Domestic and Foreign Operations

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 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 separate financial information is available and evaluated regularly by the chief operating decision-maker ("CODM") in deciding how to allocate resources and in assessing the Company's overall 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 president and chief executive officer. The business is managed based on segments administered by executive vice presidents. Each of the operating segments is 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 two operating segments. The CODM assesses the performance of each operating segment using information about its revenue and operating income (loss) before interest, taxes, and depreciation and amortization, but does not evaluate operating 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 fourth quarter of 2018, the Company changed its internal reporting segment information reported to the CODM as a result of the Bags acquisition (see Note 2. Acquisition). The operating segments are internally reported as Segment One (Commercial and Institutional) and Segment Two (Aviation). All prior periods presented have been restated to reflect the new internal reporting to the CODM.

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Segment One (Commercial and Institutional) 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.


•	Segment Two (Aviation) encompasses our services in aviation (i.e., 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 that is not specifically identifiable to Segments One or Two and certain unallocated items, such as and including prior year insurance reserve adjustments and other corporate items.

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The following is a summary of revenues and gross profit by operating segment for the years ended December 31, 2018, 2017 and 2016:



	Year Ended December 31,
(millions)	2018 (1)			Gross Margin		2017			Gross Margin		2016			Gross Margin
Services revenue
Segment One
Lease type contracts	$	386.2				$	433.8				$	420.3
Management type contracts	250.8					250.0					248.3
Total Segment One	637.0					683.8					668.6
Segment Two
Lease type contracts	27.0					129.3					124.7
Management type contracts	101.2					89.1					88.0
Total Segment Two	128.2					218.4					212.7
Other
Lease type contracts	0.7					—					—
Management type contracts	9.5					9.1					10.5
Total Other	10.2					9.1					10.5
Reimbursed management type contract revenue	693.0					679.2					676.6
Total services revenue	$	1,468.4				$	1,590.5				$	1,568.4
Gross Profit
Segment One
Lease type contracts	25.3			6.6	%	35.8			8.3	%	32.6			7.8	%
Management type contracts	94.9			37.8	%	96.9			38.8	%	95.7			38.5	%
Total Segment One	120.2					132.7					128.3
Segment Two
Lease type contracts	7.1			26.3	%	6.7			5.2	%	5.7			4.5	%
Management type contracts	31.9			31.5	%	26.2			29.2	%	24.6			28.0	%
Total Segment Two	39.0					32.9					30.3
Other
Lease type contracts	3.8			542.9	%	2.2			—	%	1.1			—	%
Management type contracts	21.0			221.1	%	17.5			192.3	%	16.7			159.0	%
Total Other	24.8					19.7					17.8
Total gross profit	184.0					185.3					176.4
General and administrative expenses	91.0					82.9					90.0
General and administrative expense percentage of gross profit	49.5		%			44.7		%			51.0		%
Depreciation and amortization	17.9					21.0					33.7
Operating income	75.1					81.4					52.7
Other expenses (income):
Interest expense	9.6					9.2					10.5
Interest income	(0.4		)			(0.6		)			(0.5		)
Gain on sale of a business	—					(0.1		)			—
Equity in (earnings) losses from investment in unconsolidated entity	(10.1		)			0.7					0.9
Total other expenses (income)	(0.9		)			9.2					10.9
Earnings before income taxes	76.0					72.2					41.8
Income tax expense	19.6					27.7					15.8
Net income	56.4					44.5					26.0
Less: Net income attributable to noncontrolling interest	3.2					3.3					2.9
Net income attributable to SP Plus Corporation	$	53.2				$	41.2				$	23.1

(1) On November 30, 2018, we completed our acquisition of Bags. Our consolidated operations for the year ended December 31, 2018 includes Bags operating results for the period of November 30, 2018 through December 31, 2018. Our consolidated results for the years ended December 31, 2017 and 2016 do not include the operating results of Bags. See Note 2. Acquisition for additional information.