will be realized in cash. The Company reviews the adequacy of its allowance for doubtful accounts on an ongoing basis, primarily using a review of specific accounts, as well as historical collection trends and aging of receivables, and records adjustments to the allowance as necessary. The Company’s allowance for doubtful accounts, which was included in Accounts receivable, net, within the Condensed Consolidated Balance Sheets, was $ i 4.6 million and $ i 4.0 million as of September 30, 2023 and December 31, 2022, respectively.
/Property and Equipment, Net
Property and equipment includes the Company's equipment, internal-use software, vehicles, leasehold improvements and construction/development in process. Property and equipment are stated at cost, less accumulated depreciation and amortization, whenever applicable.
Certain costs incurred in the planning and evaluation stage of internal-use software projects are recorded to expense as incurred. Costs associated with directly obtaining, developing or upgrading internal-use software are capitalized and included as Software in Property and equipment, net, within the Condensed Consolidated Balance Sheets. When the internal-use software is ready for
8
its intended use, it is amortized on a straight-line basis over the estimated useful life of the internal-use software, which is typically i 3 years.
Equipment and vehicles are depreciated on a straight-line basis over estimated useful lives ranging from i 1 to i 10 years. Expenditures for major renewals and improvements that extend the useful life of property and equipment, other than internal-use software, are capitalized. Leasehold improvements are amortized on a straight-line basis over the terms of the respective leases or the useful lives of the improvements, whichever is shorter.
/Equity Investments in Unconsolidated Entities
The Company has ownership interests in i 26 active partnerships, joint ventures or similar arrangements that operate parking facilities, of which i 20 are consolidated under the VIE or voting interest models and i 6 are unconsolidated where the Company’s ownership interests range from i 30- i 50 percent and for which there are no indicators of control. The Company accounts for such investments under the equity method of accounting, and the Company’s underlying share of each investee’s equity of $ i 12.1 million and $ i 11.9 million as of September 30, 2023 and December 31, 2022, respectively, was included in Other noncurrent assets within the Condensed Consolidated Balance Sheets. As the operations of these entities are consistent with the Company’s underlying core business operations, the equity in earnings of these investments were included in Services revenue - lease type contracts within the Condensed Consolidated Statements of Income. The equity earnings in these related investments were $ i 0.7 million and $ i 2.5 million during the three months ended September 30, 2023 and 2022, respectively, and $ i 2.0 million and $ i 4.0 million during the nine months ended September 30, 2023 and 2022, respectively.
/Other Noncurrent Assets
Other noncurrent assets consisted of equity investments of unconsolidated entities, advances, deposits and cost of contracts, net, as of September 30, 2023 and December 31, 2022.
Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of insurance, accrued rent, compensation, contingent consideration, payroll withholdings, property, payroll and other taxes and other accrued expenses as of September 30, 2023 and December 31, 2022.
Noncontrolling Interests
Noncontrolling interests represent the noncontrolling holders’ percentage share of income (losses) from the subsidiaries in which the Company holds a controlling, but less than 100 percent, ownership interest. The results of these subsidiaries are consolidated and included within the Condensed Consolidated Financial Statements.
During the nine months ended September 30, 2023, the Company recorded a $ i 1.0 million liability related to its estimate of additional consideration (“contingent consideration") due to a former minority partner that formerly held a noncontrolling interest in a joint venture with the Company. The Company purchased the minority partner’s interest in the joint venture in 2020. The contingent consideration is contingent on the performance of certain parking-related operations of the Bradley International Airport. The contingent consideration is not capped and, if any amount is due, would be payable to the former minority partner in April 2025. The $ i 1.0 million was determined based on a probability weighting of potential payouts and recorded in Additional paid-in capital within the Condensed Consolidated Balance Sheets. In addition, the Company recorded a deferred tax asset of $ i 0.3 million related to the contingent consideration during the nine months ended September 30, 2023, which was recorded in Additional paid-in capital within the Condensed Consolidated Balance Sheets. The Company will continue to evaluate the criteria for making these payments in the future and adjust the liability when deemed necessary.
Additionally, during the nine months ended September 30, 2023, the Company paid a former minority partner $ i 2.3 million per the terms of an agreement between the Company and the former minority partner. The Company purchased the former minority partner’s entire noncontrolling interest in a joint venture with the Company as of December 31, 2022. Per the terms of the agreement, the Company will be required to make additional payments to the former minority partner over a i ten-year period, amounting to a total of $ i 4.5 million. The $ i 2.3 million that was paid during the nine months ended September 30, 2023 was included in Accrued and other current liabilities within the Condensed Consolidated Balance Sheets as of December 31, 2022.
/Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of net assets acquired. In accordance with the Financial Accounting Standards Board's ("FASB") authoritative accounting guidance on goodwill, the Company evaluates goodwill for impairment on an annual basis, or more often if events or circumstances change that could cause goodwill to become impaired. The Company has elected to assess the impairment of goodwill annually on October 1 or at an interim date if there is an event or change in circumstances indicating the carrying value may not be recoverable. The goodwill impairment test is performed at the reporting unit level; the Company's reporting units represent its operating segments, consisting of Commercial and Aviation. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the use of acquired assets or the Company’s business strategy, and significant negative industry or economic trends.
9
The Company may perform a qualitative, rather than quantitative, assessment to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying amount. If the Company determines it is more likely than not that the fair value is less than its carrying amount, the Company would need to perform a quantitative assessment. The determination of fair value of a reporting unit utilizes cash flow projections that assume certain future revenue and cost levels, comparable marketplace data, comparable company market valuations, assumed discount rates based upon current market conditions and other valuation factors, all of which involve the use of significant judgment and estimates. The Company also assesses critical areas that may impact its business, including economic conditions, market related exposures, competition, changes in service offerings and changes in key personnel.
Other Intangible Assets, net
Other intangible assets represent assets with finite lives that are amortized on a straight-line basis over their estimated useful lives. The Company evaluates other intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to their remaining useful lives. In addition, other intangible assets are reviewed for impairment when circumstances change that would indicate the carrying value may not be recoverable. Assumptions and estimates about future values and remaining useful lives of intangible assets are complex and subjective, and can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors, such as changes in the Company's business strategy and forecasts. Although the Company believes its historical assumptions and estimates are reasonable and appropriate, different assumptions and estimates could materially impact reported financial results.
Long-Lived Assets
The Company evaluates long-lived assets, including ROU assets, leasehold improvements, equipment and construction/development in progress, for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. The Company groups assets at the lowest level for which cash flows are separately identified in order to measure an impairment. Events or circumstances that would result in an impairment review include a significant change in the use of an asset, the planned sale or disposal of an asset, or a projection that demonstrates continuing losses associated with the use of a long-lived asset or asset group. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset or asset group to future undiscounted cash flows expected to be generated by the asset or asset group. If the asset or asset group is determined to be impaired, the impairment recognized is measured by the amount by which the carrying value of the asset or asset group exceeds its fair value.
Assumptions and estimates used to determine cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity. Any future changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets or asset groups and could result in impairment charges. Future events that may result in impairment charges include economic volatility or other factors that could decrease revenues and profitability of existing locations and changes in the cost structure of existing facilities, such as increasing labor and benefit costs.
Foreign Operations
The Company has foreign operations in Canada, Puerto Rico, the United Kingdom and India. Assets and liabilities of the Company’s foreign operations are translated into U.S. dollars at the rate in effect on the respective balance sheet date, while income and expenses are translated at the average rates during the respective periods. Translation adjustments resulting from the fluctuations in exchange rates are recorded as a separate component of Accumulated other comprehensive loss in Stockholders’ equity within the Condensed Consolidated Balance Sheets, while transaction gains and losses are recorded within the Condensed Consolidated Statements of Income. Deferred income taxes are not recorded on cumulative foreign currency translation adjustments when the Company expects the foreign earnings to be permanently reinvested.
2. Acquisitions
2023 Acquisition
On i July 25, 2023, the Company acquired certain assets of Roker Inc. ("Roker"), a United States based provider of fully-integrated parking solutions that simplify permit, violation and enforcement management for organizations and municipalities, for approximately $ i 3.1 million. The Company utilized borrowings under its Senior Credit Facility and cash on hand to fund the acquisition. Roker's operations are included in the Commercial segment.
The acquisition enhances the Company's position as a global provider of frictionless technology solutions that is independent of the Company's legacy parking management related operations. The acquisition of Roker has been accounted for as a business combination, and the assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. Goodwill was measured as the excess of the consideration over the assets acquired, including other intangible assets, less liabilities assumed. Tax deductible goodwill related to the acquisition was $ i 0.9 million. The results of the acquisition's operations are reflected in the Condensed Consolidated Financial Statements from the date of the acquisition.
During the three and nine months ended September 30, 2023, the acquisition of Roker contributed $ i i 0.1 / million of service revenue and $ i i 0.1 / million of losses before income taxes, primarily due to the amortization related to the acquired other intangible assets.
10
The Company believes the information gathered to date provides a reasonable basis for estimating the fair values of the assets acquired and liabilities assumed, however, the provisional measurements of fair value for the other intangible assets and goodwill of Roker are subject to change. As a result, during the measurement period, which may be up to one year from the acquisition date, adjustments to the assets acquired and liabilities assumed may be recorded with corresponding adjustments to goodwill. The Company expects to complete the purchase price allocations for the Roker acquisition as soon as practicable but no later than one year from the acquisition date.
The estimated fair values of the assets acquired and liabilities assumed based on the information that was available as of the acquisition date were as follows:
(millions) |
|
|
|
Other intangible assets |
|
i 2.3 |
|
Goodwill |
|
i 0.9 |
|
Accounts payable |
|
( i 0.1 |
) |
Net cash paid |
$ |
i 3.1 |
|
As discussed above, during the nine months ended September 30, 2023, the Company recorded additions to other intangible assets of $ i 2.3 million. i The other intangible assets acquired were recorded at their estimated fair value on the acquisition date as follows:
(millions) |
|
Estimated Life |
|
Estimated Fair Value |
|
|
Proprietary know how |
|
i 8.0 Years |
|
$ |
i 2.1 |
|
Customer relationships |
|
i 5.4 Years |
|
|
i 0.2 |
|
Estimated fair value of identified intangible assets |
|
|
|
$ |
i 2.3 |
|
The fair values of other intangible assets acquired were determined to be Level 3 under the fair value hierarchy. The fair value estimate for all identifiable intangible assets is based on assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset.
The estimated fair value of the Proprietary know how was determined using the multi-period excess earnings method under the income approach utilizing projected financial information for the technology that was acquired. The estimated fair value of the customer relationships was determined using the distributor method under the income approach.
2022 Acquisitions
On i October 11, 2022, the Company acquired K M P Associates Limited ("KMP"), a United Kingdom based software and technology provider serving aviation and commercial parking clients, primarily through its Aeroparker technology, throughout the United States and Europe, for approximately $ i 13.8 million, less cash acquired of $ i 0.9 million, and assumed KMP's debt of $ i 0.3 million. Immediately following the acquisition, the Company repaid all of the debt assumed. KMP's operations are included in the Aviation segment.
On i November 10, 2022, the Company acquired certain assets of DIVRT, Inc. ("DIVRT"), a developer of innovative software and technology solutions that enables frictionless parking capabilities, for approximately $ i 17.6 million. In addition, the Company may be required to pay the former owner of DIVRT a maximum amount of $ i 7.0 million in contingent consideration if certain targets related to the number of the Company's locations using the DIVRT technology are met by October 31, 2025. Based on a probability weighting of potential payouts, the Company accrued $ i 4.0 million in projected contingent consideration as of the acquisition date, which was determined to be Level 3 under the fair value hierarchy. The Company's estimate of the potential payout increased to $ i 4.4 million as of September 30, 2023 compared to $ i 4.1 million as of December 31, 2022. The increases were due to the changes in the present value of the estimated payout. The Company recorded $ i 0.1 million and $ i 0.3 million of operating expense within the Condensed Consolidated Statements of Income during the three and nine months ended September 30, 2023, respectively, related to the change in the present value of the contingent consideration. As of September 30, 2023, the Company determined that the first target will be met by October 31, 2023, which is the second milestone date. As a result, the Company will pay the former owner of DIVRT $ i 1.4 million during the fourth quarter of 2023. The Company will continue to evaluate the potential payouts in the future and adjust the contingent consideration for any changes in the estimated fair value each reporting period. DIVRT's operations are included in the Commercial segment.
During the three and nine months ended September 30, 2023, the acquisitions contributed $ i 1.5 million and $ i 4.7 million, respectively, of services revenue and losses before income taxes of $ i 0.9 million and $ i 2.6 million, respectively, primarily due to the amortization related to the acquired other intangible assets.
The Company finalized its purchase price allocations for the KMP and DIVRT acquisitions during the nine months ended September 30, 2023. i The fair value of the assets acquired and liabilities assumed were as follows:
11
(millions) |
|
|
|
Cash and cash equivalents |
$ |
i 0.9 |
|
Accounts receivable |
|
i 0.7 |
|
Prepaid expenses and other current assets |
|
i 0.1 |
|
Other intangible assets |
|
i 21.7 |
|
Goodwill |
|
i 16.3 |
|
ROU asset |
|
i 0.1 |
|
Accounts payable |
|
( i 0.1 |
) |
Accrued and other current liabilities |
|
( i 1.5 |
) |
Deferred income tax liability |
|
( i 2.5 |
) |
Other long-term borrowings |
|
( i 0.3 |
) |
Net assets acquired and liabilities assumed |
|
i 35.4 |
|
Less: cash and cash equivalents acquired |
|
i 0.9 |
|
Less: contingent consideration payable |
|
i 4.0 |
|
Net cash paid |
$ |
i 30.5 |
|
In addition to the acquisitions discussed above, on April 18, 2022, the Company acquired certain other intangible assets for a purchase price of $ i 1.8 million.
As discussed above, during the year ended December 31, 2022, the Company recorded additions to other intangible assets of $ i 23.5 million. i The other intangible assets acquired were recorded at their fair value on the acquisition dates as follows:
(millions) |
|
Estimated Life |
|
Fair Value |
|
|
Proprietary know how |
|
i 7.4 Years |
|
$ |
i 17.3 |
|
Customer relationships |
|
i 5.8 Years |
|
|
i 3.2 |
|
Trade names |
|
i 13.2 Years |
|
|
i 1.8 |
|
Covenant not to compete |
|
i 4.2 Years |
|
|
i 1.2 |
|
Fair value of identified intangible assets |
|
|
|
$ |
i 23.5 |
|
The fair values of other intangible assets acquired were determined to be Level 3 under the fair value hierarchy. The fair value for all identifiable intangible assets is based on assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset.
The fair values of the Proprietary know how were determined using the multi-period excess earnings method under the income approach utilizing projected financial information for each technology that was acquired. The fair value of the customer relationships was determined using the distributor method under the income approach. The fair values of the trade names were determined using the relief from royalty savings method under the income approach. The Company considered the return on assets and market comparable methods when estimating an appropriate royalty rate for the trade names.
/3. Leases
The Company leases parking facilities, office space, warehouses, vehicles and equipment and determines if an arrangement is a lease at inception. The Company subleases certain real estate to third parties. The Company's sublease portfolio consists of operating leases for space within leased parking facilities.
As discussed in Note 1. Significant Accounting Policies and Practices, the Company tests ROU assets for impairment when impairment indicators are present.
The components of ROU assets and lease liabilities and the classification within the Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 were as follows:
(millions) |
|
Classification |
|
|
|
|
||||
Assets |
|
|
|
|
|
|
|
|
||
Operating |
|
Right-of-use assets |
|
$ |
i 173.7 |
|
|
$ |
i 166.9 |
|
Finance |
|
Property and equipment, net |
|
|
i 24.1 |
|
|
|
i 24.4 |
|
Total leased assets |
|
|
|
$ |
i 197.8 |
|
|
$ |
i 191.3 |
|
Liabilities |
|
|
|
|
|
|
|
|
||
Current |
|
|
|
|
|
|
|
|
||
Operating |
|
Short-term lease liabilities |
|
$ |
i 56.4 |
|
|
$ |
i 60.2 |
|
Finance |
|
Current portion of long-term borrowings |
|
|
i 7.0 |
|
|
|
i 7.2 |
|
Noncurrent |
|
|
|
|
|
|
|
|
||
Operating |
|
Long-term lease liabilities |
|
|
i 154.9 |
|
|
|
i 158.5 |
|
Finance |
|
Long-term borrowings, excluding current portion |
|
|
i 16.0 |
|
|
|
i 16.0 |
|
Total lease liabilities |
|
|
|
$ |
i 234.3 |
|
|
$ |
i 241.9 |
|
12
The components of lease cost and classification within the Condensed Consolidated Statements of Income during the three and nine months ended September 30, 2023 and 2022 (unaudited) were as follows:
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
(millions) |
|
Classification |
|
|
|
|
|
|
|
|
||||||||
Operating lease cost (a)(b) |
|
Cost of services - lease type contracts |
|
$ |
i 15.7 |
|
|
$ |
i 15.5 |
|
|
$ |
i 44.7 |
|
|
$ |
i 45.2 |
|
Short-term lease (a) |
|
Cost of services - lease type contracts |
|
|
i 4.5 |
|
|
|
i 4.5 |
|
|
|
i 14.7 |
|
|
|
i 14.9 |
|
Variable lease |
|
Cost of services - lease type contracts |
|
|
i 22.4 |
|
|
|
i 19.1 |
|
|
|
i 63.4 |
|
|
|
i 52.4 |
|
Operating lease cost |
|
|
|
|
i 42.6 |
|
|
|
i 39.1 |
|
|
|
i 122.8 |
|
|
|
i 112.5 |
|
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of leased assets |
|
Depreciation and amortization |
|
|
i 1.7 |
|
|
|
i 1.5 |
|
|
|
i 5.0 |
|
|
|
i 4.2 |
|
Interest on lease liabilities |
|
Interest expense |
|
|
i 0.3 |
|
|
|
i 0.2 |
|
|
|
i 0.9 |
|
|
|
i 0.7 |
|
Net lease cost |
|
|
|
$ |
i 44.6 |
|
|
$ |
i 40.8 |
|
|
$ |
i 128.7 |
|
|
$ |
i 117.4 |
|
Sublease income was $ i 0.6 million and $ i 0.4 million during the three months ended September 30, 2023 and 2022, respectively, and $ i 1.6 million and $ i 1.0 million during the nine months ended September 30, 2023 and 2022, respectively.
Maturities, lease term and discount rate information of lease liabilities as of September 30, 2023 (unaudited) were as follows:
(millions) |
|
Operating |
|
|
Finance |
|
|
Total |
|
|||
2023 |
|
$ |
i 18.1 |
|
|
$ |
i 2.3 |
|
|
$ |
i 20.4 |
|
2024 |
|
|
i 64.6 |
|
|
|
i 7.6 |
|
|
|
i 72.2 |
|
2025 |
|
|
i 52.1 |
|
|
|
i 5.6 |
|
|
|
i 57.7 |
|
2026 |
|
|
i 40.4 |
|
|
|
i 4.4 |
|
|
|
i 44.8 |
|
2027 |
|
|
i 26.4 |
|
|
|
i 2.5 |
|
|
|
i 28.9 |
|
After 2027 |
|
|
i 52.9 |
|
|
|
i 3.3 |
|
|
|
i 56.2 |
|
Total lease payments |
|
|
i 254.5 |
|
|
|
i 25.7 |
|
|
|
i 280.2 |
|
Less: Imputed interest |
|
|
i 43.2 |
|
|
|
i 2.7 |
|
|
|
i 45.9 |
|
Present value of lease liabilities |
|
$ |
i 211.3 |
|
|
$ |
i 23.0 |
|
|
$ |
i 234.3 |
|
Weighted-average remaining lease term (years) |
|
|
i 5.1 |
|
|
|
i 4.1 |
|
|
|
|
|
Weighted-average discount rate |
|
|
i 5.4 |
% |
|
|
i 5.4 |
% |
|
|
|
|
Future sublease income for the above periods shown was excluded, as the amounts are not material.
Supplemental cash flow information related to leases during the nine months ended September 30, 2023 and 2022 (unaudited) was as follows:
|
|
Nine Months Ended |
|
|||||
(millions) |
|
|
|
|
||||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
||
Operating cash outflows related to operating leases |
|
$ |
i 66.3 |
|
|
$ |
i 69.0 |
|
Operating cash outflows related to interest on finance leases |
|
|
i 0.9 |
|
|
|
i 0.7 |
|
Financing cash outflows related to finance leases |
|
|
i 5.7 |
|
|
|
i 7.7 |
|
Leased assets obtained in exchange for new operating liabilities |
|
|
i 49.3 |
|
|
|
i 12.4 |
|
Leased assets obtained in exchange for new finance lease liabilities |
|
|
i 5.6 |
|
|
|
i 5.8 |
|
4. Revenue
The Company recognizes revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.
13
Contracts with customers and clients
The Company accounts for a contract when it has the approval and commitment from both parties, the rights of the parties are identified, the payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Once a contract is identified, the Company evaluates whether the contract should be accounted for as more than one performance obligation. Substantially all of the Company’s revenues come from the following two types of arrangements: Lease type and Management type contracts.
Management type contracts
Management type contract revenue consists of management fees, including both fixed and performance-based fees, and in some cases e-commerce technology fees, customer convenience fees and monthly subscription fees related to the use of the Company's technology solutions. In exchange for this consideration, the Company may have a bundle of integrated services that comprise one performance obligation and include services such as managing the facility, as well as ancillary services such as accounting, equipment leasing, consulting, insurance and other value-added services. Management type contract revenues do not include gross customer collections at the managed facilities as these revenues belong to the property owners rather than the Company. Management type contracts generally provide the Company with management fees regardless of the operating performance of the underlying facilities. Revenue is recognized over time as the Company provides services.
Lease type contracts
Lease type contract revenue includes gross receipts (net of local taxes), consulting fees, e-commerce technology fees, customer convenience fees, gains on sales of contracts and payments for exercising termination rights. Performance obligations related to lease type contracts include parking for transient and monthly parkers. Revenue is recognized over time as the Company provides services. Under lease type arrangements, the Company pays the property owner a fixed base rent, percentage rent that is tied to the facility’s financial performance, or a combination of both. The Company operates the parking facility and is responsible for most operating expenses, but typically is not responsible for major maintenance, capital expenditures or real estate taxes. Certain expenses, primarily rental expense for the contractual arrangements that meet the definition of service concession arrangements, are recorded as a reduction of Service revenue – lease type contracts.
Service concession arrangements
Certain expenses (primarily rental expense), as well as depreciation and amortization, related to service concessions arrangements for lease type contracts, are recorded as a reduction of Service revenue – lease type contracts.
The Company recorded cost concessions related to service concession arrangements (recognized as an increase to revenue) of $ i 2.7 million and $ i 8.3 million during the three and nine months ended September 30, 2023, respectively, and $ i 3.1 million and $ i 9.2 million during the three and nine months ended September 30, 2022, respectively.
Disaggregation of revenue
The Company disaggregates its revenue from contracts with customers by type of arrangement for each of the reportable segments. The Company has concluded that such disaggregation of revenue best depicts the overall economic nature, timing and uncertainty of the Company's revenue and cash flows affected by the economic factors of the respective contractual arrangement. See Note 13. Segment Information for further information on disaggregation of the Company's revenue by segment.
Performance obligations
As of September 30, 2023, the Company had $ i 198.3 million related to performance obligations that were unsatisfied or partially unsatisfied for which the Company expects to recognize revenue. This amount excludes variable consideration primarily related to contracts where the Company and customer share the gross revenues or operating profit for the location and contracts where transaction prices include performance incentives that are constrained at contract inception. These performance incentives are based on measures that are ascertained exclusively by future performance and therefore cannot be estimated at contract inception by the Company. The Company applies the practical expedient that permits exclusion of information about the remaining performance obligations that have original expected durations of one year or less.
14
The Company expects to recognize the remaining performance obligations as revenue in future periods as follows:
(millions) (unaudited) |
|
Remaining |
|
|
2023 |
|
$ |
i 21.1 |
|
2024 |
|
|
i 64.2 |
|
2025 |
|
|
i 40.8 |
|
2026 |
|
|
i 31.6 |
|
2027 |
|
|
i 19.6 |
|
2028 and thereafter |
|
|
i 21.0 |
|
Total |
|
$ |
i 198.3 |
|
Contract balances
Contract assets and liabilities are reported on a contract-by-contract basis and are included in Accounts receivable, net, and Accrued and other current liabilities, respectively, within the Condensed Consolidated Balance Sheets.
The following table provides information about accounts receivable, contract assets and contract liabilities with customers and clients as of September 30, 2023 (unaudited) and December 31, 2022:
(millions) |
|
|
|
|
||||
Accounts receivable |
|
$ |
i 189.0 |
|
|
$ |
i 169.9 |
|
Contract asset |
|
|
i — |
|
|
|
i 1.8 |
|
Contract liabilities |
|
|
( i 15.3 |
) |
|
|
( i 17.4 |
) |
Changes in contract assets, which include the recognition of additional consideration due from the client, are offset by reclassifications of contract asset balances to accounts receivable when the Company obtains an unconditional right to consideration, thereby establishing an accounts receivable. The following table provides information about changes to contract assets during the nine months ended September 30, 2023 and 2022 (unaudited):
|
|
Nine Months Ended |
|
|||||
(millions) |
|
|
|
|
||||
Balance, beginning of period |
|
$ |
i 1.8 |
|
|
$ |
i 2.3 |
|
Additional contract assets |
|
|
i — |
|
|
|
i 0.2 |
|
Reclassification to accounts receivable |
|
|
( i 1.8 |
) |
|
|
( i 2.3 |
) |
Balance, end of period |
|
$ |
i — |
|
|
$ |
i 0.2 |
|
Changes in contract liabilities primarily include additional contract liabilities and reductions of contract liabilities when revenue is recognized. The following table provides information about changes to contract liabilities during the nine months ended September 30, 2023 and 2022 (unaudited):
|
|
Nine Months Ended |
|
|||||
(millions) |
|
|
|
|
||||
Balance, beginning of period |
|
$ |
( i 17.4 |
) |
|
$ |
( i 15.7 |
) |
Additional contract liabilities |
|
|
( i 15.3 |
) |
|
|
( i 13.2 |
) |
Recognition of revenue from contract liabilities |
|
|
i 17.4 |
|
|
|
i 15.7 |
|
Balance, end of period |
|
$ |
( i 15.3 |
) |
|
$ |
( i 13.2 |
) |
Cost of contracts, net
Cost of contracts expense related to service concession arrangements and certain management type contracts are recorded as a reduction of revenue. Cost of contracts expense during the three and nine months ended September 30, 2023 and 2022 (unaudited), which was included as a reduction to Services revenue – management type contracts within the Condensed Consolidated Statements of Income, was as follows:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||
(millions) |
|
|
|
|
|
|
|
||||||||
Cost of contracts expense |
|
$ |
i 0.2 |
|
|
$ |
i 0.3 |
|
$ |
i 0.7 |
|
|
$ |
i 0.8 |
|
15
As of September 30, 2023 (unaudited) and December 31, 2022, cost of contracts, net of accumulated amortization, included in Other noncurrent assets within the Condensed Consolidated Balance Sheets was $ i 2.4 million and $ i 2.9 million, respectively.
/5. Legal and Other Commitments and Contingencies
The Company is subject to claims and litigation in the normal course of its business, including those related to labor and employment, contracts, personal injury and other related matters, some of which allege substantial monetary damages and claims. Some of these actions may be brought as class actions on behalf of a class or purported class of employees. While the outcomes of claims and legal proceedings brought against the Company are subject to uncertainty, the Company believes the final outcome will not have a material adverse effect on its financial position, results of operations or cash flows.
6. Other Intangible Assets, net
The components of other intangible assets, net, as of September 30, 2023 (unaudited) and December 31, 2022, were as follows:
|
|
|
|
|
|
|
|
|||||||||||||||||||||
(millions) |
|
Weighted |
|
|
Intangible |
|
|
Accumulated |
|
|
Intangible |
|
|
Intangible |
|
|
Accumulated |
|
|
Intangible |
|
|||||||
Management contract rights |
|
|
i 5.8 |
|
|
$ |
i 81.0 |
|
|
$ |
( i 56.7 |
) |
|
$ |
i 24.3 |
|
|
$ |
i 81.0 |
|
|
$ |
( i 52.9 |
) |
|
$ |
i 28.1 |
|
Proprietary know how |
|
|
i 6.5 |
|
|
|
i 23.8 |
|
|
|
( i 5.2 |
) |
|
|
i 18.6 |
|
|
|
i 21.7 |
|
|
|
( i 2.7 |
) |
|
|
i 19.0 |
|
Customer relationships |
|
|
i 7.8 |
|
|
|
i 25.0 |
|
|
|
( i 8.3 |
) |
|
|
i 16.7 |
|
|
|
i 24.8 |
|
|
|
( i 6.6 |
) |
|
|
i 18.2 |
|
Trade names and trademarks |
|
|
i 12.3 |
|
|
|
i 2.9 |
|
|
|
( i 1.1 |
) |
|
|
i 1.8 |
|
|
|
i 2.8 |
|
|
|
( i 0.7 |
) |
|
|
i 2.1 |
|
Covenant not to compete |
|
|
i 3.5 |
|
|
|
i 2.9 |
|
|
|
( i 2.0 |
) |
|
|
i 0.9 |
|
|
|
i 2.9 |
|
|
|
( i 1.4 |
) |
|
|
i 1.5 |
|
Other intangible assets, net |
|
|
i 6.7 |
|
|
$ |
i 135.6 |
|
|
$ |
( i 73.3 |
) |
|
$ |
i 62.3 |
|
|
$ |
i 133.2 |
|
|
$ |
( i 64.3 |
) |
|
$ |
i 68.9 |
|
Amortization expense related to other intangible assets during the three and nine months ended September 30, 2023 and 2022, (unaudited), respectively, which was included in Depreciation and amortization within the Condensed Consolidated Statements of Income, was as follows:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||
(millions) |
|
|
|
|
|
|
|
||||||||
Amortization expense |
|
$ |
i 3.0 |
|
|
$ |
i 2.1 |
|
$ |
i 9.0 |
|
|
$ |
i 7.0 |
|
7. Goodwill
The changes in the carrying amount of goodwill during the nine months ended September 30, 2023 (unaudited) were as follows:
(millions) |
|
Commercial |
|
|
Aviation |
|
|
Total |
|
|||
Net book value as of December 31, 2022 |
|
|
|
|
|
|
|
|
|
|||
Goodwill |
|
$ |
i 387.0 |
|
|
$ |
i 215.7 |
|
|
$ |
i 602.7 |
|
Accumulated impairment losses |
|
|
— |
|
|
|
( i 59.5 |
) |
|
|
( i 59.5 |
) |
Total |
|
$ |
i 387.0 |
|
|
$ |
i 156.2 |
|
|
$ |
i 543.2 |
|
Acquisition |
|
|
i 0.9 |
|
|
|
— |
|
|
|
i 0.9 |
|
Foreign currency translation |
|
|
— |
|
|
|
i 0.1 |
|
|
|
i 0.1 |
|
Net book value as of September 30, 2023 |
|
|
|
|
|
|
|
|
|
|||
Goodwill |
|
$ |
i 387.9 |
|
|
$ |
i 215.8 |
|
|
$ |
i 603.7 |
|
Accumulated impairment losses |
|
|
— |
|
|
|
( i 59.5 |
) |
|
|
( i 59.5 |
) |
Total |
|
$ |
i 387.9 |
|
|
$ |
i 156.3 |
|
|
$ |
i 544.2 |
|
8. Borrowing Arrangements
Long-term borrowings, as of September 30, 2023 (unaudited) and December 31, 2022, in order of preference, were as follows:
|
|
Amount Outstanding |
|
|||||
(millions) |
|
|
|
|
||||
Senior Credit Facility, net of original discount on borrowings(1) |
|
$ |
i 337.7 |
|
|
$ |
i 322.3 |
|
Other borrowings(2) |
|
|
i 24.1 |
|
|
|
i 24.3 |
|
Deferred financing costs |
|
|
( i 2.0 |
) |
|
|
( i 2.4 |
) |
Total obligations |
|
|
i 359.8 |
|
|
|
i 344.2 |
|
Less: Current portion of long-term borrowings |
|
|
i 14.7 |
|
|
|
i 12.4 |
|
Total long-term borrowings, excluding current portion |
|
$ |
i 345.1 |
|
|
$ |
i 331.8 |
|
16
Senior Credit Facility
On April 21, 2022 (the “Fifth Amendment Effective Date”), the Company entered into a fifth amendment (the “Fifth Amendment”) to the Company’s credit agreement (as amended prior to the Fifth Amendment Effective Date, the “Credit Agreement”; the Credit Agreement, as amended by the Fifth Amendment, the “Amended Credit Agreement”) with Bank of America, N.A. (“Bank of America”), as Administrative Agent, swing-line lender and a letter of credit issuer; certain subsidiaries of the Company, as guarantors; and the lenders party thereto (the “Lenders”), pursuant to which the Lenders have made available to the Company a senior secured credit facility (the “Senior Credit Facility”). The Senior Credit Facility permits aggregate borrowings of $ i 600.0 million consisting of (i) a revolving credit facility of up to $ i 400.0 million at any time outstanding, which includes a letter of credit facility that is limited to $ i 100.0 million at any time outstanding, and (ii) a term loan facility of $ i 200.0 million. The maturity date of the Senior Credit Facility is i April 21, 2027.
i As of September 30, 2023, the Company was in compliance with its debt covenants under the Amended Credit Agreement.
As of September 30, 2023, the Company had $ i 39.1 million of letters of credit outstanding under the Senior Credit Facility and borrowings against the Senior Credit Facility aggregated to $ i 338.8 million.
The weighted average interest rate on the Senior Credit Facility was i 6.7% and i 4.6% during the nine months ended September 30, 2023 and 2022, respectively. That rate included the letters of credit for both years and interest rate collars during the nine months ended September 30, 2022. The weighted average interest rate on all outstanding borrowings, not including letters of credit, was i 7.2% and i 4.9% during the nine months ended September 30, 2023 and 2022, respectively.
Subordinated Convertible Debentures
The Company acquired Subordinated Convertible Debentures ("Convertible Debentures") as a result of the October 2, 2012 acquisition of Central Parking Corporation. As of October 2, 2012, the Convertible Debentures were no longer redeemable for shares. The Convertible Debentures mature on April 1, 2028 at $ i 25 per share. The Convertible Debenture holders have the right to redeem the Convertible Debentures for $ i 19.18 per share upon acceleration or earlier repayment of the Convertible Debentures. There have been i i no / redemptions of the Convertible Debentures during the periods ended September 30, 2023 and December 31, 2022. The approximate redemption value of the Convertible Debentures outstanding as of September 30, 2023 and December 31, 2022 was $ i i 1.1 / million.
/9. Stock Repurchase Program
On February 14, 2023, the Company's Board of Directors (the "Board") authorized the Company to repurchase, on the open market, shares of the Company's outstanding common stock in an amount not to exceed $ i 60.0 million. No shares have been repurchased under this program.
In May 2022, the Board authorized the Company to repurchase, on the open market, shares of the Company’s outstanding common stock in an amount not to exceed $ i 60.0 million in aggregate. During the nine months ended September 30, 2023, i 285,700 shares were repurchased at an average price of $ i 36.53 per share under this program. As of September 30, 2023, $ i 0.2 million remained available for repurchase under this program.
As a condition of the Merger Agreement (As defined in Note 14. Subsequent Events), beginning on October 4, 2023, the Company is restricted from repurchasing its common stock.
Stock repurchase activity under the May 2022 stock repurchase program during the three and nine months ended September 30, 2023 and 2022 (unaudited) was as follows:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||
(millions, except for share and per share data) |
|
|
|
|
|
|
|
||||||||
Total number of shares repurchased |
|
|
— |
|
|
|
i 667,300 |
|
|
i 285,700 |
|
|
|
i 843,800 |
|
Average price paid per share |
|
$ |
— |
|
|
$ |
i 33.08 |
|
$ |
i 36.53 |
|
|
$ |
i 32.77 |
|
Total value of common stock repurchased |
|
$ |
— |
|
|
$ |
i 22.0 |
|
$ |
i 10.4 |
|
|
$ |
i 27.6 |
|
The Company recorded $ i 0.1 million in additional paid-in capital within the Condensed Consolidated Balance Sheets during the nine months ended September 30, 2023, related to the excise tax on net repurchases of common stock that was a provision of the Inflation Reduction Act of 2022.
The remaining authorized repurchase amount under the May 2022 and February 2023 stock repurchase programs as of September 30, 2023 (unaudited), was as follows:
17
(millions) |
|
|
||
Total authorized repurchase amount |
|
$ |
i 120.0 |
|
Total value of shares repurchased |
|
|
i 59.8 |
|
Total remaining authorized repurchase amount |
|
$ |
i 60.2 |
|
10. Stock-Based Compensation
Stock Grants
The Company granted i 18,660 and i 14,635 shares of common stock to the Board during the nine months ended September 30, 2023 and 2022, respectively. The Company recognized $ i 0.6 million and $ i 0.4 million of stock-based compensation expense related to stock grants during the nine months ended September 30, 2023 and 2022, respectively.
Restricted Stock Units
During the nine months ended September 30, 2023, the Company granted i 126,931 restricted stock units to certain executives that vest over i three years. During the nine months ended September 30, 2022, the Company granted i 1,057 and i 135,054 restricted stock units to certain executives and employees that vest over one and i three years, respectively.
Nonvested restricted stock units as of September 30, 2023, and changes during the nine months ended September 30, 2023 (unaudited) were as follows:
|
|
Shares |
|
|
Weighted Average Grant-Date Fair Value |
|
||
Nonvested as of December 31, 2022 |
|
|
i 338,448 |
|
|
$ |
i 33.28 |
|
Granted |
|
|
i 126,931 |
|
|
|
i 34.57 |
|
Vested |
|
|
( i 8,426 |
) |
|
|
i 35.95 |
|
Nonvested as of September 30, 2023 |
|
|
i 456,953 |
|
|
$ |
i 33.62 |
|
The Company's stock-based compensation expense related to the restricted stock units during the three and nine months ended September 30, 2023 and 2022 (unaudited), which was included in General and administrative expenses within the Condensed Consolidated Statements of Income, was as follows:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||
(millions) |
|
|
|
|
|
|
|
||||||||
Stock-based compensation expense |
|
$ |
i 1.3 |
|
|
$ |
i 1.5 |
|
$ |
i 3.8 |
|
|
$ |
i 4.3 |
|
As of September 30, 2023, there was $ i 6.9 million of unrecognized stock-based compensation expense related to restricted stock units that are expected to be recognized over a weighted average remaining period of approximately i 1.8 years.
Performance Share Units (“PSUs”)
During the nine months ended September 30, 2023 and 2022, the Company granted i 126,921 and i 132,304 PSUs, respectively, to certain executives. The performance target is based on the achievement of a certain level of operating income, excluding depreciation and amortization, as well as certain other discretionary adjustments by the Board, over a i three-year performance period. The ultimate number of shares issued could change depending on the Company’s results over the performance period. The maximum amount of shares that could be issued for the PSU's granted in 2023 ("2023 PSUs"), the PSU's granted in 2022 ("2022 PSUs") and the PSU's granted in 2021 ("2021 PSUs") are i 253,842, i 258,114 and i 97,096, respectively. The Company is currently recognizing expense for the 2023 PSUs based on a payout of i 134,536 shares, the 2022 PSUs based on a payout of i 201,329 shares, and the maximum payout of i 97,096 shares for the 2021 PSUs.
Nonvested PSUs as of September 30, 2023, and changes during the nine months ended September 30, 2023 (unaudited), were as follows:
|
|
Shares |
|
|
Weighted Average Grant-Date Fair Value |
|
||
Nonvested as of December 31, 2022 |
|
|
i 177,605 |
|
|
$ |
i 31.94 |
|
Granted |
|
|
i 126,921 |
|
|
|
i 34.57 |
|
Nonvested as of September 30, 2023 |
|
|
i 304,526 |
|
|
$ |
i 33.04 |
|
18
The Company's stock-based compensation expense related to PSUs during the three and nine months ended September 30, 2023 and 2022 (unaudited), which was included in General and administrative expenses within the Condensed Consolidated Statements of Income, was as follows:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||
(millions) |
|
|
|
|
|
|
|
||||||||
Stock-based compensation expense |
|
$ |
i 1.4 |
|
|
$ |
i 0.7 |
|
$ |
i 3.7 |
|
|
$ |
i 1.9 |
|
As of September 30, 2023, there was $ i 6.7 million of unrecognized stock-based compensation expenses related to PSUs that are expected to be recognized over a weighted average remaining period of approximately i 1.8 years. In addition, the Company could recognize additional future stock-based compensation expenses of $ i 4.1 million and $ i 1.7 million for the 2023 PSUs and the 2022 PSUs, respectively, if the maximum performance target is achieved for each award.
/
11. Net Income per Common Share
Basic net income per common 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 common share is based upon the weighted daily average number of shares of common stock outstanding during the period plus all potentially dilutive stock-based awards, including restricted stock and performance share units, using the treasury-stock method. Unvested performance share units are excluded from the computation of weighted average diluted common shares outstanding if the performance targets upon which the issuance of the shares is contingent have not been achieved and the respective performance period has not been completed as of the end of the period.
Basic and diluted net income per common share and a reconciliation of the weighted average basic common shares outstanding to the weighted average diluted common shares outstanding during the three and nine months ended September 30, 2023 and 2022 (unaudited) was as follows:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||
(millions, except share and per share data) |
|
|
|
|
|
|
|
||||||||
Net income attributable to SP Plus Corporation |
|
$ |
i 9.2 |
|
|
$ |
i 14.3 |
|
$ |
i 29.9 |
|
|
$ |
i 40.4 |
|
Basic weighted average common shares outstanding |
|
|
i 19,649,611 |
|
|
|
i 20,744,813 |
|
|
i 19,660,930 |
|
|
|
i 21,054,095 |
|
Dilutive impact of share-based awards |
|
|
i 260,697 |
|
|
|
i 232,854 |
|
|
i 213,235 |
|
|
|
i 169,887 |
|
Diluted weighted average common shares outstanding |
|
|
i 19,910,308 |
|
|
|
i 20,977,667 |
|
|
i 19,874,165 |
|
|
|
i 21,223,982 |
|
Net income per common share |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
i 0.47 |
|
|
$ |
i 0.69 |
|
$ |
i 1.52 |
|
|
$ |
i 1.92 |
|
Diluted |
|
$ |
i 0.46 |
|
|
$ |
i 0.68 |
|
$ |
i 1.50 |
|
|
$ |
i 1.90 |
|
There were i no additional securities that could dilute basic earnings per share in the future that were not included in the computation of diluted earnings per common share, other than those disclosed.
/12. Comprehensive Loss
The components of other comprehensive loss and the income tax benefit allocated to each component during the three and nine months ended September 30, 2023 and 2022 (unaudited) were as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
(millions) |
|
Before Tax Amount |
|
|
Income Tax |
|
|
Net of Tax Amount |
|
|
Before Tax Amount |
|
|
Income Tax |
|
|
Net of Tax Amount |
|
||||||
Translation adjustments |
|
$ |
( i 0.9 |
) |
|
$ |
— |
|
|
$ |
( i 0.9 |
) |
|
$ |
( i 0.2 |
) |
|
$ |
— |
|
|
$ |
( i 0.2 |
) |
Other comprehensive loss |
|
$ |
( i 0.9 |
) |
|
$ |
— |
|
|
$ |
( i 0.9 |
) |
|
$ |
( i 0.2 |
) |
|
$ |
— |
|
|
$ |
( i 0.2 |
) |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
(millions) |
|
Before Tax Amount |
|
|
Income Tax |
|
|
Net of Tax Amount |
|
|
Before Tax Amount |
|
|
Income Tax |
|
|
Net of Tax Amount |
|
||||||
Translation adjustments |
|
$ |
( i 0.6 |
) |
|
$ |
— |
|
|
$ |
( i 0.6 |
) |
|
$ |
( i 0.7 |
) |
|
$ |
— |
|
|
$ |
( i 0.7 |
) |
De-designation of interest rate collars |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.7 |
|
|
|
i 0.2 |
|
|
|
i 0.5 |
|
Other comprehensive loss |
|
$ |
( i 0.6 |
) |
|
$ |
— |
|
|
$ |
( i 0.6 |
) |
|
$ |
— |
|
|
$ |
i 0.2 |
|
|
$ |
( i 0.2 |
) |
19
The changes to accumulated other comprehensive loss by component during the nine months ended September 30, 2023 (unaudited) were as follows:
(millions) |
|
|
|
Foreign |
|
|
Total Accumulated |
|
||
Balance as of December 31, 2022 |
|
|
|
$ |
( i 1.8 |
) |
|
$ |
( i 1.8 |
) |
Other comprehensive loss before reclassification |
|
|
|
|
( i 0.2 |
) |
|
|
( i 0.2 |
) |
Balance as of September 30, 2023 |
|
|
|
$ |
( i 2.0 |
) |
|
$ |
( i 2.0 |
) |
The changes to accumulated other comprehensive loss by component during the nine months ended September 30, 2022 (unaudited) were as follows:
(millions) |
|
Foreign |
|
|
Interest Rate Collars |
|
|
Total Accumulated |
|
|||
Balance as of December 31, 2021 |
|
$ |
( i 2.3 |
) |
|
$ |
( i 0.5 |
) |
|
$ |
( i 2.8 |
) |
Other comprehensive loss before reclassification |
|
|
( i 0.7 |
) |
|
|
— |
|
|
|
( i 0.7 |
) |
Amounts reclassified from accumulated other comprehensive loss |
|
|
— |
|
|
|
i 0.5 |
|
|
|
i 0.5 |
|
Balance as of September 30, 2022 |
|
$ |
( i 3.0 |
) |
|
$ |
— |
|
|
$ |
( i 3.0 |
) |
Reclassifications from accumulated other comprehensive loss during the three and nine months ended September 30, 2023 and 2022 (unaudited) were as follows:
(millions) |
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Classification in the Condensed Consolidated Statements of Income |
||||||||||
Interest Rate Collars: |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
||||
Net realized loss |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
i 0.7 |
|
|
Other expenses |
Reclassifications before tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.7 |
|
|
|
Income tax benefit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.2 |
|
|
|
Reclassifications, net of tax |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
i 0.5 |
|
|
|
13. Segment Information
Segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the Company's Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as the source of the Company’s reportable segments. The Company’s segments are organized in a manner consistent with which discrete financial information is available and evaluated regularly by the CODM in deciding how to allocate resources and assess performance.
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 the CODM. The CODM is the Company’s chief executive officer.
Each of the operating segments are directly responsible for revenue and expenses related to their operations, including direct segment general and administrative expenses. The CODM assesses the performance of each operating segment using information about operating income (loss) as the primary measure of performance, but does not evaluate segments using discrete asset information. Therefore, assets are not presented at the segment level. There were no inter-segment transactions during the three and nine months ended September 30, 2023, and the Company does not allocate other expense (income), interest expense (income) or income tax expense (benefit) to the operating segments. The accounting policies for segment reporting are the same as for the Company as a whole.
The Company’s operating segments are Commercial and Aviation:
20
The Other segment includes costs related to the Company’s operational support teams and costs related to common and shared infrastructure, including finance, accounting, information technology, human resources, procurement, legal and corporate development.
Revenue, operating income (loss), general and administrative expenses and depreciation and amortization by operating segment during the three and nine months ended September 30, 2023 and 2022 (unaudited) were as follows:
|
|
Three Months Ended |
Nine Months Ended |
|
||||||||||||
(millions) |
|
|
|
|
|
|
|
|
||||||||
Services revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
$ |
i 75.6 |
|
|
$ |
i 68.2 |
|
|
$ |
i 230.6 |
|
|
$ |
i 206.0 |
|
Lease type contracts |
|
|
i 70.9 |
|
|
|
i 68.6 |
|
|
|
i 207.9 |
|
|
|
i 194.9 |
|
Total Commercial |
|
|
i 146.5 |
|
|
|
i 136.8 |
|
|
|
i 438.5 |
|
|
|
i 400.9 |
|
Aviation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
|
i 77.9 |
|
|
|
i 66.7 |
|
|
|
i 216.0 |
|
|
|
i 176.6 |
|
Lease type contracts |
|
|
i 4.0 |
|
|
|
i 3.6 |
|
|
|
i 11.5 |
|
|
|
i 10.5 |
|
Total Aviation |
|
|
i 81.9 |
|
|
|
i 70.3 |
|
|
|
i 227.5 |
|
|
|
i 187.1 |
|
Reimbursed management type contract revenue |
|
|
i 232.3 |
|
|
|
i 197.3 |
|
|
|
i 662.2 |
|
|
|
i 547.2 |
|
Total services revenue |
|
$ |
i 460.7 |
|
|
$ |
i 404.4 |
|
|
$ |
i 1,328.2 |
|
|
$ |
i 1,135.2 |
|
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
$ |
i 35.7 |
|
|
$ |
i 32.4 |
|
|
$ |
i 103.0 |
|
|
$ |
i 95.7 |
|
Aviation |
|
|
i 10.6 |
|
|
|
i 9.7 |
|
|
|
i 28.8 |
|
|
|
i 26.3 |
|
Other |
|
|
( i 25.3 |
) |
|
|
( i 18.3 |
) |
|
|
( i 66.2 |
) |
|
|
( i 52.5 |
) |
Total operating income |
|
$ |
i 21.0 |
|
|
$ |
i 23.8 |
|
|
$ |
i 65.6 |
|
|
$ |
i 69.5 |
|
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
$ |
i 9.8 |
|
|
$ |
i 7.2 |
|
|
$ |
i 27.3 |
|
|
$ |
i 21.1 |
|
Aviation |
|
|
i 4.8 |
|
|
|
i 3.1 |
|
|
|
i 12.7 |
|
|
|
i 8.7 |
|
Other |
|
|
i 23.0 |
|
|
|
i 16.9 |
|
|
|
i 60.0 |
|
|
|
i 48.6 |
|
Total general and administrative expenses |
|
$ |
i 37.6 |
|
|
$ |
i 27.2 |
|
|
$ |
i 100.0 |
|
|
$ |
i 78.4 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial(1) |
|
$ |
i 3.8 |
|
|
$ |
i 3.4 |
|
|
$ |
i 11.2 |
|
|
$ |
i 9.2 |
|
Aviation(2) |
|
|
i 2.9 |
|
|
|
i 2.4 |
|
|
|
i 8.8 |
|
|
|
i 7.4 |
|
Other |
|
|
i 2.3 |
|
|
|
i 1.4 |
|
|
|
i 6.2 |
|
|
|
i 3.9 |
|
Total depreciation and amortization |
|
$ |
i 9.0 |
|
|
$ |
i 7.2 |
|
|
$ |
i 26.2 |
|
|
$ |
i 20.5 |
|
14. Subsequent Event
On October 4, 2023, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") by and among the Company, Metropolis Technologies, Inc. ("Metropolis"), and Schwinger Merger Sub Inc., a direct, wholly owned subsidiary of Metropolis (“Merger Sub”), in an all-cash transaction with a total enterprise value of approximately $ i 1.5 billion. Pursuant to the Merger Agreement, subject to the terms and conditions therein, Merger Sub will acquire all of the outstanding shares of the Company's common stock for $ i 54.00 per share, without interest, and merge with the Company, with the Company surviving as a wholly owned subsidiary of Metropolis. The transaction is expected to close in 2024, subject to customary closing conditions, including approval by the Company's stockholders and the receipt of regulatory approvals. Upon completion of the transaction, the Company's shares will no longer trade on The Nasdaq Global Select Market.
The Company has made customary representations, warranties and covenants in the Merger Agreement. Subject to certain exceptions outlined in the Merger Agreement, the Company has agreed to certain covenants relating to the Company's business during the period between the execution of the Merger Agreement and the consummation of the transaction, including restrictions on its ability to issue any shares of its capital stock, repurchase any shares of its common stock, incur additional indebtedness and engage in certain merger and acquisition transactions. As of September 30, 2023, the Company has incurred $ i 3.5 million in expenses related to the proposed merger, which the Company expects to pay in the fourth quarter of 2023.
/21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of SP Plus Corporation’s (“we”, “us” or “our”) results of operations should be read in conjunction with the condensed 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 Form 10-K for the fiscal year ended December 31, 2022.
Important Information Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q is being filed by us with the Securities and Exchange Commission (“SEC”) and contains forward-looking statements. These statements are typically accompanied by the words “expect,” “estimate,” “intend”, “will,” “predict,” “project,” “may,” “should,” “could,” “believe,” “would,” “might,” “anticipate,” or similar terms and phrases, but such words, terms and phrases are not the exclusive means of identifying such statements. These expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as enacted under the Private Securities Litigation Reform Act of 1995. These forward looking statements are made based on our expectations, beliefs and projections concerning future events and are subject to uncertainties and factors relating to operations and the business environment, all of which are difficult to predict and many of which are beyond our control. These forward-looking statements are not guarantees of future performance and there can be no assurance that our expectations, beliefs and projections will be realized. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Our actual results, performance and achievements could be materially different from those expressed in, or implied by, our forward-looking statements. Important factors which could cause or contribute to our actual results, performance or achievements being different from those expressed in, or implied by, our forward-looking statements include, but are not limited to, those discussed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and other documents we file with the SEC, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and except as expressly required by the federal securities laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, changes in circumstances, future events or for any other reason.
Overview
On October 4, 2023, we entered into an Agreement and Plan of Merger (the "Merger Agreement") by and among us, Metropolis Technologies, Inc. and Schwinger Merger Sub Inc. See Note 14. Subsequent Events within the notes to the Condensed Consolidated Financial Statements for further discussion.
As of September 30, 2023, we have incurred $3.5 million in expenses related to the proposed merger, which we expect to pay in the fourth quarter of 2023. In addition, we expect to incur certain other expenses as a result of the proposed merger.
Acquisitions
On July 25, 2023, we acquired certain assets of Roker Inc. ("Roker"), a United States based provider of fully-integrated parking solutions that simplify permit, violation and enforcement management for organizations and municipalities, for approximately $3.1 million. Roker’s operations are included in the Commercial segment.
On November 10, 2022, we acquired certain assets of DIVRT, Inc. ("DIVRT"), a developer of innovative software and technology solutions that enables frictionless parking capabilities, for approximately $17.6 million.
On October 11, 2022, we acquired K M P Associates Limited ("KMP"), a United Kingdom based software and technology provider serving aviation and commercial parking clients, primarily through its AeroParker technology, throughout the United States and Europe, for approximately $13.8 million, less cash acquired of $0.9 million, and assumed KMP’s debt of $0.3 million.
See Note 2 Acquisitions within the notes to the Condensed Consolidated Financial Statements for further discussion on the acquisitions noted above.
The acquisitions noted above enhance our position as a global provider of frictionless technology solutions that are independent of our legacy parking management and transportation related operations.
Our Business
We develop and integrate technology with operations management and support to deliver mobility solutions that enable the efficient and time-sensitive movement of people, vehicles and personal travel belongings. We are committed to providing solutions that make every moment matter for a world on the go while meeting the objectives of our diverse client base in North America and Europe, which includes aviation, commercial, hospitality and institutional clients.
We typically enter into contractual relationships with property owners or managers as opposed to owning facilities. We primarily operate under two types of arrangements: management type contracts and lease type contracts.
22
As of September 30, 2023, in our Commercial segment, we operated approximately 88% of our locations under management type contracts and 12% under lease type contracts, while in our Aviation segment, we served 159 airports across North America and Europe.
In evaluating our financial condition and operating performance, our primary area of focus is on our operating income. Revenue from lease type contracts includes all gross customer collections derived from our leased locations (net of local taxes), whereas revenue from management type contracts only includes our contractually agreed upon management fees and amounts attributable to ancillary services. Gross customer collections at facilities under management type contracts, therefore, are not included in our revenue. Accordingly, while a change in the proportion of our operating agreements that are structured as lease type contracts may cause significant fluctuations in reported revenue and cost of services, our operating income under lease type contracts will be comparable to the operating income under management type contracts.
General Business Trends
We believe that sophisticated clients recognize the potential for technology-driven mobility solutions, parking services, parking management, ground transportation services, baggage handling services and other ancillary services to be a profit generator and/or a service differentiator to their customers. By outsourcing these services, our clients are able to capture additional profit and improve customer experiences by leveraging the unique technology, operational skills and controls that an experienced services and technology solutions provider can offer. Our ability to consistently deliver a uniformly high level of service to our clients, including the use of various technology solutions and enhancements, allows us to maximize the profit and/or customer experience for our clients and improves our ability to win contracts and retain existing clients. Our focus on customer service and satisfaction is a key driver of our high retention rate, which was approximately 94% and 91% for the twelve-month periods ended September 30, 2023 and 2022, respectively, for our Commercial segment facilities.
Commercial Segment Facilities
The following table reflects our Commercial facilities (by contractual type) operated on the dates indicated:
|
|
|
|
|
|
|
||||||
Leased facilities |
|
|
411 |
|
|
|
421 |
|
|
|
426 |
|
Managed facilities |
|
|
2,953 |
|
|
|
2,709 |
|
|
|
2,664 |
|
Total Commercial segment facilities |
|
|
3,364 |
|
|
|
3,130 |
|
|
|
3,090 |
|
The increase as of September 30, 2023 included 22 unique facilities added as a result of the acquisition of Roker.
Aviation Segment - Airports Served
The following table reflects the number of airports where at least one of our services was provided as of dates indicated:
|
|
|
|
|
|
|
||||||
North America |
|
|
101 |
|
|
|
100 |
|
|
|
91 |
|
Europe |
|
|
58 |
|
|
|
58 |
|
|
|
— |
|
Total Airports |
|
|
159 |
|
|
|
158 |
|
|
|
91 |
|
The increase as of December 31, 2022 included 65 unique airports added as a result of the acquisition of KMP.
Revenue
We recognize services revenue from our contracts and certain fees for using our technology-driven mobility solutions as the related services are provided. Substantially all of our revenue comes from the following sources:
23
Management type contracts. Consists of management fees, including fixed, variable and/or performance-based fees, and in some cases e-commerce technology fees, customer convenience fees and monthly subscription fees related to the use of the Company’s technology solutions and amounts attributable to ancillary services such as accounting, equipment leasing, baggage services, payments received for exercising termination rights, consulting, developmental fees, gains on sales of contracts, insurance and other value-added services. We believe we generally can purchase required insurance at lower rates than our clients can obtain on their own because we effectively self-insure for all liability, worker’s compensation and health care claims by maintaining a large per-claim deductible. As a result, we generate operating income on the insurance provided under our management type contracts by focusing on our risk management efforts and controlling losses. Management type contract revenues do not include gross customer collections, as those revenues belong to the client rather than to us. Management type contracts generally provide us with a management fee regardless of the operating performance of the underlying facility. In addition, management type contract revenue includes revenue related to our other aviation services. Other aviation services include our baggage delivery, curbside concierge, remote airline check-in and other miscellaneous services provided to our airport and airline clients.
Lease type contracts. Consists of all revenue received at lease type locations, including gross receipts (net of local taxes), consulting and real estate development fees, e-commerce technology fees, customer convenience fees, gains on sales of contracts and payments for exercising termination rights. As discussed in Note 4. Revenue within the notes to the Condensed Consolidated Financial Statements, revenue from lease type contracts includes a reduction for certain expenses (primarily rent expense) related to service concession arrangements.
Reimbursed Management Type Contract Revenue. Consists of the direct reimbursement from the client for operating expenses incurred under a management type contract.
Cost of Services (Exclusive of Depreciation and Amortization)
Our cost of services consists of the following:
Management type contracts. Expenses under a management type contract are generally the responsibility of the client. As a result, these costs are not included in cost of services. However, “reverse” management type contracts, which typically provide for larger management fees, do require us to pay for certain costs, which are included in cost of services. In addition, certain costs related to providing our other aviation and ancillary services are included in cost of services.
Lease type contracts. Consists of contractual rents or fees paid to the client and all operating expenses incurred in connection with operating the leased facility. Contractual rents or fees paid to the client are generally based on either a fixed contractual amount, a percentage of gross revenue or a combination thereof. Generally, under a lease type arrangement, we are not responsible for major capital expenditures or real estate taxes.
Reimbursed Management Type Contract Expense. Consists of directly reimbursed costs incurred on behalf of a client under a management type contract.
Gross Profit
Gross profit equals our revenue less the cost of generating such revenue (“cost of services”) and depreciation and amortization expenses related to cost of services activities.
General and Administrative Expenses
General and administrative expenses include salaries, wages, incentive compensation, stock-based compensation, payroll taxes, insurance, travel and office related expenses for our headquarters, field offices and supervisory employees. Additionally, acquisition-related expenses are included in general and administrative expenses.
Depreciation and Amortization
Depreciation is determined using a straight-line method over estimated useful lives of the various asset classes, or in the case of leasehold improvements, over the term of the operating lease or its useful life, whichever is shorter. Intangible assets determined to have finite lives, usually acquired through the acquisition of businesses, are amortized over their remaining estimated useful life.
Operating Income
Operating income represents revenue less cost of services, general and administrative expenses and depreciation and amortization. This is the key metric our Chief Operating Decision Maker (“CODM”) uses for making decisions, assessing performance and allocating resources to our Operating Segments, Commercial and Aviation.
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 the CODM. Our CODM is
24
our chief executive officer. The CODM uses this separate discrete financial information by segment to allocate resources and assess performance, primarily based on operating income.
Our operating segments are Commercial and Aviation, which are described below.
The Other segment includes costs related to our operational support teams and common and shared infrastructure, including finance, accounting, information technology, human resources, procurement, legal and corporate development.
Analysis of Results of Operations
New business relates to contracts that started during the current period. Contract terminations relate to contracts that have expired or terminated early during the current period but where we were operating the business in the comparative period presented. Conversions relate to contracts that were converted from lease type contracts to management type contracts after the prior year period.
Acquisition-related, restructuring and other costs include compensation expenses related to organizational changes within our Company, acquisition-related expenses, including integration expenses related to our recent acquisitions, and severance and other costs primarily related to workforce reductions.
Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022
Consolidated results during the three months ended September 30, 2023 and 2022, respectively, included the following notable items:
|
|
Three Months Ended |
|
|
Variance |
|
||||||||||
(millions) (unaudited) |
|
|
|
|
|
Amount |
|
|
% |
|
||||||
Services revenue |
|
$ |
460.7 |
|
|
$ |
404.4 |
|
|
$ |
56.3 |
|
|
|
13.9 |
% |
Cost of services (exclusive of depreciation and amortization) |
|
|
393.1 |
|
|
|
346.2 |
|
|
|
46.9 |
|
|
|
13.5 |
% |
General and administrative expenses |
|
|
37.6 |
|
|
|
27.2 |
|
|
|
10.4 |
|
|
|
38.2 |
% |
Depreciation and amortization |
|
|
9.0 |
|
|
|
7.2 |
|
|
|
1.8 |
|
|
|
25.0 |
% |
Operating income |
|
|
21.0 |
|
|
|
23.8 |
|
|
|
(2.8 |
) |
|
|
(11.8 |
)% |
Interest expense |
|
|
7.4 |
|
|
|
3.9 |
|
|
|
3.5 |
|
|
|
89.7 |
% |
Income tax expense |
|
|
3.5 |
|
|
|
4.9 |
|
|
|
(1.4 |
) |
|
|
(28.6 |
)% |
Net income |
|
|
10.1 |
|
|
|
15.1 |
|
|
|
(5.0 |
) |
|
|
(33.1 |
)% |
Services revenue increased by $56.3 million, or 13.9%, attributable to the following:
25
Cost of services (exclusive of depreciation and amortization) increased by $46.9 million, or 13.5%, attributable to the following:
General and administrative expenses increased $10.4 million, or 38.2%, primarily due to higher acquisition-related, restructuring and other costs of $5.6 million during the three months ended September 30, 2023 as compared to $1.3 million during the three months ended September 30, 2022, as well as higher compensation and non-cash stock-based compensation expenses and our continued investments in business development, technology deployment and other growth initiatives.
Depreciation and amortization expenses increased $1.8 million, or 25.0%, primarily due to the amortization of other intangible assets related to the recent acquisitions and our continued investment in technology and growth initiatives.
Our effective tax rate was 25.7% and 24.5% during the three months ended September 30, 2023 and 2022, respectively.
Net income decreased $5.0 million, or 33.1%, primarily due to higher interest expense as a result of higher variable interest rates and the factors noted above, partially offset by lower income tax expense.
The following tables summarize our revenues (excluding reimbursed management type contract revenue), gross profit, general and administrative expenses, depreciation and amortization, and operating income (expense) by segment during the three months ended September 30, 2023 and 2022.
Commercial
|
Three Months Ended |
Variance |
|
|||||||||||||
(millions) (unaudited) |
|
|
|
|
|
Amount |
|
|
% |
|
||||||
Services revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
$ |
75.6 |
|
|
$ |
68.2 |
|
|
$ |
7.4 |
|
|
|
10.9 |
% |
Lease type contracts |
|
|
70.9 |
|
|
|
68.6 |
|
|
|
2.3 |
|
|
|
3.4 |
% |
Total services revenue |
|
|
146.5 |
|
|
|
136.8 |
|
|
|
9.7 |
|
|
|
7.1 |
% |
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
|
36.5 |
|
|
|
31.3 |
|
|
|
5.2 |
|
|
|
16.6 |
% |
Lease type contracts |
|
|
12.8 |
|
|
|
11.7 |
|
|
|
1.1 |
|
|
|
9.4 |
% |
Depreciation and amortization |
|
|
(2.0 |
) |
|
|
(2.1 |
) |
|
|
0.1 |
|
|
|
4.8 |
% |
Total gross profit |
|
|
47.3 |
|
|
|
40.9 |
|
|
|
6.4 |
|
|
|
15.6 |
% |
General and administrative expenses |
|
|
9.8 |
|
|
|
7.2 |
|
|
|
2.6 |
|
|
|
36.1 |
% |
Depreciation and amortization(1) |
|
|
1.8 |
|
|
|
1.3 |
|
|
|
0.5 |
|
|
|
38.5 |
% |
Operating income |
|
$ |
35.7 |
|
|
$ |
32.4 |
|
|
$ |
3.3 |
|
|
|
10.2 |
% |
Gross Profit
26
General and administrative expenses increased $2.6 million, or 36.1%, to $9.8 million during the three months ended September 30, 2023, compared to $7.2 million during the three months ended September 30, 2022. The increase was primarily due to restructuring and other costs of $1.2 million during the three months ended September 30, 2023, as well as higher compensation and non-cash stock-based compensation expenses and our continued investments in growth initiatives.
Operating income increased $3.3 million, or 10.2%, to $35.7 million during the three months ended September 30, 2023, compared to $32.4 million during the three months ended September 30, 2022, primarily due to the factors noted above, partially offset by $0.5 million of amortization expenses during the three months ended September 30, 2023 related to other intangible assets acquired as a result of the acquisitions of DIVRT and Roker.
Aviation
|
Three Months Ended |
Variance |
|
|||||||||||||
(millions) (unaudited) |
|
|
|
|
|
Amount |
|
|
% |
|
||||||
Services revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
$ |
77.9 |
|
|
$ |
66.7 |
|
|
$ |
11.2 |
|
|
|
16.8 |
% |
Lease type contracts |
|
|
4.0 |
|
|
|
3.6 |
|
|
|
0.4 |
|
|
|
11.1 |
% |
Total services revenue |
|
|
81.9 |
|
|
|
70.3 |
|
|
|
11.6 |
|
|
|
16.5 |
% |
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
|
17.1 |
|
|
|
13.7 |
|
|
|
3.4 |
|
|
|
24.8 |
% |
Lease type contracts |
|
|
1.2 |
|
|
|
1.5 |
|
|
|
(0.3 |
) |
|
|
(20.0 |
)% |
Depreciation and amortization |
|
|
(1.4 |
) |
|
|
(1.3 |
) |
|
|
(0.1 |
) |
|
|
(7.7 |
)% |
Total gross profit |
|
|
16.9 |
|
|
|
13.9 |
|
|
|
3.0 |
|
|
|
21.6 |
% |
General and administrative expenses |
|
|
4.8 |
|
|
|
3.1 |
|
|
|
1.7 |
|
|
|
54.8 |
% |
Depreciation and amortization(1) |
|
|
1.5 |
|
|
|
1.1 |
|
|
|
0.4 |
|
|
|
36.4 |
% |
Operating income |
|
$ |
10.6 |
|
|
$ |
9.7 |
|
|
$ |
0.9 |
|
|
|
9.3 |
% |
Gross Profit
General and administrative expenses increased $1.7 million, or 54.8%, to $4.8 million during the three months ended September 30, 2023, compared to $3.1 million during the three months ended September 30, 2022 primarily due to our continued investments in growth initiatives and restructuring and other costs of $0.6 million during the three months ended September 30, 2023.
Operating income increased $0.9 million, or 9.3%, to $10.6 million during the three months ended September 30, 2023, compared to $9.7 million during the three months ended September 30, 2022, primarily due to the factors noted above, partially offset by
27
$0.4 million of amortization expenses during the three months ended September 30, 2023 related to other intangibles assets acquired as a result of the acquisition of KMP.
Other
Operating expenses within the Other segment increased $7.0 million, or 38.3%, to $25.3 million during the three months ended September 30, 2023, compared to $18.3 million during the three months ended September 30, 2022, primarily due to higher acquisition-related, restructuring and other costs of $3.8 million during the three months ended September 30, 2023 as compared to $1.3 million during the three months ended September 30, 2022, as well as higher compensation and non-cash stock-based compensation expenses and our continued investments in business development and technology deployment and other growth initiatives.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
Consolidated results during the nine months ended September 30, 2023 and 2022 included the following notable items:
|
|
Nine Months Ended |
|
|
Variance |
|
||||||||||
(millions) (unaudited) |
|
|
|
|
|
Amount |
|
|
% |
|
||||||
Services revenue |
|
$ |
1,328.2 |
|
|
$ |
1,135.2 |
|
|
$ |
193.0 |
|
|
|
17.0 |
% |
Cost of services (exclusive of depreciation and amortization) |
|
|
1,136.4 |
|
|
|
966.8 |
|
|
|
169.6 |
|
|
|
17.5 |
% |
General and administrative expenses |
|
|
100.0 |
|
|
|
78.4 |
|
|
|
21.6 |
|
|
|
27.6 |
% |
Depreciation and amortization |
|
|
26.2 |
|
|
|
20.5 |
|
|
|
5.7 |
|
|
|
27.8 |
% |
Operating income |
|
|
65.6 |
|
|
|
69.5 |
|
|
|
(3.9 |
) |
|
|
(5.6 |
)% |
Interest expense |
|
|
21.5 |
|
|
|
12.2 |
|
|
|
9.3 |
|
|
|
76.2 |
% |
Income tax expense |
|
|
11.6 |
|
|
|
15.0 |
|
|
|
(3.4 |
) |
|
|
(22.7 |
)% |
Net income |
|
|
32.7 |
|
|
|
42.7 |
|
|
|
(10.0 |
) |
|
|
(23.4 |
)% |
Services revenue increased by $193.0 million, or 17.0%, attributable to the following:
Cost of services (exclusive of depreciation and amortization) increased by $169.6 million, or 17.5%, attributable to the following:
General and administrative expenses increased $21.6 million, or 27.6%, primarily due to higher compensation and non-cash stock-based compensation expenses and higher acquisition-related, restructuring and other costs of $8.2 million during the nine months
28
ended September 30, 2023 as compared to $1.8 million during the nine months ended September 30, 2022, as well as our continued investments in business development, technology deployment and growth initiatives.
Depreciation and amortization expenses increased $5.7 million, or 27.8%, primarily due to the amortization of other intangible assets related to the recent acquisitions and our continued investment in technology and growth initiatives.
Our effective tax rate was 26.2% and 26.0% during the nine months ended September 30, 2023 and 2022, respectively.
Net income decreased $10.0 million, or 23.4%, primarily due to higher interest expense as a result of the increase in variable interest rates and the factors noted above, partially offset by lower income tax expense.
The following tables summarize our revenues (excluding reimbursed management type contract revenue), gross profit, general and administrative expenses, depreciation and amortization, and operating income (expense) by segment during the nine months ended September 30, 2023 and 2022.
Commercial
|
Nine months ended |
Variance |
|
|||||||||||||
(millions) (unaudited) |
|
|
|
|
|
Amount |
|
|
% |
|
||||||
Services revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
$ |
230.6 |
|
|
$ |
206.0 |
|
|
$ |
24.6 |
|
|
|
11.9 |
% |
Lease type contracts |
|
|
207.9 |
|
|
|
194.9 |
|
|
|
13.0 |
|
|
|
6.7 |
% |
Total services revenue |
|
|
438.5 |
|
|
|
400.9 |
|
|
|
37.6 |
|
|
|
9.4 |
% |
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
|
104.0 |
|
|
|
91.5 |
|
|
|
12.5 |
|
|
|
13.7 |
% |
Lease type contracts |
|
|
37.5 |
|
|
|
34.5 |
|
|
|
3.0 |
|
|
|
8.7 |
% |
Depreciation and amortization |
|
|
(6.1 |
) |
|
|
(5.5 |
) |
|
|
(0.6 |
) |
|
|
(10.9 |
)% |
Total gross profit |
|
|
135.4 |
|
|
|
120.5 |
|
|
|
14.9 |
|
|
|
12.4 |
% |
General and administrative expenses |
|
|
27.3 |
|
|
|
21.1 |
|
|
|
6.2 |
|
|
|
29.4 |
% |
Depreciation and amortization(1) |
|
|
5.1 |
|
|
|
3.7 |
|
|
|
1.4 |
|
|
|
37.8 |
% |
Operating income |
|
$ |
103.0 |
|
|
$ |
95.7 |
|
|
$ |
7.3 |
|
|
|
7.6 |
% |
Gross Profit
General and administrative expenses increased $6.2 million, or 29.4%, to $27.3 million during the nine months ended September 30, 2023, compared to $21.1 million during the nine months ended September 30, 2022. The increase was primarily related to higher compensation and non-cash stock-based compensation expenses, as well as our continued investments in growth initiatives and higher restructuring and other costs of $2.0 million during the nine months ended September 30, 2023 as compared to $0.7 million during the nine months ended September 30, 2022.
Operating income increased $7.3 million, or 7.6%, to $103.0 million during the nine months ended September 30, 2023, compared to $95.7 million during the nine months ended September 30, 2022, primarily due to the factors noted above, partially offset by $1.3 million of amortization expenses during the nine months ended September 30, 2023 related to the other intangible assets acquired as a result of the acquisitions of DIVRT and Roker.
29
Aviation
|
Nine months ended |
Variance |
|
|||||||||||||
(millions) (unaudited) |
|
|
|
|
|
Amount |
|
|
% |
|
||||||
Services revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
$ |
216.0 |
|
|
$ |
176.6 |
|
|
$ |
39.4 |
|
|
|
22.3 |
% |
Lease type contracts |
|
|
11.5 |
|
|
|
10.5 |
|
|
|
1.0 |
|
|
|
9.5 |
% |
Total services revenue |
|
|
227.5 |
|
|
|
187.1 |
|
|
|
40.4 |
|
|
|
21.6 |
% |
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
|
46.8 |
|
|
|
38.4 |
|
|
|
8.4 |
|
|
|
21.9 |
% |
Lease type contracts |
|
|
3.5 |
|
|
|
4.0 |
|
|
|
(0.5 |
) |
|
|
(12.5 |
)% |
Depreciation and amortization |
|
|
(4.2 |
) |
|
|
(3.5 |
) |
|
|
(0.7 |
) |
|
|
(20.0 |
)% |
Total gross profit |
|
|
46.1 |
|
|
|
38.9 |
|
|
|
7.2 |
|
|
|
18.5 |
% |
General and administrative expenses |
|
|
12.7 |
|
|
|
8.7 |
|
|
|
4.0 |
|
|
|
46.0 |
% |
Depreciation and amortization(1) |
|
|
4.6 |
|
|
|
3.9 |
|
|
|
0.7 |
|
|
|
17.9 |
% |
Operating income |
|
$ |
28.8 |
|
|
$ |
26.3 |
|
|
$ |
2.5 |
|
|
|
9.5 |
% |
Gross Profit
General and administrative expenses increased $4.0 million, or 46.0%, to $12.7 million during the nine months ended September 30, 2023, compared to $8.7 million during the nine months ended September 30, 2022 primarily due to our continued investments in growth initiatives, as well as higher restructuring and other costs of $1.2 million during the nine months ended September 30, 2023 as compared to a benefit of $0.4 million during the nine months ended September 30, 2022.
Operating income increased $2.5 million, or 9.5%, to $28.8 million during the nine months ended September 30, 2023, compared to $26.3 million during the nine months ended September 30, 2022, primarily due to the factors noted above, partially offset by $1.3 million of amortization expenses during the nine months ended September 30, 2023 related to other intangibles assets acquired as a result of the acquisition of KMP.
Other
Operating expenses within the Other segment increased $13.7 million, or 26.1%, to $66.2 million during the nine months ended September 30, 2023, compared to $52.5 million during the nine months ended September 30, 2022, primarily due to higher compensation and non-cash stock-based compensation expenses and our continued investments in business development, technology deployment and growth initiatives, as well as higher acquisition-related, restructuring and other costs of $5.0 million during the nine months ended September 30, 2023 as compared to $1.5 million during nine months ended September 30, 2022.
Analysis of Financial Condition
Liquidity and Capital Resources
General
We continually project anticipated cash requirements for our operating, investing and financing needs, as well as cash flows generated from operating activities available to meet those needs. Our operating needs can include, among other items, commitments for cost of services, operating leases, payroll, insurance claims, interest and legal settlements. Our investing and
30
financing spending can include payments for acquired businesses or assets, joint ventures, capital expenditures, distributions to noncontrolling interests, stock repurchases and payments on our outstanding indebtedness.
As of September 30, 2023, we had $38.5 million of cash and cash equivalents and $237.7 million of borrowing availability under our Senior Credit Facility (as defined in Note 8. Borrowing Arrangements within the notes to the Condensed Consolidated Financial Statements). The full impact of macroeconomic conditions, including higher inflation and rising interest rates, on our business and the businesses of our customers and clients is unknown. We believe we will be able to generate sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants for the next twelve months.
We continue to monitor the impact of the recent regional bank failures. Currently, we do not believe that our banking partners are exposed to any significant credit risk, and continue to believe that we have sufficient assets and liquidity to adequately cover future obligations as they come due.
Outstanding Indebtedness
On September 30, 2023, we had total indebtedness of approximately $359.8 million, an increase of $15.6 million from December 31, 2022. The $359.8 million in total indebtedness as of September 30, 2023 included:
As of September 30, 2023, we were in compliance with our debt covenants under the Amended Credit Agreement (as defined in Note 8. Borrowing Arrangements within the Notes to the Condensed Consolidated Financial Statements).
As of September 30, 2023, we had $39.1 million of letters of credit outstanding under the Senior Credit Facility and borrowings against the Senior Credit Facility aggregated to $338.8 million.
The weighted average interest rate on our Senior Credit Facility was 6.7% and 4.6% during the nine months ended September 30, 2023 and 2022, respectively. That rate included the letters of credit for both years and interest rate collars during the nine months ended September 30, 2022. The weighted average interest rate on all outstanding borrowings, not including letters of credit, was 7.2% and 4.9% during the nine months ended September 30, 2023 and 2022, respectively.
Stock Repurchases
On February 14, 2023, our Board of Directors (our "Board") authorized us to repurchase, on the open market, shares of our outstanding common stock in an amount not to exceed $60.0 million.
In May 2022, our Board authorized us to repurchase, on the open market, shares of our outstanding common stock in an amount not to exceed $60.0 million in aggregate. During the three and nine months ended September 30, 2023, 285,700 shares were repurchased at an average price of $36.53 per share under this program. As of September 30, 2023, $0.2 million remained available for repurchase under this program.
As a condition of the Merger Agreement, beginning on October 4, 2023, we are restricted from repurchasing our common stock.
Stock repurchase activity under the May 2022 stock repurchase program during the three and nine months ended September 30, 2023 and 2022 was as follows:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||
(millions, except for share and per share data) |
|
|
|
|
|
|
|
||||||||
Total number of shares repurchased |
|
|
— |
|
|
|
667,300 |
|
|
285,700 |
|
|
|
843,800 |
|
Average price paid per share |
|
$ |
— |
|
|
$ |
33.08 |
|
$ |
36.53 |
|
|
$ |
32.77 |
|
Total value of common stock repurchased |
|
$ |
— |
|
|
$ |
22.0 |
|
$ |
10.4 |
|
|
$ |
27.6 |
|
The remaining authorized repurchase amounts under the May 2022 and February 2023 stock repurchase programs as of September 30, 2023 were as follows:
(millions) |
|
|
||
Total authorized repurchase amount |
|
$ |
120.0 |
|
Total value of shares repurchased |
|
|
59.8 |
|
Total remaining authorized repurchase amount |
|
$ |
60.2 |
|
Daily Cash Collections
As a result of day-to-day activity at our parking locations, we collect significant amounts of cash. Lease type contract revenue is generally deposited into our local bank accounts, with a portion remitted to our clients in the form of rental payments based on the
31
terms of the leases. Under management type contracts, clients may require us to deposit the daily receipts into one of our local bank accounts, with the cash in excess of our operating expenses and management fees remitted to the clients at negotiated intervals. Other clients may require us to deposit the daily receipts into client designated bank accounts and the clients then reimburse us for operating expenses and pay our management fee subsequent to month-end. In addition, our clients may require segregated bank accounts for receipts and disbursements. Our working capital and liquidity may be adversely affected if a significant number of our clients require us to deposit all parking revenues into their respective accounts.
Our liquidity also fluctuates on an intra-month and intra-year basis depending on the contract mix and timing of significant cash payments. Additionally, our ability to utilize cash deposited into our local accounts is dependent upon the availability and movement of that cash into our corporate accounts. For all these reasons, from time to time, we carry a significant cash balance, while also utilizing our Senior Credit Facility.
Summary of Cash Flows
Our primary sources of liquidity are cash flows from operating activities and availability under our Senior Credit Facility. Our cash flows during the nine months ended September 30, 2023 and 2022 were as follows:
|
|
Nine Months Ended |
|
|||||
(millions) |
|
|
|
|
||||
Net cash provided by operating activities |
|
$ |
53.5 |
|
|
$ |
75.6 |
|
Net cash used in investing activities |
|
|
(22.4 |
) |
|
|
(18.1 |
) |
Net cash used in financing activities |
|
|
(4.5 |
) |
|
|
(54.1 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
(0.5 |
) |
|
|
(0.7 |
) |
Net increase in cash and cash equivalents |
|
$ |
26.1 |
|
|
$ |
2.7 |
|
Operating Activities
Net cash provided by operating activities was $53.5 million during the nine months ended September 30, 2023 as compared to $75.6 million during the nine months ended September 30, 2022. The decrease in net cash provided by operating activities primarily resulted from the receipt of the $20.5 million U.S. Federal income tax refund during the nine months ended September 30, 2022 and higher interest payments during the nine months ended September 30, 2023 of $20.7 million as compared to $11.6 million during the nine months ended September 30, 2022, partially offset by improved working capital.
Investing Activities
Net cash used in investing activities was $22.4 million during the nine months ended September 30, 2023, an increase of $4.3 million from $18.1 million during the nine months ended September 30, 2022. The increase in net cash used in investing activities primarily resulted from the acquisition of Roker of $3.1 million and the noncontrolling interest buyout of $2.3 million during the nine months ended September 30, 2023, as well as the increase in purchases of property and equipment, primarily related to our investments in internal-use software, of $17.0 million during the nine months ended September 30, 2023 as compared to $16.5 million during the nine months ended September 30, 2022, partially offset by the acquisition of other intangible assets of $1.8 million during the nine months ended September 30, 2022.
Financing Activities
Net cash used in financing activities was $4.5 million during the nine months ended September 30, 2023, a decrease of $49.6 million from $54.1 million during the nine months ended September 30, 2022. During the nine months ended September 30, 2023, we had increased borrowings on the Senior Credit Facility as compared to the nine months ended September 30, 2022 due to lower net cash provided by operating activities, as well as lower common stock repurchases of $11.1 million during the nine months ended September 30, 2023 as compared to $26.9 million during the nine months ended September 30, 2022.
Cash and Cash Equivalents
We had Cash and cash equivalents of $38.5 million and $12.4 million as of September 30, 2023 and December 31, 2022, respectively. The cash balances reflect our ability to utilize funds deposited into our bank accounts.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
32
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial Officer and Corporate Controller, of the effectiveness of the design and operation of our disclosure controls and procedures (the "Evaluation") at a reasonable assurance level as of the last day of the period covered by this Form 10-Q.
Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, Chief Financial Officer and Corporate Controller, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosures.
Based on the Evaluation, our Chief Executive Officer, Chief Financial Officer and Corporate Controller concluded that our disclosure controls and procedures were effective as of September 30, 2023. Management’s assessment of the effectiveness of our disclosure controls and procedures as of September 30, 2023 excludes an assessment of internal control over financial reporting related to Roker (acquired July 25, 2023). Roker constituted less than 1% of total assets as of September 30, 2023, and less than 1% of the revenues during the quarter ended September 30, 2023.
Changes in Internal Control Over Financial Reporting
There have been no significant changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2023, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
Inherent limitations of the Effectiveness of Internal Control
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.
33
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to claims and litigation in the normal course of our business, including those related to labor and employment, contracts, personal injury and other related matters, some of which allege substantial monetary damages and claims. Some of these actions may be brought as class actions on behalf of a class or purported class of employees. While the outcomes of current claims and legal proceedings brought against us are subject to uncertainty, we believe the final outcome will not have a material adverse effect on our financial position, results of operations or cash flows.
We accrue a charge when we determine 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. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. 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 the amount of a loss or a range of loss involves significant estimation and judgment.
Item 1A. Risk Factors
Investors should carefully consider the discussion of risk factors and the other information described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and in subsequent filings by us with the SEC. New risks could emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our financial performance. There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
34
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
35
Item 6. Exhibits
|
|
|
|
|
|
Incorporated by Reference |
||
Exhibit Number |
|
Description |
|
Form |
|
Exhibit |
|
Filing Date/Period End Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
|
8-K |
|
3.1 |
|
||
|
|
|
|
|
|
|
|
|
3.2 |
|
Amendment to Fourth Amended and Restated Bylaws of the Company dated May 11, 2023 |
|
8-K |
|
3.2 |
|
|
|
|
|
|
|
|
|
|
|
10.1* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.2* |
|
Office Lease Second Amendment dated as of August 31, 2023 between the Company and CCP-Riverview, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2* |
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31.3* |
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32** |
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101.INS* |
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Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH* |
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Inline XBRL Taxonomy Extension Schema |
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101.CAL* |
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Inline XBRL Taxonomy Extension Calculation Linkbase |
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101.DEF* |
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Inline XBRL Taxonomy Extension Definition Linkbase |
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101.LAB* |
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Inline XBRL Taxonomy Extension Label Linkbase |
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101.PRE*
104**
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Inline XBRL Taxonomy Extension Presentation Linkbase
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 |
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** Furnished herewith
36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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SP PLUS CORPORATION |
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Date: November 2, 2023 |
By: |
/s/ G MARC BAUMANN |
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Chairman and Chief Executive Officer |
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(Principal Executive Officer) |
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Date: November 2, 2023 |
By: |
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Chief Financial Officer |
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(Principal Financial Officer) |
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Date: November 2, 2023 |
By: |
/s/ GARY T. ROBERTS |
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Senior Vice President, Corporate Controller and Assistant Treasurer |
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(Principal Accounting Officer and Duly Authorized Officer) |
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37
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 4/1/28 | ||||
| 4/21/27 | ||||
| 10/31/25 | ||||
| 12/31/23 | ||||
| Filed on: | 11/2/23 | |||
| 11/1/23 | 8-K | |||
| 10/31/23 | ||||
| 10/4/23 | 8-K | |||
| For Period end: | 9/30/23 | |||
| 7/25/23 | 8-K | |||
| 6/30/23 | 10-Q | |||
| 5/16/23 | 8-K | |||
| 3/31/23 | 10-Q | |||
| 2/24/23 | 10-K | |||
| 2/14/23 | 8-K | |||
| 1/1/23 | 3 | |||
| 12/31/22 | 10-K, ARS | |||
| 11/10/22 | 8-K | |||
| 10/11/22 | 8-K | |||
| 9/30/22 | 10-Q | |||
| 6/30/22 | 10-Q | |||
| 4/21/22 | 8-K | |||
| 4/18/22 | ||||
| 3/31/22 | 10-Q | |||
| 1/1/22 | ||||
| 12/31/21 | 10-K | |||
| 10/2/12 | 3, 8-K | |||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 2/28/24 SP Plus Corp. 10-K 12/31/23 113:17M Donnelley … Solutions/FA 1/10/24 SP Plus Corp. DEFM14A 1:1.7M Donnelley … Solutions/FA 12/18/23 SP Plus Corp. PREM14A 12/18/23 2:1.6M Donnelley … Solutions/FA |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 5/16/23 SP Plus Corp. 8-K:5,9 5/10/23 12:289K Donnelley … Solutions/FA |