Domestic and Foreign Operations

12 Months Ended

Dec. 31, 2019

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 separate financial information is available and evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and 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 December 2019, the Company changed its internal reporting segment information reported to the CODM. Certain locations previously reported under Commercial are now included in Other. All prior periods presented have been reclassified to reflect the new internal reporting to the CODM.

•

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 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 Commercial or Aviation and certain unallocated items, such as and including prior year insurance reserve adjustments and other corporate items.

[INTENTIONALLY LEFT BLANK]

The following is a summary of revenues and gross profit by operating segment for the years ended December 31, 2019, 2018 and 2017:



	Year Ended December 31,
(millions)	2019			Gross Margin Percentage		2018 (1)			Gross Margin Percentage		2017			Gross Margin Percentage
Services revenue
Commercial
Lease type contracts (2)	$	377.3				$	386.2				$	433.8
Management type contracts	252.9					249.4					248.1
Total Commercial	630.2					635.6					681.9
Aviation
Lease type contracts (2)	30.7					27.0					129.3
Management type contracts	263.5					101.2					89.1
Total Aviation	294.2					128.2					218.4
Other
Lease type contracts	0.9					0.7					—
Management type contracts	9.6					10.9					11.0
Total Other	10.5					11.6					11.0
Reimbursed management type contract revenue	728.8					693.0					679.2
Total services revenue	$	1,663.7				$	1,468.4				$	1,590.5
Gross Profit
Commercial
Lease type contracts	29.4			7.8	%	25.8			6.6	%	36.4			8.3	%
Management type contracts	101.1			40.0	%	98.3			37.8	%	100.1			38.8	%
Total Commercial	130.5					124.1					136.5
Aviation
Lease type contracts	8.3			27.0	%	7.3			26.3	%	6.7			5.2	%
Management type contracts	69.2			26.3	%	31.9			31.5	%	26.2			29.2	%
Total Aviation	77.5					39.2					32.9
Other
Lease type contracts	4.3			N/M		3.2			N/M		1.6			N/M
Management type contracts	15.8			N/M		17.5			N/M		14.3			N/M
Total Other	20.1					20.7					15.9
Total gross profit	228.1					184.0					185.3
General and administrative expenses	109.0					91.0					82.9
General and administrative expense percentage of gross profit	47.8		%			49.5		%			44.7		%
Depreciation and amortization	29.4					17.9					21.0
Operating income	89.7					75.1					81.4
Other expenses (income):
Interest expense	18.9					9.6					9.2
Interest income	(0.3		)			(0.4		)			(0.6		)
Gain on sale of a business	—					—					(0.1		)
Equity in (earnings) losses from investment in unconsolidated entity	—					(10.1		)			0.7
Total other expenses (income)	18.6					(0.9		)			9.2
Earnings before income taxes	71.1					76.0					72.2
Income tax expense	19.4					19.6					27.7
Net income	51.7					56.4					44.5
Less: Net income attributable to noncontrolling interest	2.9					3.2					3.3
Net income attributable to SP Plus Corporation	$	48.8				$	53.2				$	41.2

(1) On November 30, 2018, we completed the Acquisition. 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 year ended December 31, 2017 does not include the operating results of Bags. See Note 3. Acquisition for additional information.

(2) Includes reduction of Services revenue - lease type contracts due to the adoption of Topic 853, which required rental expense for the periods after January 1, 2018 be presented as a reduction of Services revenue - lease type contracts for that business (and corresponding contracts) that meet the criteria and definition of a service concession arrangement. See Note 5. Revenue for further discussion regarding the adoption of Topic 853.

N/M - Not Meaningful