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SP SP Plus

Filed: 29 Apr 21, 4:45pm

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 March 31, 2021  

Or

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

For the transition period from                  to

 

Commission file number: 000-50796

 

 

 

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)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

SP

The Nasdaq Stock Market LLC

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 

 

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

 

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

 

 

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

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

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class

Outstanding at April 28, 2021

Common Stock, $0.001 par value per share

23,205,424

 

Shares

 

 


Table of Contents

 

SP PLUS CORPORATION

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

2

Item 1. Financial Statements

2

Condensed Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020

2

Condensed Consolidated Statements of Income (Loss) (unaudited) for the three months ended March 31, 2021 and 2020

3

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2021 and 2020

4

Condensed Consolidated Statements of Stockholders' Equity (unaudited) for the three months ended March 31, 2021 and 2020

5

Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2021 and 2020

6

Notes to Condensed Consolidated Financial Statements

7

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

23

Item 3. Quantitative and Qualitative Disclosures about Market Risk

33

Item 4. Controls and Procedures

33

 

 

PART II. OTHER INFORMATION

34

Item 1. Legal Proceedings

34

Item 1A. Risk Factors

34

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3. Defaults Upon Senior Securities

35

Item 4. Mine Safety Disclosures

35

Item 5. Other Information

35

Item 6. Exhibits

36

 

 

Signatures

37

 

 

 

1


Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SP Plus Corporation

Condensed Consolidated Balance Sheets

 

(millions, except for share data)

 

March 31, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

18.0

 

 

$

13.9

 

Accounts and notes receivable, net

 

 

102.1

 

 

 

111.2

 

Prepaid expenses and other current assets

 

 

31.5

 

 

 

26.8

 

Total current assets

 

 

151.6

 

 

 

151.9

 

Leasehold improvements, equipment and construction in progress, net

 

 

51.7

 

 

 

53.3

 

Right-of-use assets

 

 

219.9

 

 

 

235.1

 

Goodwill

 

 

526.7

 

 

 

526.6

 

Other intangible assets, net

 

 

61.0

 

 

 

63.1

 

Deferred taxes

 

 

62.2

 

 

 

63.8

 

Other noncurrent assets, net

 

 

44.2

 

 

 

43.9

 

Total noncurrent assets

 

 

965.7

 

 

 

985.8

 

Total assets

 

$

1,117.3

 

 

$

1,137.7

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Accounts payable

 

$

99.1

 

 

$

97.8

 

Accrued and other current liabilities

 

 

98.0

 

 

 

112.7

 

Short-term lease liabilities

 

 

80.4

 

 

 

82.1

 

Current portion of long-term obligations under Senior Credit Facility and other long-term borrowings

 

 

26.1

 

 

 

25.0

 

Total current liabilities

 

 

303.6

 

 

 

317.6

 

Long-term borrowings, excluding current portion

 

 

344.8

 

 

 

337.1

 

Long-term lease liabilities

 

 

224.1

 

 

 

243.4

 

Other noncurrent liabilities

 

 

58.6

 

 

 

58.2

 

Total noncurrent liabilities

 

 

627.5

 

 

 

638.7

 

Total liabilities

 

$

931.1

 

 

$

956.3

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock, par value $0.01 per share; 5,000,000 shares authorized as of March 31, 2021 and December 31, 2020, respectively; 0 shares issued or outstanding

 

$

0

 

 

$

0

 

Common stock, par value $0.001 per share; 50,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 25,240,166 and 23,205,424 shares issued and outstanding as of March 31, 2021, respectively, and 25,123,128 and 23,088,386 shares issued and outstanding as of December 31, 2020, respectively

 

 

0

 

 

 

0

 

Treasury stock, at cost; 2,034,742 shares as of March 31, 2021 and December 31, 2020

 

 

(70.6

)

 

 

(70.6

)

Additional paid-in capital

 

 

262.3

 

 

 

261.4

 

Accumulated other comprehensive loss

 

 

(4.0

)

 

 

(4.4

)

Accumulated deficit

 

 

(1.0

)

 

 

(3.3

)

Total SP Plus Corporation stockholders’ equity

 

 

186.7

 

 

 

183.1

 

Noncontrolling interest

 

 

(0.5

)

 

 

(1.7

)

Total stockholders’ equity

 

 

186.2

 

 

 

181.4

 

Total liabilities and stockholders’ equity

 

$

1,117.3

 

 

$

1,137.7

 

 

See Notes to Condensed Consolidated Financial Statements.

2


Table of Contents

SP Plus Corporation

Condensed Consolidated Statements of Income (Loss)

 

 

 

Three Months Ended

 

(millions, except for share and per share data) (unaudited)

 

March 31, 2021

 

 

March 31, 2020

 

Services revenue

 

 

 

 

 

 

 

 

Lease type contracts

 

$

42.7

 

 

$

81.7

 

Management type contracts

 

 

86.0

 

 

 

137.1

 

 

 

 

128.7

 

 

 

218.8

 

Reimbursed management type contract revenue

 

 

118.0

 

 

 

190.9

 

Total services revenue

 

 

246.7

 

 

 

409.7

 

Cost of services

 

 

 

 

 

 

 

 

Lease type contracts

 

 

35.3

 

 

 

80.2

 

Management type contracts

 

 

55.0

 

 

 

91.3

 

 

 

 

90.3

 

 

 

171.5

 

Reimbursed management type contract expense

 

 

118.0

 

 

 

190.9

 

Lease impairment

 

 

0.1

 

 

 

77.5

 

Total cost of services

 

 

208.4

 

 

 

439.9

 

Gross profit

 

 

 

 

 

 

 

 

Lease type contracts

 

 

7.4

 

 

 

1.5

 

Management type contracts

 

 

31.0

 

 

 

45.8

 

Lease impairment

 

 

(0.1

)

 

 

(77.5

)

Total gross profit

 

 

38.3

 

 

 

(30.2

)

General and administrative expenses

 

 

21.0

 

 

 

20.7

 

Depreciation and amortization

 

 

6.3

 

 

 

7.5

 

Operating income (loss)

 

 

11.0

 

 

 

(58.4

)

Other expense (income)

 

 

 

 

 

 

 

 

Interest expense

 

 

5.8

 

 

 

4.4

 

Interest income

 

 

(0.1

)

 

 

(0.1

)

Gain on sale of other investments

 

 

0

 

 

 

(0.3

)

Total other expenses

 

 

5.7

 

 

 

4.0

 

Earnings (loss) before income taxes

 

 

5.3

 

 

 

(62.4

)

Income tax expense (benefit)

 

 

1.4

 

 

 

(16.8

)

Net income (loss)

 

 

3.9

 

 

 

(45.6

)

Less: Net income attributable to noncontrolling interest

 

 

1.6

 

 

 

0.5

 

Net income (loss) attributable to SP Plus Corporation

 

$

2.3

 

 

$

(46.1

)

Common stock data

 

 

 

 

 

 

 

 

Net income (loss) per common share

 

 

 

 

 

 

 

 

Basic

 

$

0.11

 

 

$

(2.18

)

Diluted

 

$

0.11

 

 

$

(2.18

)

Weighted average shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

21,113,494

 

 

 

21,154,047

 

Diluted

 

 

21,304,068

 

 

 

21,154,047

 

 

See Notes to Condensed Consolidated Financial Statements.

3


Table of Contents

SP Plus Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

 

 

 

Three Months Ended

 

(millions) (unaudited)

 

March 31, 2021

 

 

March 31, 2020

 

Net income (loss)

 

$

3.9

 

 

$

(45.6

)

Change in fair value of interest rate collars

 

 

0.4

 

 

 

(2.8

)

Foreign currency translation loss

 

 

 

 

 

(0.2

)

Comprehensive income (loss)

 

 

4.3

 

 

 

(48.6

)

Less: Comprehensive income attributable to noncontrolling interest

 

 

1.6

 

 

 

0.5

 

Comprehensive income (loss) attributable to SP Plus Corporation

 

$

2.7

 

 

$

(49.1

)

 

See Notes to Condensed Consolidated Financial Statements.

4


Table of Contents

SP Plus Corporation

Condensed Consolidated Statements of Stockholders' Equity

 

Three months ended March 31, 2020 (unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(millions, except share data)

 

Number

of

Shares

 

 

Par

Value

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Retained

Earnings (Accumulated Deficit)

 

 

Treasury

Stock

 

 

Noncontrolling

Interest

 

 

Total

 

Balance at January 1, 2020

 

 

22,950,360

 

 

$

0

 

 

$

262.6

 

 

$

(2.7

)

 

$

169.5

 

 

$

(55.3

)

 

$

(0.2

)

 

$

373.9

 

Net (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(46.1

)

 

 

 

 

 

0.5

 

 

 

(45.6

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

(0.2

)

 

 

 

 

 

 

 

 

 

 

 

(0.2

)

Change in fair value of interest rate collars

 

 

 

 

 

 

 

 

 

 

 

(2.8

)

 

 

 

 

 

 

 

 

 

 

 

(2.8

)

Issuance of performance stock units

 

 

46,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0

 

Non-cash stock-based compensation

 

 

 

 

 

 

 

 

(2.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2.9

)

Treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15.3

)

 

 

 

 

 

(15.3

)

Distributions to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.5

)

 

 

(0.5

)

Balance at March 31, 2020

 

 

22,997,061

 

 

$

 

 

$

259.7

 

 

$

(5.7

)

 

$

123.4

 

 

$

(70.6

)

 

$

(0.2

)

 

$

306.6

 

 

Three months ended March 31, 2021 (unaudited)

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(millions, except share data)

Number

of

Shares

 

Par

Value

 

Additional

Paid-In

Capital

 

Accumulated

Other

Comprehensive

Loss

 

Accumulated

Deficit

 

Treasury

Stock

 

Noncontrolling

Interest

 

Total

 

Balance at January 1, 2021

 

23,088,386

 

$

 

$

261.4

 

$

(4.4

)

$

(3.3

)

$

(70.6

)

$

(1.7

)

$

181.4

 

Net (loss) income

 

 

 

 

 

 

 

 

 

2.3

 

 

 

 

1.6

 

 

3.9

 

Change in fair value of interest rate collars

 

 

 

 

 

 

 

0.4

 

 

 

 

 

 

 

 

0.4

 

Issuance of restricted stock units

 

35,902

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0

 

Issuance of performance stock units

 

81,136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0

 

Non-cash stock-based compensation

 

 

 

 

 

0.9

 

 

 

 

 

 

 

 

 

 

0.9

 

Distributions to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.4

)

 

(0.4

)

Balance at March 31, 2021

 

23,205,424

 

$

 

$

262.3

 

$

(4.0

)

$

(1.0

)

$

(70.6

)

$

(0.5

)

$

186.2

 

See Notes to Condensed Consolidated Financial Statements.

5


Table of Contents

SP Plus Corporation

Condensed Consolidated Statements of Cash Flows

 

 

 

Three Months Ended

 

(millions) (unaudited)

 

March 31, 2021

 

 

March 31, 2020

 

Operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

3.9

 

 

$

(45.6

)

Adjustments to reconcile net income (loss) to net cash provided by operations:

 

 

 

 

 

 

 

 

Impairment

 

 

0.1

 

 

 

77.5

 

Depreciation and amortization

 

 

6.3

 

 

 

7.5

 

Non-cash stock-based compensation

 

 

0.9

 

 

 

(2.9

)

Provisions for credit losses on accounts receivable

 

 

0.3

 

 

 

 

Deferred income taxes

 

 

1.4

 

 

 

(40.6

)

Other

 

 

1.3

 

 

 

(0.1

)

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts and notes receivable

 

 

8.8

 

 

 

3.4

 

Prepaid and other current assets

 

 

(4.7

)

 

 

10.3

 

Accounts payable

 

 

1.3

 

 

 

6.1

 

Accrued liabilities and other

 

 

(20.6

)

 

 

(7.4

)

Net cash (used in) provided by operating activities

 

 

(1.0

)

 

 

8.2

 

Investing activities

 

 

 

 

 

 

 

 

Purchases of leasehold improvements and equipment

 

 

(2.3

)

 

 

(4.0

)

Cost of contracts purchased

 

 

(0.4

)

 

 

(0.7

)

Proceeds from sale of other investments and equipment

 

 

0.1

 

 

 

0.4

 

Net cash used in investing activities

 

 

(2.6

)

 

 

(4.3

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from credit facility revolver

 

 

97.4

 

 

 

220.4

 

Payments on credit facility revolver

 

 

(83.1

)

 

 

(206.9

)

Payments on credit facility term loan

 

 

(2.8

)

 

 

(2.8

)

Payments of debt issuance costs

 

 

(1.3

)

 

 

 

Payments on other long-term borrowings

 

 

(2.1

)

 

 

(0.8

)

Distributions to noncontrolling interest

 

 

(0.4

)

 

 

(0.5

)

Repurchases of common stock

 

 

 

 

 

(15.3

)

Net cash provided by (used in) financing activities

 

 

7.7

 

 

 

(5.9

)

Effect of exchange rate changes on cash and cash equivalents

 

 

 

 

 

(0.2

)

Increase (decrease) in cash and cash equivalents

 

 

4.1

 

 

 

(2.2

)

Cash and cash equivalents at beginning of year

 

 

13.9

 

 

 

24.1

 

Cash and cash equivalents at end of period

 

$

18.0

 

 

$

21.9

 

Supplemental disclosures

 

 

 

 

 

 

 

 

Cash paid (received) during the period for

 

 

 

 

 

 

 

 

Interest

 

$

5.0

 

 

$

4.1

 

Income taxes

 

$

0.2

 

 

$

(0.2

)

 

See Notes to Condensed Consolidated Financial Statements.

6


Table of Contents

SP Plus Corporation

Notes to Condensed Consolidated Financial Statements

 

1. Significant Accounting Policies and Practices

The Company

SP Plus Corporation (the "Company") facilitates the efficient movement of people, vehicles and personal belongings with the goal of enhancing the consumer experience while improving bottom line results for the Company’s clients. The Company provides professional parking management, ground transportation, remote baggage check-in and handling, facility maintenance, security, event logistics, and other technology-driven mobility solutions to aviation, commercial, hospitality, healthcare and government clients across North America. The Company typically enters into contractual relationships with property owners or managers as opposed to owning facilities.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures normally included in the Condensed Consolidated Balance Sheets, Statements of Income (Loss), Comprehensive Income (Loss), Stockholders' Equity 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 months ended March 31, 2021 are not necessarily indicative of the results that might be expected for any other interim period or the fiscal year ending December 31, 2021. 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 February 22, 2021 with the Securities and Exchange Commission.

Cash and Cash Equivalents

Cash equivalents represent funds temporarily invested in money market instruments with maturities of three months or less. Cash equivalents are stated at cost, which approximates fair value. Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements were $0.3 million as of March 31, 2021 and December 31, 2020, and are included within Cash and cash equivalents within the Condensed Consolidated Balance Sheets.

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 24 are consolidated under the VIE or voting interest models and 5 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 Other noncurrent assets, net 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 Services revenue - lease type contracts within the Condensed Consolidated Statements of Income (Loss). The equity earnings in these related investments were $0.1 million and $0.6 million for the three months ended March 31, 2021 and 2020, respectively.

Other Noncurrent Assets

Other noncurrent assets consisted of advances and deposits and cost of contracts, net, as of March 31, 2021 and December 31, 2020.

Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of accrued rent, compensation, payroll withholdings, property, payroll and other taxes, insurance and other accrued expenses as of March 31, 2021 and December 31, 2020.

Noncontrolling 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.

7


Table of Contents

Goodwill

Goodwill represents the excess of the purchase price paid over the fair value of net assets acquired. In accordance with the Financial Accounting Standards Board's ("FASB") authoritative accounting guidance on goodwill, the Company evaluates goodwill for impairment on an annual basis, or more often if events or circumstances change that could cause goodwill to become impaired. The Company has elected to assess the impairment of goodwill annually on October 1 or at an interim date if there is an event or change in circumstances indicating the carrying value may not be recoverable. The goodwill impairment test is performed at the reporting unit level; the Company's reporting units represent its operating segments, consisting of Commercial and Aviation. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the use of acquired assets or the Company’s business strategy, and significant negative industry or economic trends.

The Company may perform a qualitative, rather than quantitative, assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines impairment is present, the Company would need to perform a quantitative assessment to determine the amount of impairment expense. The determination of fair value of a reporting unit utilizes cash flow projections that assume certain future revenue and cost levels, comparable marketplace data, assumed discount rates based upon current market conditions and other valuation factors, all of which involve the use of significant judgment and estimates. The Company also assesses critical areas that may impact its business including economic conditions, market related exposures, competition, changes in service offerings and changes in key personnel.

Other Intangible Assets, net

Other intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. The Company evaluates the remaining useful life of other intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to their remaining useful lives. In addition, other intangible assets are reviewed for impairment when circumstances change that would indicate the carrying value may not be recoverable. Assumptions and estimates about future values and remaining useful lives of intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors, such as changes in the Company's business strategy and forecasts. Although management believes the historical assumptions and estimates are reasonable and appropriate, different assumptions and estimates could materially impact reported financial results.

For both goodwill and intangible assets, future events may indicate differences from management’s judgments and estimates which could, in turn, result in impairment charges. Future events that may result in impairment charges include extended unfavorable economic impacts of the COVID-19 pandemic (“COVID-19”), increases in interest rates, which would impact discount rates, or other factors which could decrease revenues and profitability of existing locations and changes in the cost structure of existing facilities.

Long-Lived Assets

The Company evaluates long-lived assets, including right-of-use ("ROU") assets, leasehold improvements, equipment and construction in progress, for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. The Company groups assets at the lowest level for which cash flows are separately identified in order to measure an impairment. Events or circumstances that would result in an impairment review include a significant change in the use of an asset, the planned sale or disposal of an asset, or a projection or forecast that demonstrates continuing losses associated with the use of an asset or long-lived asset group. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future undiscounted cash flows expected to be generated by the asset group. If the asset or asset group is determined to be impaired, the impairment recognized is measured by the amount by which the carrying value of the asset or asset group exceeds its fair value.

As a result of the impact of COVID-19 on the Company's operating cash flows, the Company’s management determined certain impairment testing triggers had occurred for ROU assets associated with certain asset groups during the three months ended March 31, 2020. Accordingly, the Company analyzed undiscounted cash flows for ROU assets associated with certain asset groups during the three months ended March 31, 2020. Based on the undiscounted cash flow analysis, the Company determined that estimated net carrying values exceeded undiscounted cash flows for ROU assets associated with certain asset groups and therefore during the three months ended March 31, 2020, ROU assets associated with certain asset groups were impaired. The impairment recognized is measured by the amount by which the carrying value of the ROU asset associated with certain asset groups exceeds its fair value. The Company determined there were no impairment testing triggers during the three months ended March 31, 2021. See Note 2. Leases in the notes to the Condensed Consolidated Financial Statements for further discussion.

Assumptions and estimates used to determine cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity. Any future changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in additional impairment charges. Future events that may result in impairment charges include extended unfavorable economic impacts of COVID-19, or other factors which could decrease revenues and profitability of existing locations and changes in the cost structure of existing facilities.

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Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

During the three months ended March 31, 2021, the Company adopted the following Accounting Standards Updates (“ASUs”) with no material impact on the Condensed Consolidated Financial Statements:

 

ASU

 

Topic

 

Method of Adoption

2021-01

 

Reference Rate Reform (Topic 848): Scope

 

Prospective

2020-10

 

Codification Improvements

 

Prospective

2020-03

 

Codification Improvements to Financial Instruments

 

Prospective

2019-11

 

Codification Improvements to Topic 326, Financial Instruments – Credit Losses

 

Prospective

 

Accounting Pronouncements to be Adopted

Effects of Reference Rate Reform on Financial Reporting

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedient and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (IBORs) and, particularly, risks associated with the phase out of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. The ASU can be adopted no later than December 1, 2022 with early adoption permitted. The Company is currently assessing the impact of adopting the standard on the Company's financial position, results of operations, cash flows and financial statement disclosures.

Investments - equity securities; Investments-Equity Method and Joint Ventures; Derivatives and Hedging

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this ASU clarify the interaction between the accounting for investments in equity securities, investment in equity method and certain derivatives instruments. The ASU is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. This ASU is effective for fiscal years beginning after December 15, 2021. The Company is currently assessing the impact of adopting the standard on the Company's financial position, results of operations, cash flows and financial statement disclosures.

2. Leases

The Company leases parking facilities, office space, warehouses, vehicles and equipment and determines if an arrangement is a lease at inception. The Company subleases certain real estate to third parties. The Company's sublease portfolio consists of operating leases for space within leased parking facilities.

The Company accounts for leases in accordance with Topic 842. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent the Company's "right-of-use" over an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The ROU asset includes cumulative prepaid or accrued rent, as well as lease incentives, initial direct costs and acquired lease contracts. The short term lease exception has been applied to leases with an initial term of 12 months or less and therefore, these leases are not recorded on the balance sheet.

As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. Lease expense is recognized on a straight-line basis over the lease term.

For leases that include one or more options to renew, the exercise of such renewal options is at the Company's sole discretion or mutual agreement. The Company’s lease term may include renewal options that are at the Company’s sole discretion and are reasonably certain to be exercised. Equipment and vehicle leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

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Variable lease components comprising of payments that are a percentage of parking services revenue based on contractual levels and rental payments adjusted periodically for inflation are not included in the lease liability. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As discussed in Note 1. Significant Accounting Policies and Practices, the Company tests ROU assets when impairment indicators are present. Due to the impact of COVID-19 on the Company's operating cash flows, the Company determined certain impairment testing triggers had occurred within its asset groups during the three months ended March 31, 2020. Accordingly, the Company performed an undiscounted cash flow analysis on certain operating lease ROU assets during the three months ended March 31, 2020. Based on the undiscounted cash flow analysis as of March 31, 2020, the Company determined that certain ROU asset groups had net carrying values that exceeded their estimated undiscounted future cash flows and fair value for these asset groups was determined. The fair value of the ROU assets measured on a non-recurring basis, which is classified as Level 3 in the fair value hierarchy, was determined based on estimates of future discounted cash flows. The estimated fair values were compared to net carrying values, and as a result, ROU assets held and used with a carrying amount of $224.9 million were determined to have a fair value of $147.4 million, resulting in impairment charges of $77.5 million in the Commercial segment during the three months ended March 31, 2020, which was included within Lease impairment in the Condensed Consolidated Statements of Income (Loss). The Company recorded $0.1 million of impairment charges during the three months ended March 31, 2021, which was included within Lease impairment in the Condensed Consolidated Statements of Income (Loss).

In April 2020, the FASB staff provided accounting elections for entities that receive or provide lease-related concessions to mitigate the economic effects of COVID-19 on lessees. The Company elected not to evaluate whether certain concessions provided by lessors in response to COVID-19, that are within the scope of additional interpretation provided by the FASB in April 2020, were lease modifications and has also elected not to apply modification guidance under Topic 842. These concessions will be recognized as a reduction of rent expense in the month they occur and will be recorded within Cost of parking services within the Condensed Consolidated Statements of Income (Loss). As a result of COVID-19, the Company was able to negotiate lease concessions with certain landlords. These rent concessions have been recorded in accordance with the guidance noted above. As a result, the Company recorded $5.0 million related to rent concessions as a reduction to cost of services during the three months ended March 31, 2021. The Company did 0t receive any concessions during the three months ended March 31, 2020.

Costs associated with the right to use the infrastructure on service concession arrangements are recorded as a reduction of revenue in accordance with the scope of ASU No. 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services. See Note 4. Revenue for further discussion on service concession arrangements.

The components of ROU assets and lease liabilities and classification on the Condensed Consolidated Balance Sheet as of March 31, 2021 (unaudited) and December 31, 2020 were as follows:

 

(millions)

 

Classification

 

March 31, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

 

 

Operating

 

Right-of-use assets

 

$

219.9

 

 

$

235.1

 

Finance

 

Leasehold improvements, equipment and construction in progress, net

 

 

27.3

 

 

 

28.8

 

Total leased assets

 

 

 

$

247.2

 

 

$

263.9

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

 

Operating

 

Short-term lease liabilities

 

$

80.4

 

 

$

82.1

 

Finance

 

Current portion of long-term obligations under Senior Credit Facility and other long-term borrowings

 

 

7.4

 

 

 

7.8

 

Noncurrent

 

 

 

 

 

 

 

 

 

 

Operating

 

Long-term lease liabilities

 

 

224.1

 

 

 

243.4

 

Finance

 

Long-term borrowings, excluding current portion

 

 

18.7

 

 

 

20.5

 

Total lease liabilities

 

 

 

$

330.6

 

 

$

353.8

 

 

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The components of lease cost and classification in the Condensed Consolidated Statement of Income (Loss) for the three months ended March 31, 2021 and 2020 (unaudited) were as follows:

 

 

 

 

 

Three Months Ended

 

(millions)

 

Classification

 

March 31, 2021

 

 

March 31, 2020

 

Operating lease cost (a)(b)

 

Cost of services - lease type contracts

 

$

14.0

 

 

$

35.6

 

Short-term lease (a)

 

Cost of services - lease type contracts

 

 

4.7

 

 

 

8.8

 

Variable lease

 

Cost of services - lease type contracts

 

 

3.6

 

 

 

7.8

 

Operating lease cost

 

 

 

 

22.3

 

 

 

52.2

 

Finance lease cost

 

 

 

 

 

 

 

 

 

 

Amortization of leased assets

 

Depreciation and amortization

 

 

1.5

 

 

 

0.7

 

Interest on lease liabilities

 

Interest expense

 

 

0.3

 

 

 

0.2

 

Lease impairment

 

Lease impairment

 

 

0.1

 

 

 

77.5

 

Net lease cost

 

 

 

$

24.2

 

 

$

130.6

 

 

(a)

Operating lease cost included in General and administrative expenses are related to leases for office space amounting to $1.0 million and $1.5 million for the three months ended March 31, 2021 and 2020, respectively.

(b)

Includes rent concessions amounting to $5.0 million for the three months ended March 31, 2021. NaN rent concessions were recognized during the three months ended March 31, 2020.

Sublease income was $0.4 million during the three months ended March 31, 2021 and 2020.

The Company has not entered into operating lease arrangements as of March 31, 2021 that commence in future periods.

Maturities of lease liabilities, lease term, and discount rate information as of March 31, 2021 (unaudited) were as follows:

 

(millions)

 

Operating

Leases

Liabilities

 

 

Finance

Leases

Liabilities

 

 

Total

 

2021

 

$

69.6

 

 

$

6.4

 

 

$

76.0

 

2022

 

 

79.3

 

 

 

7.4

 

 

 

86.7

 

2023

 

 

59.2

 

 

 

5.3

 

 

 

64.5

 

2024

 

 

41.8

 

 

 

3.4

 

 

 

45.2

 

2025

 

 

29.7

 

 

 

1.7

 

 

 

31.4

 

After 2025

 

 

69.3

 

 

 

5.1

 

 

 

74.4

 

Total lease payments

 

 

348.9

 

 

 

29.3

 

 

 

378.2

 

Less: Imputed interest

 

 

44.4

 

 

 

3.2

 

 

 

47.6

 

Present value of lease liabilities

 

$

304.5

 

 

$

26.1

 

 

$

330.6

 

Weighted-average remaining lease term (years)

 

 

5.5

 

 

 

5.0

 

 

 

 

 

Weighted-average discount rate

 

 

5.0

%

 

 

4.3

%

 

 

 

 

 

Future sublease income for the above periods shown was excluded as the amounts are not material.

Supplemental cash flow information related to leases for the three months ended March 31, 2021 and 2020 (unaudited) was as follows:

 

 

Three Months Ended

 

(millions)

 

March 31, 2021

 

 

March 31, 2020

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

 

Operating cash outflows related to operating leases

 

$

24.0

 

 

$

50.3

 

Operating cash outflows related to interest on finance leases

 

 

0.3

 

 

 

0.2

 

Financing cash outflows related to finance leases

 

 

2.1

 

 

 

0.8

 

Leased assets obtained in exchange for new operating liabilities

 

 

1.7

 

 

 

8.1

 

Leased assets obtained in exchange for new finance lease liabilities

 

 

 

 

 

2.1

 

 

3. Restructuring and Other Integration Related Costs

The Company has incurred certain restructuring and other integration related costs related to pre-acquisition matters that were expensed as incurred, which include:

 

Costs (primarily severance and relocation costs) related to a series of Company initiated workforce reductions to increase organizational effectiveness and provide cost savings that can be reinvested in the Company's growth initiatives, during 2021 and 2020 (included within Cost of services and General and administrative expenses within the Condensed Consolidated Statements of Income (Loss)); and

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Other integration related costs related to pre-acquisition matters (included within Cost of services and General and administrative expenses within the Consolidated Statements of Income (Loss)).

The restructuring and other integration related costs for the three months ended March 31, 2021 and 2020 (unaudited) were as follows:

 

 

 

Three Months Ended

 

(millions)

 

March 31, 2021

 

 

March 31, 2020

 

Cost of services - lease type contracts

 

$

0.2

 

 

$

0.2

 

Cost of services - management type contracts

 

 

1.6

 

 

 

0.2

 

General and administrative expenses

 

 

0.7

 

 

 

0.5

 

 

The accrual for restructuring and other integration related costs related to pre-acquisition matters of $2.5 million and $1.2 million is included in Accrued and other current liabilities within the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020, respectively.

4. Revenue

Contracts with customers and clients

The Company accounts for a contract when it has the approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Once a contract is identified, the Company evaluates whether the contract should be accounted for as more than one performance obligation. Substantially all of the Company's revenues come from the following two types of arrangements: Lease type and Management type contracts.

Lease type contracts

Under lease type arrangements, the Company pays the property owner a fixed base rent, percentage rent that is tied to the facility’s financial performance, or a combination of both. The Company operates the parking facility and is responsible for most operating expenses, but typically is not responsible for major maintenance, capital expenditures or real estate taxes. Performance obligations related to lease type contracts include parking for transient and monthly parkers. Revenue is recognized over time as the Company provides services. As noted in Note 1. Significant Accounting Policies and Practices and in accordance with Topic 853, certain expenses, primarily rental expense for the contractual arrangements that meet the definition of service concession arrangements, are recorded as a reduction of revenue.

Management type contracts

Management type contract revenue consists of management fees, including both fixed and performance-based fees. In exchange for this consideration, the Company may have a bundle of integrated services that comprise one performance obligations and include services such as managing the facility as well as ancillary services such as accounting, equipment leasing, consulting, insurance and other value-added services. The Company believes that it can generally purchase required insurance for the facility and facility operations at lower rates than clients can obtain on their own because the Company is effectively self-insured for all liability, workers' compensation and health care claims by maintaining a large per-claim deductible. As a result, the Company generates operating income on the insurance provided under its management type contracts by focusing on risk management efforts and controlling losses. Management type contract revenues do not include gross customer collections at the managed facilities as these revenues belong to the property owners rather than the Company. Management type contracts generally provide the Company with management fees regardless of the operating performance of the underlying facilities. Revenue is recognized over time as the Company provides services.

Service concession arrangements

Service concession agreements include both lease type and management type contracts. Revenue generated from service concession arrangements is accounted for under the guidance of Topics 606 and 853. Certain expenses (primarily rental expense) related to service concession arrangements and depreciation and amortization, have been recorded as a reduction of Service revenue - lease type contracts.

As a result of COVID-19, the Company was able to negotiate cost reductions on certain lease type contracts related to service concession arrangements. As a result, the Company recorded $13.4 million related to cost concessions (which increased revenue pursuant to Topic 853) during the three months ended March 31, 2021. The Company did 0t receive any similar cost concessions during the three months ended March 31, 2020.

Contract modifications and taxes

Contracts are often modified to account for changes in contract specifications and requirements. The Company considers contract modifications to exist when the parties to the contract have approved changes to or new enforceable rights and obligations, which may include changes to the contract consideration due to the Company or creates new performance obligations. The Company assesses whether a contract modification results in either a new separate contract, the termination of

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the existing contract and creation of a new contract, or modifies the existing contract. Typically, modifications are accounted for prospectively.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, which are collected by the Company from a customer, are excluded from revenue.

Reimbursed management type contract revenue and expense

The Company recognizes both revenues and expenses, in equal amounts, that are directly reimbursed from the property owner for operating expenses incurred under a management type contract. The Company has determined it is the principal in these transactions, as the nature of its performance obligations is for the Company to provide the services on behalf of the customer. As the principal to these related transactions, the Company has control of the promised services before they are transferred to the client.

Disaggregation of revenue

The Company disaggregates its revenue from contracts with customers by type of arrangement for each of the reportable segments. The Company has concluded that such disaggregation of revenue best depicts the overall economic nature, timing and uncertainty of the Company's revenue and cash flows affected by the economic factors of the respective contractual arrangement. See Note 14. Segment Information for further information on disaggregation of the Company's revenue by segment.

Performance obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer or client, and is the unit of account under Topic 606. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company's contracts have a single performance obligation that is not separately identifiable from other promises in the contract and therefore not distinct, comprising the promise to provide a bundle of monthly services or parking services for transient or monthly parkers.

The contract price is generally deemed to be the transaction price. Some management type contracts include performance incentives that are based on variable performance measures. These incentives are constrained at contract inception and recognized once the customer has confirmed that the Company has met the contractually agreed upon performance measures as defined in the contract.

The Company's performance obligations are primarily satisfied over time as the Company provides the related services. Typically, revenue is recognized over time on a straight-line basis as the Company satisfies the related performance obligation. There are certain management type contracts where revenue is recognized based on costs incurred to date plus a reasonable margin. The Company has concluded this is a faithful depiction of how control is transferred to the customer. Performance obligations satisfied at a point in time for the three months ended March 31, 2021 and 2020, respectively, were not significant.

The time between completion of the performance obligation and collection of cash is typically not more than 30 - 60 days. In certain contractual arrangements, such as monthly parker contracts, cash is typically collected in advance of the Company commencing its performance obligations under the contractual arrangement.

On March 31, 2021, the Company had $108.9 million related to performance obligations that were unsatisfied or partially unsatisfied for which the Company expects to recognize revenue. This amount excludes variable consideration primarily related to contracts where the Company and customer share the gross revenues or operating profit for the location and contracts where transaction prices include performance incentives that are constrained at contract inception. These performance incentives are based on measures that are ascertained exclusively by future performance and therefore cannot be estimated at contract inception by the Company. The Company applies the practical expedient that permits exclusion of information about the remaining performance obligations that have original expected durations of one year or less.

The Company expects to recognize the remaining performance obligations as revenue in future periods as follows:

 

(millions) (unaudited)

 

Remaining

Performance

Obligations

 

2021

 

$

39.0

 

2022

 

 

30.7

 

2023

 

 

20.8

 

2024

 

 

10.6

 

2025

 

 

4.5

 

2026 and thereafter

 

 

3.3

 

Total

 

$

108.9

 

 

Contract balances

The timing of revenue recognition, billings and cash collections results in accounts receivable, contract assets and contract liabilities. Accounts receivable represent amounts where the Company has an unconditional right to the consideration and

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therefore only the passage of time is required for the Company to receive consideration due from the customer. Both lease and management type contracts have customers and clients where amounts are billed as work progresses or in advance in accordance with agreed-upon contractual terms. Billing may occur subsequent to or prior to revenue recognition, resulting in contract assets and contract liabilities. The Company, on occasion, receives advances or deposits from customers and clients, on both lease and management type contracts, before revenue is recognized, resulting in the recognition of contract liabilities.

Contract assets and liabilities are reported on a contract-by-contract basis and are included in Accounts and notes receivable, net, and Accrued and other current liabilities, respectively, on the Condensed Consolidated Balance Sheets. There were 0 impairment charges recorded on contract assets and contract liabilities for the three months ended March 31, 2021 and 2020.

The following table provides information about accounts receivable, contract assets and contract liabilities with customers and clients as of March 31, 2021 (unaudited) and December 31, 2020:

 

(millions)

 

March 31, 2021

 

 

December 31,

2020

 

Accounts receivable

 

$

96.1

 

 

$

102.7

 

Contract asset

 

 

6.0

 

 

 

8.6

 

Contract liability

 

 

(8.2

)

 

 

(12.5

)

 

Changes in contract assets which include recognition of additional consideration due from the customer are offset by reclassifications of contract asset balances to accounts receivable when the Company obtains an unconditional right to consideration, thereby establishing an accounts receivable. The following table provides information about changes to contract asset balances during the three months ended March 31, 2021 and 2020 (unaudited):

 

 

 

Three Months Ended

 

(millions)

 

March 31, 2021

 

 

March 31, 2020

 

Balance, beginning of period

 

$

8.6

 

 

$

11.0

 

Additional contract assets

 

 

6.0

 

 

 

10.2

 

Reclassification to accounts receivable

 

 

(8.6

)

 

 

(11.0

)

Balance, end of period

 

$

6.0

 

 

$

10.2

 

 

Changes in contract liabilities primarily include additional contract liabilities and reductions of contract liabilities when revenue is recognized. The following table provides information about changes to contract liability balances during the three months ended March 31, 2021 and 2020 (unaudited):

 

 

 

Three Months Ended

 

(millions)

 

March 31, 2021

 

 

March 31, 2020

 

Balance, beginning of period

 

$

(12.5

)

 

$

(19.4

)

Additional contract liabilities

 

 

(8.2

)

 

 

(13.5

)

Recognition of revenue from contract liabilities

 

 

12.5

 

 

 

19.4

 

Balance, end of period

 

$

(8.2

)

 

$

(13.5

)

 

Cost of contracts, net

Cost of contracts, net, represents the cost of obtaining contractual rights associated with providing services for management type contracts. Incremental costs incurred to obtain service contracts are amortized on a straight line basis over the estimated life of the contracts, including anticipated renewals and terminations. The amortization period is consistent with the timing of when the Company satisfies the related performance obligations. Estimated lives are based on the contract life.

Amortization expense related to cost of contracts not considered service concession arrangements is included within Depreciation and amortization in the Condensed Consolidated Statements of Income (Loss).  Amortization expense of cost of contracts related to service concession arrangements within the scope of Topic 853 and certain management type contracts are recorded as a reduction of revenue and were not significant for the three months ended March 31, 2021 and 2020, respectively.  Amortization expense related to cost of contracts for the three months ended March 31, 2021 and 2020 (unaudited) was as follows:

 

 

 

Three Months Ended

 

(millions)

 

March 31, 2021

 

 

March 31, 2020

 

Amortization expense

 

$

0.3

 

 

$

0.4

 

 

As of March 31, 2021 and December 31, 2020, cost of contracts net of accumulated amortization included on the Condensed Consolidated Balance Sheets within Other noncurrent assets was $4.4 million and $4.8 million, respectively. NaN impairment charges were recorded for the three months ended March 31, 2021 and 2020, respectively.

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The Company is subject to claims and litigation in the normal course of its business, including those related to labor and employment, contracts, personal injury and other related matters, some of which allege substantial monetary damages and claims. Some of these actions may be brought as class actions on behalf of a class or purported class of employees. While the outcomes of claims and legal proceedings brought against the Company are subject to significant uncertainty, management believes the final outcome will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company accrues a charge when 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. When a loss is probable, the Company records an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, the Company records the lowest amount in the estimated range of loss and disclose the estimated range. The Company does 0t record liabilities for reasonably possible loss contingencies, but does disclose a range of reasonably possible losses if they are material and the Company is able to estimate such a range. If the Company cannot provide a range of reasonably possible losses, the Company explains the factors that prevent the Company from determining such a range. In addition, the Company accrues for the authoritative judgments or assertions made against the Company by government agencies at the time of their rendering regardless of The Company’s intent to appeal. The Company regularly evaluates current information available to the Company to determine whether an accrual should be established or adjusted. Estimating the probability that a loss will occur and estimating the amount of a loss or a range of loss involves significant estimation and judgment.

6. Other Intangible Assets, net

The components of other intangible assets, net, at March 31, 2021 (unaudited) and December 31, 2020 were as follows:

 

 

 

 

 

 

 

March 31, 2021

 

 

December 31, 2020

 

(millions)

 

Weighted

Average

Life (Years)

 

 

Intangible

Assets,

Gross

 

 

Accumulated

Amortization

 

 

Intangible

Assets,

Net

 

 

Intangible

Assets,

Gross

 

 

Accumulated

Amortization

 

 

Intangible

Assets,

Net

 

Covenant not to compete

 

 

2.0

 

 

$

2.9

 

 

$

(1.5

)

 

$

1.4

 

 

$

2.9

 

 

$

(1.3

)

 

$

1.6

 

Trade names and trademarks

 

 

2.7

 

 

 

0.9

 

 

 

(0.3

)

 

 

0.6

 

 

 

0.9

 

 

 

(0.2

)

 

 

0.7

 

Proprietary know how

 

 

3.4

 

 

 

3.8

 

 

 

(0.6

)

 

 

3.2

 

 

 

3.8

 

 

 

(0.4

)

 

 

3.4

 

Management contract rights

 

 

7.9

 

 

 

81.0

 

 

 

(43.9

)

 

 

37.1

 

 

 

81.0

 

 

 

(42.6

)

 

 

38.4

 

Customer relationships

 

 

12.7

 

 

 

21.5

 

 

 

(2.8

)

 

 

18.7

 

 

 

21.5

 

 

 

(2.5

)

 

 

19.0

 

Other intangible assets, net

 

 

8.9

 

 

$

110.1

 

 

$

(49.1

)

 

$

61.0

 

 

$

110.1

 

 

$

(47.0

)

 

$

63.1

 

 

Amortization expense related to intangible assets for the three months ended March 31, 2021 and 2020 (unaudited), respectively, which was included in Depreciation and amortization within the Condensed Consolidated Statements of Income (Loss), was as follows:

 

 

 

Three Months Ended

 

(millions)

 

March 31, 2021

 

 

March 31, 2020

 

Amortization expense

 

$

2.1

 

 

$

3.9

 

 

7. Goodwill

The changes to the carrying amount of goodwill for the three months ended March 31, 2021 (unaudited) were as follows:

 

(millions)

 

Commercial

 

 

Aviation

 

 

Total

 

Net book value as of December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

377.1

 

 

$

209.0

 

 

$

586.1

 

Accumulated impairment losses

 

 

0

 

 

 

(59.5

)

 

 

(59.5

)

Total

 

$

377.1

 

 

$

149.5

 

 

$

526.6

 

Foreign currency translation

 

 

0.1

 

 

 

0

 

 

 

0.1

 

Net book value as of March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

377.2

 

 

$

209.0

 

 

$

586.2

 

Accumulated impairment losses

 

 

0

 

 

 

(59.5

)

 

 

(59.5

)

Total

 

$

377.2

 

 

$

149.5

 

 

$

526.7

 

 

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8. Borrowing Arrangements

Long-term borrowings as of March 31, 2021 (unaudited) and December 31, 2020, in order of preference, were as follows:

 

 

 

Amount Outstanding

 

(millions)

 

March 31,

2021

 

 

December 31,

2020

 

Senior Credit Facility, net of original discount on borrowings(1)

 

$

343.9

 

 

$

332.3

 

Other borrowings

 

 

29.2

 

 

 

31.5

 

Deferred financing costs

 

 

(2.2

)

 

 

(1.7

)

Total obligations

 

 

370.9

 

 

 

362.1

 

Less: Current portion of long-term obligations under Senior Credit Facility and other long-term borrowings

 

 

26.1

 

 

 

25.0

 

Total long-term obligations under Senior Credit Facility and other borrowings

 

$

344.8

 

 

$

337.1

 

 

(1)

Includes discount on borrowings of $0.8 million and $0.9 million as of March 31, 2021 and December 31, 2020, respectively.

Senior Credit Facility

 

On February 16, 2021 (the “Fourth Amendment Effective Date”), the Company entered into the fourth amendment (the “Fourth Amendment”) to the Company’s credit agreement (as amended prior to the Fourth Amendment Effective Date (as defined below), the “Credit Agreement”) with Bank of America, N.A. (“Bank of America”), as Administrative Agent, swing-line lender and a letter of credit issuer; Wells Fargo Bank, N.A., as syndication agent; BMO Harris Bank N.A., JPMorgan Chase Bank, N.A., KeyBank National Association and U.S. Bank National Association, as co-documentation agents; Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as joint lead arrangers and bookrunners; and the lenders party thereto (the “Lenders”), pursuant to which the Lenders have made available to the Company a senior secured credit facility (the “Senior Credit Facility”). Prior to the Fourth Amendment Effective Date and pursuant to the third amendment (the “Third Amendment”) to the Credit Agreement, which was entered into on May 6, 2020, the Senior Credit Facility permitted aggregate borrowings of $595.0 million consisting of (i) a revolving credit facility of up to $370.0 million at any time outstanding, which includes a letter of credit facility that is limited to $100.0 million at any time outstanding, and (ii) a term loan facility of $225.0 million (the entire principal amount of which the Company withdrew November 30, 2018). Pursuant to the Credit Agreement as amended by the Fourth Amendment (the “Amended Credit Agreement”), the aggregate commitments under the revolving credit facility decreased by $45.0 million to $325.0 million.

Borrowings under the Senior Credit Facility bear interest, at the Company’s option, 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 (i) the applicable pricing levels set forth in the Credit Agreement (the “Applicable Margin”) for London Interbank Offered Rate (“LIBOR”) loans, subject to a “floor” on LIBOR of 1.00%, or a comparable or successor rate to LIBOR approved by Bank of America, plus the applicable LIBOR rate, or (ii) the Applicable Margin for base rate loans 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 the applicable LIBOR rate plus 1.0%, except that the Fourth Amendment provided that, for the period from May 6, 2020 until the date on which the Company delivers a compliance certificate for the fiscal quarter ending June 30, 2022, (i) the interest rate applicable to both the term loan and revolving credit facilities was fixed at LIBOR plus 2.75% per annum and (ii) the per annum rate applicable to unused revolving credit facility commitments was fixed at 0.375% (the “Fixed Margin Rates”).

Also pursuant to the Fourth Amendment, (a) the Company is subject to a Minimum Liquidity (as described in the Amended Credit Agreement) test that requires the Company to have liquidity of at least $40.0 million at each of March 31, 2021 and June 30, 2021, and (b) the Company is subject to a requirement that, at any time cash on hand exceeds $40.0 million for a period of three consecutive business days, the Company must repay revolving loans in an amount equal to such excess. Certain other negative and financial covenants were amended, which included restrictions on certain Investments, Permitted Acquisitions, Restricted Payments and Prepayments of Subordinated Debt (each as defined in the Amended Credit Agreement), through the delivery of the compliance certificate for the fiscal quarters ending March 31, 2022 or June 30, 2022, as applicable.

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Prior to the Fourth Amendment Effective Date, the Company was required to maintain a maximum consolidated total debt to EBITDA ratio of between 5.50:1.0 and 3.50:1.0 (with such ratio being waived for the fiscal quarter ended June 30, 2020 and with certain step-ups and step-downs described in, and as calculated in accordance with, the Amended Credit Agreement). In addition, the Company was required to maintain a minimum consolidated fixed charge coverage ratio of not less than 3.50:1.0 (with certain step-ups and step-downs described in the Amended Credit Agreement). Under the terms of the Fourth Amendment, the maximum consolidated debt to EBITDA ratio is waived for each of the quarters ending March 31, 2021 and June 30, 2021. Starting with the quarter ending September 30, 2021, the Company will be required to maintain a maximum consolidated total debt to EBITDA ratio (as calculated in accordance with the Fourth Amendment) of not greater than 5.25:1.0 (with certain step-downs described in the Amended Credit Agreement). As of March 31, 2021, the Company was required to maintain a minimum consolidated fixed coverage ratio of not less than 1.60:1:0 (with certain step-ups and step-downs described in the Amended Credit Agreement).

During the three months ended March 31, 2021, the Company incurred approximately $1.2 million for fees and other customary closing costs in connection with the Amended Credit Agreement.

Under the terms of the Amended Credit Agreement, term loans under the Senior Credit Facility were subject to scheduled quarterly payments of principal in installments equal to 1.25% of initial aggregate principal amount of such term loan through the first quarter of 2021 and will increase to 1.875% thereafter.

Events of default under the 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 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 Administrative Agent can, with the consent of the required Lenders, among others, (i) terminate the commitments under the Credit Agreement, (ii) accelerate and require the Company to repay all the outstanding amounts owed under the 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 Credit Agreement) has guaranteed all existing and future indebtedness and liabilities of the other guarantors and the Company arising under the Credit Agreement. The Company’s obligations under the Credit Agreement and such domestic subsidiaries’ guaranty obligations are secured by substantially all of their respective assets. The Senior Credit Facility matures on November 30, 2023. The proceeds from the Senior Credit Facility may be used to finance working capital, capital expenditures and acquisitions, as well as for other general corporate purposes. The Amended Credit Agreement did not change the guarantors, collateral, maturity date or permitted uses of proceeds, except as otherwise described above.

As of March 31, 2021, the Company was in compliance with its debt covenants under the Credit Agreement.

At March 31, 2021, the Company had $49.5 million of letters of credit outstanding under the Senior Credit Facility and borrowings against the Senior Credit Facility aggregated to $344.7 million.

The weighted average interest rate on the Company's Senior Credit Facility was 3.6% and 2.6% for the periods ended March 31, 2021 and 2020, respectively. That rate included all outstanding LIBOR contracts and letters of credit. The weighted average interest rate on all outstanding borrowings, not including letters of credit, was 3.8% and 2.7%, at March 31, 2021 and 2020, respectively.

Interest Rate Collars

In May 2019, the Company entered into three-year interest rate collar contracts with an aggregate notional amount of $222.3 million and maturity dates of April 2022. The interest rate collars were used to manage interest rate risk associated with variable interest rate borrowings under the Credit Agreement. The interest rate collars established a range where the Company will pay the counterparties if the one-month LIBOR rate falls below the established floor rate, and the counterparties will pay the Company if the one-month LIBOR rate exceeds the established ceiling rate of 2.5%. The interest rate collars settle monthly through the maturity date. No payments or receipts are exchanged on the interest rate collar contracts unless interest rates rise above or fall below the pre-determined ceiling or floor rates. The notional amount amortized consistently with the term loan portion of the Senior Credit Facility under the Credit Agreement prior to the Third Amendment. The fair value of the interest rate collars is a Level 2 fair value measurement, as the fair value is determined based on quoted prices of similar items in active markets. As of March 31, 2021 and December 31, 2020, the liability for interest rate collars of $2.5 million and $3.1 million, respectively, was included in Other noncurrent liabilities in the Condensed Consolidated Balance Sheets. The interest rate collars were classified as cash flow hedges through May 5, 2020.

On May 6, 2020, concurrent with entering into the Third Amendment, the Company de-designated the three-year interest rate collars. Prior to de-designation, the effective portion of the change in the fair value of the interest rate collars was reported in Accumulated other comprehensive loss. Upon de-designation, the balance in Accumulated other comprehensive loss is being reclassified to Other expense (income) in the Condensed Consolidated Statements of Income (Loss) on a straight-line basis through April 2022, which is over the remaining life for which the interest rate collars had previously been designated as cash flow hedges. Changes in the fair value of the interest rate collars after de-designation are included within Other expense (income) in the Condensed Consolidated Statements of Income (Loss). For the three months ended March 31, 2021, $0.6 million of interest was paid for the interest rate collars.

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See Note 13. Comprehensive Income (Loss) for the amount of loss recognized in Other Comprehensive income (loss) on the interest rate collars and the loss reclassified from Accumulated other comprehensive loss to the Condensed Consolidated Statements of Income (Loss) during the three months ended March 31, 2021.

Subordinated Convertible Debentures

The Company acquired Subordinated Convertible Debentures ("Convertible Debentures") as a result of the October 2, 2012 acquisition of Central Parking Corporation. The subordinated debenture holders have the right to redeem the Convertible Debentures for $19.18 per share upon their stated maturity (April 1, 2028) or upon acceleration or earlier repayment of the Convertible Debentures. The Convertible Debentures mature at $25 per share. There were 0 redemptions of Convertible Debentures during the periods ended March 31, 2021 and December 31, 2020, respectively. The approximate redemption value of the Convertible Debentures outstanding at each of March 31, 2021 and December 31, 2020 was $1.1 million.

9. Stock Repurchase Program

In July 2019, the Company's Board of Directors (“Board”) authorized the Company to repurchase, on the open market, shares of the Company’s outstanding common stock in an amount not to exceed $50.0 million in aggregate. During the three months ended March 31, 2020, the Company repurchased 393,975 shares of common stock at an average price of $38.78 under this program. During the three months ended March 31, 2021, 0 shares were repurchased under this program.

In March 2020, the Board authorized the Company to repurchase, on the open market, shares of the Company’s outstanding common stock in an amount not to exceed $50.0 million in aggregate. NaN shares have been repurchased under this program.

As of March 31, 2021, $50.0 million and $9.4 million remained available for repurchase under the March 2020 and July 2019 stock repurchase programs, respectively. Under the programs, repurchases 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 Rules 10b-18, to the extent relied upon, and 10b5-1 under the Exchange Act, at times and prices considered to be appropriate at the Company's discretion. The stock repurchase programs do not obligate the Company to repurchase any particular amount of common stock, have no fixed termination date, and may be suspended at any time at the Company's discretion. On March 10, 2020 and continuing through March 31, 2021, in order to improve the Company's liquidity during COVID-19, the Company suspended repurchases under the stock repurchase programs.

Share repurchase activity under the stock repurchase programs during the three months ended March 31, 2021 and 2020 (unaudited) was as follows:

 

 

 

Three Months Ended

 

(millions, except for share and per share data)

 

March 31, 2021

 

 

March 31, 2020

 

Total number of shares repurchased

 

 

 

 

 

393,975

 

Average price paid per share

 

$

 

 

$

38.78

 

Total value of shares repurchased

 

$

 

 

$

15.3

 

 

The remaining authorized repurchase amounts in the aggregate under the July 2019 and March 2020 repurchase programs as of March 31, 2021 (unaudited) was as follows:

 

(millions)

 

March 31, 2021

 

Total authorized repurchase amount

 

$

100.0

 

Total value of shares repurchased

 

 

40.6

 

Total remaining authorized repurchase amount

 

$

59.4

 

 

10. Bradley Agreement

In February 2000, the Company, through a partnership agreement with a minority partner (the “Partnership”), entered into a 25-year agreement (the "Bradley Agreement") with the State of Connecticut (the “State”) that was due to expire on April 6, 2025, under which the Company would operate garage and surface parking spaces at Bradley International Airport (“Bradley”) located in the Hartford, Connecticut metropolitan area.

Under the terms of the Bradley Agreement, the parking garage was financed through the issuance of State of Connecticut special facility revenue bonds and provided that the Company deposited, with the trustee for the bondholders, all gross revenues collected from operations of the garage and surface parking. From those gross revenues, the trustee paid debt service on the special facility revenue bonds outstanding, operating and capital maintenance expenses of the garage and surface parking facilities, and specific annual guaranteed minimum payments to the State. All of the cash flows from the parking facilities were pledged as the security of the special facility revenue bonds and were collected and deposited with the bond trustee. Each month the bond trustee made certain required monthly distributions, which were characterized as “Guaranteed Payments.” To the extent the monthly gross receipts generated by the parking facilities were not sufficient for the bond trustee to make the required Guaranteed Payments, the Company was obligated to deliver the deficiency amount to the bond trustee, with such deficiency payments representing interest bearing advances to the bond trustee. 

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On June 30, 2020, the Company and the State agreed to terminate the Bradley Agreement, with an effective date of May 31, 2020 (the “Termination Agreement”). The Company then entered into a management type contract with the Connecticut Airport Authority, effective June 1, 2020 (the “Bradley Management Agreement”), under which the Company will provide the same parking services for Bradley.  

Under the terms of the Bradley Management Agreement, the Company is no longer required to make deficiency payments. In addition, other than the contingent consideration discussed below, the Company has no other ongoing obligations under the Bradley Agreement.

 

On June 30, 2020, concurrent with the termination of the Bradley Agreement and effective as of May 31, 2020, the Company entered into an agreement to purchase the minority partners’ share in the Partnership previously established to execute the Bradley Agreement for a total cash consideration of $1.7 million. The consideration was paid in cash during the year ended December 31, 2020. Under the terms of the Termination Agreement, the Company may be required to pay additional consideration (“contingent consideration”) to the minority partner, that is contingent on the performance of the operations of Bradley. The contingent consideration is not capped and if any, would be payable to the minority partner in April 2025. Based on a probability weighting of potential payouts, the criteria to accrue for such potential payments had not been met and the contingent consideration was estimated to have no fair value as of March 31, 2021. The Company will continue to evaluate the criteria for making these payments in the future and accrue for such potential payments if deemed necessary.

11. Stock-Based Compensation

Stock Grants

There were 0 stock grants granted during the three months ended March 31, 2021 and 2020, respectively. The Company recognized 0 stock-based compensation expense related to stock grants for the three months ended March 31, 2021 and 2020, respectively.  

Restricted Stock Units

During the three months ended March 31, 2021, the Company granted 160,843 and 152,659 restricted stock units to certain executives and employees that vest over two and three years, respectively.

Nonvested restricted stock units as of March 31, 2021, and changes during the three months ended March 31, 2021 (unaudited) were as follows:

 

 

Shares

 

 

Weighted Average Grant-Date Fair Value

 

Nonvested as of December 31, 2020

 

 

51,276

 

 

$

33.24

 

Granted

 

 

313,502

 

 

 

34.45

 

Nonvested as of March 31, 2021

 

 

364,778

 

 

$

34.28

 

 

The Company's stock-based compensation expense related to the restricted stock units for the three months ended March 31, 2021 and 2020 (unaudited), respectively, which is included in General and administrative expenses within the Condensed Consolidated Statements of Income (Loss), was as follows:

 

 

 

Three Months Ended

 

(millions)

 

March 31, 2021

 

 

March 31, 2020

 

Stock-based compensation expense

 

$

0.8

 

 

$

0.3

 

 

As of March 31, 2021, there was $10.6 million of unrecognized stock-based compensation costs related to the restricted stock units that are expected to be recognized over a weighted average remaining period of approximately 2.1 years.

Performance Share Units (“PSU’s”)

During the three months ended March 31, 2021, the Company granted 50,868 performance share units to certain executives. The performance target is based on the achievement of a certain level income from operations, excluding depreciation and amortization, as well as certain other discretionary adjustments by the Board, over the three-year performance period from 2021 through 2023. The ultimate number of shares issued could change depending on the Company’s results over the performance period. The maximum amount of shares that could be issued for the shares granted in 2021 are 101,736.

Due to the impact of COVID-19 on the Company’s operations, the Company expects the targets for the PSU awards granted in 2019 (“2019 PSU’s) and 2020 (“2020 PSU’s) to not be achieved. As such, during the three months ended March 31, 2020, the Company reversed $1.4 million of compensation expense related to the 2019 PSU’s. In addition, during the three months ended March 31, 2020, the Company reversed $1.8 million of compensation expense related to the PSU awards granted in 2018 (“2018 PSU’s”), as the targets were not expected to be achieved as of March 31, 2020; however, during December 2020, the Compensation Committee of the Board modified the performance target for the 2018 PSU’s, as well as evaluated qualitative performance factors for the Company for 2020, which resulted in achievement of 95% of the target. The 2018 PSU’s vested as of December 31, 2020.

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Table of Contents

Nonvested PSU’s as of March 31, 2021, and changes during the year ended March 31, 2021 (unaudited) was as follows:

 

 

 

Shares

 

 

Weighted Average Grant-Date Fair Value

 

Nonvested as of December 31, 2020

 

 

200,218

 

 

$

35.27

 

Granted

 

 

50,868

 

 

 

34.97

 

Forfeited

 

 

(3,375

)

 

 

35.96

 

Nonvested as of March 31, 2021

 

 

247,711

 

 

$

35.20

 

 

The Company's stock-based compensation expense (net reduction of expense) related to PSU’s during the three months ended March 31, 2021 and 2020 (unaudited), respectively, which is included in General and administrative expenses within the Condensed Consolidated Statements of Income (Loss), was as follows:

 

 

 

Three Months Ended

 

(millions)

 

March 31, 2021

 

 

March 31, 2020

 

Stock-based compensation expense

 

$

0.1

 

 

$

(3.2

)

 

As of March 31, 2021, there was $1.7 million of unrecognized compensation costs related to PSU awards that are expected to be recognized over a weighted average remaining period of approximately 2.7 years. Since the Company no longer expects the required performance targets to be achieved for the 2019 and 2020 PSU’s, no future compensation expense is expected to be recognized; however, future compensation expense for the 2019 and 2020 PSU’s could reach a maximum of $14.1 million if certain performance targets are achieved.

12. Net Income (Loss) per Common Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted daily average number of shares of common stock outstanding during the period. Diluted net income (loss) 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 restricted stock units, using the treasury-stock method. Unvested performance share units are excluded from the computation of weighted average diluted common shares outstanding if the performance targets upon which the issuance of the shares is contingent have not been achieved and the respective performance period has not been completed as of the end of the period. In periods where the Company has a net loss, restricted stock units are excluded from the calculation of net income (loss) per common share, as their inclusion would be anti-dilutive.

Basic and diluted net income (loss) per common share and a reconciliation of the weighted average basic common shares outstanding to the weighted average diluted common shares outstanding for the three months ended March 31, 2021 and 2020 (unaudited) was as follows:

 

 

 

Three Months Ended

 

(millions, except share and per share data)

 

March 31, 2021

 

 

March 31, 2020

 

Net income (loss) attributable to SP Plus Corporation

 

$

2.3

 

 

$

(46.1

)

Basic weighted average common shares outstanding

 

 

21,113,494

 

 

 

21,154,047

 

Dilutive impact of share-based awards

 

 

190,574

 

 

 

 

Diluted weighted average common shares outstanding

 

 

21,304,068

 

 

 

21,154,047

 

Net income (loss) per common share

 

 

 

 

 

 

 

 

Basic

 

$

0.11

 

 

$

(2.18

)

Diluted

 

$

0.11

 

 

$

(2.18

)

 

Due to the net loss during the three months ended March 31, 2020, common stock equivalents arising from 153,442 restricted stock units were excluded from the computation.

There were 0 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.

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Table of Contents

13. Comprehensive Income (Loss)

The components of other comprehensive income (loss) and income tax benefit allocated to each component for the three months ended March 31, 2021 and 2020 (unaudited) were as follows:

 

 

 

Three Months Ended

March 31, 2021

 

(millions)

 

Before Tax Amount

 

 

Income Tax

 

 

Net of Tax Amount

 

Change in fair value of interest rate collars

 

$

0.6

 

 

$

0.2

 

 

$

0.4

 

Other Comprehensive income

 

$

0.6

 

 

$

0.2

 

 

$

0.4

 

 

 

 

Three Months Ended

March 31, 2020

 

(millions)

 

Before Tax Amount

 

 

Income Tax

 

 

Net of Tax Amount

 

Translation adjustments

 

$

(0.2

)

 

$

 

 

$

(0.2

)

Change in fair value of interest rate collars

 

 

(3.8

)

 

 

(1.0

)

 

 

(2.8

)

Other Comprehensive loss

 

$

(4.0

)

 

$

(1.0

)

 

$

(3.0

)

 

The changes to accumulated other comprehensive loss by component for the three months ended March 31, 2021 (unaudited), were as follows:

 

(millions)

 

Foreign

Currency

Translation

Adjustments

 

 

Change in Fair Value

of Interest Rate Collars

 

 

Total Accumulated

Other

Comprehensive

Loss

 

Balance as of December 31, 2020

 

$

(2.2

)

 

$

(2.2

)

 

$

(4.4

)

Amounts reclassified from accumulated other comprehensive loss

 

 

-

 

 

 

0.4

 

 

 

0.4

 

Balance as of March 31, 2021

 

$

(2.2

)

 

$

(1.8

)

 

$

(4.0

)

 

The changes to accumulated other comprehensive loss by component for the three months ended March 31, 2020 (unaudited), were as follows:

 

(millions)

 

Foreign

Currency

Translation

Adjustments

 

 

Change in Fair Value

of Interest Rate Collars

 

 

Total Accumulated

Other

Comprehensive

Loss

 

Balance as of December 31, 2019

 

$

(2.3

)

 

$

(0.4

)

 

$

(2.7

)

Other comprehensive loss before reclassification

 

 

(0.2

)

 

 

(2.8

)

 

 

(3.0

)

Balance as of March 31, 2020

 

$

(2.5

)

 

$

(3.2

)

 

$

(5.7

)

 

Reclassifications from accumulated other comprehensive loss for the three months ended March 31, 2021 and 2020 were as follows:

 

(millions) (unaudited)

 

Three Months Ended

March 31

 

 

Classification in the Condensed Consolidated Statements of Income (Loss)

Interest Rate Collars:

 

2021

 

 

2020

 

 

 

Net realized loss

 

$

0.6

 

 

$

 

 

Other expense (income)

Reclassifications before tax

 

 

0.6

 

 

 

 

 

 

Income tax benefit

 

 

0.2

 

 

 

 

 

 

Reclassifications, net of tax

 

$

0.4

 

 

$

 

 

 

 

14. Business Unit Segment Information

Segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the Company's Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as the source of the Company’s reportable segments. The Company’s segments are organized in a manner consistent with which discrete financial information is available and evaluated regularly by the CODM in deciding how to allocate resources and assess performance.

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An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses, and about which separate financial information is regularly evaluated by the CODM. The CODM is the Company’s chief executive officer.

Each of the operating segments are directly responsible for revenue and expenses related to their operations including direct segment administrative costs. Finance, information technology, human resources and legal are shared functions that are not allocated back to the 2 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 other income, interest expense, depreciation and amortization or income taxes to the operating segments. The accounting policies for segment reporting are the same as for the Company as a whole.

In July 2020, the Company changed its internal reporting segment information reported to the CODM. Certain hospitality locations previously reported under Aviation are now included in Commercial. All prior year amounts have been reclassified to conform to the Company’s current reporting structure.

 

Commercial encompasses the Company's services in healthcare facilities, municipalities, including meter revenue collection and enforcement services, government facilities, hotels, commercial real estate, residential communities, retail, colleges and universities, as well as ancillary services such as shuttle and ground transportation services, valet services, taxi and livery dispatch services and event planning, including shuttle and transportation services.

 

Aviation encompasses the Company's services in aviation (i.e., airports, airline and certain hospitality clients with baggage and parking services) as well as ancillary services, which include shuttle and ground transportation services, valet services, baggage handling, baggage repair and replacement, remote air check-in services, wheelchair assist services and other services.

 

"Other" consists of ancillary revenue that is not specifically identifiable to Commercial or Aviation and certain unallocated items, such as and including prior year insurance reserve adjustments and other corporate items.

Revenue and gross profit by operating segment for the three months ended March 31, 2021 and 2020 (unaudited) were as follows:

 

 

Three Months Ended

 

(millions)

 

March 31, 2021

 

 

Gross

Margin

%

 

 

March 31, 2020

 

 

Gross

Margin

%

 

Services Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease type contracts

 

$

41.3

 

 

 

 

 

 

$

76.3

 

 

 

 

 

Management type contracts

 

 

55.0

 

 

 

 

 

 

 

74.5

 

 

 

 

 

Total Commercial

 

 

96.3

 

 

 

 

 

 

 

150.8

 

 

 

 

 

Aviation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease type contracts

 

 

1.3

 

 

 

 

 

 

 

5.2

 

 

 

 

 

Management type contracts

 

 

29.4

 

 

 

 

 

 

 

60.2

 

 

 

 

 

Total Aviation

 

 

30.7

 

 

 

 

 

 

 

65.4

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease type contracts

 

 

0.1

 

 

 

 

 

 

 

0.2

 

 

 

 

 

Management type contracts

 

 

1.6

 

 

 

 

 

 

 

2.4

 

 

 

 

 

Total Other

 

 

1.7

 

 

 

 

 

 

 

2.6

 

 

 

 

 

Reimbursed management type contract revenue

 

 

118.0

 

 

 

 

 

 

 

190.9

 

 

 

 

 

Total Services Revenue

 

$

246.7

 

 

 

 

 

 

$

409.7

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease type contracts

 

$

6.2

 

 

 

15.0

%

 

$

(0.9

)

 

 

(1.2

)%

Management type contracts

 

 

20.9

 

 

 

38.0

%

 

 

25.7

 

 

 

34.5

%

Lease impairment

 

 

 

 

N/M

 

 

 

(77.5

)

 

N/M

 

Total Commercial

 

 

27.1

 

 

 

 

 

 

 

(52.7

)

 

 

 

 

Aviation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease type contracts

 

 

0.4

 

 

 

30.8

%

 

 

0.3

 

 

 

5.8

%

Management type contracts

 

 

6.8

 

 

 

23.1

%

 

 

14.3

 

 

 

23.8

%

Lease Impairment

 

 

(0.1

)

 

N/M

 

 

 

 

 

 

N/M

 

Total Aviation

 

 

7.1

 

 

 

 

 

 

 

14.6

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease type contracts

 

 

0.8

 

 

N/M

 

 

 

2.1

 

 

N/M

 

Management type contracts

 

 

3.3

 

 

N/M

 

 

 

5.8

 

 

N/M

 

Total Other

 

 

4.1

 

 

 

 

 

 

 

7.9

 

 

 

 

 

Total gross profit

 

$

38.3

 

 

 

 

 

 

$

(30.2

)

 

 

 

 

N/M - Not Meaningful

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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 fiscal year ended December 31, 2020.

Important Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q is being filed by SP Plus Corporation (“we”, “us” or “our”) with the Securities and Exchange Commission (“SEC”) and contains forward-looking statements, including statements regarding the anticipated further impact of the COVID-19 pandemic (“COVID-19”) on our operations and financial condition. These statements are typically accompanied by the words “expect,” “estimate,” “intend”, “will,” “predict,” “project,” “may,” “should,” “could,” “believe,” “would,” “might,” “anticipate,” or similar terms and phrases, but such words, terms and phrases are not the exclusive means of identifying such statements. These expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as enacted under the Private Securities Litigation Reform Act of 1995. These forward looking statements are made based on 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. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Our actual results, performance and achievements could be materially different from those expressed in, or implied by, our forward-looking statements. Important factors which could cause or contribute to our actual results, performance or achievements being different from those expressed in, or implied by, our forward-looking statements include, but are not limited to, those discussed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and other documents we file with the SEC, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and except as expressly required by the federal securities laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances, future events or for any other reason.

Overview

Our Business

We facilitate the efficient movement of people, vehicles and personal belongings with the goal of enhancing the consumer experience while improving bottom line results for our clients. We provide professional parking management, ground transportation, remote baggage check-in and handling, facility maintenance, security, event logistics, and other technology-driven mobility solutions to aviation, commercial, hospitality, healthcare and government clients across North America. We typically enter into contractual relationships with property owners or managers as opposed to owning facilities.

We operate under two types of arrangements: management type contracts and lease type contracts.

 

Under a management type contract, we typically receive a fixed and/or variable monthly fee for providing our services, and we may also receive an incentive fee based on the achievement of certain performance objectives. We also receive fees for ancillary services. Typically, all of the underlying revenue and expenses under a standard management type contract flow through to our client rather than to us. However, some management type contracts, which are referred to as “reverse” management type contracts, usually provide for larger management fees and require us to pay various costs.

 

Under a lease type contract, we generally pay to the client either a fixed annual rent, a percentage of gross customer collections, or a combination of both. Under a lease type contract, we collect all revenue and are responsible for most operating expenses, but typically are not responsible for major maintenance, capital expenditures or real estate taxes. Margins for lease type 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 March 31, 2021, we operated approximately 86% of our locations under management type contracts and approximately 14% under lease type contracts.

In evaluating our financial condition and operating performance, one of our primary areas of focus is on our gross profit. Revenue from lease type contracts includes all gross customer collections derived from our leased locations (net of local taxes), whereas revenue from management type contracts only includes our contractually agreed upon management fees and amounts attributable to ancillary services. Gross customer collections at facilities under management type contracts, therefore, are not included in our revenue. Accordingly, while a change in the proportion of our operating agreements that are structured as lease type contracts may cause significant fluctuations in reported revenue and cost of services, those changes will not artificially affect our gross profit. Therefore, gross profit is one of our primary areas of focus.

General Business Trends

We believe that sophisticated clients (which also include property owners) recognize the potential for parking services, parking management, ground transportation services, baggage handling services, technology-driven mobility solutions and other

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ancillary services to be a profit generator and/or a service differentiator to their customers. By outsourcing these services, they are able to capture additional profit and improve customer experiences by leveraging the unique operational skills and controls that an experienced services company can offer. Our ability to consistently deliver a uniformly high level of services to our clients, including the use of various technological enhancements, allows us to maximize the profit and/or customer experience to our clients and improves our ability to win contracts and retain existing clients. Our focus on customer service and satisfaction is a key driver of our high retention rate, which was approximately 87% and 94% for the twelve-month periods ended March 31, 2021 and 2020, respectively. This retention rate captures facilities in the Commercial segment.

Commercial Segment Facilities

In order to mitigate some of the effects from COVID-19, we converted many of our lease locations to management locations during the past year. In addition, we were able to exit many less profitable contracts, which were for both lease and management locations. The following table reflects our Commercial facilities (by contractual type) operated on the dates indicated:

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

March 31, 2020

 

Leased facilities

 

 

430

 

 

 

445

 

 

 

603

 

Managed facilities

 

 

2,536

 

 

 

2,539

 

 

 

2,609

 

Total Commercial segment facilities

 

 

2,966

 

 

 

2,984

 

 

 

3,212

 

 

Revenue

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

Lease type contracts. Consists of all revenue received at lease type locations, including gross receipts (net of local taxes), consulting and real estate development fees, gains on sales of contracts and payments for exercising termination rights.  Revenue from lease type contracts includes a reduction for service concessions.

Management type contracts. Consists of management fees, including fixed, variable and/or performance-based fees, and amounts attributable to ancillary services such as accounting, equipment leasing, baggage services, payments received for exercising termination rights, consulting, developmental fees, gains on sales of contracts, insurance and other value-added services. We believe we generally can purchase required insurance at lower rates than our clients can obtain on their own because we effectively self-insure for all liability 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 type contracts by focusing on our risk management efforts and controlling losses. Management type contract revenues do not include gross customer collections at those facilities, as those revenues belong to the client rather than to us. Management type contracts generally provide us with a management fee regardless of the operating performance of the underlying management type contract.

Reimbursed Management Type Contract Revenue. Consists of the direct reimbursement from the client for operating expenses incurred under a management type contract, which are reflected in our revenue.

Cost of Services

Our cost of services consists of the following:

Lease type contracts. Consists of contractual rents or fees paid to the client and all operating expenses incurred in connection with operating the leased facility. Contractual rents or fees paid to the client are generally based on either a fixed contractual amount, a percentage of gross revenue or a combination thereof. Generally, under a lease type arrangement we are not responsible for major capital expenditures or real estate taxes.

Management type contracts. Cost of services under a management type contract is generally the responsibility of the client. As a result, these costs are not included in our results of operations. However, our reverse management type contracts, which typically provide for larger management fees, do require us to pay for certain costs and those costs are included in our results of operations.

Reimbursed Management Type Contract Expense. Consists of directly reimbursed costs incurred on behalf of a client under a management type contract, which are reflected in our cost of 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 and management type 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 and supervisory employees.

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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.

Goodwill

Goodwill represents the excess of purchase price paid over the fair value of net assets acquired. In accordance with the Financial Accounting Standards Board's ("FASB") authoritative accounting guidance on goodwill, we evaluate goodwill for impairment on an annual basis, or more often if events or circumstances change that could cause goodwill to become impaired. We have elected to assess the impairment of goodwill annually on October 1 or at an interim date if there is an event or change in circumstances indicating the carrying value may not be recoverable. The goodwill impairment test is performed at the reporting unit level; our reporting units represent our operating segments, consisting of Commercial and Aviation. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the use of acquired assets or our business strategy, and significant negative industry or economic trends.

We may perform a qualitative, rather than quantitative, assessment, to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount. The determination of fair value of a reporting unit utilizes cash flow projections that assume certain future revenue and cost levels, comparable marketplace data, assumed discount rates based upon current market conditions and other valuation factors, all of which involve the use of significant judgment and estimates. We also assess critical areas that may impact our business including economic conditions, market related exposures, competition, changes in service offerings and changes in key personnel.

Other Intangibles Assets, net

Other intangible assets represent assets with finite lives that are amortized over their estimated useful lives and reviewed for impairment when circumstances change that would indicate the carrying value may not be recoverable. Intangible assets are amortized on a straight-line basis over their estimated useful lives. We evaluate the remaining useful life of the other intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to their remaining useful lives. Assumptions and estimates about future values and remaining useful lives of our intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors, such as changes in our business strategy and internal forecasts. Although management believes the historical assumptions and estimates are reasonable and appropriate, different assumptions and estimates could materially impact reported financial results.

For both goodwill and intangible assets, future events may indicate differences from our judgments and estimates which could, in turn, result in impairment charges. Future events that may result in impairment charges include extended unfavorable economic impacts of COVID-19, increases in interest rates, which would impact discount rates, or other factors which could decrease revenues and profitability of existing locations and changes in the cost structure of existing facilities.

Long-Lived Assets

We evaluate long-lived assets, primarily including right-of-use (“ROU”) assets, leasehold improvements, equipment and construction in progress for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. We group assets at the lowest level for which cash flows are separately identified in order to measure an impairment. Events or circumstances that would result in an impairment review include a significant change in the use of an asset, the planned sale or disposal of an asset, or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset group. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future undiscounted cash flows expected to be generated by the asset group. If it is determined to be impaired, the impairment recognized is measured by the amount by which the carrying value of the asset exceeds its fair value.

Assumptions and estimates used to determine cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity. Any future changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in additional impairment charges. Future events that may result in impairment charges include extended unfavorable economic impacts of COVID-19, or other factors which could decrease revenues and profitability of existing locations and changes in the cost structure of existing facilities.

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.

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The operating segments are reported to our CODM as Commercial and Aviation.

 

Commercial encompasses our services in healthcare facilities, municipalities, including meter revenue collection and enforcement services, government facilities, hotels, commercial real estate, residential communities, retail, colleges and universities, as well as ancillary services such as shuttle and ground transportation services, valet services, taxi and livery dispatch services and event planning, including shuttle and transportation services.

 

Aviation encompasses our services in aviation (e.g., airports, airline and certain hospitality clients with baggage and parking services) as well as ancillary services, which includes shuttle and ground transportation services, valet services, baggage handling, baggage repair and replacement, remote air check-in services, wheelchair assist services and other services.

 

"Other" consists of ancillary revenue and costs that are not specifically attributable to Commercial or Aviation and certain unallocated items, such as and including prior year insurance reserve adjustments and other corporate items.

In July 2020, we changed our internal reporting segment information reported to the CODM. Certain hospitality locations previously reported under Aviation are now included in Commercial. All prior year amounts have been reclassified to conform to our current reporting structure.

Analysis of Results of Operations

Three Months Ended March 31, 2021 Compared to Three Months March 31, 2020

Existing business represents business that has been operating for at least one year and operating for the entire period in the comparative period being presented. Other business is comprised of expired business, conversions and new business. As a result of COVID-19, we have executed on a strategy to successfully convert certain lease type contracts to management type contracts or terminate certain lease type contracts, which should provide a higher gross profit over the contract term. In addition, for those locations that have remained leases, we have worked with landlords to either receive rent concessions or change lease terms to be more favorable to us. Expired business relates to contracts that have expired during the current period but we were operating the business in the comparative period presented. Existing business in the Other segment represents amounts not specifically attributable to Commercial or Aviation and certain unallocated items.

Consolidated results for the three months ended March 31, 2021 and 2020, respectively, include the following notable items:

 

 

 

Three Months Ended

 

 

Variance

 

(millions) (unaudited)

 

March 31, 2021

 

 

March 31, 2020

 

 

Amount

 

 

%

 

Services revenue (1)

 

$

128.7

 

 

$

218.8

 

 

$

(90.1

)

 

 

(41.2

)%

Cost of services (2)

 

 

90.3

 

 

 

171.5

 

 

 

(81.2

)

 

 

(47.3

)%

Lease impairment

 

 

0.1

 

 

 

77.5

 

 

 

(77.4

)

 

 

(99.9

)%

Gross profit

 

 

38.3

 

 

 

(30.2

)

 

 

68.5

 

 

 

226.8

%

General and administrative expenses

 

 

21.0

 

 

 

20.7

 

 

 

0.3

 

 

 

1.4

%

Depreciation and amortization

 

 

6.3

 

 

 

7.5

 

 

 

(1.2

)

 

 

(16.0

)%

Operating income (loss)

 

 

11.0

 

 

 

(58.4

)

 

 

69.4

 

 

 

118.8

%

Income tax expense (benefit)

 

 

1.4

 

 

 

(16.8

)

 

 

18.2

 

 

 

108.3

%

(1)

Excludes Reimbursed management type contract revenue of $118.0 million and $190.9 million for the three months ended March 31, 2021 and 2020, respectively.

(2)

Excludes Reimbursed management type contract expense of $118.0 million and $190.9 million for the three months ended March 31, 2021 and 2020, respectively.

 

Services revenue decreased by $90.1 million, or 41.2%, attributable to the following:

 

Services revenue for lease type contracts decreased $39.0 million, or 47.7%, primarily driven by a decrease of $17.9 million from existing business, $11.3 million from expired business, and $10.4 million from locations that converted to management type contracts during the periods presented, partially offset by an increase of $0.6 million from new business. Existing business revenue decreased $17.9 million, or 30.1%, primarily due to a decrease in transient revenue as a result of COVID-19, partially offset by the recognition of certain cost concessions of $13.4 million related to service concessions.

 

Services revenue for management type contracts decreased $51.1 million, or 37.3%, primarily driven by a decrease of $43.9 million from existing business and $12.6 million from expired business, partially offset by an increase of $4.6 million from new business and $0.8 million from locations that converted from lease type contracts during the periods presented. Existing business revenue decreased $43.9 million, or 36.3%, primarily due to a decrease in volume based management type contracts as a result of COVID-19.

Gross profit increased by $68.5 million, or 226.8%, attributable to the following:

 

Gross profit for lease type contracts increased $5.9 million, or 393.3%, and gross profit percentage increased to 17.3% for the three months ended March 31, 2021, compared to 1.8% for the three months ended March 31, 2020. Gross profit for lease type contracts increased as a result of increases in existing business and increased profit as a result of

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expired business. Gross profit for existing business increased $4.4 million, or 122.2%, primarily due to the recognition of certain cost concessions of $13.4 million related to service concessions and $5.0 million related to rent concessions, as well as a decrease in overall net operating costs, partially offset by decreases in transient revenue as a result of COVID-19 and an increase in restructuring and other integration related costs.

 

Gross profit for management type contracts decreased $14.8 million, or 32.3%, while gross profit percentage for management type contracts increased to 36.0% for three months ended March 31, 2021, compared to 33.4% for three months ended March 31, 2020. Gross profit for management type contracts decreased as a result of decreases in existing business and expired business, partially offset by increased new business and locations that converted from lease type contracts during the periods presented. Gross profit for existing business decreased $13.8 million, or 32.7%, primarily due to a decrease in volume based management type contracts as a result of COVID-19 and increased restructuring and other integration costs, partially offset by a decrease in compensation, benefits and overall net operating costs.

 

We recognized $0.1 million of impairment charges related to an abandoned office lease in the Aviation segment during the three months ended March 31, 2021. We recognized $77.5 million of impairment charges related to operating lease ROU assets in the Commercial segment during the three months ended March 31, 2020.

General and administrative expenses increased $0.3 million, or 1.4%, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily related to the reversal of stock based compensation related to performance share units during the three months ended March 31, 2020, as well as higher performance based compensation during the three months ended March 31, 2021, partially offset by cost reduction initiatives.

Our effective tax rate was 26.4% and 26.9% for the three months ended March 31, 2021 and 2020, respectively.

The following charts summarize our revenues (excluding reimbursed management type contract revenue) and gross profit by segment for the three months ended March 31, 2021 and 2020.

Commercial segment: Services Revenue

Lease type contracts. Revenue decreased $35.0 million, or 45.9%, to $41.3 million for the three months ended March 31, 2021, compared to $76.3 million for the three months ended March 31, 2020. Existing business decreased $17.0 million, or 29.8%, primarily due to a decrease in transient revenue as a result of the ongoing COVID-19 pandemic, partially offset by the recognition of certain cost concessions of $9.8 million related to service concessions. Revenue from other business decreased by $18.0 million, or 93.3%, primarily due to decreases of $11.1 million from expired business and $7.6 million from locations that converted to management type contracts during the periods presented, partially offset by an increase of $0.7 million from new business.

Management type contracts. Revenue decreased $19.5 million, or 26.2%, to $55.0 million for the three months ended March 31, 2021, compared to $74.5 million for the three months ended March 31, 2020.  Existing business management type revenue decreased $15.8 million, or 25.1%, primarily due to a decrease in volume based management type contracts. Other business management type revenue decreased by $3.7 million, or 31.9%, primarily due to a decrease of $8.5 million from expired

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business, partially offset by increases of $4.3 million from new business and $0.5 million in locations that converted from lease type contracts during the period presented.

Commercial segment: Gross Profit

 

 

 

Lease type contracts. Gross profit increased $7.1 million, or 788.9%, to $6.2 million for the three months ended March 31, 2021, compared to a loss of $0.9 million for three months ended March 31, 2020. Gross profit percentage increased to 15.0% for the three months ended March 31, 2021, compared to negative 1.2% for the three months ended March 31, 2020. Gross profit increased as a result of increases in existing business and increased profit as a result of expired business, partially offset by a decrease in new business. Gross profit for existing business increased $5.6 million, or 466.7%, primarily due to the recognition of certain cost concessions of $14.8 million, as well as decreases in variable rent and overall net operating costs, partially offset by decreases in transient revenue due to COVID-19 and a decrease in compensation, benefits and overall net operating costs.

Management type contracts. Gross profit decreased $4.8 million, or 18.7%, to $20.9 million for the three months ended March 31, 2021, compared to $25.7 million for the three months ended March 31, 2020. Gross profit percentage increased to 38.0% for three months ended March 31, 2021, compared to 34.5% for three months ended March 31, 2020. Gross profit decreased as a result of decreases in existing business and increased profit as a result of expired business, partially offset by an increase in new business and locations that converted from lease type contracts during the periods presented. Gross profit for existing business decreased $5.2 million, or 21.9%, primarily due to a decrease in volume based management type contracts as a result of COVID-19, partially offset by a decrease in compensation, benefits and overall net operating costs.

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Aviation segment: Services Revenue

 

 

 

Lease type contracts. Revenue decreased $3.9 million, or 75.0%, to $1.3 million for the three months ended March 31, 2021, compared to $5.2 million for the three months ended March 31, 2020. Existing business decreased $0.8 million, or 38.1%, primarily due to a decrease in transient revenue as a result of COVID-19, partially offset by the recognition of certain cost concessions of $3.6 million related to service concessions. Other business decreased by $3.1 million, or 100.0%, primarily due to decreases of $2.8 million from locations that converted to management type contracts during the periods presented, $0.2 million from expired business and $0.1 million from new business.

Management type contracts. Revenue decreased $30.8 million, or 51.2%, to $29.4 million for the three months ended March 31, 2021, compared to $60.2 million for the three months ended March 31, 2020.  Existing business decreased by $27.3 million, or 49.0%, primarily due to a decrease in volume based management type contracts. Other business decreased by $3.5 million, or 77.8%, primarily due to decreases of $4.1 million from expired business, partially offset by increases of $0.3 million in new business and $0.3 million from locations that converted from lease type contracts during the period presented.

Aviation segment: Gross Profit

 

 

 

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Lease type contracts. Gross profit increased $0.1 million, or 33.3%, to $0.4 million for the three months ended March 31, 2021, compared to $0.3 million for three months ended March 31, 2020. Gross profit percentage increased to 30.8% for the three months ended March 31, 2021, compared to 5.8% for the three months ended March 31, 2020. Gross profit increased as a result of increases in existing business and locations that converted to management type contracts during the periods presented, partially offset by new business. Gross profit for existing business increased $0.1 million, or 33.3%, primarily due to the recognition of certain concessions of $3.6 million and a decrease in compensation, benefits and overall net operating costs, partially offset by decreases in transient revenue.

Management type contracts. Gross profit decreased $7.5 million, or 52.4%, to $6.8 million for the three months ended March 31, 2021, compared to $14.3 million for the three months ended March 31, 2020. Gross profit percentage decreased to 23.1% for three months ended March 31, 2021, compared to 23.8% for three months ended March 31, 2020. Gross profit decreased as a result of decreases in existing business, increased profit as a result of expired business and new business, partially offset by an increase in locations that converted from lease type contracts in the periods presented. Gross profit for existing business decreased $6.1 million, or 48.0%, primarily due to decreases in volume based management type contracts as a result of COVID-19, partially offset by a decrease in compensation, benefits and overall net operating costs.

"Other" segment

"Other" consists of ancillary revenue and costs that are not specifically identifiable to the Commercial or Aviation Segments and certain unallocated items, such as and including prior year insurance reserve adjustments and other corporate items. Total service revenue in “Other” decreased $0.9 million, or 34.6%, to $1.7 million for the three months ended March 31, 2021, compared to $2.6 million for the three months ended March 31, 2020. Gross profit for “Other” decreased $3.8 million, or 48.1%, to $4.1 million for the three months ended March 31, 2021, compared to $7.9 million for the three months ended March 31, 2020.

Analysis of Financial Condition

Liquidity and Capital Resources

General

We continually project anticipated cash requirements for our operating, investing and financing needs, as well as cash flows generated from operating activities available to meet these needs. Our operating needs can include, among other items, commitments for cost of services, operating leases, payroll, insurance claims, interest and legal settlements. Our investing and financing spending can include payments for acquired businesses, joint ventures, capital expenditures, cost of contracts, distributions to noncontrolling interests, share repurchases and payments on our outstanding indebtedness.

As of March 31, 2021, we had $18.0 million of cash and cash equivalents and $130.5 million of borrowing availability under our Senior Credit Facility (prior to our Minimum Liquidity requirement (as described in the Amended Credit Agreement). COVID-19 and resulting global disruptions have negatively affected the global economy as well as our business and the businesses of our customers and clients. The full impact of COVID-19 on our business and the businesses of our customers and clients is unknown and highly unpredictable and could continue beyond the containment of the COVID-19 outbreak. In order to lessen the impacts from COVID-19, we have taken actions to improve our liquidity, including, without limitation, reducing operating expenses and capital expenditures and suspending repurchases of our common stock. Based on these actions and our expectations regarding the impact of COVID-19, we believe we will be able to generate sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants for the next twelve months.

Outstanding Indebtedness

On March 31, 2021, we had total indebtedness of approximately $370.9 million, an increase of $8.8 million from December 31, 2020. The $370.9 million in total indebtedness as of March 31, 2021 includes:

 

$341.7 million under our Senior Credit Facility (as defined below); and

 

$29.2 million of other debt including finance lease obligations.

Senior Credit Facility

 

On February 16, 2021 (the “Fourth Amendment Effective Date”), we entered into a fourth amendment (the “Fourth Amendment”) to our credit agreement (as amended prior to the Fourth Amendment Effective Date (as defined below), the “Credit Agreement”) with Bank of America, N.A. (“Bank of America”), as Administrative Agent, swing-line lender and a letter of credit issuer; Wells Fargo Bank, N.A., as syndication agent; BMO Harris Bank N.A., JPMorgan Chase Bank, N.A., KeyBank National Association and U.S. Bank National Association, as co-documentation agents; Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as joint lead arrangers and bookrunners; and the lenders party thereto (the “Lenders”), pursuant to which the Lenders have made available to us a senior secured credit facility (the “Senior Credit Facility”). Prior to the Fourth Amendment Effective Date and pursuant to the third amendment (the “Third Amendment”) to the Credit Agreement, which was entered into on May 6, 2020, the Senior Credit Facility permitted aggregate borrowings of $595.0 million consisting of (i) a revolving credit facility of up to $370.0 million at any time outstanding, which includes a letter of credit facility that is limited to $100.0 million at any time outstanding, and (ii) a term loan facility of $225.0 million (the entire principal amount of which we drew

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on November 30, 2018). Pursuant to the Credit Agreement as amended by the Fourth Amendment (the “Amended Credit Agreement”), the aggregate commitments under the revolving credit facility decreased by $45.0 million to $325.0 million.

 

Borrowings under the Senior Credit Facility bear interest, at our option, at a rate per annum based on our 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 (i) the applicable pricing levels set forth in the Credit Agreement (the “Applicable Margin”) for London Interbank Offered Rate (“LIBOR”) loans, subject to a “floor” on LIBOR of 1.00%, or a comparable or successor rate to LIBOR approved by Bank of America, plus the applicable LIBOR rate, or (ii) the Applicable Margin for base rate loans 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 the applicable LIBOR rate plus 1.0%, except that the Fourth Amendment provided that, for the period from May 6, 2020 until the date on which we deliver a compliance certificate for the fiscal quarter ending June 30, 2022, (i) the interest rate applicable to both the term loan and revolving credit facilities was fixed at LIBOR plus 2.75% per annum and (ii) the per annum rate applicable to unused revolving credit facility commitments was fixed at 0.375% (the “Fixed Margin Rates”).

 

Also pursuant to the Fourth Amendment, (a) we are subject to a Minimum Liquidity (as described in the Amended Credit Agreement) test that requires us to have liquidity of at least $40.0 million at each of March 31, 2021 and June 30, 2021, and (b) we are subject to a requirement that, at any time cash on hand exceeds $40.0 million for a period of three consecutive business days, we must repay revolving loans in an amount equal to such excess. Certain other negative and financial covenants were amended, which included restrictions on certain Investments, Permitted Acquisitions, Restricted Payments and Prepayments of Subordinated Debt (each as defined in the Amended Credit Agreement), through the delivery of the compliance certificate for the fiscal quarters ending March 31, 2022 or June 30, 2022, as applicable.

 

Prior to the Fourth Amendment Effective Date, we were required to maintain a maximum consolidated total debt to EBITDA ratio of between 5.50:1.0 and 3.50:1.0 (with such ratio being waived for the fiscal quarter ended June 30, 2020 and with certain step-ups and step-downs described in, and as calculated in accordance with, the Credit Agreement). In addition, we were required to maintain a minimum consolidated fixed charge coverage ratio of not less than 3.50:1.0 (with certain step-ups and step-downs described in the Credit Agreement). Under the terms of the Fourth Amendment, the maximum consolidated debt to EBITDA ratio will be waived for each of the quarters ending March 31, 2021 and June 30, 2021. Starting with the quarter ending September 30, 2021, we will be required to maintain a maximum consolidated total debt to EBITDA ratio (as calculated in accordance with the Fourth Amendment) of not greater than 5.25:1.0 (with certain step-downs described in the Amended Credit Agreement). As of March 31, 2021, we were required to maintain a minimum consolidated fixed coverage ratio of not less than 1.60:1:0 (with certain step-ups and step-downs described in the Amended Credit Agreement).

During the three months ended March 31, 2021, we incurred approximately $1.2 million for fees and other customary closing costs in connection with the Amended Credit Agreement.

Under the terms of the Amended Credit Agreement, term loans under the Senior Credit Facility were subject to scheduled quarterly payments of principal in installments equal to 1.25% of the initial aggregate principal amount of such term loan through the first quarter of 2021 and will increase to 1.875% thereafter.

Events of default under the 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 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 Administrative Agent can, with the consent of the required Lenders, among others (i) terminate the commitments under the Credit Agreement, (ii) accelerate and require the Company to repay all the outstanding amounts owed under the Credit Agreement, and (iii) require the Company to cash collateralize any outstanding letters of credit.

Each of our wholly owned domestic subsidiaries (subject to certain exceptions set forth in the Credit Agreement) has guaranteed all existing and future indebtedness and liabilities of the other guarantors and the Company arising under the Credit Agreement. Our obligations under the Credit Agreement and such domestic subsidiaries’ guaranty obligations are secured by substantially all of their respective assets. The Senior Credit Facility matures on November 30, 2023. The proceeds from the Senior Credit Facility may be used to finance working capital, capital expenditures and acquisitions, as well as for other general corporate purposes. The Amended Credit Agreement did not change the guarantors, collateral, maturity date or permitted uses of proceeds, except as otherwise described above.

As of March 31, 2021, we had $49.5 million letters of credit outstanding under the Senior Credit Facility and borrowings against the Senior Credit Facility were $344.7 million (excluding debt discount of $0.8 million and deferred financing costs of $2.2 million).  As of March 31, 2021, we were in compliance with the covenants under the Amended Credit Agreement, and we had $130.5 million of borrowing availability under the Senior Credit Facility (prior to our Minimum Liquidity requirement (as described in the Amended Credit Agreement).

Stock Repurchases

On March 10, 2020, we suspended stock repurchases in order to help improve liquidity in response to the impacts of COVID-19.

In July 2019, our Board of Directors (the “Board”) authorized us to repurchase, on the open market, shares of our outstanding common stock in an amount not to exceed $50.0 million in aggregate. Under this program, we have repurchased 393,975 shares of common stock at an average price of $38.78 during the three months ended March 31, 2020.

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In March 2020, the Board authorized a new program to repurchase, on the open market, shares of our outstanding common stock in an amount not to exceed $50.0 million in aggregate.  We have yet to repurchase shares under this program.

Since commencement, under all three programs, we have repurchased 2,034,742 shares of common stock through March 31, 2021. The remaining authorized repurchase amounts in aggregate under the July 2019 and March 2020 repurchase programs as of March 31, 2021 was as follows:

 

(millions)

 

March 31, 2021

 

Total authorized repurchase amount

 

$

100.0

 

Total value of shares repurchased

 

 

40.6

 

Total remaining authorized repurchase amount

 

$

59.4

 

 

Daily Cash Collections

As a result of day-to-day activity at our parking locations, we collect significant amounts of cash. Lease type contract revenue is generally deposited into our local bank accounts, with a portion remitted to our clients in the form of rental payments according to the terms of the leases. Under management type contracts, clients may require us to deposit the daily receipts into one of our local bank accounts, with the cash in excess of our operating expenses and management fees remitted to the clients at negotiated intervals. Other clients may require us to deposit the daily receipts into client designated bank accounts and the clients then reimburse us for operating expenses and pay our management fee subsequent to month-end 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 accounts. For all of these reasons, from time to time, we carry a significant cash balance, while also utilizing our Senior Credit Facility.

Summary of Cash Flows

Our primary sources of liquidity are cash flows from operating activities and availability under our Senior Credit Facility. Our cash flows for the three months ended March 31, 2021 and 2020, respectively, were as follows:

 

 

 

Three Months Ended

 

(millions)

 

March 31, 2021

 

 

March 31, 2020

 

Net cash (used in) provided by operating activities

 

$

(1.0

)

 

$

8.2

 

Net cash used in investing activities

 

 

(2.6

)

 

 

(4.3

)

Net cash provided by (used in) financing activities

 

 

7.7

 

 

 

(5.9

)

Effect of exchange rate changes on cash and cash equivalents

 

 

 

 

 

(0.2

)

Net increase (decrease) in cash and cash equivalents

 

$

4.1

 

 

$

(2.2

)

 

Operating Activities

Net cash used in operating activities was $1.0 million for the three months ended March 31, 2021 as compared to net cash provided by operating activities of $8.2 million during the three months ended March 31, 2020. The decrease in net cash provided by operating activities primarily resulted from the impacts of COVID-19, as well as our significant efforts during March 2020 to control working capital to prepare for the uncertainty of COVID-19.

Investing Activities

Net cash used in investing activities was $2.6 million for the three months ended March 31, 2021, a decrease of $1.7 million from $4.3 million during the three months ended March 31, 2020.  Cash used to purchase leasehold improvements and equipment was $2.3 million during the three months ended March 31, 2021 as compared to $4.0 million during the three months ended March 31, 2020, reflecting our investment in technology initiatives during the three months ended March 31, 2020.

Financing Activities

Net cash provided by financing activities was $7.7 million for the three months ended March 31, 2021, as compared to net cash used in financing activities of $5.9 million during the three months ended March 31, 2020. The increase in net cash provided by investing activities was primarily due to the repurchases of common stock during the three months ended March 31, 2020 that were suspended on March 10, 2020.

Cash and Cash Equivalents

We had Cash and cash equivalents of $18.0 million and $13.9 million at March 31, 2021 and December 31, 2020, respectively.  The cash balances reflect our ability to utilize funds deposited into our bank accounts.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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 our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (the "Evaluation") at a reasonable assurance level as of the last day of the period covered by this Form 10-Q.

Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer, principal financial officer and principal accounting officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosures.

Based on the Evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2021.

Changes in Internal Control Over Financial Reporting

There have been no significant changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2021, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

Inherent limitations of the Effectiveness of Internal Control

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

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PART II. OTHER INFORMATION

We are subject to claims and litigation in the normal course of our business, including those related to labor and employment, contracts, personal injury and other related matters, some of which allege substantial monetary damages and claims. Some of these actions may be brought as class actions on behalf of a class or purported class of employees. While the outcomes of claims and legal proceedings brought against us are subject to significant uncertainty, our management believes the final outcome will not have a material adverse effect on our financial position, results of operations or cash flows.

We accrue a charge when 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. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and disclose the estimated range. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. 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. We regularly evaluate current information available to us to determine whether an accrual should be established or adjusted. Estimating the probability that a loss will occur and estimating the amount of a loss or a range of loss involves significant estimation and judgment.

Item 1A. Risk Factors

Investors should carefully consider the discussion of risk factors and the other information described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in subsequent filings by us with the SEC. New risks could emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our financial performance. There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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Item 2. Unregistered Sales of Equity and Use of Proceeds

Not applicable.

 

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

 

Index to Exhibits

 

 

 

 

 

 

 

Incorporated by

Reference

Exhibit

Number

 

Description

 

Form

 

Exhibit

 

Filing

Date/Period

End Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 31.1*

 

Section 302 Certification dated April 29, 2021 for G Marc Baumann, President and Chief Executive Officer (Principal Executive Officer).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 31.2*

 

Section 302 Certification dated April 29, 2021 for Kristopher H. Roy, Chief Financial Officer (Principal Financial Officer and 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 April 29, 2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  101.INS*

 

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  101.SCH*

 

Inline XBRL Taxonomy Extension Schema

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  101.CAL*

 

Inline XBRL Taxonomy Extension Calculation Linkbase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  101.DEF*

 

Inline XBRL Taxonomy Extension Definition Linkbase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  101.LAB*

 

Inline XBRL Taxonomy Extension Label Linkbase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  101.PRE*

 

104**

 

 

Inline XBRL Taxonomy Extension Presentation Linkbase

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*               Filed herewith

**        Furnished herewith

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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

 

 

 

Date: April 29, 2021

By:

/s/ G MARC BAUMANN

 

 

G Marc Baumann

 

 

Chief Executive Officer and President

 

 

(Principal Executive Officer)

 

 

 

Date: April 29, 2021

By:

/s/ KRISTOPHER H. ROY

 

 

Kristopher H. Roy

 

 

Chief Financial Officer

 

 

(Principal Financial Officer, and Principal Accounting Officer)

 

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