Business Unit Segment Information

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

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

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

In the first quarter of 2017, the Company changed its internal reporting segment information reported to its CODM. The operating segments are internally reported as Region One (Commercial) and Region Two (Airports). All prior periods presented have been restated to reflect the new internal reporting to the CODM.

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Region One (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 transportation services, valet services, taxi and livery dispatch services and event planning, including shuttle and transportation services.


•	Region Two (Airports) encompasses our services at all major airports as well as ancillary services, which includes shuttle and transportation services and valet services.


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

The business is managed based on regions administered by executive vice presidents. The following is a summary of revenues (excluding reimbursed management contract revenue) and gross profit by regions for the three and nine months ended September 30, 2017 and 2016:



	Three Months Ended September 30,										Nine Months Ended September 30,
(millions) (unaudited)	2017			Gross Margin %		2016			Gross Margin %		2017			Gross Margin %		2016			Gross Margin %
Parking Services Revenue
Region One
Lease contracts	$	108.9				$	104.9				$	326.0				$	316.6
Management contracts	62.5					61.1					190.1					185.5
Total Region One	171.4					166.0					516.1					502.1
Region Two
Lease contracts	32.0					31.2					96.6					93.7
Management contracts	22.2					20.6					66.4					69.1
Total Region Two	54.2					51.8					163.0					162.8
Other
Lease contracts	—					—					—					—
Management contracts	2.0					2.4					6.3					7.4
Total Other	2.0					2.4					6.3					7.4
Reimbursed management contract revenue	165.1					177.0					512.7					501.8
Total Parking Services Revenue	$	392.7				$	397.2				$	1,198.1				$	1,174.1
Gross Profit
Region One
Lease contracts	$	7.8		7	%	$	8.8		8	%	$	28.9		9	%	$	25.3		8	%
Management contracts	25.3			40	%	24.4			40	%	74.7			39	%	70.7			38	%
Total Region One	33.1					33.2					103.6					96.0
Region Two
Lease contracts	1.6			5	%	1.5			5	%	4.9			5	%	4.0			4	%
Management contracts	6.2			28	%	6.2			30	%	19.5			29	%	18.0			26	%
Total Region Two	7.8					7.7					24.4					22.0
Other
Lease contracts	0.5			—	%	—			—	%	1.8			—	%	0.6			—	%
Management contracts	4.5			225	%	3.0			125	%	14.1			224	%	10.7			145	%
Total Other	5.0					3.0					15.9					11.3
Total gross profit	$	45.9				$	43.9				$	143.9				$	129.3
General and administrative expenses	19.6					20.3					63.3					67.0
General and administrative expense percentage of gross profit	43		%			46		%			44		%			52		%
Depreciation and amortization	4.9					7.8					16.3					26.8
Operating income	21.4					15.8					64.3					35.5
Other expenses (income)
Interest expense	2.2					2.7					7.1					8.1
Interest income	(0.2		)			(0.1		)			(0.5		)			(0.4		)
Gain on sale of business	—					—					(0.1		)			—
Equity in losses from investment in unconsolidated entity	0.1					0.4					0.5					1.2
Total other expenses (income)	2.1					3.0					7.0					8.9
Earnings before income taxes	19.3					12.8					57.3					26.6
Income tax expense	7.3					5.1					21.3					10.9
Net income	12.0					7.7					36.0					15.7
Less: Net income attributable to noncontrolling interest	0.8					0.7					2.6					2.2
Net income attributable to SP Plus Corporation	$	11.2				$	7.0				$	33.4				$	13.5