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 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 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.

The operating segments are internally reported to the Company's CODM as Region One (Commercial) and Region Two (Airports).

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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 include shuttle and transportation services and valet services.


•	"Other" consists of ancillary revenue that is not specifically identifiable to Regions One or Two and certain unallocated items, such as and including prior year insurance reserve adjustments/costs and other corporate items.

The business is managed based on regions administered by executive officers.

The following is a summary of revenues (excluding reimbursed management type contract revenue) and gross profit by regions for the three and nine months ended September 30, 2018 and 2017:



	Three Months Ended										Nine Months Ended
(millions) (unaudited)	September 30, 2018			Gross Margin %		September 30, 2017			Gross Margin %		September 30, 2018			Gross Margin %		September 30, 2017			Gross Margin %
Parking Services Revenue
Region One
Lease type contracts (1)	$	97.6				$	108.9				$	290.8				$	326.0
Management type contracts	59.4					62.5					191.1					190.1
Total Region One	157.0					171.4					481.9					516.1
Region Two
Lease type contracts (1)	6.9					32.0					20.3					96.6
Management type contracts	21.1					22.2					66.2					66.4
Total Region Two	28.0					54.2					86.5					163.0
Other
Lease type contracts	0.2					—					0.5					—
Management type contracts	2.1					2.0					7.5					6.3
Total Other	2.3					2.0					8.0					6.3
Reimbursed management type contract revenue	174.8					165.1					514.8					512.7
Total Parking Services Revenue	$	362.1				$	392.7				$	1,091.2				$	1,198.1
Gross Profit
Region One
Lease type contracts	$	7.7		8	%	$	7.8		7	%	$	19.5		7	%	$	28.9		9	%
Management type contracts	24.1			41	%	25.3			40	%	71.8			38	%	74.7			39	%
Total Region One	31.8					33.1					91.3					103.6
Region Two
Lease type contracts	2.0			29	%	1.6			5	%	5.6			28	%	4.9			5	%
Management type contracts	6.7			32	%	6.2			28	%	20.3			31	%	19.5			29	%
Total Region Two	8.7					7.8					25.9					24.4
Other
Lease type contracts	0.8			400	%	0.5			—	%	3.3			660	%	1.8			—	%
Management type contracts	3.7			176	%	4.5			225	%	15.1			201	%	14.1			224	%
Total Other	4.5					5.0					18.4					15.9
Total gross profit	$	45.0				$	45.9				$	135.6				$	143.9
General and administrative expenses	18.7					19.6					63.3					63.3
General and administrative expense percentage of gross profit	42		%			43		%			47		%			44		%
Depreciation and amortization	4.2					4.9					12.7					16.3
Operating income	22.1					21.4					59.6					64.3
Other expenses (income)
Interest expense	2.1					2.2					6.5					7.1
Interest income	(0.1		)			(0.2		)			(0.3		)			(0.5		)
Gain on sale of a business	—					—					—					(0.1		)
Equity losses (earnings) from investment in unconsolidated entity	—					0.1					(10.1		)			0.5
Total other expenses (income)	2.0					2.1					(3.9		)			7.0
Earnings before income taxes	20.1					19.3					63.5					57.3
Income tax expense	5.6					7.3					16.9					21.3
Net income	14.5					12.0					46.6					36.0
Less: Net income attributable to noncontrolling interest	1.0					0.8					2.5					2.6
Net income attributable to SP Plus Corporation	$	13.5				$	11.2				$	44.1				$	33.4

(1) Includes reduction of Parking services revenue - lease type contracts due to the adoption of Topic 853, which requires rental expense for the periods after January 1, 2018 be presented as a reduction of Parking services revenue - lease type contracts for those locations (and corresponding contracts) that meet the criteria and definition of a service concession arrangement. Refer to Note 2. Revenue, for further discussion regarding the adoption of Topic 853.