Business Unit Segment Information

3 Months Ended

Mar. 31, 2015

Business Unit Segment Information

Business Unit Segment Information

13. 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 six 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.

Effective January 1, 2015, the Company began certain organizational and executive leadership changes to align with how the CODM reviews performance and makes decisions in managing the Company and therefore, changed internal operating segment information reported to the CODM. The operating segments are internally reported as Region One (North), Region Two (South), Region Three (New York Metropolitan tri-state area of New York, New Jersey and Connecticut), Region Four (Airport transportation operations nationwide, Region Five (other operating segments of USA Parking and event planning and transportation services). All prior periods presented have been restated to reflect the new internal reporting to the CODM.

Region One encompasses operations in Delaware, District of Columbia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Northern California, Ohio, Oregon, Pennsylvania, Rhode Island, Virginia, Washington, West Virginia, Wisconsin and four Canadian provinces of Alberta, Manitoba, Ontario and Quebec.

Region Two encompasses operations in Alabama, Arizona, Colorado, Florida, Georgia, Hawaii, Kansas, Louisiana, Mississippi, Missouri, Nebraska, New Mexico, North Carolina, Oklahoma, South Carolina, Southern California, Tennessee, Texas Utah and Puerto Rico.

Region Three encompasses operations in the New York metropolitan tri-state area of New York, New Jersey and Connecticut.

Region Four encompasses all major airport and transportation operations nationwide.

Region Five encompasses other operating segments including USA Parking and event planning and transportation services.

Other consists of ancillary revenue that is not specifically identifiable to a region and insurance reserve adjustments related to prior years.

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 months ended March 31, 2015 and 2014 (unaudited):

		Three months ended
		March 31, 2015		Gross Margin%		March 31, 2014		Gross Margin%
Revenues
Region One
Lease contracts		$	47,224			$	47,332
Management contracts		20,160				21,631
Total Region One		67,384				68,963
Region Two
Lease contracts		31,227				28,761
Management contracts		20,443				20,052
Total Region Two		51,670				48,813
Region Three
Lease contracts		26,408				28,014
Management contracts		6,718				6,487
Total Region Three		33,126				34,501
Region Four
Lease contracts		29,708				11,350
Management contracts		25,471				25,629
Total Region Four		55,179				36,979
Region Five
Lease contracts		1,241				712
Management contracts		17,557				12,921
Total Region Five		18,798				13,633
Other
Lease contracts		7				466
Management contracts		3,709				3,235
Total Other		3,716				3,701
Reimbursed management contract revenue		174,281				169,178
Total Revenues	$	404,154			$	375,768

Gross Profit
Region One
Lease contracts	$	1,542			3	%	$		660		1	%
Management contracts		9,409			47	%	8,977				42	%
Total Region One		10,951					9,637
Region Two
Lease contracts		4,524			14	%	3,917				14	%
Management contracts		8,020			39	%	8,589				43	%
Total Region Two		12,544					12,506
Region Three
Lease contracts		(464		)	-2	%	(295			)	-1	%
Management contracts		3,404			51	%	3,683				57	%
Total Region Three		2,940					3,388
Region Four
Lease contracts		863			3	%	586				5	%
Management contracts		5,513			22	%	6,076				24	%
Total Region Four		6,376					6,662
Region Five
Lease contracts		202			16	%	70				10	%
Management contracts		3,708			21	%	3,515				27	%
Total Region Five		3,910					3,585
Other
Lease contracts		455			N/A		(387			)	N/A
Management contracts		4,014			N/A		(99			)	N/A
Total Other		4,469					(486			)
Total gross profit	$	41,190					35,292
General and administrative expenses		25,673					26,066
General and administrative expense percentage of gross profit		62		%			74			%
Depreciation and amortization		7,934					7,163
Operating income		7,583					2,063
Other expenses (income)
Interest expense		4,043					4,809
Interest income		(60		)			(98			)
Equity in losses from investment in unconsolidated entity		471					—
		4,454					4,711
Income (loss) before income taxes		3,129					(2,648			)
Income tax (benefit)		1,335					(7,438			)
Net income		1,794					4,790
Less: Net income attributable to noncontrolling interest		452					487
Net income attributable to SP Plus Corporation		$	1,342				$	4,303