Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2016March 31, 2017
 
Commission file number: 000-50796
 
 splogoa06.jpg
SP Plus Corporation
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware 16-1171179
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)  
 
200 E. Randolph Street, Suite 7700
Chicago, Illinois 60601-7702
(Address of Principal Executive Offices, Including Zip Code)
 
(312) 274-2000
(Registrant’s Telephone Number, Including Area Code)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES ý  NO o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES ý  NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): 
Large accelerated filer o
 
Accelerated filer x
   
Non-accelerated filer o
 
Smaller reporting company o
Emerging growth company o
(Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected 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. o

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

As of NovemberMay 2, 2016,2017, there were 22,356,58622,488,641 shares of common stock of the registrant outstanding.
 

SP PLUS CORPORATION
 
TABLE OF CONTENTS
 
PART I. FINANCIAL INFORMATION
2
Item 1. Financial Statements
2
Condensed Consolidated Balance Sheets as of September 30, 2016March 31, 2017 (unaudited) and December 31, 20152016
2
Condensed Consolidated Statements of Income (unaudited) for the three and nine months ended September 30,March 31, 2017 and 2016 and 2015
3
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30,March 31, 2017 and 2016 and 2015
4
Condensed Consolidated Statements of Cash Flows (unaudited) for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015
5
Notes to Condensed Consolidated Financial Statements
6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
2522
Item 3. Quantitative and Qualitative Disclosures about Market Risk
4033
Item 4. Controls and Procedures
4033
  
PART II. OTHER INFORMATION
4134
Item 1. Legal Proceedings
4134
Item 1A. Risk Factors
4134
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
4134
Item 3. Defaults Upon Senior Securities
4134
Item 4. Mine Safety Disclosures
4134
Item 5. Other Information
4134
Item 6. Exhibits
4235
  
Signatures
4336


PART I. FINANCIAL INFORMATION 
Item 1. Financial Statements

SP Plus Corporation
Condensed Consolidated Balance Sheets
(millions, except for share and per share data)September 30, 2016 December 31, 2015March 31, 2017 December 31, 2016
(unaudited)  
(unaudited)  
Assets 
  
 
  
Cash and cash equivalents$19.3
 $18.7
$21.6
 $22.2
Notes and accounts receivable, net120.7
 105.1
125.0
 120.7
Prepaid expenses and other11.2
 13.9
11.8
 13.7
Deferred taxes12.3
 12.3
Total current assets163.5
 150.0
158.4
 156.6
Leasehold improvements, equipment, land and construction in progress, net31.8
 34.6
Leasehold improvements, equipment and construction in progress, net29.1
 30.9
Other assets 
  
 
  
Advances and deposits4.6
 5.0
4.3
 4.3
Other intangible assets, net64.5
 75.9
58.1
 61.3
Favorable acquired lease contracts, net31.8
 38.1
28.0
 30.0
Equity investments in unconsolidated entities18.5
 19.0
18.7
 18.5
Other assets, net21.5
 18.3
16.8
 16.3
Deferred taxes18.2

17.9
Cost of contracts, net11.2
 11.9
10.9
 11.4
Goodwill431.5
 431.3
431.4
 431.4
Total other assets583.6
 599.5
586.4
 591.1
Total assets$778.9
 $784.1
$773.9
 $778.6
Liabilities and stockholders’ equity 
  
 
  
Accounts payable$97.0
 $95.1
$113.9
 $109.9
Accrued rent22.7
 22.9
20.8
 21.7
Compensation and payroll withholdings21.1
 21.0
21.9
 25.7
Property, payroll and other taxes9.2
 8.6
10.1
 7.6
Accrued insurance18.1
 19.4
18.4
 18.1
Accrued expenses25.1
 25.4
18.1
 25.5
Current portion of obligations under Restated Credit Facility and other long-term borrowings19.1
 15.2
20.4
 20.4
Total current liabilities212.3
 207.6
223.6
 228.9
Long-term borrowings, excluding current portion

 



 

Obligations under Restated Credit Facility194.8
 209.4
171.3
 174.5
Other long-term borrowings0.2
 0.5
0.1
 0.2
195.0
 209.9
171.4
 174.7
Unfavorable acquired lease contracts, net42.6
 50.3
38.0
 40.2
Other long-term liabilities68.7
 66.2
65.5
 66.4
Total noncurrent liabilities306.3
 326.4
274.9
 281.3
Stockholders’ equity 
  
 
  
Preferred Stock, par value $0.01 per share; 5,000,000 shares authorized as of September 30, 2016 and December 31, 2015; no shares issued—
 —
Common stock, par value $0.001 per share; 50,000,000 shares authorized as of September 30, 2016 and December 31, 2015; 22,356,586 and 22,328,578 shares issued as of September 30, 2016 and December 31, 2015—
 —
Treasury stock, at cost; 219,519 shares at September 30, 2016 and nil shares at December 31, 2015(5.4) —
Preferred Stock, par value $0.01 per share; 5,000,000 shares authorized as of March 31, 2017 and December 31, 2016; no shares issued—
 —
Common stock, par value $0.001 per share; 50,000,000 shares authorized as of March 31, 2017 and December 31, 2016; 22,471,041 and 22,328,578 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively.—
 —
Treasury Stock, at cost; 305,183 shares at March 31, 2017 and December 31, 2016(7.5)
(7.5)
Additional paid-in capital250.5
 247.9
252.6
 251.2
Accumulated other comprehensive loss(1.3) (1.1)(1.5) (1.4)
Retained earnings16.3
 2.8
31.6
 25.9
Total SP Plus Corporation stockholders’ equity260.1
 249.6
275.2
 268.2
Noncontrolling interest0.2
 0.5
0.2
 0.2
Total stockholders’ equity260.3
 250.1
275.4
 268.4
Total liabilities and stockholders’ equity$778.9
 $784.1
$773.9
 $778.6
See Notes to Condensed Consolidated Financial Statements.

SP Plus Corporation
Condensed Consolidated Statements of Income 
Three Months Ended Nine Months EndedThree Months Ended
(millions, except for share and per share data) (unaudited)September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015March 31, 2017 March 31, 2016
Parking services revenue

 

  
  
 
 138.5
Lease contracts$136.1
 $146.6
 $410.3
 $428.9
$130.8
 $138.5
Management contracts84.1
 85.8
 262.0
 268.2
92.1
 91.2

220.2
 232.4
 672.3
 697.1
222.9
 229.7
Reimbursed management contract revenue188.9
 168.3
 537.0
 513.4
191.6
 167.9
Total revenue409.1
 400.7
 1,209.3
 1,210.5
Total parking services revenue414.5
 397.6
Cost of parking services

 

  
  
 
 

Lease contracts125.8
 136.0
 380.4
 399.1
125.8
 130.6
Management contracts50.5
 53.6
 162.6
 167.5
56.6
 60.7

176.3
 189.6
 543.0
 566.6
182.4
 191.3
Reimbursed management contract expense188.9
 168.3
 537.0
 513.4
191.6
 167.9
Total cost of parking services365.2
 357.9
 1,080.0
 1,080.0
374.0
 359.2
Gross profit

 

  
  
 
  
Lease contracts10.3
 10.6
 29.9
 29.8
5.0
 7.9
Management contracts33.6
 32.2
 99.4
 100.7
35.5
 30.5
Total gross profit43.9
 42.8
 129.3
 130.5
40.5
 38.4
General and administrative expenses20.3
 23.7
 67.0
 74.2
21.2
 24.6
Depreciation and amortization7.8
 8.3
 26.8
 24.4
6.6
 9.2
Operating income15.8
 10.8
 35.5
 31.9
12.7
 4.6
Other expenses (income)

 

  
  
 
  
Interest expense2.7
 2.9
 8.1
 10.0
2.6
 2.8
Interest income(0.1) —
 (0.4) (0.1)(0.1) (0.2)
Gain on sale of a business—
 (0.5) —
 (0.5)
Equity in losses from investment in unconsolidated entity0.4
 0.4
 1.2
 1.2
0.2
 0.5
Total other expenses3.0
 2.8
 8.9
 10.6
Total other expenses (income)2.7
 3.1
Earnings before income taxes12.8
 8.0
 26.6
 21.3
10.0
 1.5
Income tax expense5.1
 3.5
 10.9
 4.5
3.3
 0.9
Net income7.7
 4.5
 15.7
 16.8
6.7
 0.6
Less: Net income attributable to noncontrolling interest0.7
 0.8
 2.2
 2.0
0.7
 0.6
Net income attributable to SP Plus Corporation$7.0
 $3.7
 $13.5
 $14.8
$6.0
 $—
Common stock data

 

  
  
 
  
Net income per share

 

  
  
Net income per common share 
  
Basic$0.31
 $0.17
 $0.60
 $0.67
$0.27
 $—
Diluted$0.31
 $0.16
 $0.60
 $0.66
$0.27
 $—
Weighted average shares outstanding

 

 

 

   
Basic22,208,139
 22,205,707
 22,293,776
 22,159,701
22,148,265
 22,328,578
Diluted22,497,111
 22,548,166
 22,571,933
 22,519,818
22,447,904
 22,593,505
 
See Notes to Condensed Consolidated Financial Statements.


SP Plus Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss)
Three Months Ended Nine Months EndedThree Months Ended
(millions) (unaudited)September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015March 31, 2017 March 31, 2016
Net income$7.7
 $4.5
 $15.7
 $16.8
$6.7
 $0.6
Other comprehensive expense (income)0.1
 (0.5) (0.2) (1.1)
Other comprehensive expense(0.1) (0.1)
Comprehensive income7.8
 4.0
 15.5
 15.7
6.6
 0.5
Less: Comprehensive income attributable to noncontrolling interest0.7
 0.8
 2.2
 2.0
0.7
 0.6
Comprehensive income attributable to SP Plus Corporation$7.1
 $3.2
 $13.3
 $13.7
Comprehensive income (loss) attributable to SP Plus Corporation$5.9
 $(0.1)
 
See Notes to Condensed Consolidated Financial Statements.


SP Plus Corporation
Condensed Consolidated Statements of Cash Flows
Nine Months EndedThree Months Ended
(millions) (unaudited)September 30, 2016 September 30, 2015March 31, 2017 March 31, 2016
Operating activities 
  
 
  
Net income$15.7
 $16.8
$6.7
 $0.6
Adjustments to reconcile net income to net cash provided by operations:

 



 

Depreciation and amortization27.0
 24.8
6.9
 9.4
Net accretion of acquired lease contracts(1.4) (1.1)(0.4) (0.4)
(Gain) loss on sale of equipment(0.2) 0.1
—
 (0.6)
Net gain on sale of business—
 (0.5)
Amortization of debt issuance costs0.6
 0.9
0.2
 0.2
Amortization of original discount on borrowings0.4
 0.9
0.1
 0.1
Non-cash stock-based compensation2.8
 3.1
0.9
 0.6
Provisions for losses on accounts receivable0.1
 0.4
0.1
 0.1
Excess tax benefit related to vesting on restricted stock units—
 (0.2)
Deferred income taxes2.3
 (7.7)(0.3) 0.1
Changes in operating assets and liabilities

 



 

Notes and accounts receivable(15.6) 1.9
(4.3) (1.5)
Prepaid assets1.5
 0.7
1.9
 (9.8)
Other assets(5.0) 1.9
(0.7) 0.3
Accounts payable2.0
 (15.4)4.0
 5.0
Accrued liabilities0.4
 (7.5)(10.1) 0.7
Net cash provided by operating activities30.6
 19.1
5.0
 4.8
Investing activities 
  
 
  
Purchase of leasehold improvements and equipment(10.8) (6.6)(1.1) (2.5)
Proceeds from sale of equipment and contract terminations2.9
 0.4
—
 2.8
Proceeds from sale of business, net—
 1.0
Cost of contracts purchased(2.0) (2.7)(0.3) (0.3)
Net cash used in investing activities(9.9) (7.9)(1.4) —
Financing activities 
  
 
  
Tax benefit from vesting of restricted stock units—
 0.2
Contingent payments for businesses acquired—
 (0.1)
Payments on senior credit facility revolver (Senior Credit Facility and Restated Credit Facility)(302.2) (353.3)
Proceeds from senior credit facility revolver (Senior Credit Facility and Restated Credit Facility)301.7
 347.6
Proceeds from term loan (Restated Credit Facility)—
 10.4
Payments on term loan (Senior Credit Facility and Restated Credit Facility)(11.2) (11.2)
Payments on senior credit facility revolver (Restated Credit Facility)(126.0) (68.6)
Proceeds from senior credit facility revolver (Restated Credit Facility)127.6
 81.3
Payments on term loan (Restated Credit Facility)(5.0) (3.8)
Payments on other long-term borrowings(0.2) (0.3)(0.1) (0.1)
Distribution to noncontrolling interest(2.6) (1.7)(0.6) (1.5)
Payments of debt issuance costs and original discount on borrowings(0.1) (1.4)(0.1) (0.1)
Repurchase of common stock(5.4) —
Net cash used in financing activities(20.0) (9.8)
Net cash (used in) provided by financing activities(4.2) 7.2
Effect of exchange rate changes on cash and cash equivalents(0.1) (0.6)—
 0.1
Increase in cash and cash equivalents0.6
 0.8
(Decrease) increase in cash and cash equivalents(0.6) 12.1
Cash and cash equivalents at beginning of year18.7
 18.2
22.2
 18.7
Cash and cash equivalents at end of period$19.3
 $19.0
$21.6
 $30.8
Supplemental disclosures 
  
 
  
Cash paid during the period for 
  
 
  
Interest$6.9
 $8.4
$2.3
 $2.4
Income taxes, net$11.8
 $14.3
$0.9
 $0.6
 
See Notes to Condensed Consolidated Financial Statements.

SP Plus Corporation
Notes to Condensed Consolidated Financial Statements
(millions, except for share and per share data) (unaudited) 


1. Significant Accounting Policies and Practices
 
The Company

SP Plus Corporation (the “Company”) provides parking management, ground transportation and other ancillary services to commercial, institutional and municipal clients in urban markets and airports across the United States, Puerto Rico and Canada. These services include a comprehensive set of on-site parking management and ground transportation services, which include facility maintenance, training, scheduling and supervising all service personnel as well as providing customer service, marketing, and accounting and revenue control functions necessary to facilitate the operation of clients’ facilities. The Company also provides a range of ancillary services such as airport shuttle operations, valet services, taxi and livery dispatch services, security services and municipal meter revenue collection and enforcement services.
 
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 Condensed Consolidated Balance Sheets, Statements of Income, Comprehensive (Loss) Income and Cash Flows prepared in conformity with U.S. GAAP have been condensed or omitted as permitted by such rules and regulations.
 
In the opinion of management, all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair presentation have been included. Operating results for the three and nine periodsmonth period ended September 30, 2016 areMarch 31, 2017 is not necessarily indicative of the results that might be expected for any other interim period or the fiscal year ended December 31, 2016.2017. 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 filed on March 1, 2016.February 24, 2017.
 
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 was $0.5$0.6 million and $0.9$0.3 million as of September 30, 2016March 31, 2017 and December 31, 2015,2016, respectively, and are included within Cash and cash equivalents within the Condensed Consolidated Balance Sheets.
 
Financial Instruments
 
The carrying values of cash, accounts receivable and accounts payable approximate their fair value due to the short-term nature of these financial instruments. Book overdrafts of $28.5$28.3 million and $25.8$36.5 million are included within Accounts payable within the Condensed Consolidated Balance Sheets as of September 30, 2016March 31, 2017 and December 31, 2015,2016, respectively. Long-term debt has a carrying value that approximates fair value because these instruments bear interest at variable market rates.
 
Equity Investments in Unconsolidated Entities
 
The Company has ownership interests in 29 active partnerships, joint ventures or similar arrangements that operate parking facilities, of which 21 are consolidated under the VIE or voting interest models and 8 are unconsolidated where the Company’s ownership interests range from 30-50 percent and for which there are no indicators of control. The Company accounts for such investments under the equity method of accounting, and its underlying share of each investee’s equity is included in Equity investments in unconsolidated entities 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 are included in Parking services revenue—Lease contracts within the Condensed Consolidated Statements of Income. The equity earnings in these related investments waswere $0.7 million and $1.8$0.5 million for the three and nine months ended September 30,March 31, 2017 and 2016, respectively. The equity earnings in these related investments was $0.6 million and $1.5 million for the three and nine months ended September 30, 2015, respectively.
 
In October 2014, the Company entered into an agreement to establish a joint venture with Parkmobile USA, Inc. (“Parkmobile USA”) and contributed all of the assets and liabilities of its proprietary Click and Park parking prepayment business in exchange for a 30 percent interest in the newly formed legal entity called Parkmobile, LLC (“Parkmobile”). The joint venture of Parkmobile provides on-demand and prepaid transaction processing for on- and off-street parking and transportation services. The contribution of the Click and Park business in the joint venture resulted in a loss of control of the business, and therefore it was deconsolidated from the Company’s financial statements. The Company accounts for its investment in the joint venture with Parkmobile using the equity method of accounting, and its underlying share of equity in Parkmobile is included in Equity investments in unconsolidated entities

within the Condensed Consolidated Balance Sheets.  The equity earningslosses in the Parkmobile joint venture is included in Equity in losses from investment in unconsolidated entity within the Condensed Consolidated Statements of Income.

Non-Controlling Interests
 
Noncontrolling interests represent the noncontrolling holders’ percentage share of income or losses from the subsidiaries in which the Company holds a majority, but less than 100 percent, ownership interest and the results of which are consolidated and included within the Condensed Consolidated Financial Statements.
 
Sale of Business
 
During the third quarter 2015, the Company signed an agreement to sell and subsequently sold portions of the Company’s security business primarily operating in the Southern California market to a third-party for a gross sales price of $1.8 million which resulted in a gain on sale of business of $0.5 million, net of legal and other expenses. The assets under the sale agreement met the definition of a business as defined by ASU 805-10-55-4.  Cash consideration received during the third quarter 2015, net of legal and other expenses, was $1.0 million with the remaining consideration for the sale of the business being classified as contingent consideration, which perconsideration. Per the salesales agreement the contingent consideration is based on the performance of the business and retention of current customers over an eighteen-month period and due from the buyer inending on February 2017. The buyer has sixty days from February 2017 to calculate and remit the remaining consideration. The contingent consideration was valued at fair value as of the date of sale of the business and resulted in the Company recognizing a contingent consideration receivable from the buyer in the amount of $0.5 million.  The pre-tax profit for the operations of the sold business was not significant to prior periods presented.  See Note 6. Fair Value Measurement for the fair value of the contingent consideration receivable as of September 30, 2016 and DecemberMarch 31, 2015.2017.
 
Interest Rate Swap Transactions
 
In October 2012, the Company entered into Interest Rate Swap transactions (collectively, the “Interest Rate Swaps”) with each of JPMorgan Chase Bank, N.A., Bank of America, N.A. and PNC Bank, N.A. in an initial aggregate Notional Amount of $150.0 million (the “Notional Amount”). The Interest Rate Swaps have a termination date of September 30, 2017. The Interest Rate Swaps effectively fix the interest rate on an amount of variable interest rate borrowings under the Company's credit agreements, originally equal to the Notional Amount at 0.7525% per annum plus the applicable margin rate for LIBOR loans under the Company's credit agreements, determined based upon the Company’s consolidated total debt to EBITDA ratio. The Notional Amount is subject to scheduled quarterly amortization that coincides with quarterly prepayments of principal under the Company's credit agreements. These Interest Rate Swaps are classified as cash flow hedges, and the Company assesses the effectiveness of the hedge on a monthly basis. The ineffective portion of the cash flow hedge is recognized in earnings as an increase of interest expense. As of September 30, 2016,March 31, 2017, no ineffectiveness of the hedge has been recognized in interest expense. See Note 6. Fair Value Measurement for the fair value of the interest rate swap as of September 30, 2016March 31, 2017 and December 31, 2015.2016.
 
The Company does not enter into derivative instruments for any purpose other than for cash flow hedging purposes.

Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In September 2015,March 2016, the Financial Accounting Standards Board ("the FASB") issued Accounting Standards Update ("ASU") No. 2015-16,2016-09, Business CombinationsCompensation - Stock Compensation (Topic 805)718): SimplifyingImprovements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies several aspects of the Accountingaccounting for Measurement-Period Adjustments. ASU 2015-16 requires that an acquirer in a business combination recognize adjustments to provisional amounts that are identified during the measurement periodshare-based payment award transactions and their presentation in the reporting periodfinancial statements. The new guidance will require all income tax effects of awards to be recognized in which the adjustment amounts are determined.  The amendment requires that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.  The ASU also requires an entity to present separately on the face of the income statement when the awards vest or discloseare settled, eliminating additional paid in capital ("APIC") pools. The guidance will also require companies to elect whether to account for forfeitures of share-based payments by (1) recognizing forfeitures of awards as they occur (e.g., when an award does not vest because the notesemployee leaves the portioncompany) or (2) estimating the number of awards expected to be forfeited and adjusting the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustmentestimate when it is likely to the provisional amounts had been recognizedchange, as is currently required. These and other requirements of the acquisition date.  ASU No. 2015-16 is2016-09 are effective for interim and annual reporting periods beginning after December 15, 2015.  2016.

The Company adopted the standard asprovisions of March 2016 on a prospective basis, as required.ASU 2016-09 in the first quarter of 2017. The adoption of this standard did not have a material impact onto the Company's financial position, results of operations, cash flows,flow and financial statement disclosures.disclosures are as follows:

On a modified retrospective basis, as allowed by ASU 2016-09, the Company elected to account for forfeitures of share-based awards as they occur. As a result, beginning retained earnings includes a $0.3 million adjustment related to the recognition of estimated forfeitures previously not recognized as expense by the Company as of December 31, 2016.

The Company recognized excess tax benefits of $0.5 million for the three months ended March 31, 2017 related to shares issued and settled with employees during the first quarter of 2017.

ASU 2016-09 also requires the presentation of excess tax benefits on the statement of cash flows as an operating activity on either a prospective or retrospective basis. The Company elected to apply this guidance on a prospective basis. Prior periods have not been adjusted to reflect this adoption.


There was no significant impact to diluted weighted average shares outstanding for purposes of calculating net income per common share-diluted for the three months ended March 31, 2017, as a result of the adoption.

In February 2015,March 2016, the FASB issued ASU No. 2015-2,2016-07, ConsolidationInvestments - Equity Method and Joint Ventures (Topic 810)323): AmendmentsSimplifying the Transition to Equity Method of Accounting, which eliminates the Consolidation Analysis.requirements to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. Under ASU 2015-2 amends certain aspects2016-08, the equity method of accounting should be applied prospectively from the date significant influence is obtained. The new standard also provides specific guidance for available-for-sale securities that become eligible for the equity method of accounting. In those cases, any unrealized gain or loss recorded within accumulated other comprehensive income should be recognized in earnings at the date the investment initially qualifies for the use of the consolidation guidance under U.S. GAAP. It modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities and also eliminates the presumption that a general partner should consolidate a limited partnership.equity method. The guidance also affects the consolidation analysis as it relates to interests in VIEs, particularly those that have fee arrangements and related party relationships. ASU 2015-02new standard is effective for interim and annual reporting periods beginning after December 15, 2015 and retrospective adoption is required either through a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the year of adoption or retrospectively for all comparative periods.2016. The Company adopted thethis standard as of March 2016.January 1, 2017. The Company evaluated the latest consolidation analysis under ASU 2015-02, which was performed as of December 2015. The Company also

evaluated updates to entity arrangements after December 2015. The adoption of this standard did not have an impact on the Company's financial position, results of operations,operation, cash flows and financial statement disclosures.

In January 2015,March 2016, the FASB issued ASU No. 2015-1,2016-05, Income Statement - ExtraordinaryDerivatives and Unusual Items (Subtopic 225-20)Hedging (Topic 815): Simplifying Income Statement Presentation by Eliminating the Concept Effect of Extraordinary ItemsDerivative Contract Novations on Existing Hedge Accounting Relationships. The new guidance clarifies that a change in the counterparty to a derivative contract, in and of itself, does not require the dedesignation of a hedging relationship. An entity will, however, still need to evaluate whether it is probable that the counterparty will perform under contract as part of its ongoing effectiveness assessment for hedge accounting. Therefore, a novation of a derivative to a counterparty with a sufficiently high credit risk could still result in the dedesignation of the hedging relationship. ASU 2015-1 eliminates from GAAP the concept of extraordinary items. The amendments2016-05 is effective in this Update are effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2015.2016, including interim periods within those years. The Company adopted thethis standard as of March 2016.January 1, 2017. The adoption of this standard did not have an impact on the Company's financial position, results of operations,operation, cash flows and financial statement disclosures.

Accounting Pronouncements to be Adopted

In June 2014,January 2017, the FASB issued ASU No. 2014-122017-04, CompensationIntangibles - Stock CompensationGoodwill and Other - Simplifying the Test for Goodwill Impairment (Topic 718): Accounting for Share Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period350). A performance target inASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 under current goodwill impairment test rules) to measure a share-based payment that affects vesting and that could be achieved aftergoodwill impairment charge. Instead, entities will record an impairment charge based on the requisite service period should be accounted for asexcess of a performance conditionreporting unit’s carrying amount over its fair value (i.e., measure the charge based on the Step 1 analysis under Accounting Standards Codification (ASC) 718, Compensation—Stock Compensation. As a result, the target is not reflected in the estimation of the award’s grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance conditioncurrent guidance). The standard will be achieved. The guidanceapplied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 20152019 for public business entities ("PBEs") that meet the definition of a Securities and Exchange Commission ("SEC") filer (i.e., for any impairment test performed by calendar-year entities in 2020), December 15, 2020 for PBEs that are not SEC filers (i.e., for any impairment test performed by calendar-year entities in 2021), and December 15, 2021 for all other entities (i.e., for any impairment test performed by calendar-year entities in 2022). Early adoption is permitted for annual and interim periods within those annual periods.goodwill impairment testing dates after 1 January 2017. The Company adoptedis currently assessing the standard asimpact of March 2016. The Company reviewed current stock compensation award programs and noted the adoption of ASU 2014-12 did not have an impactadopting this standard on the Company'sCompany’s financial position, results of operations, cash flows and financial statement disclosures.

In April 2015,January 2017, the FASB issued ASU No. 2015-03,2017-01, InterestBusiness Combinations - ImputationClarifying the Definition of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costsa Business (Topic 805). Under ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount2017-01, an entity first determines whether substantially all of the related debt liability insteadfair value of being presented asthe gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business. If it’s not met, the entity then evaluates whether the set meets the requirement that a business include, at a minimum, an asset.input and a substantive process that together significantly contribute to the ability to create outputs. Under current guidance, a business consists of (1) inputs, (2) processes applied to those inputs and (3) the ability to create outputs. ASU 2015-03 requires retrospective application2017-01 is effective for public business entities for fiscal years beginning after December 15, 2017, and represents a change in accounting principle. ASU 2015-03interim periods within those years. For all other entities, it is effective for fiscal years beginning after December 15, 2015 with early adoption being permitted for financial statements that have not been previously issued.2018, and interim periods within fiscal years beginning after December 15, 2019. The ASU will be applied prospectively to any transactions occurring within the period of adoption. The Company adopted ASU 2015-03 asis currently assessing the impact of December 2015 on a retrospective basis and reclassified debt issuance costs from Other assets to a direct reduction from the carrying amount of the (i) Current portion of obligations under the Restated Senior Credit Facility borrowings and (ii) Long-term obligations under the Restated Credit Facility borrowings within the Condensed Consolidated Balance Sheets. See Note 11. Borrowing Arrangements for further detailadopting this standard on the Company's debt instruments.Company’s financial position, results of operations, cash flows and financial statement disclosures.

Accounting PronouncementsIn November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows - Restricted Cash (Topic 230). ASU 2016-18 clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. The guidance requires entities to be Adoptedshow the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The guidance, which is based on a consensus of the Emerging Issues Task Force (EITF), is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. For all other entities, it is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently assessing the impact of adopting this standard on the Company’s financial position, results of operations, cash flows and financial statement disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (Topic 230). ASU 2016-15 amends the guidance in ASC 230 related to the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of the ASU is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. The amendment adds or clarifies several statement of cash flow classification issues including: (i) debt prepayment or debt extinguishment costs, (ii) settlement of certain zero-coupon debt instruments, (iii) contingent consideration payments, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, (vi) distributions received from equity method investments, (vii) beneficial interest in

securitization transactions, and (viii) separately identifiable cash flows and application of the predominance principle. The standard is effective for interim and annual reporting periods beginning after December 15, 2017. The Company is currently assessing the impact of adopting this standard on the Company’s financial position, results of operations, cash flows and financial statement disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326). The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for interim and annual reporting periods beginning after December 15, 2019. The Company is currently assessing the impact of adopting this standard on the Company’s financial position, results of operations, cash flows and financial statement disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies several aspects of the accounting for share-based payment award transactions and their presentation in the financial statements. The new guidance will require all income tax effects of awards to be recognized in the income statement when the awards vest or are settled, eliminating APIC pools. The guidance will also require companies to elect whether to account for forfeitures of share-based payments by (1) recognizing forfeitures of awards as they occur (e.g., when an award does not vest because the employee leaves the company) or (2) estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as is currently required. These and other requirements of ASU No. 2016-09 are effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted in any annual or interim period for which financial statements haven't been issued or made for issuance. However, all aspects of the guidance must be adopted in the same period. If an entity early adopts the guidance in an interim period, any

adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently assessing the impact of adopting this standard on the Company’s financial position, results of operations, cash flows and financial statement disclosures.

In March 2016, the FASB issued ASU No. 2016-07, Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to Equity Method of Accounting, which eliminates the requirements to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. Under ASU 2016-08, the equity method of accounting should be applied prospectively from the date significant influence is obtained. The new standard also provides specific guidance for available-for-sale securities that become eligible for the equity method of accounting. In those cases, any unrealized gain or loss recorded within accumulated other comprehensive income should be recognized in earnings at the date the investment initially qualifies for the use of the equity method. The new standard is effective for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently assessing the impact of adopting the standard on the Company's financial reporting for impacted entities, cash flows and financial statement disclosures.

In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. The new guidance clarifies that a change in the counterparty to a derivative contract, in and of itself, does not require the dedesignation of a hedging relationship. An entity will, however, still need to evaluate whether it is probable that the counterparty will perform under contract as part of its ongoing effectiveness assessment for hedge accounting. Therefore, a novation of a derivative to a counterparty with a sufficiently high credit risk could still result in the dedesignation of the hedging relationship. ASU 2016-05 is effective in fiscal years beginning after December 15, 2016, including interim periods within those years. Early adoption is permitted and entities have the option to adopt the new ASU on a prospective basis to new derivative contract novations or on a modified retrospective basis. The Company is currently assessing the impact of adopting the standard on the Company's financial reporting for impacted entities, cash flows and financial statement disclosures.

In February 2016, the FASB issued ASU No. 2016-2,2016-02, Leases (Topic 842). ASU 2016-2 requires lessees to move most leases to the balance sheet and recognize expense, similar to current accounting guidance, on the income statement. Additionally, the classification criteria and the accounting for sales-type and direct financing leases is modified for lessors. Under ASU 2016-2, all entities will classify leases to determine: (i) lease-related revenue and expense and (ii) for lessors, amount recorded on the balance sheet. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, with full retrospective application being prohibited. ASU 2016-2 is effective for interim and annual reporting periods beginning after December 15, 2018. These and other changes to accounting for leases under ASU 2016-2 are currently being evaluated by the Company for impacts to the Company's financial position, results of operations, cash flows and financial statement disclosures.

In January 2016, the FASB issued ASU No. 2016-1,2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-1 amends various areas of the accounting for financial instruments. Key provisions of the amendment currently being evaluated by the Company requires (i) equity investments to be measured at fair value (except those accounted for under the equity method), (ii) the simplification of equity investment impairment determination, (iii) certain changes to the fair value measurement of financial instruments measured at amortized cost, (iv) the separate presentation, in other comprehensive income, the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (given certain conditions), and (v) the evaluation for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the Company's other deferred tax assets. ASU 2016-1 is effective for interim and annual reporting periods beginning after December 15, 2017. These provisions and others of ASU 2016-1 are currently being assessed by the Company for impacts on the Company's financial position, results of operations, cash flows and financial statement disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. ASU 2015-17 requires entities to present deferred tax assets and liabilities as noncurrent on the balance sheet. This ASU simplifies current guidance which requires entities to separately classify deferred tax assets and liabilities as current or noncurrent on the balance sheet. The new guidance will be effective for public business entities in fiscal years beginning after December 15, 2016, including interim periods within those years. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively (i.e., by reclassifying the comparative balance sheet). If applied prospectively, entities are required to include a statement that prior periods were not retrospectively adjusted. If applied retrospectively, entities are also required to include quantitative information about the effects of the change on prior periods. ASU 2015-17 is currently being assessed by the Company for impacts on the Company's financial position, results of operations, cash flows and financial statement disclosures.

Accounting Pronouncements to be Adopted Related to Topic 606: Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-9,2014-09, Revenue from Contracts with Customers (Topic 606). Since the release of ASU No. 2014-9, the FASB has issued severalthe following additional ASUs updating the topic. Below are the ASUs the Company is currently assessing the impact of adopting on the Company's financial position, results of operations, cash flows and financial statement disclosures relating to Topic 606. The effective date of each of these ASUs are the same as those of ASC 606 (i.e., fiscal years and interim periods within those fiscal years beginning on or after December 15, 2017).topic:


In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The FASB amended guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. The amendments clarify that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. The FASB also added a practical expedient to ease transition for contracts that were modified prior to adoption of the revenue standard under both the full and modified retrospective transition approaches. The amendments clarify how an entity should evaluate the collectability threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. They also clarify that the fair value of noncash consideration should be measured at contract inception when determining the transaction price. The amendments also allow an entity to make an accounting policy election to exclude from the transaction price certain types of taxes collected from a customer if it discloses that policy. The Company is currently assessing the impact of adopting this standard on the Company’s financial position, results of operations, cash flows and financial statement disclosures.

In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The FASB amended guidance on identifying performance obligations to allow entities to disregard items that are immaterial in the context of the contract, clarify when a promised good or service is separately identifiable (i.e., distinct
within the context of the contract) and allow an entity to elect to account for the cost of shipping and handling performed after control of a good has been transferred to the customer as a fulfillment cost (i.e., an expense). The ASU also clarifies how an entity should evaluate the nature of its promise in granting a license of intellectual property (IP) and requires entities to classify IP in one of two categories: functional IP or symbolic IP, which will determine whether it recognizes revenue over time or at a point in time. The amendments also address how entities should consider license renewals and restrictions and apply the exception for sales- and usage-based royalties received in exchange for licenses of IP. The Company is currently assessing the impact of adopting this standard on the Company’s financial position, results of operations, cash flows and financial statement disclosures.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The ASU clarifies that the analysis must focus on whether a company has control of the goods or services before they are transferred to the customer. Specifically under the ASU, an entity determines the nature of the goods or services provided to the customer and whether it controls each specified good or service before it is transferred to the customer. An entity can be a principal for some goods or services and an agent for others within the same contract. In general, a company is a principal if it controls the goods or services before transferring them to the customer. If it is not certain the company has control, it would evaluate three indicators that control has been obtained before the entity transfers the goods or services to a customer: (1) the entity is primarily responsible for fulfillment, (2) the entity has inventory risk before or after the good or service is transferred to the customer, and (3) the entity has discretion to establish pricing. Credit risk does not indicate that an entity has obtained control. Companies will need to re-evaluate their principal-agent conclusions using the new guidance as they prepare to adopt the new revenue standard. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements of ASU No. 2014-09, Revenue from Contracts with Customers. The Company is currently assessing the impact of adopting this standard on the Company’s financial position, results of operations, cash flows and financial statement disclosures.

In May 2014,August 2015, the FASB issued ASU No. 2014-9,2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in ASU No. 2014-9

Collectively these standards create Topic 606, Revenue from Contracts with Customers, and supersede thenew accounting guidance for revenue recognition requirements in Topic 605, Revenue Recognition,that supersedes most existing revenue recognition rules, including most industry specific revenue recognition guidance. In addition, the amendments supersede the cost guidance in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contract, and create a new Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Topic 606 also provides new guidance on the recognition of certain costs related to customer contracts, and changes the FASB guidance for revenue-related issues, such as how an entity is required to consider whether revenue should be reported gross or net basis. The amendments are effective for fiscal years and interim periods within those fiscal years beginning on or after December 15, 2017. Early adoption

The Company's process for implementing Topic 606 includes, but is not permitted.limited to, identifying contracts within the scope of the standard, identifying distinct performance obligations within each contract, and applying the new guidance for measuring and recognizing revenue, to each performance obligation. The Company is currently assessingexpects to complete the assessment in the second half of 2017, which will include an evaluation of the impact of adopting this standard on the Company’s financial position, results of operations, cash flows and financial statement disclosures.guidance either through the modified-retrospective method or full retrospective method.
 

2. Legal and Other Commitments and Contingencies
 
The Company is subject to claims and litigation in the normal course of its business. The Company applies the provisions as defined in the guidance related to accounting for contingencies in determining the recognition and measurement of potential liabilities associated with legal claims against the Company. Management obtains inputuses guidance from internal and external legal counsel on the potential outcome of litigation in determining the need to record liabilities for potential losses and the disclosure of pending legal claims.
 
Contracts Acquired in the Central Merger

Certain lease contracts acquired in the Central Merger include provisions allocating to the Company responsibility for the cost of certain structural and other repairs required to be made to the leased property, including improvement and repair costs arising as a result of ordinary wear and tear. The Company recorded $0.1 million and $2.1 millionof costs during each of the three months ended September 30,March 31, 2017 and 2016 (net of expected recoveries of the total cost recognized by the Company through the applicable indemnity discussed further below and 2015, respectively,in Note 3. Central Merger and $0.4 millionRestructuring, Merger and $4.2 million during the nine months ended September 30, 2016 and 2015, respectively, of costsIntegration Costs) in Cost of parking services—Lease contracts within the Condensed Consolidated Statements of Income for structural and other repair costs related to certain lease contracts acquired in the Central Merger, whereby the Company has

expensed repair costs for certain leases and engaged third-party general contractors to complete certain structural and other repair projects, and other indemnity related costs. The Company expects to incur additional costs for certain structural and other repair costs pursuant to the contractual requirements of certain lease contracts acquired in the Central Merger (“Structural and Repair Costs”). Based on information available at this time, the Company currently expects to incur additional Structural and Repair Costs of $0.1 million.  While the Company is unable to estimate with certainty when such remaining costs will be incurred, it is expected that a substantial majority of these costs will be incurred by December 2016. Seein early- to mid-calendar year 2017.  Additionally and as further described in Note 3. Acquisition for Structural Repair Costs incurred and related to certain lease contracts acquired in the Central Merger and Restructuring, Merger and Integration Costs, the Company's settlement on certain costs incurred underCompany settled all outstanding matters between the applicable indemnity that were previously determinedformer Central stockholders and the Company and is therefore unable to recover any additional Structural and Repair Costs yet to be recoverable.incurred by the Company through the indemnity.

Holten Settlement

In March 2010, John V. Holten, a former indirect controlling shareholder of the Company, filed a lawsuit against the Company in the United States District Court, District of Connecticut. Mr. Holten was terminated as the Company's chairman in October 2009. The lawsuit alleged breach of his employment agreement and claimed that the agreement entitled Mr. Holten to payments worth more than $3.8 million. The Company filed an answer and counterclaim to Mr. Holten's lawsuit in 2010.

In March 2016, the Company and Mr. Holten settled all claims in connection with the original lawsuits ("Holten Settlement"). Per the settlement, the Company will pay Mr. Holten $3.4 million of which $1.9 million will be recovered by the Company through the Company's directors and officersofficer's liability insurance policies. The Company recognized an expense, net of insurance recoveries, related to the Holten Settlement of $1.5 million for the ninethree months ended September 30,March 31, 2016. This expense is included in General and administrative expense within the Condensed Consolidated Statement of Income.

3. AcquisitionCentral Merger and Restructuring, Merger and Integration Costs
 
On October 2, 2012 ("Closing Date"), the Company completed the acquisition (the "Central Merger" or "Merger") of 100% of the outstanding common shares of KCPC Holdings, Inc., which was the ultimate parent of Central Parking Corporation (collectively, "Central"), for 6,161,332 shares of Company common stock and the assumption of approximately $217.7 million of Central's debt, net of cash acquired. Additionally, the Agreement and Plan of Merger dated February 28, 2012 with respect to the Central Merger ("Merger Agreement") providesprovided that Central's former stockholders arewere entitled to receive cash consideration (the "Cash Consideration") in the amount equal to $27.0 million plus, if and to the extent the Net Debt Working Capital (as defined below) was less than $275.0 million (the "Lower Threshold") as of September 30, 2012, the amount by which the Net Debt Working Capital was below such amount (such sum, the "Cash Consideration Amount") to be paid three years after closing, to the extent the $27.0 million iswas not used to satisfy indemnity obligations pursuant to the Merger Agreement.
Pursuant to the Merger Agreement, the Company iswas entitled to indemnification from Central's former stockholders (i) if and to the extent Central's combined net debt and the absolute value of Central's working capital (as determined in accordance with the Merger Agreement) (the "Net Debt Working Capital") exceeded $285.0 million (the "Upper Threshold") as of September 30, 2012 and (ii) for certain defined adverse consequences as set forth in the Merger Agreement (including with respect to Structural and Repair Costs). Pursuant to the Merger Agreement, Central's former stockholders arewere required to satisfy certain indemnity obligations, which arewere capped at the Cash Consideration Amount (the "Capped Items") only through a reduction of the Cash Consideration. For certain other indemnity obligations set forth in the Merger Agreement, which arewere not capped at the Cash Consideration Amount (the "Uncapped Items"), including the Net Debt Working Capital indemnity obligations described above, Central's former stockholders mayhad the ability to satisfy any amount payable pursuant to such indemnity obligations as follows (provided that the Company reserves the right to reject the cash and stock alternatives available to the Company and choose to reduce the Cash Consideration):
Central's former stockholders can elect to pay such amount with cash;
Central's former stockholders can elect to pay such amount with the Company's common stock (valued at $23.64 per share, the market value as of the closing date of the Merger Agreement); or

Central's former stockholders can elect to reduce the $27.0 million cash consideration by such amount, subject to the condition that the cash consideration remains at least $17.0 million to cover Capped Items.

Under the Merger Agreement, all post-closing claims and disputes, including as to indemnification matters, are ultimately subject to resolution through binding arbitration or, in the case of a dispute as to the calculation of Net Debt Working Capital, resolution by an independent public accounting firm.

Since the Closing Date, the Company periodically provided Central’sand Central's former stockholders noticeexchanged notices regarding indemnification matters, including with respect to the calculation of Net Debt Working Capital, and the Company made adjustments for known matters as they arose.arose, although Central’s former stockholders may not have agreed to the aggregate of such adjustments made by the Company. During such time, Central’s former stockholders continually requested additional documentation supporting the Company’s indemnification claims, including with respect to the Company’s calculation of Net Debt Working Capital. Furthermore, following the Company's notices of indemnification matters, the representative of Central's former stockholders indicated that they may make additional inquiries and raise issues with respect to the Company's indemnification claims (including, specifically, as to Structural and Repair Costs) and that they may assert various claims of their own relating to the Merger Agreement.

The Company previously determined and submitted notification to Central’s former stockholders, that (i) the Net Debt Working Capital was $296.3 million as of September 30, 2012 and that, accordingly, the Net Debt Working Capital exceeded the Upper

Threshold by $11.3 million; and (ii) the Company had indemnity claims of $23.4 million for certain defined adverse consequences (including indemnity claims with respect to Structural and Repair Costs incurred through December 31, 2015) and as set forth in an October 1, 2015 notification letter to Central's former stockholders' that certain indemnification claims for Structural and Repair Costs yet to be incurred met the requirements of the indemnification provisions established in the Merger Agreement.

In early 2015, the Company and Central’s former stockholders engaged an independent public accounting firm for ultimate resolution, through binding arbitration, regarding its dispute as to the Company’s calculation of Net Debt Working Capital. On April 30, 2015, with respect to the Company's Net Debt Working Capital calculation, the representative of Central's former stockholders submitted specific objections to the Company's calculation, asserting that the Net Debt Working Capital as of September 30, 2012 was $270.8 million ($4.2 million below the Lower Threshold) and on September 21, 2015 submitted a revised calculation, asserting that the Net Debt Working Capital as of September 30, 2012 was $278.0 million ($3.0 million above the Lower Threshold) and therefore no amounts were due to the Company given calculated net Debt Working Capital is between the Lower Threshold and the Upper Threshold. On October 1, 2015, the Company provided notification to Central's former stockholders that the aggregate amount of the Company's (i) Net Debt Working Capital claim of $11.3 million as of September 30, 2012 and (ii) indemnity claims for certain defined adverse consequences as set forth in the Merger Agreement (including with respect to Structural and Repair Costs), exceeded the $27.0 million Cash Consideration and therefore the Company would not be making any Cash Consideration payment pursuant to Section 3.7 of the Merger Agreement. On October 20, 2015, Central's former stockholders provided notification that they deemed the Company's refusal to pay the $27.0 million Cash Consideration to be a violation of the terms of the Merger Agreement.

On February 19, 2016, the Company and Central’s former stockholders received a non-appealable and binding decision from the independent public accounting firm indicating that Net Debt Working Capital as of September 30, 2012 was $291.6 million, or $6.6 million above the Upper Threshold. Furthermore, as part of the independent public accounting firm’s decision over the calculation of Net Debt Working Capital as of September 30, 2012, it was determined by the independent public accounting firm and the Company that $1.5 million of Net Debt Working Capital claims were more appropriately claimable as an adverse consequence indemnification claim, as defined in the Merger Agreement. As such and in conjunction with the independent public accounting firm’s decision on Net Debt Working Capital, the Company (i) reclassified $1.5 million of indemnification claims from the Net Debt Working Capital calculation to indemnification claims for certain adverse consequences; and (ii) recognized an expense of $1.6 million ($0.9 million, net of tax) in General and administrative expenses for certain of the other amounts disallowed under the Net Debt Working Capital calculation as of and for the year ended December 31, 2015.2015 respectively. The independent public accounting firm also determined that an additional $1.6 million of Net Debt Working Capital claims were disallowed; however, these Net Debt Working Capital amounts claimed by the Company were not previously recognized by the Company as a cost recovery given their contingent nature and since these claims were not previously recognized as an expense by the Company, and therefore the independent public accounting firm’s decision to disallow these claims had no impact to the Company's consolidated financial statements as of and for the year ended December 31, 2015.

As a result of the independent public accounting firm’s decision on the calculation of Net Debt Working Capital, the Company revised its indemnity claims for certain defined adverse consequences from $23.4 million to $24.9 million. On March 11, 2016, the Company provided notification to Central's former stockholders of an additional indemnity claim for $1.6 million and further provided further notification that its indemnity claims for certain defined adverse consequences aggregated to $26.5 million. The additional $1.6 million of additional indemnity claim made by the Company in the March 11, 2016 letter was not recognized as a cost recovery given the contingent nature and since this claim was not previously recognized by the Company as an expense.

As previously discussed in Note 2. Legal and Other Commitments and Contingencies, certain lease contracts acquired in the Central Merger include provisions allocating to the Company responsibility for all or a defined portion of the costs of certain structural and other repair costs required on the property, including improvement and repair costs arising as a result of ordinary wear and tear. The Company reduced the Cash Consideration Amount by $6.6 million, representing the amount that Net Debt Working Capital exceeded the Upper Threshold, and $17.9$18.8 million, representing the amount of indemnified claims for certain adverse consequences (including but not limited to Structural and Repair Costs) recognized by the Company as of September 30, 2016. Additionally, the Company submitted $7.7 million of additional indemnity claims for certain adverse consequences (including but not limited to Structural and Repair Costs) to Central's former Stockholders,stockholders, including claims as set forthfor in the March 11, 2016 letter, but did not recognize these indemnity claims as a receivable or offset to the Cash ConsiderationContingent Amount with a corresponding gain or reduction of costs incurred by the Company, as these claims were contingent in nature or represent costs which the Company had not yet incurred but which met the requirements of the indemnification provisions established in the Merger Agreement.

On September 27, 2016, the Company and Central's former stockholders agreed-upon non-binding terms to settle all outstanding matters (including the Company's claims discussed above) between the parties relating to the Central Merger (the "Settlement("Settlement Terms") and are currently draftingon December 15, 2016 the Company and negotiatingCentral's former stockholders executed a bindingsettlement agreement ("Settlement Agreement") to memorializesettle all outstanding matters between the Settlement Terms.parties relating to the Central Merger (including the Company's claims as described above). Pursuant to the Settlement Terms,Agreement, the Company would paypaid Central's former stockholders $2.5 million in the aggregate, (whichwhich effectively reducesreduced the $27.0 million of Cash Consideration that would have been payable by the Company to Central's former stockholders under the Merger Agreement by $24.5 million and which amount has been accrued for as of September 30, 2016 and is included within Accrued expenses in the Condensed Consolidated Balance Sheet) to settle all outstanding matters between the parties pursuant to the Central Merger and accordingly would have no further obligation to pay any of the Cash Consideration.million. As a result of the Settlement Terms, the Company recorded $0.8 million ($0.5 million, net of tax) withinin General and administrative expense inwithin the Condensed Consolidated Statements of Income.


The Central Merger has been accounted for using the acquisition method of accounting (in accordance with the provisions of Accounting Standards Codification ("ASC") 805, Business Combinations, prior to the adoption of ASU No. 2015-16), which requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The purchase price has been allocated based on the estimated fair value of net assets acquired and liabilities assumed at the date of the date of acquisition. The Company finalized the purchase price allocation duringIncome in the third quarter of 2013.2016. Additionally and pursuant to the Settlement Agreement, the parties fully released one another for claims relating to the Central Merger, and therefore the Company has no further obligation to pay any additional Cash Consideration Amount to Central's former stockholders.
The
Restructuring, Merger and Integration Costs

Since the Central Merger, the Company has incurred certain restructuring, acquisition and integration costs associated with the transaction that were expensed as incurred andincurred. These costs are reflected in General and administrative expenses and Depreciation and amortization within the Condensed Consolidated Statements of Income forIncome. Depreciation and amortization includes costs related to the threewrite-off of certain fixed assets and nine months ended September 30, 2016 and 2015the acceleration of certain software assets directly as showna result of the Central Merger. Additionally, in the table below:fourth quarter of 2016, the Company initiated a series of workforce reductions to increase organizational effectiveness and provide cost savings that can be reinvested in the Company's growth initiatives. An accrual for restructuring, merger and integration costs of $4.6 million ($3.1 million is included in Compensation and payroll withholdings, $0.2 million in Accrued expenses and $1.3 million in Other long-term liabilities within the Condensed Consolidated Balance Sheets) and $5.4 million ($3.6 million is included in Compensation and payroll withholdings, $0.3 million in Accrued expenses and $1.5 million in Other long-term liabilities within the Condensed Consolidated Balance Sheets) as of March 31, 2017 and December 31, 2016, respectively.
The aggregate costs associated with the restructuring, merger and integration costs are summarized in the following table:
Three Months Ended Nine Months EndedThree Months Ended
(millions) (unaudited)September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015March 31, 2017
March 31, 2016
General and administrative expenses$0.2
 $1.6
 $1.1
 $3.5
$0.1

$0.8
Depreciation and amortization—
 —
 2.4
 —
—

1.0
Total$0.2
 $1.6
 $3.5
 $3.5
$0.1

$1.8
4. Other Intangible Assets, net

The following table presents a summary of other intangible assets, net:
  September 30, 2016 (unaudited) December 31, 2015  March 31, 2017 (unaudited) December 31, 2016
(millions)Weighted
Average
Life (in
Years)		 Acquired
Intangible
Assets,
Gross (1)		 Accumulated
Amortization		 Acquired
Intangible
Assets,
Net		 Acquired
Intangible
Assets,
Gross (1)		 Accumulated
Amortization		 Acquired
Intangible
Assets,
Net		Weighted
Average
Life (Years)		 Acquired
Intangible
Assets,
Gross (1)		 Accumulated
Amortization		 Acquired
Intangible
Assets,
Net		 Acquired
Intangible
Assets,
Gross (1)		 Accumulated
Amortization		 Acquired
Intangible
Assets,
Net
Covenant not to compete2.3 $0.9
 $(0.9) $—
 $0.9
 $(0.9) $—
1.8 $0.9
 $(0.9) $—
 $0.9
 $(0.9) $—
Trade names and trademarks2.8 9.8
 (9.6) 0.2
 9.8
 (7.8) 2.0
2.3 9.8
 (9.6) 0.2
 9.8
 (9.6) 0.2
Proprietary know how0.6 34.7
 (30.8) 3.9
 34.7
 (25.0) 9.7
2.2 34.7
 (34.6) 0.1
 34.7
 (32.6) 2.1
Management contract rights12.1 81.0
 (20.6) 60.4
 81.0
 (16.8) 64.2
11.6 81.0
 (23.2) 57.8
 81.0
 (22.0) 59.0
Acquired intangible assets, net (2)11.4 $126.4
 $(61.9) $64.5
 $126.4
 $(50.5) $75.9
11.6 $126.4
 $(68.3) $58.1
 $126.4
 $(65.1) $61.3

(1)  Excludes the original cost and accumulated amortization of fully amortized intangible assets.
(2)  Intangible assets have estimated useful lives between one and nineteen years.

The following table presents the Company's amortization expense related to intangible assets included in depreciation and amortization expense:
Three Months Ended Nine Months Ended Three Months Ended
(millions) (unaudited)September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015 March 31, 2017 March 31, 2016
Amortization expense related to intangible assets included in depreciation and amortization expense$3.8
 $3.8
 $11.4
 $11.4
Amortization expense related to other intangible assets included in depreciation and amortization $3.2
 $3.8

5. Goodwill
 
The amounts for goodwill and changes to carrying value by operating segment are as follows (unaudited):follows:
(millions)Region
One		 Region
Two		 Region
Three		 Total
Balance as of December 31, 2015 (1)$337.5
 $62.7
 $31.1
 $431.3
Foreign currency translation0.2
 —
 —
 0.2
Balance as of September 30, 2016$337.7
 $62.7
 $31.1
 $431.5
(millions) (unaudited)Region
One		 Region
Two		 Total
Balance as of December 31, 2016 (1)$368.7
 $62.7
 $431.4
Foreign currency translation—
 —
 —
Balance as of March 31, 2017$368.7
 $62.7
 $431.4

(1) Due to the new segment reporting effective asin the first quarter of January 1, 2016,2017, goodwill allocated to previous reporting units of Region One Region Two, and Region Three have been aggregated into a single reporting unit,operating segment, Region One. See also Note 13.14. Business Unit Segment Information for further discussion on certain organizational and executive leadership changes.
 

The Company tests goodwill at least annually for impairment (the Company has elected to annually test for potential impairment of goodwill on the first day of the fourth quarter) and tests more frequently if indicators are present or changes in circumstances suggest that impairment may exist.  The indicators include, among others, declines in sales, earnings or cash flows or the

development of a material adverse change in business climate.  The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a reporting unit.component.
 
Due to a change in the Company’s segment reporting effective January 1, 2016,in the first quarter of 2017, the goodwill allocated to certain previous reporting units have been aggregated into a single reporting unit.operating segment. See also Note 13.14. Business Unit Segment Information for further disclosure on the Company’s change in reporting segments effective January 1, 2016.in the first quarter of 2017.
 
As a result of the change in internal reporting segment information, the Company completed aan interim quantitative impairment analysis (Step One) for goodwill as of January 1, 2016, which was completed during the first quarter 2016,2017 and concluded that the estimated fair values of each of the Company's reporting units exceeded its carrying amount of net assets assigned to thatthe respective reporting unit as of January 1, 20162017 and immediately prior to the reorganization and therefore no further testing was required (Step Two). In conducting the January 1, 20162017 goodwill Step One analysis, the Company analyzed actual and projected growth trends of the reporting units, gross margin, operating expenses and Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") (which also includes forecasted five-year income statement and working capital projection, a market-based weighted average cost of capital and terminal values after five years). 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. As part of the January 1, 20162017 goodwill assessment, the Company engaged a third-party to evaluate its reporting units' fair values. No impairment was recorded as a result of the interim goodwill impairment test performed.
The reporting units are reported as Region One (Urban), Region Two (Airport transportation) and Region Three (USA Parking reporting unit and event planning and transportation services reporting unit). For purposes of reportable segments, the goodwill in Region Three is attributable to USA Parking and event planning and transportation services reporting units.

6. Fair Value Measurement
 
Fair Value Measurements-Recurring Basis
 
In determining fair value, the Company uses various valuation approaches within the fair value measurement framework. Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. Applicable accounting literature establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The fair value hierarchy is based on observable or unobservable inputs to valuation techniques that are used to measure fair value. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. Applicable accounting literature defines levels within the hierarchy based on the reliability of inputs as follows:
 
•Level 1: Inputs are quoted prices in active markets for identical assets or liabilities.
 
•Level 2: Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable and market-corroborated inputs, which are derived principally from or corroborated by observable market data.

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

The following table sets forth the Company’s financial assets and liabilities measured at fair value on a recurring basis and the basis of measurement at September 30, 2016March 31, 2017 and December 31, 2015:2016:
Fair Value MeasurementFair Value Measurement
September 30, 2016 (unaudited) December 31, 2015March 31, 2017 (unaudited) December 31, 2016
(millions)Level 1 Level 2 Level 3 Level 1 Level 2 Level 3Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets 
  
  
  
  
  
 
  
  
  
  
  
Prepaid expenses and other 
  
  
  
  
  
 
  
  
  
  
  
Contingent consideration receivable$—
 $—
 $0.5
 $—
 $—
 $0.5
$—
 $—
 $0.5
 $—
 $—
 $0.5
Interest Rate Swaps—
 —
 —
 —
 0.2
 —
Interest rate swap—
 0.1
 —
 —
 0.1
 —
Total$—
 $—
 $0.5
 $—
 $0.2
 $0.5
$—
 $0.1
 $0.5
 $—
 $0.1
 $0.5
Liabilities 
  
  
  
  
  
Accrued expenses 
  
  
  
  
  
Interest Rate Swaps$—
 $0.1
 $—
 $—
 $—
 $—
Total$—
 $0.1
 $—
 $—
 $—
 $—
 

Interest Rate SwapSwaps
 
The Company seeks to minimize risks from interest rate fluctuations through the use of interest rate swap contracts and hedge only exposures in the ordinary course of business. Interest rate swaps are used to manage interest rate risk associated with our floating rate debt. The Company accounts for its derivative instruments at fair value provided it meets certain documentary and analytical requirements to qualify for hedge accounting treatment. Hedge accounting creates the potential for a Consolidated Statements of Incomean income statement match between the changes in fair values of derivatives and the changes in cost of the associated underlying transactions, in this case interest expense. Derivatives held by us are designated as hedges of specific exposures at inception, with an expectation

that changes in the fair value will essentially offset the change in the underlying exposure. Discontinuance of hedge accounting is required whenever it is subsequently determined that an underlying transaction is not going to occur, with any gains or losses recognized in the Consolidated Statements of Income at such time, with any subsequent changes in fair value recognized currently in earnings. Fair values of derivatives are determined based on quoted prices for similar contracts. The effective portion of the change in fair value of the interest rate swap is reported in Accumulated other comprehensive income, a component of Stockholders' equity, and is being recognized as an adjustment to interest expense or other (expense) income, respectively, over the same period the related expenses are recognized in earnings. Ineffectiveness would occur when changes in the market value of the hedged transactions are not completely offset by changes in the market value of the derivative and those related gains and losses on derivatives representing hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized currently in earnings when incurred. No ineffectiveness was recognized during the ninethree months ended September 30, 2016March 31, 2017 and 2015.2016.
 
Contingent Consideration Receivable
 
During the third quarter 2015, certain assets, which met the definition of a business, were sold to a third-party in an arms-length transaction (see also Note 1. Significant Accounting Policies and Practices for further detail on the sale of the business).  Under the sales agreement, 40% of the sale proceeds from the buyer is contingent in nature and scheduled to be received by the Company inwithin sixty days of February 2017.2017 or eighteen months from the date of the transaction, however, the buyer has sixty days from February 2017 to calculate and remit the remaining consideration. The contingent consideration amount expected to be received by the Company is based on the financial and operational performance of the business sold.  The significant inputs used to derive the Level 3 fair value contingent consideration receivable is the probability of reaching certain revenue growth of the business sold and retention of current customers over an eighteen month period.  The fair value of the contingent consideration receivable as of September 30, 2016March 31, 2017 was $0.5 million, with the fair value of the contingent consideration receivable to be remeasured each subsequent reporting period.million.
 
Nonrecurring Fair Value Measurements

Certain assets are measured at fair value on a nonrecurring basis; that is, the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Non-financial assets such as goodwill, intangible assets, and leasehold improvements, equipment and construction in progress are subsequently measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognized. The Company assesses the impairment of intangible assets annually or whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. The fair value of its goodwill and intangible assets is not estimated if there is no change in events or circumstances that indicate the carrying amount of an intangible asset may not be recoverable. There were no impairment charges for the ninethree months ended September 30, 2016March 31, 2017 and 2015.2016.
 
Financial Instruments Not Measured at Fair Value
 
The following presents the carrying amounts and estimated fair values of financial instruments not measured at fair value in the Condensed Consolidated Balance Sheet at September 30, 2016March 31, 2017 and December 31, 2015:2016: 
September 30, 2016 (unaudited) December 31, 2015March 31, 2017 (unaudited) December 31, 2016
(millions)Carrying
Amount		 Fair Value Carrying
Amount		 Fair ValueCarrying
Amount		 Fair Value Carrying
Amount		 Fair Value
Cash and cash equivalents$19.3
 $19.3
 $18.7
 $18.7
$21.6
 $21.6
 $22.2
 $22.2
Long-term borrowings 
  
  
  
 
  
  
  
Restated Credit Facility, net of original discount on borrowings and deferred financing costs$212.3
 $212.3
 $223.1
 $223.1
$190.2
 $190.2
 $193.4
 $193.4
Other obligations$1.8
 $1.8
 $2.0
 $2.0
1.6
 1.6
 1.7
 1.7
 
The carrying value of Cashcash and cash equivalents approximates their fair value due to the short-term nature of these financial instruments and has been classified as a Level 1. The fair value of the RestatedSenior Credit Facility and Other obligations were estimated to not be materially different from the carrying amount and are generally measured using a discounted cash flow analysis based on current market interest rates for similar types of financial instruments and would be classified as a Level 2.


7. Borrowing Arrangements
 
Long-term borrowings, in order of preference, consist of:
   Amount Outstanding
(millions)Maturity Date September 30, 2016 (unaudited) December 31, 2015
Restated Credit Facility, net of original discount on borrowings and deferred financing costs(1) / (2) $212.3
 $223.1
Other borrowingsVarious 1.8
 2.0
Total obligations under Restated Credit Facility and other borrowings  $214.1
 $225.1
Less: Current portion of obligations under Restated Credit Facility and other borrowings  19.1
 15.2
Total long-term obligations under Restated Credit Facility and other borrowings  $195.0
 $209.9
(1) Credit Agreement was due to mature on October 2, 2017.
(2) Restated Credit Agreement matures on February 20, 2020.
   Amount Outstanding
(millions)Maturity Date March 31, 2017 December 31, 2016
 
 (unaudited) 

Restated Credit Facility, net of original discount on borrowings and deferred financing costsFebruary 20, 2020 $190.2
 $193.4
Other borrowingsVarious 1.6
 1.7
Total obligations under Restated Credit Facility and other borrowings  191.8
 195.1
Less: Current portion of obligations under Restated Credit Facility and other borrowings  20.4
 20.4
Total long-term obligations under Restated Credit Facility and other borrowings  $171.4
 $174.7
 
Senior Credit Facility
 
On October 2, 2012, the Company entered into a credit agreement (“Credit Agreement”) with Bank of America, N.A. ("Bank of America"), as administrative agent, Wells Fargo Bank, N.A. ("Wells Fargo Bank") and JPMorgan Chase Bank, as co-syndication agents, U.S. Bank National Association, First Hawaiian Bank and General Electric Capital Corporation, as co-documentation agents, Merrill Lynch, Pierce, Fenner & Smith Inc., Wells Fargo Securities, LLC and J.P. Morgan Securities LLC, as joint lead arrangers and joint book managers, and the lenders party thereto.

Pursuant to the terms, and subject to the conditions, of the Credit Agreement, the Lenders made available to the Company a secured senior credit facility (the “Senior Credit Facility”) that permitted aggregate borrowings of $450.0 million consisting of (i) a revolving credit facility of up to $200.0 million at any time outstanding, which included a letter of credit facility that was limited to $100.0 million at any time outstanding, and (ii) a term loan facility of $250.0 million. The Senior Credit Facility was due to mature on October 2, 2017.
  
Amended and Restated Credit Facility
 
On February 20, 2015 (“Restatement Date”), the Company entered into an Amended and Restated Credit Agreement (the “Restated Credit Agreement”) with Bank of America, N.A. (“Bank of America”), as administrative agent, an issuing lender and swing-line lender; Wells Fargo Bank, N.A., as an issuing lender and syndication agent; U.S. Bank National Association, First Hawaiian Bank and BMO Harris Bank N.A., as co-documentation agents; Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as joint lead arrangers and joint book managers; and the lenders party thereto (the “Lenders”). The Restated Credit Agreement reflects modifications to, and an extension of, the Senior Credit Agreement.Facility.
 
Pursuant to the terms, and subject to the conditions, of the Restated Credit Agreement, the Lenders have made available to the Company a senior secured credit facility (the “Restated Credit Facility”) that permits aggregate borrowings of $400.0 million consisting of (i) a revolving credit facility of up to $200.0 million at any time outstanding, which includes a $100.0 million sublimit for letters of credit and a $20.0 million sublimit for swing-line loans, and (ii) a term loan facility of $200.0 million (reduced from $250.0 million under the Senior Credit Facility). The Company may request increases of the revolving credit facility in an aggregate additional principal amount of $100.0 million. The Restated Credit Facility matures on February 20, 2020.
 
The entire amount of the term loan portion of the Restated Credit Facility had been drawn by the Company as of the Restatement Date (including approximately $10.4 million drawn on such date) and is subject to scheduled quarterly amortization of principal as follows: (i) $15.0 million in the first year, (ii) $15.0 million in the second year, (iii) $20.0 million in the third year, (iv) $20.0 million in the fourth year, (v) $20.0 million in the fifth year and (vi) $110.0 million in the sixth year. The Company also had outstanding borrowings of $147.3 million (including $53.4 million in letters of credit) under the revolving credit facility as of the Restatement Date.
 
Borrowings under the Restated Credit Facility bear interest, at the Company’s option, (i) at a rate per annum based on the Company’s consolidated total debt to EBITDA ratio for the 12-month period ending as of the last day of the immediately preceding fiscal quarter, determined in accordance with the pricing levels set forth in the Restated Credit Agreement (the “ Applicable Margin”), plus LIBOR or (ii) the Applicable Margin plus the highest of (x) the federal funds rate plus 0.5%, (y) the Bank of America prime rate and (z) a daily rate equal to LIBOR plus 1.0% (the highest of (x), (y) and (z), the “Base Rate”), except that all swing-line loans will bear interest at the Base Rate plus the Applicable Margin.
 
Under the terms of the Restated Credit Agreement, the Company is required to maintain a maximum consolidated total debt to EBITDA ratio of not greater than 4.0 to 1.0 as of the end of any fiscal quarter ending during the period from the Amended and Restatement Date through September 30, 2015, (ii) 3.75 to 1.0 as of the end of any fiscal quarter ending during the period from

October 1, 2015

through September 30, 2016, and (iii) 3.5 to 1.0 as of the end of any fiscal quarter ending thereafter. In addition, the Company is required to maintain a minimum consolidated fixed charge coverage ratio of not less than 1.25 to1.0.1.25:1.0.
 
Events of default under the Restated Credit Agreement include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, the occurrence of any cross default event, non-compliance with the other loan documents, the occurrence of a change of control event, and bankruptcy and other insolvency events. If an event of default occurs and is continuing, the Lenders holding a majority of the commitments and outstanding term loan under the Restated Credit Agreement have the right, among others, to (i) terminate the commitments under the Restated Credit Agreement, (ii) accelerate and require the Company to repay all the outstanding amounts owed under the Restated Credit Agreement and (iii) require the Company to cash collateralize any outstanding letters of credit.
 
Each wholly owned domestic subsidiary of the Company (subject to certain exceptions set forth in the Restated Credit Agreement) has guaranteed all existing and future indebtedness and liabilities of the other guarantors and the Company arising under the Restated Credit Agreement. The Company’s obligations under the Restated Credit Agreement and such domestic subsidiaries’ guaranty obligations are secured by substantially all of their respective assets.
 
The Company was in compliance with all covenants as of September 30, 2016.March 31, 2017.
 
As of September 30, 2016,March 31, 2017, the Company had $98.1$104.7 million of borrowing availability under the Restated Credit Agreement, of which the Company could have borrowed $91.4$104.7 million on September 30, 2016March 31, 2017 and remained in compliance with the above described covenants as of such date. The additional borrowing availability under the Restated Credit Agreement is limited only as of the Company’s fiscal quarter-end by the covenant restrictions described above. At September 30, 2016,March 31, 2017, the Company had $60.1$67.5 million of letters of credit outstanding under the Restated Senior Credit Facility, with aggregate borrowings against the Restated Senior Credit Facility of $215.6$192.9 million (excluding debt discount of $1.4$1.1 million and deferred financing cost of $1.9$1.5 million).

In connection with and effective upon the execution and delivery of the Restated Credit Agreement on February 20, 2015, the Company recorded losses on extinguishment of debt, relating to debt discount and debt issuance costs, of $0.6 million for the nine months ended September 30, 2015.

8. Share Repurchase Plan

In May 2016, the Company's Board of Directors authorized the Company to repurchase, on the open market, shares of its outstanding common stock in an amount not to exceed $30$30.0 million in aggregate. Purchases of the Company's common stock may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with Rule 10b-18 and 10b5-1under10b5-1 under the Securities Exchange Act of 1934 ("Exchange Act"). The share repurchase program does not obligate the Company to repurchase any particular amount of common stock, and has no fixed termination date.

Under this program, the Company has repurchased 219,519305,183 shares of common stock through September 30, 2016. The table below summarizesMarch 31, 2017 at an average price of $24.43 per share, repurchase activityresulting in $7.5 million in program-to-date purchases. No shares were repurchased during the three and nine months ended September 30, 2016.
 Three Months Ended Nine Months Ended
(millions, except for share and per share data) (unaudited)September 30, 2016 September 30, 2016
Total number of shares repurchased181,619
 219,519
Average price paid per share$24.62
 $24.38
Total value of shares repurchased$4.5
 $5.4
March 31, 2017.

 Three Months Ended Nine Months Ended
(millions) (unaudited)September 30, 2016 September 30, 2016
Total authorized repurchase amount$29.1
 $30.0
Total value of shares repurchased4.5
 5.4
Total remaining authorized repurchase amount$24.6
 $24.6


9. Bradley Agreement
 
The Company entered into a 25-year agreement with the State of Connecticut (“State”) that expires on April 6, 2025, under which it operates the surface parking and 3,500 garage parking spaces at Bradley International Airport (“Bradley”) located in the Hartford, Connecticut metropolitan area.

The parking garage was financed through the issuance of State of Connecticut special facility revenue bonds and provides that the Company deposits, with the trustee for the bondholders, all gross revenues collected from operations of the surface and garage parking. From these gross revenues, the trustee pays debt service on the special facility revenue bonds outstanding, operating and capital maintenance expense of the surface and garage parking facilities, and specific annual guaranteed minimum payments to the state. Principal and interest on the Bradley special facility revenue bonds increase from approximately $3.6 million in contract year 2002 to approximately $4.5 million in contract year 2025. Annual guaranteed minimum payments to the State increase from approximately $8.3 million in contract year 2002 to approximately $13.2 million in contract year 2024. The annual minimum guaranteed payment to the State by the trustee for the twelve months ended December 31, 2017 and 2016 and 2015 is $11.3$11.5 million and was $11.0$11.3 million, respectively. All of the cash flow from the parking facilities are pledged to the security of the special facility revenue bonds and are collected and deposited with the bond trustee. Each month the bond trustee makes certain required monthly distributions, which are characterized as “Guaranteed Payments.”  To the extent the monthly gross receipts generated by the parking facilities are not sufficient for the trustee to make the required Guaranteed Payments, the Company is obligated to deliver the deficiency amount to the trustee, with such deficiency payments representing interest bearing advances to the trustee. The Company does not directly guarantee the payment of any principal or interest on any debt obligations of the State of Connecticut or the trustee.
 

The following is the list of Guaranteed Payments:
 
Garage and surface operating expenses,

Principal and interest on the special facility revenue bonds,

Trustee expenses,

Major maintenance and capital improvement deposits; and

State minimum guarantee.
 
To the extent sufficient funds are available, the trustee is then directed to reimburse the Company for deficiency payments up to the amount of the calculated surplus, with the Company having the right to be repaid the principal amount of any and all deficiency payments, together with actual interest and premium, not to exceed 10% of the initial deficiency payment. The Company calculates and records interest and premium income along with deficiency principal repayments as a reduction of cost of parking services in the period the associated deficiency repayment is received from the trustee. The Company believes these advances to be fully recoverable as the Bradley Agreement places no time restriction on the Company’s right to reimbursement. The reimbursement of principal, interest and premium will be recognized when received.
 
The total deficiency repayments (net of payments made) to the State net of reimbursements, as of September 30, 2016March 31, 2017 (unaudited) are as follows:
(millions)20162017
Balance at December 31, 2015$11.6
Balance at December 31, 2016$9.9
Deficiency payments made0.2
0.1
Deficiency repayment received(1.4)(0.2)
Balance at September 30, 2016$10.4
Balance at March 31, 2017$9.8

The total deficiency paymentsrepayments (net of payments made), interest and premium received and recorded for the three and nine months ended September 30,March 31, 2017 and 2016 and 2015 are as follows:
Three Months Ended Nine Months EndedThree Months Ended
(millions) (unaudited)September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015March 31, 2017 March 31, 2016
Deficiency repayments$—
 $0.2
 $1.2
 $1.0
$0.1
 $—
Interest$0.2
 $0.1
 $0.3
 $0.3
$—
 $0.1
Premiums$—
 $—
 $0.2
 $0.1
Premium$—
 $—

The net of these amountsDeficiency payments made are recorded as a reductionan increase in Cost of parking services—Management contracts within the Condensed Consolidated Statementsservices and deficiency repayments, interest and premium received are recorded as reductions to Cost of Income.parking services. The reimbursement of principal, interest and premium are recognized when received. There were no amounts of estimated deficiency payments accrued as of September 30, 2016March 31, 2017 and December 31, 2015,2016, as the Company concluded that the potential for future deficiency payments did not meet the criteria of both probable and estimable.

 
In addition to the recovery of certain general and administrative expenses incurred, the Bradley Agreement provides for an annual management fee payment, which is based on operating profit tiers. The annual management fee is further apportioned 60% to the Company and 40% to an un-affiliated entity and the annual management fee will be paid to the extent funds are available for the trustee to make a distribution, and are paid after Guaranteed Payments (as defined in the Bradley Agreement), and after the repayment of all deficiency payments, including interest and premium. Cumulative management fees of approximately $16.5$17.0 million and $15.7$16.7 million have not been recognized as of September 30, 2016March 31, 2017 and December 31, 2015,2016, respectively, and no management fees were recognized as revenue for the ninethree months ended September 30, 2016March 31, 2017 and 2015.2016.

10. Stock-Based Compensation

Stock Options and Grants
 
There were no stock optionsgrants granted during the ninethree months ended September 30, 2016March 31, 2017 and 2015.2016. The Company recognized no stock-based compensation expense related to stock optionsgrants for the ninethree months ended September 30, 2016March 31, 2017 and 2015, as all stock options previously granted were fully vested. As of September 30, 2016, there were no unrecognized compensation costs related to unvested stock options.2016.

Below is a summary of Company authorized vested stock grants to certain directors for the nine months ended September 30, 2016 and 2015. In 2016, vested stock grants were authorized on April 21. In 2015, vested stock grants were authorized on April 21 and September 29. Stock-based compensation expense related to vested stock grants are included in General and administrative expenses within the Condensed Consolidated Statements of Income.
 Three Months Ended Nine Months Ended
(millions) (unaudited)September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015
Vested stock grants—
 8,624
 32,180
 40,981
Stock-based compensation expense$—
 $0.2
 $0.7
 $0.9

Restricted Stock Units
 
During the ninethree months ended September 30, 2016, 4,020March 31, 2017, no restricted stock units were authorized by the Company. During the ninethree months ended September 30,March 31, 2017 and 2016, 1,415no restricted stock units vested. During the ninethree months ended September 30, 2015, 58,816 restricted stock units vested. During the nine months ended September 30,March 31, 2017 and 2016, 4,124no restricted stock units were forfeited under the amendedCompany's Amended and restated Long-TermRestated Long Term Incentive Plan and became available for reissuance. 4,124 restricted stock units were forfeited during the nine months ended September 30, 2015.

The table below shows the Company's stock-based compensation expense related to the restricted stock units for the three and nine months ended September 30,March 31, 2017 and 2016 and 2015 respectively, and is included in General and administrative expenses within the Condensed Consolidated Statements of Income.
Three Months Ended Nine Months EndedThree Months Ended
(millions) (unaudited)September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015March 31, 2017 March 31, 2016
Stock-based compensation expense$0.2
 $0.4
 $0.6
 $1.2
$0.2
 $0.2

As of September 30, 2016,March 31, 2017, there was $2.1$1.5 million of unrecognized stock-based compensation costs net of estimated forfeitures, related to the restricted stock units that are expected to be recognized over a weighted average remaining period of approximately 3.12.6 years years.

Performance Share Units
 
In September 2014, the Board of Directors authorized a performance-based incentive program under the Company’s Amended and Restated Long-Term Incentive Plan (“Performance-Based Incentive Program”), whereby the Company will issue performance share units to certain executive management individuals that represent shares potentially issuable in the future. The objective of the Performance-Based Incentive Program is to link compensation to business performance, encourage ownership of Company stock, retain executive talent, and reward executive performance. The Performance-Based Incentive Program provides participating executive management individuals with the opportunity to earn vested common stock if certain performance targets for pre-tax free cash flow are achieved over a three year performance period and recipients satisfy service-based vesting requirements. The stock-based compensation expense associated with unvested performance share units are recognized on a straight-line basis over the shorter of the vesting period or minimum service period and dependent upon the probable outcome of the number of shares that will ultimately be issued based on the achievement of pre-tax free cash flow over the cumulative three years year period.  During the ninethree months ended September 30, 2016 and 2015,March 31, 2017, the Company granted 98,078 and 103,600, respectively, of74,390 performance share units

to certain individuals within executive management.  During the ninethree months ended September 30,March 31, 2017 and 2016, nil and 2015, 4,493, and 4,009, respectively, performance share units were forfeited under the amendedAmended and restatedRestated Long-Term Incentive Plan and became available for reissuance.  As of September 30, 2016, 18,685March 31, 2017, 14,195 shares were vested related to certain participating executives being eligible for retirement.

The table below shows the Company's stock-based compensation expense related to the Performance-Based Incentive Program for the three and nine months ended September 30,March 31, 2017 and 2016 and 2015 respectively, and is included in General and administrative expenses within the Condensed Consolidated Statements of Income.
Three Months Ended Nine Months EndedThree Months Ended
(millions) (unaudited)September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015March 31, 2017 March 31, 2016
Stock-based compensation expense$0.5
 $0.3
 $1.5
 $0.9
$0.7
 $0.4

Future compensation expense for currently outstanding awards under the Performance Based Incentive Program could reach a maximum of $8.4 million.$10.4 million. Stock-based compensation for the Performance-Based Incentive Program is expected to be recognized over a weighted average period of 2.1 years.

Adoption of ASU 2016-09
Refer to Note 1. 1.8Significant Accounting Policies and Practices years.for the impact of adopting ASU 2016-09 on the Company's stock-based compensation, income taxes, and net income per common share.

11. Net Income per Common Share
 
Basic net income per share is computed by dividing net income by the weighted daily average number of shares of common stock outstanding during the period. Diluted net income per share is based upon the weighted daily average number of shares of common stock outstanding for the period plus dilutive potential common shares, including stock options and restricted stock units using the treasury-stock method.
 

A reconciliation of the weighted average basic common shares outstanding to the weighted average diluted common shares outstanding is as follows:
 Three Months Ended
 Nine Months Ended 
 Three Months Ended
(millions, except for share and per share data) (unaudited)September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015
(millions, except share and per share data) (unaudited) March 31, 2017 March 31, 2016
Net income attributable to SP Plus Corporation$7.0
 $3.7
 $13.5
 $14.8
 $6.0
 $—
Basic weighted average common shares outstanding22,208,139
 22,205,707
 22,293,776
 22,159,701
 22,148,265
 22,328,578
Dilutive impact of share-based awards288,972
 342,459
 278,157
 360,117
 299,639
 264,927
Diluted weighted average common shares outstanding22,497,111
 22,548,166
 22,571,933
 22,519,818
 22,447,904
 22,593,505
Net income per common share 
  
      
  
Basic$0.31
 $0.17
 $0.60
 $0.67
 $0.27
 $—
Diluted$0.31
 $0.16
 $0.60
 $0.66
 $0.27
 $—
 
For the three and nine months ended September 30,March 31, 2017 and 2016, and 2015, performance share units were excluded from the computation of weighted average diluted common share outstanding because the number of shares ultimately issuable is contingent on the Company's performance goals, which were not achieved as of the reporting date.
 
There are no additional securities that could dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share, other than those disclosed.


Adoption of ASU 2016-09
There was no significant impact to diluted weighted average shares outstanding for purposes of calculating net income per common share-diluted as a result of adopting ASU 2016-09. Refer to Note 1. Significant Accounting Policies and Practices for additional information on the impact of adopting ASU 2016-09 to the Company.
12. Comprehensive Income (Loss)
 
Comprehensive income (loss) consists of the following components, net of tax:
Three Months Ended Nine Months EndedThree Months Ended
(millions) (unaudited)September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015March 31, 2017 March 31, 2016
Net income$7.7
 $4.5
 $15.7
 $16.8
$6.7
 $0.6
Effective portion of unrealized gain (loss) on cash flow hedge0.2
 (0.2) (0.1) (0.5)
Effective portion of unrealized loss on cash flow hedge(0.1) (0.2)
Foreign currency translation(0.1) (0.3) (0.1) (0.6)—
 0.1
Comprehensive income7.8
 4.0
 15.5
 15.7
6.6
 0.5
Less: Comprehensive income attributable to noncontrolling interest0.7
 0.8
 2.2
 2.0
0.7
 0.6
Comprehensive income attributable to SP Plus Corporation$7.1
 $3.2
 $13.3
 $13.7
Comprehensive income (loss) attributable to SP Plus Corporation$5.9
 $(0.1)

Accumulated other comprehensive loss is comprised of unrealized gains (losses) on cash flow hedges and foreign currency translation adjustments. The components of changes in accumulated comprehensive loss, net of tax, for the ninethree months ended September 30, 2016March 31, 2017 were as follows:
(millions) (unaudited)Foreign Currency
Translation
Adjustments		 Effective Portion of
Unrealized Gain (Loss)
on Cash Flow Hedge		 Total
Accumulated
Other
Comprehensive
Loss		Foreign Currency
Translation
Adjustments		 Effective Portion of
Unrealized Gain (Loss)
on Cash Flow Hedge		 Total Accumulated
Other
Comprehensive
Loss
Balance at December 31, 2015$(1.2) $0.1
 $(1.1)
Balance at December 31, 2016$(1.4) $—
 $(1.4)
Change in other comprehensive income (loss)(0.1) (0.1) (0.2)—
 (0.1) (0.1)
Balance at September 30, 2016$(1.3) $—
 $(1.3)
Balance at March 31, 2017$(1.4) $(0.1) $(1.5)
 

13. Income Taxes
 
For the three months ended September 30, 2016,March 31, 2017, the Company recognized an income tax expense of $5.1$3.3 million on pre-tax earnings before income taxes of $12.8$10.0 million compared to $0.9 million income tax expense on pre-tax earnings of $3.5 million on earnings before income taxes of $8.0$1.5 million for the three months ended September 30, 2015. For the nine months ended September 30, 2016, the Company recognized income tax expense of $10.9 million on earnings before income taxes of $26.6 million compared to income tax expense of $4.5 million on earnings before income taxes of $21.3 million for the nine months ended September 30, 2015. The effective tax rate was approximately 41.0% for the nine months ended September 30, 2016 compared to approximately 21.0% for the nine months ended September 30, 2015.March 31, 2016. The effective tax rate for the ninethree months ended September 30, 2015March 31, 2017 was significantly33.4% compared to 58.0% for the three months ended March 31, 2016. The effective tax rate for the three months ended March 31, 2017 was lower than the expected statutory tax rate due to the adoption of ASU 2016-09 and the related excess tax benefits now recognized as a reduction of income

tax expense ($0.5 million) and a reduction of income tax expense related to the benefit realized on the settlement of certain income tax related matters with a local tax jurisdiction ($0.2 million).The effective tax rate for the ninethree months ended September 30,March 31, 2016 primarilywas higher than the expected statutory tax rate due to a discrete benefit for the reversalwrite-off of a valuation allowancedeferred tax asset ($0.2 million) for historicalcertain state net operating losses attributable to New York, New York (City of New York). The valuation allowance was reversed in the second quarter of 2015 due to the City of New York law changes enacted April 1, 2015, which resulted in the Company determining that the future benefit of net operating loss carryforwards was more likely than not to be recognized.losses.

As of September 30, 2016,March 31, 2017, the Company has not identified any uncertain tax positions that would have a material impact on the Company’s financial position. The Company recognizes potential interest and penalties related to uncertain tax positions, if any, in income tax expense.
 
The tax years that remain subject to examination for the Company’s major tax jurisdictions at September 30, 2016March 31, 2017 are shown below:
 
2013 – 20152016         United States — federal income tax
2007 – 20152016         United States — state and local income tax
2012 – 20152016         Canada and Puerto Rico

Adoption of ASU 2016-09
Refer to Note 1. Significant Accounting Policies and Practices for the impact of adopting ASU 2016-09 on the Company's stock-based compensation, income taxes, and net income per common share.
 

14. Business Unit Segment Information
 
Segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the 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 Company’s CODM in deciding how to allocate resources and in assessing 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 Company’s CODM. The CODM is the Company’s chief executive officer.
 
Each of the operating segments is directly responsible for revenue and expenses related to their operations including direct regional administrative costs. Finance, information technology, human resources, and legal are shared functions that are not allocated back to the threetwo operating segments. The CODM assesses the performance of each operating segment using information about its revenue and gross profit as its primary measure of performance, but does not evaluate segments using discrete asset information. There are no inter-segment transactions and the Company does not allocate interest and other income, interest expense, depreciation and amortization or taxes to operating segments. The accounting policies for segment reporting are the same as for the Company as a whole.

Effective January 1, 2016,In the first quarter of 2017, the Company began certain organizational and executive leadership changes to align with how the CODM reviews performance and makes decisions in managing the Company and, therefore, changed certainits internal operatingreporting segment information reported to theits CODM. Specifically, the previous internally reportedThe operating segments knownare internally reported as Region One (North),(Commercial) and Region Two (South), and Region Three (New York Metropolitan tri-state area of New York, New Jersey, and Connecticut) were aggregated into a single operating segment now known as Region One (Urban)(Airports). Region Two (Airport transportation operations nationwide) and Region Three (other operating segments of USA Parking and event planning and transportation services), previously known as Region Four and Region Five, respectively, will continue to be reported to the CODM unchanged. All prior periods presented have been restated to reflect the new internal reporting to the CODM.
Region One (Urban)(Commercial) encompasses operationsour services in Alabama, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, Puerto Rico,healthcare facilities, municipalities, including meter revenue collection and three Canadian provinces of Alberta, Ontarioenforcement services, government facilities, hotels, commercial real estate, residential communities, retail, colleges and Quebec.universities, as well as ancillary services such as shuttle and transportation services, valet services, taxi and livery dispatch services and event planning, including shuttle and transportation services.
Region Two (Airport transportation)(Airports) encompasses our services at all major airportairports as well as ancillary services, which includes shuttle and transportation operations nationwide.
Region Three encompasses other reporting units of USA Parkingservices and event planning and transportationvalet services.
Other consists of ancillary revenue that is not specifically identifiable to a region and certain unallocated items, such as and including prior year insurance reserve adjustments.
The business is managed based on regions administered by executive vice presidents.

The following is a summary of revenues (excluding reimbursed management contract revenue) and gross profit by regions for the three and nine months ended September 30, 2016March 31, 2017 and 2015:

2016:
 Three Months Ended September 30, Nine Months Ended September 30,
(millions) (unaudited)2016 Gross
Margin
%		 2015 Gross
Margin
%		 2016 Gross
Margin
%		 2015 Gross
Margin
%
Parking Services Revenue 
  
  
  
 
 
 
 
Region One 
  
  
  
 

 

 

 

Lease contracts$103.1
  
 $113.8
  
 $312.3
 

 $330.9
 

Management contracts51.2
  
 47.7
  
 147.3
 

 142.6
 

Total Region One154.3
  
 161.5
  
 459.6
 

 473.5
 

Region Two 
  
  
  
 

 

 

 

Lease contracts31.3
  
 31.8
  
 93.7
 

 94.4
 

Management contracts20.7
  
 26.6
  
 69.2
 

 78.2
 

Total Region Two52.0
  
 58.4
  
 162.9
 

 172.6
 

Region Three 
  
  
  
 

 

 

 

Lease contracts1.7
  
 1.1
  
 4.3
 

 3.5
 

Management contracts9.0
  
 8.2
  
 35.6
 

 36.6
 

Total Region Three10.7
  
 9.3
  
 39.9
 

 40.1
 

Other 
  
  
  
 

 

 

 

Lease contracts—
  
 (0.1)  
 —
 

 0.1
 

Management contracts3.2
  
 3.3
  
 9.9
 

 10.8
 

Total Other3.2
  
 3.2
  
 9.9
 

 10.9
 

Reimbursed management contract revenue188.9
  
 168.3
  
 537.0
 

 513.4
 

Total Revenues409.1
  
 400.7
  
 1,209.3
 

 1,210.5
 

Gross Profit 
  
  
  
 

 

 

 

Region One 
  
  
  
 

 

 

 

Lease contracts8.1
 7.9% 10.9
 9.6 % 25.3
 8.1% 28.4
 8.6 %
Management contracts21.3
 41.6% 21.5
 45.1 % 62.8
 42.6% 63.3
 44.4 %
Total Region One29.4
  
 32.4
  
 88.1
 

 91.7
 

Region Two 
  
  
  
 

 

 

 

Lease contracts1.5
 4.8% 1.7
 5.3 % 4.0
 4.3% 4.4
 4.7 %
Management contracts6.1
 29.5% 5.7
 21.4 % 18.7
 27.0% 18.4
 23.5 %
Total Region Two7.6
  
 7.4
  
 22.7
 

 22.8
 

Region Three 
  
  
  
 

 

 

 

Lease contracts0.3
 17.6% 0.1
 9.1 % 0.5
 11.6% 0.3
 8.6 %
Management contracts3.1
 34.4% 2.8
 34.1 % 9.4
 26.4% 9.3
 25.4 %
Total Region Three3.4
  
 2.9
  
 9.9
 

 9.6
 

Other 
  
  
  
 

 

 

 

Lease contracts0.4
 —% (2.1) (2,100.0)% 0.1
 —% (3.3) (3,300.0)%
Management contracts3.1
 96.9% 2.2
 66.7 % 8.5
 85.9% 9.7
 89.8 %
Total Other3.5
  
 0.1
  
 8.6
 

 6.4
 

Total gross profit43.9
 
 42.8
 
 129.3
 
 130.5
 
General and administrative expenses20.3
 
 23.7
 
 67.0
 
 74.2
 
General and administrative expense percentage of gross profit46.2% 
 55.4% 
 51.8% 
 56.9% 
Depreciation and amortization7.8
 
 8.3
 
 26.8
 
 24.4
 
Operating income15.8
 
 10.8
 
 35.5
 
 31.9
 

Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended
2016 Gross
Margin
%		 2015 Gross
Margin
%		 2016 Gross
Margin
%		 2015 Gross
Margin
%
(millions) (unaudited)March 31, 2017 Gross
Margin
%		 March 31, 2016 Gross
Margin
%
Parking Services Revenue 
  
  
  
Region One 
  
  
  
Lease contracts$99.8
  
 $108.0
  
Management contracts68.1
  
 64.5
  
Total Region One167.9
  
 172.5
  
Region Two 
  
  
  
Lease contracts31.0
  
 30.5
  
Management contracts21.8
  
 24.1
  
Total Region Two52.8
  
 54.6
  
Other 
  
  
  
Lease contracts—
  
 —
  
Management contracts2.2
  
 2.6
  
Total Other2.2
  
 2.6
  
Reimbursed management contract revenue191.6
  
 167.9
  
Total Parking Services Revenue$414.5
  
 $397.6
  
Gross Profit 
  
  
  
Region One 
  
  
  
Lease contracts3.3
 3% $6.7
 6%
Management contracts24.6
 36% 22.2
 34%
Total Region One27.9
  
 28.9
  
Region Two 
  
  
  
Lease contracts1.2
 4% 0.7
 2%
Management contracts6.3
 29% 4.4
 18%
Total Region Two7.5
  
 5.1
  
Other 
  
  
  
Lease contracts0.5
 —% 0.5
 —%
Management contracts4.6
 209% 3.9
 150%
Total Other5.1
  
 4.4
  
Total gross profit40.5
 
 $38.4
 
General and administrative expenses21.2
 
 24.6
 
General and administrative expense percentage of gross profit52% 
 64% 
Depreciation and amortization6.6
 
 9.2
 
Operating income12.7
 
 4.6
 
Other expenses (income) 
    
   

 
 

 
 
  
  
  
Interest expense2.7
   2.9
   8.1
 
 10.0
 
2.6
  
 2.8
  
Interest income(0.1)   —
   (0.4) 
 (0.1) 
(0.1)  
 (0.2)  
Gain on a sale of business—
 
 (0.5) 
 —
 
 (0.5) 
Equity in losses from investment in unconsolidated entity0.4
 
 0.4
 
 1.2
 
 1.2
 
0.2
  
 0.5
  
Total other expenses (income)3.0
 
 2.8
 
 8.9
 
 10.6
 
2.7
 

 3.1
 

Earnings before income taxes12.8
   8.0
   26.6
 
 21.3
 
10.0
  
 1.5
  
Income tax expense5.1
   3.5
   10.9
 
 4.5
 
3.3
  
 0.9
  
Net income7.7
   4.5
   15.7
 
 16.8
 
6.7
  
 0.6
  
Less: Net income attributable to noncontrolling interest0.7
   0.8
   2.2
 
 2.0
 
0.7
  
 0.6
  
Net income attributable to SP Plus Corporation$7.0
   $3.7
   $13.5
 
 $14.8
 
$6.0
  
 $—
  



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following discussion of our results of operations should be read in conjunction with the 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 year ended December 31, 2015.2016.
 
Important Information Regarding Forward-Looking Statements
 
This Quarterly Report on Form 10-Q is being filed by SP Plus Corporation (“we”, “SP Plus” or the “Company”) with the Securities and Exchange Commission (“SEC”) and contains forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words “expect,” “estimate,” “intend”, “will,” “predict,” “project,” “may,” “should,” “could,” “believe,” “would,” “might,” “anticipate,” or words of 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”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995.  These forward looking statements are made based on management’s 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 management’s 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.
 
Although we believe there is a reasonable basis for the forward-looking statements, our actual results could be materially different. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth on our description of risk factors in Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2016, 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, changed circumstances, future events or for any other reason.
 
Overview
 
Our Business
We provide parking management, ground transportation and other ancillary services to commercial, institutional and municipal clients in urban markets and airports across the United States, Puerto Rico and Canada. Our services include a comprehensive set of on-site parking management and ground transportation services, which include facility maintenance, security services, training, scheduling and supervising all service personnel as well as providing customer service, marketing, and accounting and revenue control functions necessary to facilitate the operation of our clients’ facilities.clients' facilities or events. We also provide a range of ancillary services such as airport shuttle operations, valet services, taxi and livery dispatch services and municipal meter revenue collection and enforcement services. We typically enter into contractual relationships with property owners or managers as opposed to owning facilities.

We operate our clients’ properties through two types of arrangements: management contracts and leases. Under a management contract, we typically receive a base monthly fee for managing the facility, and we may also receive an incentive fee based on the achievement of facility performance objectives. We also receive fees for ancillary services. Typically, all of the underlying revenues and expenses under a standard management contract flow through to our clients rather than to us. However, some management contracts, which are referred to as “reverse” management contracts, usually provide for larger management fees and require us to pay various costs. Under lease arrangements, we generally pay to the property owner a fixed annual rent, a percentage of gross customer collections or a combination thereof. We collect all revenues under lease arrangements and we are responsible for most operating expenses, but we are typically not responsible for major maintenance, capital expenditures or real estate taxes. Margins for lease contracts vary significantly, not only due to operating performance, but also due to variability of parking rates in different cities and varying space utilization by parking facility type and location.  As of September 30, 2016,March 31, 2017, we operated 81% of our locations under management contracts and 19% under leases.
 
In evaluating our financial condition and operating performance, management’s primary focus is on our gross profit and total general and administrative expense. Although the underlying economics to us of management contracts and leases are similar, the manner in which we are required to account for them differs. Revenue from leases includes all gross customer collections derived from our leased locations (net of local parking taxes), whereas revenue from management contracts only includes our contractually agreed upon management fees and amounts attributable to ancillary services. Gross customer collections at facilities under management contracts, therefore, are not included in our revenue. Accordingly, while a change in the proportion of our operating agreements that are structured as leases versus management contracts may cause significant fluctuations in reported revenue and expense of parking services that change will not artificially affect our gross profit. For example, as of September 30, 2016,March 31, 2017, 81% of our locations were operated under management contracts and 77%88% of our gross profit for the ninethree months ended September 30, 2016March 31, 2017 was derived from management contracts. Only 39%41% of total revenue (excluding reimbursed management contract revenue), however, was from management contracts because under those contracts the revenue collected from parking customers belongs to our clients. Therefore, gross profit and total general and administrative expense, rather than revenue, are management’s primary focus.


General Business Trends

We believe that sophisticated commercial real estate developers and property managers and owners recognize the potential for parking and related services to be a profit generator rather than a cost center. Often, the parking experience makes both the first and the last impressions on their properties' tenants and visitors. By outsourcing these services, they are able to capture additional profit by leveraging the unique operational skills and controls that an experienced parking management company can offer. Our ability to consistently deliver a uniformly high level of parking and related services, andincluding the use of various technological enhancements, allows us to maximize the profit to our clients and improves our ability to win contracts and retain existing locations. Our focus on customer service and satisfaction is a key driver of our high location retention rate, which was approximately 88%94% and 89% as of September 30,84% for the twelve month periods ended March 31, 2017 and 2016, and 2015, respectively.

Summary of Operating Facilities
 
We focus our operations in core markets where a concentration of locations improves customer service levels and operating margins. The following table reflects our facilities operated at the end of the periods indicated:
September 30, 2016
 December 31, 2015
 September 30, 2015
March 31, 2017
 December 31, 2016
 March 31, 2016
Leased facilities (1)696
 713
 739
702
 688
 706
Managed facilities (1)3,025
 3,161
 3,161
2,976
 2,966
 3,155
Total facilities3,721
 3,874
 3,900
Total facilities (1) (2)3,678
 3,654
 3,861

(1) Includes partial ownership in onetwo managed facilityfacilities and one leased facility acquired in the Central Merger.
(2) December 31, 2016 and March 31, 2016 facilities are adjusted for Click and Park locations due to the termination of the transition services agreement.

Revenue
 
We recognize parking services revenue from lease and management contracts as the related services are provided. Substantially all of our revenue comes from the following two sources:
 
Parking services revenue—lease contracts. Parking services revenue related to lease contracts consist of all revenue received at a leased facility, including parking receipts (net of local parking tax), consulting and real estate development fees, gains on sales of contracts and payments for exercising termination rights.
 
Parking services revenue—management contracts. Management contract revenue consists of management fees, including both fixed and performance-based fees, and amounts attributable to ancillary services such as accounting, equipment leasing, payments received for exercising termination rights, consulting, developmental fees, gains on sales of contracts, insurance and other value-added services with respect to managed locations. We believe we generally purchase required insurance at lower rates than our clients can obtain on their own because we effectively self-insure for all liability and worker’s compensation and health care claims by maintaining a large per-claim deductible. As a result, we have generated operating income on the insurance provided under our management contracts by focusing on our risk management efforts and controlling losses. Management contract revenues do not include gross customer collections at the managed locations as these revenues belong to the property owner rather than to us. Management contracts generally provide us with a management fee regardless of the operating performance of the underlying facilities.
 
Conversions between types of contracts, lease or management, are typically determined by our client and not us. Although the underlying economics to us of management contracts and leases are similar, the manner in which we account for them differs substantially.
 
Reimbursed Management Contract Revenue
 
Reimbursed management contract revenue consists of the direct reimbursement from the property owner for operating expenses incurred under a management contract, which are reflected in our revenue.
 
Cost of Parking Services
 
Our cost of parking services consists of the following:
 
Cost of parking services—lease contracts. The cost of parking services under a lease arrangement consists of contractual rental fees paid to the facility owner and all operating expenses incurred in connection with operating the leased facility. Contractual fees paid to the facility owner are generally based on either a fixed contractual amount or a percentage of gross revenue or a combination thereof. Generally, under a lease arrangement we are not responsible for major capital expenditures or real estate taxes.
 

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

Reimbursed Management Contract Expense
 
Reimbursed management contract expense consists of direct reimbursed costs incurred on behalf of property owners under a management contract, which are reflected in our cost of parking services.
 
Gross Profit
 
Gross profit equals our revenue less the cost of generating such revenue. This is the key metric we use to examine our performance because it captures the underlying economic benefit to us of both lease contracts and management contracts.
 
General and Administrative Expenses
 
General and administrative expenses include salaries, wages, payroll taxes, insurance, travel and office related expenses for our headquarters, field offices, supervisory employees, and board of directors.
 
Depreciation and Amortization
 
Depreciation is determined using a straight-line method over the estimated useful lives of the various asset classes, or in the case of leasehold improvements, over the initial term of the operating lease or its useful life, whichever is shorter. Intangible assets determined to have finite lives are amortized over their remaining estimated useful life.
 
Results of Operations
 
Segments

An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses, and about which separate financial information is regularly evaluated by our chief operating decision maker (“CODM”), in deciding how to allocate resources. Our CODM is our chief executive officer.
Effective January 1, 2016,In the first quarter of 2017, we began certain organizational and executive leadership changes to align with how our CODM reviews performance and makes decisions in managingchanged the Company and therefore, changed internal operatingreporting segment information reported to theour CODM. The operating segments are internally reported as Region One (Urban), Region Two (Airport transportation)region one (Commercial) and Region Three (other reporting units of USA Parking and event planning and transportation services)region two (Airports). All prior periods presented have been restated to reflect the new internal reporting to the CODM.
Region One (Urban)one (Commercial) encompasses operationsour services in Alabama, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, Puerto Rico,healthcare facilities, municipalities, including meter revenue collection and the three Canadian provinces of Alberta, Ontarioenforcement services, government facilities, hotels, commercial real estate, residential communities, retail, colleges and Quebec.

Region Two (Airport transportation) encompasses all major airportuniversities, as well as ancillary services such as shuttle and transportation operations nationwide.

Region Three encompasses other operating segments including USA Parkingservices, valet services, taxi and livery dispatch services and event planning, including shuttle and transportation services.

Region two (Airports) encompasses our services at all major airports as well as ancillary services, which includes shuttle and transportation services and valet services.
Other"Other" consists of ancillary revenue that is not specifically identifiable to a region and certain unallocated items, such as and including prior year insurance reservesreserve adjustments.
















The following is a summary of revenues (excluding reimbursed management contract revenue), cost of parking services and gross profit by regions for the three and nine months ended September 30, 2016March 31, 2017 and 2015:2016:
 
Three Months Ended September 30, 2016March 31, 2017 Compared to Three Months September 30, 2015March 31, 2016
 
Segment revenue information is summarized as follows (unaudited):follows:
Three Months Ended September 30,Three Months Ended March 31,
Region One Region Two Region Three Other Total VarianceRegion One Region Two Other Total Variance
(millions)2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Amount %
(millions) (unaudited)2017 2016 2017 2016 2017 2016 2017 2016 Amount %
Lease contract revenue: 
  
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
New locations$4.6
 $0.3
 $0.2
 $—
 $0.3
 $—
 $—
 $—
 $5.1
 $0.3
 $4.8
 1,600.0 %$4.9
 $0.3
 $0.7
 $—
 $—
 $—
 $5.6
 $0.3
 $5.3
 1,766.7 %
Contract expirations0.5
 14.9
 —
 1.0
 0.3
 0.2
 —
 —
 0.8
 16.1
 (15.3) (95.0)%0.6
 13.1
 —
 1.3
 —
 —
 0.6
 14.4
 (13.8) (95.8)%
Same locations94.3
 92.4
 31.1
 30.8
 0.9
 0.8
 —
 (0.1) 126.3
 123.9
 2.4
 1.9 %92.0
 91.3
 30.3
 29.2
 —
 —
 122.3
 120.5
 1.8
 1.5 %
Conversions3.7
 6.2
 —
 —
 0.2
 0.1
 —
 —
 3.9
 6.3
 (2.4) (38.1)%2.3
 3.3
 —
 —
 —
 —
 2.3
 3.3
 (1.0) (30.3)%
Total lease contract revenue$103.1
 $113.8
 $31.3
 $31.8
 $1.7
 $1.1
 $—
 $(0.1) $136.1
 $146.6
 $(10.5) (7.2)%$99.8
 $108.0
 $31.0
 $30.5
 $—
 $—
 $130.8
 $138.5
 $(7.7) (5.6)%
Management contract revenue: 
  
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
New locations$7.1
 $0.9
 $2.2
 $0.3
 $1.3
 $0.1
 $—
 $—
 $10.6
 $1.3
 $9.3
 715.4 %$10.8
 $1.1
 $3.2
 $0.6
 $—
 $—
 $14.0
 $1.7
 $12.3
 723.5 %
Contract expirations0.5
 5.2
 —
 10.6
 0.3
 0.9
 —
 —
 0.8
 16.7
 (15.9) (95.2)%0.4
 6.8
 —
 8.0
 —
 —
 0.4
 14.8
 (14.4) (97.3)%
Same locations43.5
 41.5
 18.5
 15.7
 7.3
 7.2
 3.2
 3.3
 72.5
 67.7
 4.8
 7.1 %56.8
 56.5
 18.6
 15.5
 2.2
 2.6
 77.6
 74.6
 3.0
 4.0 %
Conversions0.1
 0.1
 —
 —
 0.1
 —
 —
 —
 0.2
 0.1
 0.1
 100.0 %0.1
 0.1
 —
 —
 —
 —
 0.1
 0.1
 —
 — %
Total management contract revenue$51.2
 $47.7
 $20.7
 $26.6
 $9.0
 $8.2
 $3.2
 $3.3
 $84.1
 $85.8
 $(1.7) (2.0)%$68.1
 $64.5
 $21.8
 $24.1
 $2.2
 $2.6
 $92.1
 $91.2
 $0.9
 1.0 %
 
Parking services revenue—lease contracts.  Lease contract revenue decreased $10.5$7.7 million, or 7.2%5.6%, to $136.1$130.8 million for the three months ended September 30, 2016,March 31, 2017, compared to $146.6$138.5 million for the three months ended September 30, 2015.March 31, 2016. The decrease in lease contract revenue resulted primarily from decreasesincreases of $15.3$5.3 million from new locations and $1.8 million from same locations, completely offset by a $13.8 million decrease in revenue from contract expirations and $2.4$1.0 million from locations that converted from management contracts during the year, partially offset by increases of $4.8 million from new locations and $2.4 million from same locations.periods presented. Same location revenue increases wereincreased $1.8 million or 1.5%, primarily due to increases in short-termmonthly parking revenue and monthly parkertransient revenue.
 
From a reporting segment perspective, lease contract revenue decreased primarily due to decreases in contract expirations in regions one and two and conversionconversions in region one, partially offset by increases in new locations in all three regions one and two and same locations in all three regions one and other, contract expirations in region three and conversions in region three.two. The other region amounts in same location represent revenue not specifically identifiable to a region.
 
Revenue associated with same store represents locations that have been operating for at least one year and operating for the entire period in the comparative period being presented. Revenue associated with contract expirations relates to contracts that have expired, however, we were operating the facility in the comparative period presented.
 
Parking services revenue—management contracts. Management contract revenue decreased $1.7increased $0.9 million, or 2.0%1.0%, to $84.1$92.1 million for the three months ended September 30, 2016,March 31, 2017, compared to $85.8$91.2 million for the three months ended September 30, 2015.March 31, 2016.  The decreaseincrease in management contract revenue resulted primarily from a decrease of $15.9 million from contract expirations, partially offset by increases of $9.3$12.3 million from new locations $4.8and $3.0 million from same locations, and $0.1partially offset by a $14.4 million decrease in revenue from locations that converted from lease contracts during the year.contract expirations. Same location revenue increases wereincreased $3.0 million, or 4.0% primarily due to an increase in otherfees from ancillary services revenue and incentive fees.services.

From a reporting segment perspective, management contract revenue decreasedincreased primarily due to decreasesincreases from new locations in contract expirations in all three regions one and two and same locations in other,regions one and two, partially offset by increasesdecreases in new locationsrevenue from contract expirations in all three regions one and two and same locations in all three regions and conversions in region three.other. The other region amounts in same location represent revenues not specifically identifiable to a region.
 
Revenue associated with same store represents locations that have been operating for at least one year and operating for the entire period in the comparative period being presented. Revenue associated with contract expirations relates to contracts that have expired, however, we were operating the facility in the comparative period presented.
 
Reimbursed management contract revenue. Reimbursed management contract revenue increased $20.6$23.7 million, or 12.2%14.1%, to $188.9$191.6 million for the three months ended September 30, 2016,March 31, 2017, compared to $168.3$167.9 million for the three months ended September 30, 2015.March 31, 2016. This increase resulted primarily from additionalan increase in reimbursements for costs incurred on behalf of owners.

Segment cost of parking services information is summarized as follows (unaudited):follows:
Three Months Ended September 30,Three Months Ended March 31,
Region One Region Two Region Three Other Total VarianceRegion One Region Two Other Total Variance
(millions)2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Amount %
(millions) (unaudited)2017 2016 2017 2016 2017 2016 2017 2016 Amount %
Cost of parking services lease contracts: 
  
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
New locations$4.6
 $0.3
 $0.2
 $—
 $0.3
 $—
 $—
 $—
 $5.1
 $0.3
 $4.8
 1,600.0 %$4.6
 $0.3
 $0.6
 $—
 $—
 $—
 $5.2
 $0.3
 $4.9
 1,633.3 %
Contract expirations0.7
 13.4
 —
 1.0
 0.2
 0.4
 —
 —
 0.9
 14.8
 (13.9) (93.9)%0.6
 12.2
 —
 1.3
 —
 —
 0.6
 13.5
 (12.9) (95.6)%
Same locations86.2
 83.2
 29.6
 29.1
 0.7
 0.6
 (0.4) 2.0
 116.1
 114.9
 1.2
 1.0 %89.0
 85.9
 29.2
 28.5
 (0.5) (0.5) 117.7
 113.9
 3.8
 3.3 %
Conversions3.5
 6.0
 —
 —
 0.2
 —
 —
 —
 3.7
 6.0
 (2.3) (38.3)%2.3
 2.9
 —
 —
 —
 —
 2.3
 2.9
 (0.6) (20.7)%
Total cost of parking services lease contracts$95.0
 $102.9
 $29.8
 $30.1
 $1.4
 $1.0
 $(0.4) $2.0
 $125.8
 $136.0
 $(10.2) (7.5)%$96.5
 $101.3
 $29.8
 $29.8
 $(0.5) $(0.5) $125.8
 $130.6
 $(4.8) (3.7)%
Cost of parking services management contracts: 
  
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
New locations$5.0
 $0.8
 $2.2
 $0.1
 $0.9
 $—
 $—
 $—
 $8.1
 $0.9
 $7.2
 800.0 %$6.5
 $0.6
 $3.2
 $0.7
 $—
 $—
 $9.7
 $1.3
 $8.4
 646.2 %
Contract expirations0.6
 3.0
 (0.1) 10.6
 0.2
 0.8
 —
 —
 0.7
 14.4
 (13.7) (95.1)%0.5
 4.6
 —
 7.6
 —
 —
 0.5
 12.2
 (11.7) (95.9)%
Same locations24.2
 22.3
 12.5
 10.2
 4.8
 4.6
 0.1
 1.1
 41.6
 38.2
 3.4
 8.9 %36.5
 37.0
 12.3
 11.4
 (2.4) (1.3) 46.4
 47.1
 (0.7) (1.5)%
Conversions0.1
 0.1
 —
 —
 —
 —
 —
 —
 0.1
 0.1
 —
 — %—
 0.1
 —
 —
 —
 —
 —
 0.1
 (0.1) — %
Total cost of parking services management contracts$29.9
 $26.2
 $14.6
 $20.9
 $5.9
 $5.4
 $0.1
 $1.1
 $50.5
 $53.6
 $(3.1) (5.8)%$43.5
 $42.3
 $15.5
 $19.7
 $(2.4) $(1.3) $56.6
 $60.7
 $(4.1) (6.8)%
 
Cost of parking services—lease contracts.  Cost of parking services for lease contracts decreased $10.2$4.8 million, or 7.5%3.7%, to $125.8 million for the three months ended September 30, 2016,March 31, 2017, compared to $136.0$130.6 million for the three months ended September 30, 2015.March 31, 2016.  The decrease in cost of parking services for lease contracts resulted primarily from decreases of $13.9$12.9 million from contract expirations and $2.3$0.6 million from locations that converted from management contracts during the periods presented, partially offset by a $4.8increases of $4.9 million increase from new locations and $1.2$3.8 million from same locations. Same location costs increased $3.8 million, or 3.3%, primarily due to higheran increase in rent expense as a result of higher revenuerevenues for same locations, partially offset by lowerdecreased costs not specifically allocatedrelating to regions in other.certain unallocated insurance reserve adjustments.

From a reporting segment perspective, cost of parking services for lease contracts decreased primarily due to decreases infrom contract expirations in all three regions same locations in otherone and two and conversions in region one, partially offset by increases in new locations in all three regions one and two and same locations in all three regions one and conversionstwo. The other region amounts in region three.same location represent costs not specifically identifiable to a region.

Cost of parking services associated with same store represents locations that have been operating for at least one year and operating for the entire period in the comparative period being present. Cost of parking services associated with contract expirations relates to contacts that have expired, however, we were operating the facility in the comparative period presented.
 
Cost of parking services—management contracts.  Cost of parking services for management contracts decreased $3.1$4.1 million, or 5.8%6.8%, to $50.5$56.6 million for the three months ended September 30, 2016,March 31, 2017, compared to $53.6$60.7 million for the three months ended September 30, 2015.March 31, 2016. The decrease in cost of parking services for management contracts resulted primarily from decreases of $13.7$11.7 million from contract expirations, partially offset by increases of $7.2 million from new locations and $3.4$0.7 million from same locations. Costs forlocations and $0.1 million from locations that converted from lease contracts were unchanged forduring the three months ended September 30, 2016, compared to September 30, 2015.periods presented, partially offset by an increase of $8.4 million from new locations. Same location costs increaseddecreased $0.7 million, or 1.5%, primarily due to higherdecreased costs relatedrelating to operations and ancillary services,certain unallocated insurance reserve adjustments, partially offset by loweran increase in costs not specifically allocated to regions.from ancillary services.
 
From a reporting segment perspective, cost of parking services for management contracts decreased primarily due tofrom contract expirations in all three regions one and two, same locations in region one and other and conversions in region one, partially offset by increases from new locations in regions one and two and same locations in regions one and two. The other partially offset by increasesregion amounts in new locations in all three regions and same locations in all three regions.location represent costs not specifically identifiable to a region.
 
RevenueCost of parking services associated with same store represents locations that have been operating for at least one year and operating for the entire period in the comparative period being presented. Cost of parking associated with contract expirations relates to contracts that have expired, however, we were operating the facility in the comparative period presented.
 
Reimbursed management contract expense. Reimbursed management contract expense increased $20.6$23.7 million, or 12.2%14.1%, to $188.9$191.6 million for the three months ended September 30, 2016,March 31, 2017, compared to $168.3$167.9 million for the three months ended September 30, 2015.March 31, 2016. This increase resulted primarily from additionalan increase in reimbursements for costs incurred on behalf of owners.owner

Segment gross profit/gross profit percentage information is summarized as follows (unaudited):
follows:
Three Months Ended September 30,Three Months Ended March 31,
Region One Region Two Region Three Other Total VarianceRegion One Region Two Other Total Variance
(millions)2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Amount %
(millions) (unaudited)2017 2016 2017 2016 2017 2016 2017 2016 Amount %
Gross profit lease contracts: 
  
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
New locations$—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 — %$0.3
 $—
 $0.1
 $—
 $—
 $—
 $0.4
 $—
 $0.4
 — %
Contract expirations(0.2) 1.5
 —
 —
 0.1
 (0.2) —
 —
 (0.1) 1.3
 (1.4) (107.7)%—
 0.9
 —
 —
 —
 —
 —
 0.9
 (0.9) (100.0)%
Same locations8.1
 9.2
 1.5
 1.7
 0.2
 0.2
 0.4
 (2.1) 10.2
 9.0
 1.2
 13.3 %3.0
 5.4
 1.1
 0.7
 0.5
 0.5
 4.6
 6.6
 (2.0) (30.3)%
Conversions0.2
 0.2
 —
 —
 —
 0.1
 —
 —
 0.2
 0.3
 (0.1) (33.3)%—
 0.4
 —
 —
 —
 —
 —
 0.4
 (0.4) (100.0)%
Total gross profit lease contracts$8.1
 $10.9
 $1.5
 $1.7
 $0.3
 $0.1
 $0.4
 $(2.1) $10.3
 $10.6
 $(0.3) (2.8)%$3.3
 $6.7
 $1.2
 $0.7
 $0.5
 $0.5
 $5.0
 $7.9
 $(2.9) (36.7)%
(Percentages)(Percentages)
Gross profit percentage lease contracts: 
  
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
New locations— % —% —% —% —% — % —% —% — % —%    6.1 % —% 14.3% — % —% —% 7.1 % —%    
Contract expirations(40.0)% 10.1% —% —% 33.3% (100.0)% —% —% (12.5)% 8.1%    — % 6.9% —% — % —% —% — % 6.3%    
Same locations8.6 % 10.0% 4.8% 5.5% 22.2% 25.0 % —% 2,100.0% 8.1 % 7.3%    3.3 % 5.9% 3.6% 2.4 % —% —% 3.8 % 5.5%    
Conversions5.4 % 3.2% —% —% —% 100.0 % —% —% 5.1 % 4.8%    — % 12.1% —% — % —% —% — % 12.1%    
Total gross profit percentage7.9 % 9.6% 4.8% 5.3% 17.6% 9.1 % —% 2,100.0% 7.6 % 7.2%    3.3 % 6.2% 3.9% 2.3 % —% —% 3.8 % 5.7%    
Gross profit management contracts: 
  
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
New locations$2.1
 $0.1
 $—
 $0.2
 $0.4
 $0.1
 $—
 $—
 $2.5
 $0.4
 $2.1
 525.0 %$4.3
 $0.5
 $—
 $(0.1) $—
 $—
 $4.3
 $0.4
 $3.9
 975.0 %
Contract expirations(0.1)��2.2
 0.1
 —
 0.1
 0.1
 —
 —
 0.1
 2.3
 (2.2) (95.7)%(0.1) 2.2
 —
 0.4
 —
 —
 (0.1) 2.6
 (2.7) (103.8)%
Same locations19.3
 19.2
 6.0
 5.5
 2.5
 2.6
 3.1
 2.2
 30.9
 29.5
 1.4
 4.7 %20.3
 19.5
 6.3
 4.1
 4.6
 3.9
 31.2
 27.5
 3.7
 13.5 %
Conversions—
 —
 —
 —
 0.1
 —
 —
 —
 0.1
 —
 0.1
 — %0.1
 —
 —
 —
 —
 —
 0.1
 —
 0.1
 — %
Total gross profit management contracts$21.3
 $21.5
 $6.1
 $5.7
 $3.1
 $2.8
 $3.1
 $2.2
 $33.6
 $32.2
 $1.4
 4.3 %$24.6
 $22.2
 $6.3
 $4.4
 $4.6
 $3.9
 $35.5
 $30.5
 $5.0
 16.4 %
 (Percentages)
Gross profit percentage management contracts: 
  
  
  
  
  
    
  
  
  
  
 
  
  
  
    
  
  
  
  
New locations29.6 % 11.1% —% 66.7% 30.8% 100.0 % —% —% 23.6 % 30.8%    39.8 % 45.5% —% (16.7)% —% —% 30.7 % 23.5%    
Contract expirations(20.0)% 42.3% —% —% 33.3% 11.1 % —% —% 12.5 % 13.8%    (25.0)% 32.4% —% 5.0 % —% —% (25.0)% 17.6%    
Same locations44.4 % 46.3% 32.4% 35.0% 34.2% 36.1 % 96.9% 66.7% 42.6 % 43.6%    35.7 % 34.5% 33.9% 26.5 % 209.1% 150.0% 40.2 % 36.9%    
Conversions— % —% —% —% 100.0% — % —% —% 50.0 % —%    100.0 % —% —% — % —% —% 100.0 % —%    
Total gross profit percentage41.6 % 45.1% 29.5% 21.4% 34.4% 34.1 % 96.9% 66.7% 40.0 % 37.5%    36.1 % 34.4% 28.9% 18.3 % 209.1% 150.0% 38.5 % 33.4%    
 
Gross profit—lease contracts. Gross profit for lease contracts decreased $0.3$2.9 million, or 2.8%36.7%, to $10.3$5.0 million for the three months ended September 30, 2016,March 31, 2017, compared to $10.6$7.9 million for three months ended September 30, 2015.March 31, 2016. Gross profit percentage for lease contracts increaseddecreased to 7.6%3.8% for the three months ended September 30, 2016,March 31, 2017, compared to 7.2%5.7% for the three months ended September 30, 2015.March 31, 2016. Gross profit for lease contracts decreased primarily as a result of decreases in gross profit for contract expirations, same locations and locations that converted from management contracts during the periods presented, partially offset by increases in samenew locations. Gross profit for same locations increased primarily due to increased short term and monthly parkerlease revenue and an increasea decrease in gross profit in other,unallocated insurance reserve adjustments, partially offset by an increase in rent expense as a result of higher lease revenue.
 
From a reporting segment perspective, gross profit for lease contracts decreased primarily fromdue to decreases in contract expirations in region one, same locations in region one and conversions in region one, partially offset by increases in gross profit from new locations in regions one and two and conversions in region three, partially offset by increases in contract expirations in region three and same locations in other.region two.

Gross profit associated with same store represents locations that have been operating for at least one year and operating for the entire period in the comparative period being present. Gross profit associated with contract expirations relates to contracts that have expired, however, we were operating the facility in the comparative period presented.
 

Gross profit—management contracts. Gross profit for management contracts increased $1.4$5.0 million, or 4.3%16.4%, to $33.6$35.5 million for the three months ended September 30, 2016,March 31, 2017, compared to $32.2$30.5 million for the three months ended September 30, 2015.March 31, 2016. Gross profit percentage for management contracts increased to 40.0%38.5% for three months ended September 30, 2016,March 31, 2017, compared to 37.5%33.4% for three months ended September 30, 2015. The increase in grossMarch 31, 2016. Gross profit for management contracts was primarilyincreased as a result of increases in gross profit for new locations, same locations and locations that converted from lease contracts during the periods presented, partially offset by a decreasedecreases in

contract expirations. Gross profit for same locations increased primarily due to higher revenues foran increase in revenue from ancillary servicesfees and a decrease indecreased costs relating to certain operating costs not allocated to a region,unallocated reserve adjustments, partially offset by an increase inincreased costs for ancillary services.
 
From a reporting segment perspective, gross profit for management contracts increased primarily due to increases infrom new locations in regionsregion one and three, contract expirations in region two, same locations in regions one and two and other, and conversions in region three,one, partially offset by decreases in new locations in region two, contract expirations in regionregions one and same locations in region three.two.
 
Gross profit associated with same store represents locations that have been operating for at least one year and operating for the entire period in the comparative period being present. Gross profit associated with contract expirations relates to contracts that have expired, however, we were operating the facility in the comparative period presented.

General and administrative expenses. General and administrative expenses decreased $3.4 million, or 14.3%13.8%, to $20.3$21.2 million for the three months ended September 30, 2016, asMarch 31, 2017, compared to $23.7$24.6 million for the three months ended September 30, 2015.March 31, 2016. The decrease in general and administrative expenses overall was due primarily to a decrease in restructuring,compensation and benefit costs related to cost reduction initiatives, merger and integration costs, including severance and benefit expenses, reductions in compensation and benefitrelated costs, and overall better expense control, partially offset by an increase incontrol. Additionally, the three months ended March 31, 2016 included costs forrelated to the preliminary non-binding settlement of indemnitylitigation with a former indirect controlling shareholder of the Company for adverse consequences with Central's former stockholders$1.5 million, net of $0.8 million.insurance recoveries.

Depreciation and amortization. Depreciation and amortization decreased $0.5$2.6 million, or 6.0%28.3%, to $7.8$6.6 million for the three months ended September 30, 2016, asMarch 31, 2017, compared to $8.3$9.2 million for the three months ended September 30, 2015.March 31, 2016. This decrease was primarily a result of a decreaseaccelerated depreciation of software during the three months ended March 31, 2016. Additionally, the three months ended March 31, 2017 did not include amortization of certain intangible assets as they were fully amortized in amortization and depreciation for investments in certain information system enhancements and infrastructure.2016.
 
Interest expense. Interest expense decreased $0.2 million, or 6.9%7.1%, to $2.7$2.6 million for the three months ended September 30, 2016, asMarch 31, 2017, compared to $2.9$2.8 million for the three months ended September 30, 2015.March 31, 2016.  The decrease in interest expense was primarily related to decreases in average borrowing rates and reductions in amounts outstanding under our SeniorRestated Credit Facility, and Restated Credit Facility.partially offset by an increase in average borrowing rates.

Interest income. Interest income was $0.1 million and nil$0.2 million for the three months ended September 30,March 31, 2017 and 2016, and 2015, respectively.

Gain on sale of a business. During the three months ended September 30, 2015, the Company recognized a gain of $0.5 million on the sale of the Company's security business primarily operating in the Southern California market.

Equity in losses from investment in unconsolidated entity. Equity in losses from investment in unconsolidated entity was $0.4$0.2 million and $0.5 million for the three months ended September 30,March 31, 2017 and 2016, and 2015.respectively.
 
Income tax expense. Income tax expense increased $1.6$2.4 million, or 45.7%266.7%, to $5.1$3.3 million for the three months ended September 30, 2016, asMarch 31, 2017, compared to $3.5$0.9 million for the three months ended September 30, 2015.March 31, 2016. Our effective tax rate was 39.8%33.4% for the three months ended September 30, 2016,March 31, 2017, compared to 43.8%58.0% for the three months ended September 30, 2015. An increase in our earnings before income taxes resulted in $1.9 million increase in income tax expense, partially offset by a decrease in our effective tax rate, resulting in a $0.3 million decrease in income tax expense.

























Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

Segment revenue information is summarized as follows (unaudited):

 Nine Months Ended September 30,
 Region One Region Two Region Three Other Total Variance
(millions)2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Amount %
Lease contract revenue

 

 

 

 

 

 

 

 

 

 

 

New locations$13.4
 $2.0
 $56.4
 $53.7
 $0.3
 $—
 $—
 $—
 $70.1
 $55.7
 $14.4
 25.9 %
Contract expirations11.0
 46.6
 0.1
 3.4
 0.7
 0.9
 —
 —
 11.8
 50.9
 (39.1) (76.8)%
Same locations275.2
 266.7
 37.2
 37.3
 2.5
 2.4
 —
 0.1
 314.9
 306.5
 8.4
 2.7 %
Conversions12.7
 15.6
 —
 —
 0.8
 0.2
 —
 —
 13.5
 15.8
 (2.3) (14.6)%
Total lease contract revenue$312.3
 $330.9
 $93.7
 $94.4
 $4.3
 $3.5
 $—
 $0.1
 $410.3
 $428.9
 $(18.6) (4.3)%
Management contract revenue

 

 

 

 

 

 

 

 

 

 

 

New locations$20.4
 $3.9
 $9.4
 $0.4
 $3.4
 $0.6
 $—
 $—
 $33.2
 $4.9
 $28.3
 577.6 %
Contract expirations3.9
 20.0
 9.7
 31.5
 4.2
 7.8
 —
 —
 17.8
 59.3
 (41.5) (70.0)%
Same locations122.6
 118.4
 50.1
 46.3
 27.8
 28.1
 9.9
 10.8
 210.4
 203.6
 6.8
 3.3 %
Conversions0.4
 0.3
 —
 —
 0.2
 0.1
 —
 —
 0.6
 0.4
 0.2
 50.0 %
Total management contract revenue$147.3
 $142.6
 $69.2
 $78.2
 $35.6
 $36.6
 $9.9
 $10.8
 $262.0
 $268.2
 $(6.2) (2.3)%

Parking services revenue—lease contracts.  Lease contract revenue decreased $18.6 million, or 4.3%, to $410.3 million for the nine months ended September 30, 2016, compared to $428.9 million for the nine months ended September 30, 2015. The decrease in lease contract revenue resulted primarily from a decrease of $39.1 million from contract expirations and $2.3 million from locations that converted from management contracts, partially offset by increases of $14.4 million from new locations and $8.4 million from same locations. Same location revenue increases were primarily due to increases in short-term parking and monthly parker revenue.
From a reporting segment perspective, lease contract revenue decreased primarily due to decreases in contract expirations in all three regions, same locations in region two and other and conversions in region one, partially offset by increases in new locations in all three regions, same locations in regions one and three and conversions in region three. The other region amounts in same location represent revenue not specifically identifiable to a region.
Revenue associated with contract expirations relates to contracts that have expired, however, we were operating the facility in the comparative period presented.
Parking services revenue—management contracts. Management contract revenue decreased $6.2 million, or 2.3%, to $262.0 million for the nine months ended September 30, 2016, compared to $268.2 million for the nine months ended September 30, 2015.  The decrease in management contract revenue resulted primarily from a decrease of $41.5 million from contract expirations, partially offset by increases of $28.3 million from new locations, $6.8 million from same locations and $0.2 million from locations that converted from lease contracts during the year. Same location revenue increases were primarily due to an increase in other ancillary services revenue and incentive fees.
From a reporting segment perspective, management contract revenue decreased primarily due to decreases in contract expirations in all three regions and same locations in region three and other, partially offset by increases in new locations in all three regions, same locations in regions one and two and conversions in regions one and three. The other region amounts in same location represent revenues not specifically identifiable to a region.
Revenue associated with contract expirations relates to contracts that have expired, however, we were operating the facility in the comparative period presented.
Reimbursed management contract revenue. Reimbursed management contract revenue increased $23.6 million, or 4.6%, to $537.0 million for the nine months ended September 30, 2016, compared to $513.4 million for the nine months ended September 30, 2015. This increase resulted from additional reimbursements for costs incurred on behalf of owners.








Segment cost of parking services information is summarized as follows (unaudited):
 Nine Months Ended September 30,
 Region One Region Two Region Three Other Total Variance
(millions)2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Amount %
Cost of parking services lease contracts:

 

 

 

 

 

 

 

 

 

 

 

New locations$13.3
 $1.8
 $55.6
 $52.6
 $0.3
 $—
 $—
 $—
 $69.2
 $54.4
 $14.8
 27.2 %
Contract expirations10.6
 43.3
 0.1
 3.3
 0.7
 1.0
 —
 —
 11.4
 47.6
 (36.2) (76.1)%
Same locations251.1
 243.1
 34.0
 34.1
 2.1
 2.0
 (0.1) 3.4
 287.1
 282.6
 4.5
 1.6 %
Conversions12.0
 14.3
 —
 —
 0.7
 0.2
 —
 —
 12.7
 14.5
 (1.8) (12.4)%
Total cost of parking services lease contracts$287.0
 $302.5
 $89.7
 $90.0
 $3.8
 $3.2
 $(0.1) $3.4
 $380.4
 $399.1
 $(18.7) (4.7)%
Cost of parking services management contracts:

 

 

 

 

 

 

 

 

 

 

 

New locations$14.1
 $2.2
 $8.7
 $0.2
 $2.3
 $0.4
 $—
 $—
 $25.1
 $2.8
 $22.3
 796.4 %
Contract expirations3.3
 12.8
 10.9
 30.8
 3.5
 6.6
 —
 —
 17.7
 50.2
 (32.5) (64.7)%
Same locations67.0
 64.2
 30.9
 28.8
 20.2
 20.3
 1.4
 1.1
 119.5
 114.4
 5.1
 4.5 %
Conversions0.1
 0.1
 —
 —
 0.2
 —
 —
 —
 0.3
 0.1
 0.2
 200.0 %
Total cost of parking services management contracts$84.5
 $79.3
 $50.5
 $59.8
 $26.2
 $27.3
 $1.4
 $1.1
 $162.6
 $167.5
 $(4.9) (2.9)%

Cost of parking services—lease contracts.  Cost of parking services for lease contracts decreased $18.7 million, or 4.7%, to $380.4 million for the nine months ended September 30, 2016, compared to $399.1 million for the nine months ended September 30, 2015.  The decrease in cost of parking services for lease contracts resulted primarily from a decrease of $36.2 million from contract expirations and $1.8 million from locations that converted from management contracts, partially offset by increases of $14.8 million from new locations and $4.5 million from same locations. Same location costs increased primarily due to higher rent expense as a result of higher revenue for same locations, partially offset by a lower costs not specifically allocated to regions in other.
From a reporting segment perspective, cost of parking services for lease contracts decreased primarily due to contract expirations in all three regions, same locations in regions two and other and conversions in region one, partially offset by increases in new locations in all three regions, same locations in regions one and three and conversions in region three.

Cost of parking services associated with contract expirations relates to contacts that have expired, however, we were operating the facility in the comparative period presented.
Cost of parking services—management contracts.  Cost of parking services for management contracts decreased $4.9 million, or 2.9%, to $162.6 million for the nine months ended September 30, 2016, compared to $167.5 million for the nine months ended September 30, 2015. The decreases in cost of parking for management contracts resulted primarily from a decrease of $32.5 million from contract expirations, partially offset by increases of $22.3 million from new locations, $5.1 million from same locations and $0.2 million from locations that converted from lease contracts. Same location costs increased primarily due to higher costs related to ancillary services, and certain costs not specifically allocated to regions in other.
From a reporting segment perspective, cost of parking services for management contract decreased primarily due to contract expirations in all three regions and same locations in region three, partially offset by increases in new locations in all three regions and same locations in regions one, two and other.

Revenue associated with contract expirations relates to contracts that have expired, however, we were operating the facility in the comparative period presented.
Reimbursed management contract expense. Reimbursed management contract expense increased $23.6 million, or 4.6%, to $537.0 million for the nine months ended September 30, 2016, compared to $513.4 million for the nine months ended September 30, 2015. This increase resulted from additional reimbursements for costs incurred on behalf of owners.










Segment gross profit/gross profit percentage information is summarized as follows (unaudited):
 Nine Months Ended September 30,
 Region One Region Two Region Three Other Total Variance
(millions)2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Amount %
Gross profit lease contracts:

 

 

 

 

 

 

 

 

 

 

 

New locations$0.1
 $0.2
 $0.8
 $1.1
 $—
 $—
 $—
 $—
 $0.9
 $1.3
 $(0.4) (30.8)%
Contract expirations0.4
 3.3
 —
 0.1
 —
 (0.1) —
 —
 0.4
 3.3
 (2.9) (87.9)%
Same locations24.1
 23.6
 3.2
 3.2
 0.4
 0.4
 0.1
 (3.3) 27.8
 23.9
 3.9
 16.3 %
Conversions0.7
 1.3
 —
 —
 0.1
 —
 —
 —
 0.8
 1.3
 (0.5) (38.5)%
Total gross profit lease contracts$25.3
 $28.4
 $4.0
 $4.4
 $0.5
 $0.3
 $0.1
 $(3.3) $29.9
 $29.8
 $0.1
 0.3 %
 (Percentages)
Gross profit percentage lease contracts:

 

 

 

 

 

 

 

 

 

 

 

New locations0.7% 10.0% 1.4 % 2.0% —% — % —% — % 1.3% 2.3% 

 

Contract expirations3.6% 7.1% — % 2.9% —% (11.1)% —% — % 3.4% 6.5% 

 

Same locations8.8% 8.8% 8.6 % 8.6% 16.0% 16.7 % —% (3,300.0)% 8.8% 7.8% 

 

Conversion5.5% 8.3% — % —% 12.5% — % —% — % 5.9% 8.2% 

 

Total gross profit percentage8.1% 8.6% 4.3 % 4.7% 11.6% 8.6 % —% (3,300.0)% 7.3% 6.9% 

 

Gross profit management contracts:

 

 

 

 

 

 

 

 

 

 

 

New locations$6.3
 $1.7
 $0.7
 $0.2
 $1.1
 $0.2
 $—
 $—
 $8.1
 $2.1
 $6.0
 285.7 %
Contract expirations0.6
 7.2
 (1.2) 0.7
 0.7
 1.2
 —
 —
 0.1
 9.1
 (9.0) (98.9)%
Same locations55.6
 54.2
 19.2
 17.5
 7.6
 7.8
 8.5
 9.7
 90.9
 89.2
 1.7
 1.9 %
Conversions0.3
 0.2
 —
 —
 —
 0.1
 —
 —
 0.3
 0.3
 —
 — %
Total gross profit management contracts$62.8
 $63.3
 $18.7
 $18.4
 $9.4
 $9.3
 $8.5
 $9.7
 $99.4
 $100.7
 $(1.3) (1.3)%
  
Gross profit percentage management contracts:

 

 

 

 

 

 

 

 

 

 

 

New locations30.9% 43.6% 7.4 % 50.0% 32.4% 33.3 % —% — % 24.4% 42.9% 

 

Contract expirations15.4% 36.0% (12.4)% 2.2% 16.7% 15.4 % —% — % 0.6% 15.3% 

 

Same locations45.4% 45.8% 38.3 % 37.8% 27.3% 27.8 % 85.9% 89.8 % 43.2% 43.8% 

 

Conversions75.0% 66.7% — % —% —% 100.0 % —% — % 50.0% 75.0% 

 

Total gross profit percentage42.6% 44.4% 27.0 % 23.5% 26.4% 25.4 % 85.9% 89.8 % 37.9% 37.5% 

 



Gross profit—lease contracts. Gross profit for lease contracts increased $0.1 million, or 0.3%, to $29.9 million for the nine months ended September 30, 2016, compared to $29.8 million for nine months ended September 30, 2015. Gross profit percentage for lease contracts increased to 7.3% for the nine months ended September 30, 2016, compared to 6.9% for the nine months ended September 30, 2015. Gross profit for lease contracts increased primarily as a result of increases in gross profit for same locations, partially offset by decreases in new locations, contract expirations, and locations that converted from management contracts. Gross profit for same locations increased primarily due to increased revenue related to short-term parking and monthly parker revenue and an overall increase in gross profit in other, partially offset by an increase rent expense as a result of higher lease revenue.
From a reporting segment perspective, gross profit for lease contracts increased primarily from contract expirations in region three, same locations in regions one and other and conversions in region three, partially offset by decreases in new locations in regions one and two and contract expirations in regions one and two and conversions in region one.
Gross profit associated with contract expirations relates to contracts that have expired, however, we were operating the facility in the comparative period presented.
Gross profit—management contracts. Gross profit for management contracts decreased $1.3 million, or 1.3%, to $99.4 million for the nine months ended September 30, 2016, compared to $100.7 million for the nine months ended September 30, 2015. Gross profit percentage for management contracts increased to 37.9% for nine months ended September 30, 2016, compared to 37.5%

for nine months ended September 30, 2015. The decrease in gross profit for management contracts was primarily a result of decreases in contract expirations, partially offset by an increase in gross profit for new locations and same locations. Gross profit for same locations decreased primarily due a decrease in overall gross profit for other-driven primarily as a result of lower revenue and higher costs not allocated to regions and an increase in costs related to ancillary services, partially offset by higher revenues for ancillary services and incentive fees.
From a reporting segment perspective, gross profit for management contracts decreased primarily due to decreases in contract expirations for all three regions, same locations in region three and other and conversions in region three, partially offset by increases in new locations in all three regions, same locations in regions one and two and conversions in region one.
Gross profit associated with contract expirations relates to contracts that have expired, however, we were operating the facility in the comparative period presented.

General and administrative expenses. General and administrative expenses decreased $7.2 million, or 9.7%, to $67.0 million for the nine months ended September 30, 2016, as compared to $74.2 million for the nine months ended September 30, 2015. The decrease in general and administrative expenses overall was due to a decrease in restructuring, merger and integration costs, including severance and benefit expenses, reductions in compensation and benefit costs and overall better expense control, partially offset by an increase in costs as a result of settling previous litigation with a former indirect controlling shareholder of the Company for $1.5 million, net of insurance recoveries, and the preliminary non-binding settlement of indemnity for adverse consequences with Central's former stockholders of $0.8 million.

Depreciation and amortization. Depreciation and amortization increased $2.4 million, or 9.8%, to $26.8 million for the nine months ended September 30, 2016, as compared to $24.4 million for the nine months ended September 30, 2015. This increase was primarily a result of an increase in amortization and depreciation for investments in information system enhancements and infrastructure.
Interest expense. Interest expense decreased $1.9 million, or 19.0%, to $8.1 million for the nine months ended September 30, 2016, as compared to $10.0 million for the nine months ended September 30, 2015.  The decrease in interest expense was primarily related to decreases in average borrowing rates and reductions in amounts outstanding under our Senior Credit Facility and Restated Credit Facility as well as $0.6 million included in interest expense for the nine months ended September 30, 2015 for the write-off of debt discount and debt issuance costs in connection with the Restated Credit Agreement.

Interest income. Interest income was $0.4 million and $0.1 million for the nine months ended September 30, 2016 and 2015, respectively.

Gain on sale of a business. During the nine months ended September 30, 2015, the Company recognized a gain of $0.5 million on the sale of the Company's security business primarily operating in the Southern California market.

Equity in losses from investment in unconsolidated entity. Equity in losses from investment in unconsolidated entity was $1.2 million for the nine months ended September 30, 2016 and 2015.
Income tax expense. Income tax expense increased $6.4 million, or 142.2%, to $10.9 million for the nine months ended September 30, 2016, as compared to $4.5 million for the nine months ended September 30, 2015. Our effective tax rate was 41.0% for the nine months ended September 30, 2016, compared to 21.0% for the nine months ended September 30, 2015.March 31, 2016. The effective tax rate for the ninethree months ended September 30, 2015 was less than the effective tax rate for the nine months ended September 30, 2016March 31, 2017 decreased primarily due to the 2015 discrete benefitadoption of ASU 2016-09 (Improvements to Employee Share-Based Payment Accounting) and the related excess tax benefits now recognized for New York, New York (Cityas a reduction of New York) law change. The valuation allowance was reversed in the second quarterincome tax expense ($0.5 million), a reduction of 2015 dueincome tax expense related to the Citybenefit realized on the settlement of New York law changes enacted April 1, 2015, which resulted in our determination that the future benefitcertain income tax related matters with a local tax jurisdiction ($0.2 million), partially offset by a write-off of deferred tax assets related to certain net operating loss carryforwards was more likely than not to be recognized.($0.2 million) recognized during the three months ended March 31, 2016. See Note 1. Significant Accounting Policies and Practices of the Condensed Consolidated Financial Statements for further discussion of the impact of ASU 2016-09.

Liquidity and Capital Resources
 
Outstanding Indebtedness
 
On September 30, 2016,March 31, 2017, we had total indebtedness of approximately $214.1$191.8 million, a decrease of $11.0$3.3 million from December 31, 2015.2016. The $214.1$191.8 million in total indebtedness as of September 30, 2016March 31, 2017 includes:
 
▪$212.3190.2 million under our Restated Credit Facility, net of original discount on borrowings of $1.4$1.1 million and deferred financing costs of $1.9$1.5 million; and

▪$1.81.6 million of other debt obligations, which includes capital lease obligations, obligations on seller notes and other indebtedness.
 

Senior Credit Facility
 
On October 2, 2012, wethe Company entered into a credit agreement (“Credit Agreement”) with Bank of America, N.A. ("Bank of America"), as administrative agent, Wells Fargo Bank, N.A. ("Wells Fargo Bank") and JPMorgan Chase Bank, N.A., as co-syndication agents, U.S. Bank National Association, First Hawaiian Bank and General Electric Capital Corporation, as co-documentation agents, Merrill Lynch, Pierce, Fenner & Smith Inc., Wells Fargo Securities, LLC and J.P. Morgan Securities LLC, as joint lead arrangers and joint book managers, and the lenders party thereto.
 
Pursuant to the terms, and subject to the conditions, of the Credit Agreement, the lenders made available to usthe Company a secured Senior Credit Facility (the “Senior Credit Facility”) that permitted aggregate borrowings of $450.0 million consisting of (i) a revolving credit facility of up to $200.0 million at any time outstanding, which included a letter of credit facility that was limited to $100.0 million at any time outstanding, and (ii) a term loan facility of $250.0 million. The Senior Credit Facility was due to mature on October 2, 2017.
 
Amended and Restated Credit Facility
 
On February 20, 2015 (“Restatement Date”), we entered into an Amended and Restated Credit Agreement (the "Restated Credit Agreement") with Bank of America, N.A. (“Bank of America”), as administrative agent, an issuing lender and swing-line lender; Wells Fargo Bank, N.A., as an issuing lender and syndication agent; U.S. Bank National Association, First Hawaiian Bank and BMO Harris Bank N.A., as co-documentation agents; Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as joint lead arrangersarranginers and joint book managers; and the lenders party thereto (the “Lenders”). The Restated Credit Agreement reflects modifications to, and an extension of, the Senior Credit Agreement, as described above.Facility.

Pursuant to the terms, and subject to the conditions of the Restated Credit Agreement, the Lenders have made available to the Company a senior secured credit facility (the “Restated Credit Facility”) that permits aggregate borrowings of $400.0 million consisting of (i) a revolving credit facility of up to $200.0 million at any time outstanding, which includes a $100.0 million sublimit for letters of credit and a $20.0 million sublimit for swing-line loans, and (ii) a term loan facility of $200.0 million (reduced from $250.0 million)million under the Senior Credit Facility). The Company may request increases of the revolving credit facility in an aggregate additional principal amount of $100.0 million. The Restated Credit Facility matures on February 20, 2020.
 
The entire amount of the term loan portion of the Restated Credit Facility had been drawn by usthe Company as of the Restatement Date (including approximately $10.4 million drawn on such date) and is subject to scheduled quarterly amortization of principal as follows: (i) $15.0 million in the first year, (ii) $15.0 million in the second year, (iii) $20.0 million in the third year, (iv) $20.0 million in the fourth year, (v) $20.0 million in the fifth year and (vi) $110.0 million in the sixth year. The Company also had outstanding borrowings of $147.3 million (including $53.4 million in letters of credit) under the revolving credit facility as of the Restatement Date.
 
Borrowings under the Restated Credit Facility bear interest, at ourthe Company’s option, (i) at a rate per annum based on the Company’s consolidated total debt to EBITDA ratio for the 12-month period ending as of the last day of the immediately preceding fiscal quarter, determined in accordance with the pricing levels set forth in the Restated Credit Agreement (the “Restatement Applicable“Applicable Margin”), plus LIBOR or (ii) the Restatement Applicable Margin plus the highest of (x) the federal funds rate plus 0.5%, (y) the Bank of America prime rate and (z) a daily rate equal to LIBOR plus 1.0% (the highest of (x), (y) and (z), the “Base Rate”), except that all swing-line loans will bear interest at the Base Rate plus the Applicable Margin.
 
Under the terms of the Restated Credit Agreement, we are required to maintain a maximum consolidated total debt to EBITDA ratio of not greater than 4.0 to 1.0 as of the end of any fiscal quarter ending during the period from the Restatement Date through September 30, 2015, (ii) 3.75 to 1.0 as of the end of any fiscal quarter ending during the period from October 1, 2015 through September 30, 2016, and (iii) 3.5 to 1.0 as of the end of any fiscal quarter ending thereafter. In addition, the Company is required to maintain a minimum consolidated fixed charge coverage ratio of not less than 1:25:1.0.
 
Events of default under the Restated Credit Agreement include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, the occurrence of any cross default event, non-compliance with the other loan documents, the occurrence of a change of control event, and bankruptcy and other insolvency events. If an event of default occurs and is continuing, the Lenders holding a majority of the commitments and outstanding term loan under the Restated Credit Agreement

have the right, among others, to (i) terminate the commitments under the Restated Credit Agreement, (ii) accelerate and require the Company to repay all the outstanding amounts owed under the Restated Credit Agreement and (iii) require the Company to cash collateralize any outstanding letters of credit.
 
Each wholly owned domestic subsidiary of the Company (subject to certain exceptions set forth in the Restated Credit Agreement) has guaranteed all existing and future indebtedness and liabilities of the other guarantors and the Company arising under the Restated Credit Agreement. The Company's obligations under the Restated Credit Agreement and such domestic subsidiaries’ guaranty obligations are secured by substantially all of their respective assets.

We were in compliance with all covenants as of September 30, 2016.March 31, 2017.

As of September 30, 2016,March 31, 2017, we had $98.1$104.7 million of borrowing availability under the Restated Credit Agreement, of which we could have borrowed $91.4$104.7 million on September 30, 2016March 31, 2017 and remained in compliance with the above described covenants as of such date. The additional borrowing availability under the Restated Credit Agreement is limited only as of the Company’s fiscal quarter-

endquarter-end by the covenant restrictions described above. At September 30, 2016, the CompanyAs of March 31, 2017, we had $60.1$67.5 million of letters of credit outstanding under the Restated Credit Facility, with aggregate borrowings against the Restated Credit Facility of $215.6$192.9 million (excluding original discount on borrowings of $1.4$1.1 million and deferred financing costs of $1.9$1.5 million).

Share Repurchases

In May 2016, our Board of Directors authorized us to repurchase shares of our common stock in the open market of up to $30.0 million in aggregate. DuringPurchases of our common stock may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with Rule 10b- 18 and 10b5- 1 under the third quarterSecurities Exchange Act of 2016,1934 ("Exchange Act). The share repurchase program does not obligate us to repurchase any particular amount of common stock, and has no fixed termination date.

Under this program, we repurchased 181,619305,183 shares from third-party shareholdersof common stock through March 31, 2017 at an average price of $24.62$24.43 per share, and average commissions of $0.03 per share. The total value of the third quarter transactions was $4.5 million.

At September 30, 2016, 219,519resulting in $7.5 million in program-to-date repurchases. No shares were held as treasury stock with $24.6 million remaining available for repurchase underrepurchased during the May 2016 stock repurchase program.three months ended March 31, 2017.

Commitments and Contingencies
 
Central Merger

We have contractual provisions under certain lease contracts to complete structural or other improvements to leased properties and incur repair costs, including improvements and repairs arising as a result of ordinary wear and tear, and evaluate the nature of those costs when incurred and either capitalizes the costs as leasehold improvements, as applicable, or recognizes the costs as repair expenses within Cost of parking services—Lease contracts within the Condensed Consolidated Statements of Income.
 
Certain lease contracts acquired in the Central Merger include provisions allocating to us responsibility for the cost of certain structural and other repairs required to be made to the leased property, including improvement and repair costs arising as a result of ordinary wear and tear. We recorded $0.1 million and $2.1 millionin costs during each of the three months ended September 30,March 31, 2017 and 2016 (net of expected recoveries of the total cost recognized by the Company through the applicable indemnity discussed further in Note 3. Central Merger and 2015, respectively,Restructuring, Merger and $0.4 million and $4.2 million during the nine months ended September 30, 2016 and 2015, respectively, IntegrationCosts of costsour Condensed Consolidated Financial Statements) in Cost of parking services—Lease contracts within the Condensed Consolidated Statements of Income for structural and other repair costs related to certain lease contracts acquired in the Central Merger, whereby we have expensed repair costs for certain leases and engaged third-party general contractors to complete certain structural and other repair projects, and other indemnity related costs. We expect to incur additional costs for certain structural and other repair costs pursuant to the contractual requirements of certain lease contracts acquired in the Central Merger (“Structural and Repair Costs”). Based on information available at this time, we currently expect to incur additional Structural and Repair Costs of $0.3$0.1 million.  While we are unable to estimate with certainty when such remaining costs will be incurred, it is expected that a substantial majority of these costs will be incurred by December 2016. Seein early-mid calendar year 2017.  Additionally and as further described in Note 3. AcquisitionCentral Merger and Restructuring, Merger and IntegrationCosts forof our Condensed Consolidated Financial Statements, we settled all outstanding matters between the former Central Stockholders and us and are therefore unable to recover any additional Structural and Repair Costs incurred and related to certain lease contracts acquired in the Central Merger and our settlement on certain costs incurred under the applicable indemnity that were previously determinedyet to be recoverable.incurred by us through the indemnity.

Holten Settlement

In March 2010, John V. Holten, a former indirect controlling shareholder of the Company, filed a lawsuit against us in the United States District Court, District of Connecticut. Mr. Holten was terminated as ourthe chairman in October 2009. The lawsuit alleged breach of his employment agreement and claimed that the agreement entitled Holten to payments worth more than $3.8 million. We filed an answer and counterclaim to Mr. Holten's lawsuit in 2010.

In March 2016, we settled all claims in connectionconnections with the original lawsuits ("Holten Settlement"). Per the settlement, we will pay Mr. Holten $3.4 million of which $1.9 million will be recovered by us through our directors and officers liability insurance policies. We recognized an expense, net of insurance recoveries, related to the Holten settlement of $1.5 million for the ninethree months ended September 30,March 31, 2016. The expense is included in General and administrative expense within the Condensed Consolidated Statement of Income.

Interest Rate Swap TransactionsSwaps
 
On October 25, 2012, we entered into Interest Rate Swap transactions (collectively, the “Interest Rate Swaps”) with each of JPMorgan Chase Bank, N.A., Bank of America, N.A. and PNC Bank, N.A. in an initial aggregate Notional Amount of $150.0 million (the “Notional Amount”). The Interest Rate Swaps have a termination date of September 30, 2017. The Interest Rate Swaps effectively fix the interest rate on an amount of variable interest rate borrowings under our credit agreements, originally equal to the Notional Amount at 0.7525% per annum plus the applicable margin rate for LIBOR loans under our credit agreements determined based upon our consolidated total debt to EBITDA ratio. The Notional Amount is subject to scheduled quarterly amortization that coincides with quarterly prepayments of principal under our credit agreements. These Interest Rate Swaps are classified as cash flow hedges, and we calculate the effectiveness of the hedge on a monthly basis. The ineffective portion of the cash flow hedge is recognized in earnings as an increase of interest expense. As of September 30, 2016,March 31, 2017, no ineffectiveness of the hedge has been recognized.recognized in interest expense. The fair value of the Interest Rate Swaps at September 30, 2016 was a liability of $0.1 millionMarch 31, 2017 and is included in Accrued expenses within the Condensed Consolidated Balance Sheet.  The fair value of the Interest Rate Swaps at December 31, 20152016 was an asset of $0.2$0.1 million in both periods and is included in the line item "Other assets, net" within the Condensed Consolidated Balance Sheet.Sheets.

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

Deficiency Payments

Pursuant to our obligations with respect to the parking garage operations at Bradley International Airport, we are required to make certain deficiency payments for the benefit of the State of Connecticut and for holders of special facility revenue bonds. The deficiency payments represent contingent interest bearing advances to the trustee to cover operating cash flow requirements. As of September 30, 2016,March 31, 2017, we had made $10.4$9.8 million of cumulative deficiency repayments from the trustee, net of payments. Deficiency payments made are recorded as increases to cost parking services and the reimbursements are recorded as reductions to cost of parking services. We believe these advances to be fully recoverable and will recognize the principal, interest and premium payments related to these deficiency payments when they are received. We do not directly guarantee the payment of any principal or interest on any debt obligations of the State of Connecticut or the trustee.

The total deficiency paymentsrepayments (net of payments made), interest and premium received and recorded for the three and nine months ended September 30,March 31, 2017 and 2016 and 2015 (unaudited) are as follows:
Three Months Ended Nine Months EndedThree Months Ended
(millions)September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015
(millions) (unaudited)March 31, 2017 March 31, 2016
Deficiency repayments$—
 $0.2
 $1.2
 $1.0
$0.1
 $—
Interest$0.2
 $0.1
 $0.3
 $0.3
$—
 $0.1
Premium$—
 $—
 $0.2
 $0.1
$—
 $—

Daily Cash Collections

As a result of day-to-day activity at our parking locations, we collect significant amounts of cash. Lease contract revenue is generally deposited into our local bank accounts, with a portion remitted to our clients in the form of rental payments according to the terms of the leases. Under management contracts, 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 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 or may require segregated bank accounts for the receipts and disbursements at locations. Our working capital and liquidity may be adversely affected if a significant number of our clients require us to deposit all parking revenues into their respective accounts.
 
Our liquidity also fluctuates on an intra-month and intra-year basis depending on the contract mix and timing of significant cash payments. Additionally, our ability to utilize cash deposited into our local accounts is dependent upon the availability and movement of that cash into our corporate account. For all these reasons, from time to time, we carry a significant cash balance, while also utilizing our Restated Credit Facility.
 

Summary of Cash Flows
Nine Months EndedThree Months Ended
(millions) (unaudited)September 30, 2016 September 30, 2015March 31, 2017 March 31, 2016
Net cash provided by operating activities$30.6
 $19.1
$5.0
 $4.8
Net cash used in investing activities$(9.9) $(7.9)$(1.4) $—
Net cash used in financing activities$(20.0) $(9.8)
Net cash (used in) provided by financing activities$(4.2) $7.2
 
Operating Activities
 
Our primary sources of funds are cash flows from operating activities and changes in operating assets and liabilities.

Net cash provided by operating activities totaled $30.6$5.0 million for the ninethree months ended September 30, 2016.March 31, 2017. Cash provided by operating activities for the first ninethree months of 20162017 included $47.3$14.2 million from operations; partially offset by changes in operating assets and liabilities that resulted in a use of $16.7$9.2 million. The net increase in operating assets and liabilities resulted primarily fromwas a result of (i) an increase in notes and accounts receivable of $15.6$4.3 million due to timing of collections; (ii) a net increasedecrease in prepaid and other assets of $3.5$1.9 million mainly due to prepaid operating expensespayroll and an increase in our deferred tax assetannual software maintenance renewals; (iii) a $0.4 million net increase in accrued liabilities primarily related to timing of payments and (iv) a $2.0$4.0 million increase in accounts payable due to timing of payments to our clients as described under "Daily Cash Collections".; (v) a $10.1 million net decrease in accrued liabilities primarily related to timing of payments including payment of our 2016 performance-based compensation accrual as well as a reduction in customer deposits and (vi) a $0.7 million increase in other assets.

Net cash provided by operating activities totaled $19.1$4.8 million for ninethree months ended September 30, 2015.March 31, 2016. Cash provided by operating activities for the first ninethree months of 20152016 included $37.5$10.1 million from operations; partially offset by changes in operating assets and liabilities that resulted in a use of $18.4$5.3 million. The net use of cashincrease in operating assets and liabilities resultedwas a result of (i) an increase in notes and accounts receivable of $1.5 million due to timing of collections; (ii) an increase in prepaid assets of $9.8 million primarily

from (i) due to prepaid payroll and annual software maintenance renewals; (iii) a decrease$5.0 million increase in accounts payable of $15.4 million that resulted from the reductiondue to timing of payments owed to our clients that are under management contracts as described under "Daily Cash Collection"Collections"; and (ii)(v) a decrease in accrued liabilities of $7.5$0.7 million related to timing of payments, including a decrease in deposits from clients, net decreases in income, property, payroll and other local taxes and a decrease in the current portion of insurance reserves, partially offset by a net increase in accrued performance-based compensation; partially offset by (iii) a net decrease in prepaid expenses and other of $2.6 million due to payments on other receivables and a decrease in prepaid expenses, offset by an increase in prepaid property taxes and (iv) a $1.9 million decrease in notes and accounts receivable due to timing of payments from our clients.liabilities.

Investing Activities
 
Net cash used in investing activities totaled $9.9$1.4 million for the ninethree months ended September 30, 2016.March 31, 2017. Cash used in investing activities for the ninethree months ended September 30, 2016March 31, 2017 included (i) $10.8$1.1 million for capital investments needed to secure and/or extend lease facilities and investments in information system enhancements and infrastructure and (ii) $2.0$0.3 million for cost of contract purchases; offset by (iii) $2.9 million of proceeds from the sale of assets and contract terminations.purchases.
 
Net cash used in investing activities totaled $7.9$0.0 million in the ninethree months ended September 30, 2015.March 31, 2016. Cash used in investing activities for the ninethree months ended September 30, 2015March 31, 2016 included (i) $6.6$2.5 million for capital investments needed to secure and/or extend lease facilities and investments in information system enhancements and infrastructure and (ii) $2.7$0.3 million for cost of contract purchases; partially offset by (iii) $0.4 million on proceeds from sale of assets and (iv) $1.0$2.8 million of proceeds from the sale of business.assets and contract terminations.

Financing Activities

Net cash used in financing activities totaled $20.0$4.2 million in the ninethree months ended September 30, 2016.March 31, 2017. Cash used in financing activities for the ninethree months ended September 30, 2016March 31, 2017 included (i) net payments on the Restated Credit Facility revolver of $0.5 million; (ii) $2.6$0.6 million of distributions to noncontrolling interest; (iii) $11.2(ii) $5.0 million for payments on the Restated Credit Facility term loan, (iv) $0.2loan; (iii) $0.1 million for payments on other long-term borrowings,debt obligations; and (v) $0.1 million on payments for debt issuance costs and (vi) $5.4 million on the repurchase of common stock.
Net cash used in financing activities totaled $9.8 million in the nine months ended September 30, 2015. Cash used in financing activities for the nine months ended September 30, 2015 included (i) $0.1 million in contingent payments for an acquired business; (ii) $11.2 million for payments on the Rested Credit Facility term loan; (iii) $0.3 million for payments on other long-term borrowings; (iv) $1.7 million of distributions to noncontrolling interest and (v) $1.4 million for payments of debt issuance and discount on borrowings costs; partially offset by (vi) net proceeds of $4.7 million from the Senior Credit Facility/Restated Credit Facility and (vii) a $0.2 tax benefitrevolver of $1.6 million.
Net cash provided by financing activities totaled $7.2 million in the three months ended March 31, 2016. Cash provided by financing activities for the three months ended March 31, 2016 included (i) net proceeds from the vestingRestated Credit Facility revolver of restricted stock units.$12.7 million; partially offset by (ii) $1.5 million of distributions to noncontrolling interest; (iii) $3.8 million for payments on the term loan, (iv) $0.1 million for payments on other long-term debt obligations; and (v) $0.1 million on payments for debt issuance costs.

Cash and Cash Equivalents
 
We had cash and cash equivalents of $19.3$21.6 million and $18.7$22.2 million at September 30, 2016March 31, 2017 and December 31, 2015,2016, respectively.  Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements were $0.5$0.6 million and $0.9$0.3 million as of September 30, 2016March 31, 2017 and December 31, 2015,2016, respectively, and are included within Cash and cash equivalents within the Condensed Consolidated Balance Sheets.


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 Form 10-K for the year-ended December 31, 2015.2016.
 
Item 4. Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
As of the end of the period covered by this quarterly report, we conducted an evaluation, under supervision and with the participation of management, including the chief executive officer, chief financial officer and corporate controller, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended ("Exchange Act")(Exchange Act). Based upon that evaluation, our chief executive officer, chief financial officer and corporate controller concluded that our disclosure controls and procedures were effective as of September 30, 2016.March 31, 2017. 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 principal executive officer, principal financial officer and principal accounting officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
 
Changes in Internal Controls Over Financial Reporting
 
There have been no significant changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
 
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.


PART II. OTHER INFORMATION

Item 1. Legal Proceedings
We are subject to litigation and other claims in the normal course of our business. The outcomes of legal proceedings and claims brought against us and other loss contingencies are subject to significant uncertainty. We accrue a charge against income when our management determines that it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we accrue for the authoritative judgments or assertions made against us by government agencies at the time of their rendering regardless of our intent to appeal. In addition, we are from time-to-time party to litigation, administrative proceedings and union grievances that arise in the normal course of business, and occasionally pay non-material amounts to resolve claims or alleged violations of regulatory requirements. There are no "normal course" matters that separately or in the aggregate, would, in the opinion of management, have a material adverse effect on our operations, financial condition or cash flow.
In determining the appropriate accounting for loss contingencies, we consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of potential loss. We regularly evaluate current information available to us to determine whether an accrual should be established or adjusted. Estimating the probability that a loss will occur and estimating the amount of a potential loss or a range of potential loss involves significant judgment. In addition, we are subject to various legal proceedings, claimsestimation and other matters that arise in the ordinary course of business. In the opinion of management, the amount of the liability, if any, with respect to these matters will not materially affect our condensed consolidated financial statements. We maintain liability insurance coverage to assist in protecting our assets from losses arising from or related to activities associated with business operations. 

judgment.
See Note 2. Legal and Other Commitments and Contingencies and Note 3. Acquisition to the Condensed Consolidated Financial Statements included in Item 1. "Financial Statements" for disclosures related to the Holten Settlement reached in March 2016 and the preliminary non-binding settlement of all outstanding matters relating the 2016.
See Note 3. Central Merger betweenand Restructuring, Merger and Integration Costs to the Company and Central'sCondensed Financial Statements included in Item 1. "Financial Statements" for disclosures related to the Settlement Agreement with former stockholders reachedCentral Stockholders in SeptemberDecember 2016.

Item 1A. Risk Factors
 
There have been no material changes to the risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.2016.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
The following table provides information about purchases we made during the quarter ended September 30, 2016There were no sales or repurchases of equity securities that are registered by us pursuant Section 12 of the Exchange Act:
(millions, except for share and per share data) (unaudited)Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Approximate Dollar Value of Shares That May Yet be Purchased Under the Plan
   
07/01/2016 through 07/31/201680,800
 $24.46
 80,800
 $27.1
08/01/2016 through 08/31/201674,803
 24.66
 74,803
 25.3
09/01/2016 through 09/30/201626,016
 24.97
 26,016
 24.6
Total181,619
 $24.62
 181,619
 $24.6

In May 2016, our Board of Directors authorized us to repurchasestock in the open market shares of our outstanding common stock in an amount not to exceed $30 million.three months ended March 31, 2017.

During the third quarter of 2016, we repurchased 181,619 shares in the open market at an average price of $24.62 per share and average commissions of $0.03 per share. The total value of the third quarter transactions was $4.5 million. At September 30, 2016, 219,519 shares were held as treasury stock.

At September 30, 2016, $24.6 million remained available for repurchase under the May 2016 stock repurchase program. The share repurchase program has no fixed termination date.

Item 3. Defaults upon Senior Securities
 
Not applicable.
 
Item 4. Mine Safety Disclosures
 
Not applicable.
 
Item 5. Other Information

 
Not applicable.


Item 6. Exhibits
 
Index to Exhibits
Exhibit
Number
 Description
   
3.1*10.1 FourthSixth Amendment to Employment Agreement dated as of February 16, 2017 between the Company and Robert N. Sacks (incorporated by reference to exhibit 10.6.6 of the Company's Annual Report on Form 10-K filed on February 24, 2017).
10.2Third Amendment to Amended and Restated BylawsExecutive Employment Agreement dated as of February 16, 2017 between the Company and Gerald M. Klaisle (incorporated by reference to exhibit 10.10.3 of the Company dated January 1, 2010.Company's Annual Report on Form 10-K filed on February 24, 2017).
3.1.1* Amendment to Fourth Amended and Restated Bylaws of SP Plus Corporation effective February 19, 2016.
3.1.2*10.3 Second Amendment to Fourth AmendedEmployment Agreement dated as of February 15, 2017 between the Company and Restated BylawsRob Toy (incorporated by reference to exhibit 10.12.1 of SP Plus Corporation effective August 5, 2016.the Company's Annual Report on Form 10-K filed on February 24, 2017).
31.1* Section 302 Certification dated NovemberMay 3, 20162017 for G Marc Baumann, Director, President and Chief Executive Officer (Principal Executive Officer).
31.2* Section 302 Certification dated NovemberMay 3, 20162017 for Vance C. Johnston, Chief Financial Officer and Treasurer (Principal Financial Officer).
31.3* Section 302 Certification dated NovemberMay 3, 20162017 for Kristopher H. Roy, Senior Vice President, Corporate Controller and Assistant Treasurer (Principal Accounting Officer).
32** Certification pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated NovemberMay 3, 2016.2017.
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema
101.CAL* XBRL Taxonomy Extension Calculation Linkbase
101.DEF* XBRL Taxonomy Extension Definition Linkbase
101.LAB* XBRL Taxonomy Extension Label Linkbase
101.PRE* XBRL Taxonomy Extension Presentation Linkbase
*             Filed herewith
**        Furnished herewith


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.
 
 
 SP PLUS CORPORATION
   
Dated: NovemberMay 3, 20162017By:/s/ G MARC BAUMANN
  G Marc Baumann
  Director, President and Chief Executive Officer
  (Principal Executive Officer)
   
Dated: NovemberMay 3, 20162017By:/s/ VANCE C. JOHNSTON
  Vance C. Johnston
  Executive Vice President, Chief Financial Officer and Treasurer
  (Principal Financial Officer)
   
Dated: NovemberMay 3, 20162017By:/s/ KRISTOPHER H. ROY
  Kristopher H. Roy
  Senior Vice President, Corporate Controller
  and Assistant Treasurer
  (Principal Accounting Officer and Duly Authorized Officer)


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