Business Unit Segment Information

6 Months Ended

Jun. 30, 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 and six months ended June 30, 2015 and 2014 (unaudited):

	Three Months Ended						Six Months Ended
	June 30, 2015		Gross Margin %	June 30, 2014		Gross Margin %	June 30, 2015		Gross Margin %	June 30, 2014		Gross Margin %
Revenues
Region One
Lease contracts	$	51,489		$	52,315		$	98,713		$	99,650
Management contracts	19,883			21,070			40,004			42,784
Total Region One	71,372			73,385			138,717			142,434
Region Two
Lease contracts	33,775			30,499			65,003			59,259
Management contracts	21,078			22,300			41,526			41,245
Total Region Two	54,853			52,799			106,529			100,504
Region Three
Lease contracts	27,652			29,521			54,057			57,532
Management contracts	6,788			5,536			13,506			12,650
Total Region Three	34,440			35,057			67,563			70,182
Region Four
Lease contracts	32,370			11,233			62,077			22,583
Management contracts	26,114			25,859			51,585			52,573
Total Region Four	58,484			37,092			113,662			75,156
Region Five
Lease contracts	1,159			1,286			2,400			2,483
Management contracts	10,858			8,120			28,415			21,046
Total Region Five	12,017			9,406			30,815			23,529
Other
Lease contracts	9			104			19			86
Management contracts	3,584			2,046			7,327			4,588
Total Other	3,593			2,150			7,346			4,674
Reimbursed management contract revenue	170,856			164,539			345,137			333,717
Total Revenues	$	405,615		$	374,428		809,769			$	750,196

Gross Profit
Region One
Lease contracts	$	4,090	8	%	$	4,192	8	%	$	5,632	6	%	$	4,769	5	%
Management contracts	8,864		45	%	8,849		42	%	18,255		46	%	17,958		42	%
Total Region One	12,954				13,041				23,887				22,727
Region Two
Lease contracts	6,842		20	%	5,941		19	%	11,367		17	%	9,661		16	%
Management contracts	8,808		42	%	9,959		45	%	16,810		40	%	17,683		43	%
Total Region Two	15,650				15,900				28,177				27,344
Region Three
Lease contracts	1,031		4	%	1,052		4	%	565		1	%	887		2	%
Management contracts	3,359		49	%	2,825		51	%	6,764		50	%	7,021		56	%
Total Region Three	4,390				3,877				7,329				7,908
Region Four
Lease contracts	1,691		5	%	962		9	%	2,554		4	%	1,561		7	%
Management contracts	7,187		28	%	7,229		28	%	12,700		25	%	13,623		26	%
Total Region Four	8,878				8,191				15,254				15,184

	Three Months Ended										Six Months Ended
	June 30, 2015			Gross Margin %		June 30, 2014			Gross Margin %		June 30, 2015			Gross Margin %		June 30, 2014			Gross Margin %
Region Five
Lease contracts	(22		)	-2	%	14			1	%	179			7	%	131			5	%
Management contracts	2,742			25	%	2,680			33	%	6,450			23	%	6,272			30	%
Total Region Five	2,720					2,694					6,629					6,403
Other
Lease contracts	(1,652		)	-18356	%	818			787	%	(1,195		)	-6289	%	521			606	%
Management contracts	3,495			98	%	3,373			165	%	7,544			103	%	3,099			68	%
Total Other	1,843					4,191					6,349					3,620
Total gross profit	$	46,435				$	47,894				$	87,625				83,186
General and administrative expenses	24,739					24,996					50,412					51,062
General and administrative expense percentage of gross profit	53		%			52		%			58		%			61%
Depreciation and amortization	8,165					7,730					16,099					14,893
Operating income	13,531					15,168					21,114					17,231
Other expenses (income)
Interest expense	3,062					4,811					7,105					9,620
Interest income	(40		)			(94		)			(100		)			(192		)
Equity in losses from investment in unconsolidated entity	353					—					824					—
Income (loss) before income taxes	10,156					10,451					13,285					7,803
Income tax (benefit)	(385		)			4,254					950					(3,184		)
Net income	10,541					6,197					12,335					10,987
Less: Net income attributable to noncontrolling interest	784					890					1,236					1,377
Net income attributable to SP Plus Corporation	$	9,757				$	5,307				$	11,099				$	9,610