UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
Or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of |
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(I.R.S. Employer Identification No.) |
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Incorporation or Organization) |
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(Address of Principal Executive Offices, Including Zip Code)
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(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
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☒ |
Accelerated Filer |
☐ |
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Non-accelerated Filer |
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Smaller Reporting Company |
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Emerging Growth Company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
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Class |
Outstanding at July 29, 2021 |
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Common Stock, $0.001 par value per share |
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Shares |
SP PLUS CORPORATION
TABLE OF CONTENTS
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SP Plus Corporation
Condensed Consolidated Balance Sheets
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(millions, except for share data) |
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June 30, 2021 |
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December 31, 2020 |
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(unaudited) |
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Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts and notes receivable, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Leasehold improvements, equipment and construction in progress, net |
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Right-of-use assets |
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Goodwill |
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Other intangible assets, net |
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Deferred taxes |
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Other noncurrent assets, net |
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Total noncurrent assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Accounts payable |
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$ |
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$ |
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Accrued and other current liabilities |
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Short-term lease liabilities |
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Current portion of long-term obligations under Senior Credit Facility and other long-term borrowings |
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Total current liabilities |
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Long-term borrowings, excluding current portion |
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Long-term lease liabilities |
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Other noncurrent liabilities |
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Total noncurrent liabilities |
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Total liabilities |
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$ |
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$ |
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Stockholders’ equity |
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Preferred stock, par value $ |
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$ |
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$ |
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Common stock, par value $ |
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Treasury stock, at cost; |
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( |
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( |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Retained earnings (accumulated deficit) |
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( |
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Total SP Plus Corporation stockholders’ equity |
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Noncontrolling interest |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
2
SP Plus Corporation
Condensed Consolidated Statements of Income (Loss)
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Three Months Ended |
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Six Months Ended |
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(millions, except for share and per share data) (unaudited) |
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June 30, 2021 |
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June 30, 2020 |
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June 30, 2021 |
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June 30, 2020 |
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Services revenue |
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Lease type contracts |
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$ |
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$ |
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$ |
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$ |
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Management type contracts |
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Reimbursed management type contract revenue |
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Total services revenue |
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Cost of services |
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Lease type contracts |
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Management type contracts |
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Reimbursed management type contract expense |
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Lease impairment |
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— |
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Total cost of services |
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Gross profit |
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Lease type contracts |
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( |
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( |
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Management type contracts |
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Lease impairment |
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— |
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( |
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( |
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( |
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Total gross profit |
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( |
) |
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( |
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General and administrative expenses |
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Depreciation and amortization |
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Impairment of intangible assets |
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— |
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— |
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Operating income (loss) |
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( |
) |
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( |
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Other expense (income) |
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Interest expense |
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Interest income |
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( |
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( |
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( |
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( |
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Other expenses (income) |
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— |
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— |
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( |
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Total other expenses |
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Earnings (loss) before income taxes |
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( |
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( |
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Income tax expense (benefit) |
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( |
) |
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( |
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Net income (loss) |
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( |
) |
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( |
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Less: Net income (loss) attributable to noncontrolling interest |
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( |
) |
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( |
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Net income (loss) attributable to SP Plus Corporation |
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$ |
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$ |
( |
) |
$ |
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$ |
( |
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Common stock data |
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Net income (loss) per common share |
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Basic |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Diluted |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Weighted average shares outstanding |
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Basic |
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Diluted |
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See Notes to Condensed Consolidated Financial Statements.
3
SP Plus Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss)
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Three Months Ended |
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Six Months Ended |
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(millions) (unaudited) |
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June 30, 2021 |
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June 30, 2020 |
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June 30, 2021 |
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June 30, 2020 |
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Net income (loss) |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Change in fair value of interest rate collars |
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( |
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Foreign currency translation gain (loss) |
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( |
) |
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( |
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Comprehensive income (loss) |
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( |
) |
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( |
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Less: Comprehensive income (loss) attributable to noncontrolling interest |
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( |
) |
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( |
) |
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Comprehensive income (loss) attributable to SP Plus Corporation |
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$ |
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$ |
( |
) |
$ |
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$ |
( |
) |
See Notes to Condensed Consolidated Financial Statements.
4
SP Plus Corporation
Condensed Consolidated Statements of Stockholders' Equity
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Six months ended June 30, 2020 (unaudited) |
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Common Stock |
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(millions, except share data) |
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Number of Shares |
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Par Value |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Loss |
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Retained Earnings |
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Treasury Stock |
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Noncontrolling Interest |
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Total |
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Balance at January 1, 2020 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Net (loss) income |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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Foreign currency translation |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
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Change in fair value of interest rate collars |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
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Issuance of performance stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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Non-cash stock-based compensation |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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( |
) |
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Treasury stock |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Distributions to noncontrolling interest |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Balance at March 31, 2020 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
) |
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Foreign currency translation |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
) |
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Change in fair value of interest rate collars |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of stock grants |
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— |
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— |
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— |
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— |
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— |
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Non-cash stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Noncontrolling interest buyout |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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( |
) |
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Distributions to noncontrolling interest |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Balance at June 30, 2020 |
|
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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|
5
|
Six months ended June 30, 2021 (unaudited) |
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Common Stock |
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(millions, except share data) |
Number of Shares |
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Par Value |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Loss |
|
Retained Earnings (Accumulated Deficit) |
|
Treasury Stock |
|
Noncontrolling Interest |
|
Total |
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||||||||
|
Balance at January 1, 2021 |
|
|
|
$ |
— |
|
$ |
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|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
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|
Net income |
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— |
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— |
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— |
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— |
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— |
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|
Change in fair value of interest rate collars |
|
— |
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— |
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— |
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— |
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— |
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— |
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Issuance of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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|
Issuance of performance stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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|
Non-cash stock-based compensation |
|
— |
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— |
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— |
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— |
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— |
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— |
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Distributions to noncontrolling interest |
|
— |
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— |
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— |
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— |
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— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
Balance at March 31, 2021 |
|
|
|
$ |
— |
|
$ |
|
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
|
|
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Foreign currency translation |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
Change in fair value of interest rate collars |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
Issuance of stock grants |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
Non-cash stock-based compensation |
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
Distributions to noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
Balance at June 30, 2021 |
|
|
|
$ |
— |
|
$ |
|
|
$ |
( |
) |
$ |
|
|
$ |
( |
) |
$ |
( |
) |
$ |
|
|
See Notes to Condensed Consolidated Financial Statements.
6
SP Plus Corporation
Condensed Consolidated Statements of Cash Flows
|
|
|
Six Months Ended |
|
|||||
|
(millions) (unaudited) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||
|
Operating activities |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
|
|
|
$ |
( |
) |
|
Adjustments to reconcile net income (loss) to net cash provided by operations: |
|
|
|
|
|
|
|
|
|
Impairment |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
Non-cash stock-based compensation |
|
|
|
|
|
|
( |
) |
|
Provisions for credit losses on accounts receivable |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
( |
) |
|
Other |
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
Accounts and notes receivable |
|
|
( |
) |
|
|
|
|
|
Prepaid and other current assets |
|
|
( |
) |
|
|
|
|
|
Accounts payable |
|
|
|
|
|
|
( |
) |
|
Accrued liabilities and other |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
Purchases of leasehold improvements and equipment |
|
|
( |
) |
|
|
( |
) |
|
Cost of contracts |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from sale of other investments and equipment |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
Financing activities |
|
|
|
|
|
|
|
|
|
Payments on credit facility revolver |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from credit facility revolver |
|
|
|
|
|
|
|
|
|
Payments on credit facility term loan |
|
|
( |
) |
|
|
( |
) |
|
Payments of debt issuance costs |
|
|
( |
) |
|
|
— |
|
|
Payments on other long-term borrowings |
|
|
( |
) |
|
|
( |
) |
|
Distributions to noncontrolling interest |
|
|
( |
) |
|
|
( |
) |
|
Repurchases of common stock |
|
|
— |
|
|
|
( |
) |
|
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
( |
) |
|
Increase (decrease) in cash and cash equivalents |
|
|
|
|
|
|
( |
) |
|
Cash and cash equivalents at beginning of year |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
|
Supplemental disclosures |
|
|
|
|
|
|
|
|
|
Cash paid (received) during the period for |
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
|
|
|
$ |
|
|
|
Income taxes |
|
$ |
|
|
|
$ |
( |
) |
See Notes to Condensed Consolidated Financial Statements.
7
SP Plus Corporation
Notes to Condensed Consolidated Financial Statements
1. Significant Accounting Policies and Practices
The Company
SP Plus Corporation (the "Company") facilitates the efficient movement of people, vehicles and personal belongings with the goal of enhancing the consumer experience while improving bottom line results for the Company’s clients. The Company provides technology-driven mobility solutions, professional parking management, ground transportation, remote baggage check-in and handling, facility maintenance, security, and event logistics to aviation, commercial, hospitality, healthcare and government clients across North America. The Company typically enters into contractual relationships with property owners or managers as opposed to owning facilities.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures normally included in the Condensed Consolidated Balance Sheets, Statements of Income (Loss), Comprehensive Income (Loss), Stockholders' Equity and Cash Flows prepared in conformity with U.S. GAAP have been condensed or omitted as permitted by such rules and regulations.
In the opinion of management, all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that might be expected for any other interim period or the fiscal year ending December 31, 2021. The financial statements presented in this report should be read in conjunction with the Company’s annual Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K filed on February 22, 2021 with the Securities and Exchange Commission.
Cash and Cash Equivalents
Cash equivalents represent funds temporarily invested in money market instruments with maturities of three months or less. Cash equivalents are stated at cost, which approximates fair value. Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements were $
Equity Investments in Unconsolidated Entities
The Company has ownership interests in
Other Noncurrent Assets
Other noncurrent assets consisted of advances and deposits and cost of contracts, net, as of June 30, 2021 and December 31, 2020.
Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of accrued rent, compensation, payroll withholdings, property, payroll and other taxes, insurance and other accrued expenses as of June 30, 2021 and December 31, 2020.
Noncontrolling Interests
Noncontrolling interests represent the noncontrolling holders’ percentage share of income or losses from the subsidiaries in which the Company holds a majority, but less than 100 percent, ownership interest and the results of which are consolidated and included within the Condensed Consolidated Financial Statements.
8
Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of net assets acquired. In accordance with the Financial Accounting Standards Board's ("FASB") authoritative accounting guidance on goodwill, the Company evaluates goodwill for impairment on an annual basis, or more often if events or circumstances change that could cause goodwill to become impaired. The Company has elected to assess the impairment of goodwill annually on October 1 or at an interim date if there is an event or change in circumstances indicating the carrying value may not be recoverable. The goodwill impairment test is performed at the reporting unit level; the Company's reporting units represent its operating segments, consisting of Commercial and Aviation. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the use of acquired assets or the Company’s business strategy, and significant negative industry or economic trends.
The Company may perform a qualitative, rather than quantitative, assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines impairment is present, the Company would need to perform a quantitative assessment to determine the amount of impairment expense. The determination of fair value of a reporting unit utilizes cash flow projections that assume certain future revenue and cost levels, comparable marketplace data, assumed discount rates based upon current market conditions and other valuation factors, all of which involve the use of significant judgment and estimates. The Company also assesses critical areas that may impact its business including economic conditions, market related exposures, competition, changes in service offerings and changes in key personnel.
Other Intangible Assets, net
Other intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. The Company evaluates the remaining useful life of other intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to their remaining useful lives. In addition, other intangible assets are reviewed for impairment when circumstances change that would indicate the carrying value may not be recoverable. Assumptions and estimates about future values and remaining useful lives of intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors, such as changes in the Company's business strategy and forecasts. Although management believes the historical assumptions and estimates are reasonable and appropriate, different assumptions and estimates could materially impact reported financial results.
As a result of the impact of the COVID-19 pandemic (“COVID-19”) on the Company’s expected future operating cash flows, the Company determined certain impairment testing triggers had occurred related to the Company’s Proprietary know how intangible assets. Accordingly, the Company analyzed undiscounted cash flows for these intangible assets as of June 30, 2020. Based on that undiscounted cash flow analysis, the Company determined that estimated net carrying values exceeded undiscounted future cash flows for certain Proprietary know how intangible assets and therefore as of June 30, 2020, certain Proprietary know how intangible assets were impaired. See Note 6. Other Intangibles Assets, net in the notes to the Condensed Consolidated Financial Statements for further discussion.
For both goodwill and intangible assets, future events may indicate differences from management’s judgments and estimates which could, in turn, result in impairment charges. Future events that may result in impairment charges include extended unfavorable economic impacts of COVID-19, increases in interest rates, which would impact discount rates, or other factors which could decrease revenues and profitability of existing locations and changes in the cost structure of existing facilities.
Long-Lived Assets
The Company evaluates long-lived assets, including right-of-use ("ROU") assets, leasehold improvements, equipment and construction in progress, for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. The Company groups assets at the lowest level for which cash flows are separately identified in order to measure an impairment. Events or circumstances that would result in an impairment review include a significant change in the use of an asset, the planned sale or disposal of an asset, or a projection or forecast that demonstrates continuing losses associated with the use of an asset or long-lived asset group. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future undiscounted cash flows expected to be generated by the asset group. If the asset or asset group is determined to be impaired, the impairment recognized is measured by the amount by which the carrying value of the asset or asset group exceeds its fair value.
As a result of the impact of COVID-19 on the Company's operating cash flows, the Company’s management determined certain impairment testing triggers had occurred for ROU assets associated with certain asset groups during the six months ended June 30, 2020. Accordingly, the Company analyzed undiscounted cash flows for ROU assets associated with certain asset groups during the six months ended June 30, 2020. Based on the undiscounted cash flow analysis, the Company determined that estimated net carrying values exceeded undiscounted cash flows for ROU assets associated with certain asset groups and therefore during the six months ended June 30, 2020, ROU assets associated with certain asset groups were impaired. The impairment recognized is measured by the amount by which the carrying value of the ROU asset associated with these asset groups exceeds its fair value. The Company determined there were no impairment testing triggers during the six months ended June 30, 2021. See Note 2. Leases in the notes to the Condensed Consolidated Financial Statements for further discussion.
Assumptions and estimates used to determine cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity. Any future changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in additional impairment charges. Future events that may result in impairment charges include extended
9
unfavorable economic impacts of COVID-19, or other factors which could decrease revenues and profitability of existing locations and changes in the cost structure of existing facilities.
Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
During the six months ended June 30, 2021, the Company adopted the following Accounting Standards Updates (“ASUs”) with no material impact on the Condensed Consolidated Financial Statements:
|
ASU |
|
Topic |
|
Method of Adoption |
|
2021-01 |
|
Reference Rate Reform (Topic 848): Scope |
|
Prospective |
|
2020-10 |
|
Codification Improvements |
|
Prospective |
|
2020-03 |
|
Codification Improvements to Financial Instruments |
|
Prospective |
|
2019-11 |
|
Codification Improvements to Topic 326, Financial Instruments – Credit Losses |
|
Prospective |
Accounting Pronouncements to be Adopted
Effects of Reference Rate Reform on Financial Reporting
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedient and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (IBORs) and, particularly, risks associated with the phase out of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. The ASU can be adopted no later than December 1, 2022 with early adoption permitted. The Company is currently assessing the impact of adopting the standard on the Company's financial position, results of operations, cash flows and financial statement disclosures.
Investments - equity securities; Investments-Equity Method and Joint Ventures; Derivatives and Hedging
In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this ASU clarify the interaction between the accounting for investments in equity securities, investment in equity method and certain derivatives instruments. The ASU is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. This ASU is effective for fiscal years beginning after December 15, 2021. The Company is currently assessing the impact of adopting the standard on the Company's financial position, results of operations, cash flows and financial statement disclosures.
2. Leases
The Company leases parking facilities, office space, warehouses, vehicles and equipment and determines if an arrangement is a lease at inception. The Company subleases certain real estate to third parties. The Company's sublease portfolio consists of operating leases for space within leased parking facilities.
The Company accounts for leases in accordance with Topic 842. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent the Company's "right-of-use" over an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The ROU asset includes cumulative prepaid or accrued rent, as well as lease incentives, initial direct costs and acquired lease contracts. The short term lease exception has been applied to leases with an initial term of 12 months or less and therefore, these leases are not recorded on the balance sheet.
As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. Lease expense is recognized on a straight-line basis over the lease term.
For leases that include one or more options to renew, the exercise of such renewal options is at the Company's sole discretion or mutual agreement. The Company’s lease term may include renewal options that are at the Company’s sole discretion and are reasonably certain to be exercised. Equipment and vehicle leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
10
Variable lease components comprising of payments that are a percentage of parking services revenue based on contractual levels and rental payments adjusted periodically for inflation are not included in the lease liability. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As discussed in Note 1. Significant Accounting Policies and Practices, the Company tests ROU assets when impairment indicators are present. Due to the impact of COVID-19 on the Company's operating cash flows, the Company determined certain impairment testing triggers had occurred within its asset groups during the six months ended June 30, 2020. Accordingly, the Company performed an undiscounted cash flow analysis on certain operating lease ROU assets during the six months ended June 30, 2020. Based on the undiscounted cash flow analysis, the Company determined that certain ROU asset groups had net carrying values that exceeded their estimated undiscounted future cash flows and fair value for these asset groups was determined. The fair value of the ROU assets measured on a non-recurring basis, which is classified as Level 3 in the fair value hierarchy, was determined based on estimates of future discounted cash flows. The estimated fair values were compared to net carrying values, and as a result, ROU assets held and used with a carrying amount of $
In April 2020, the FASB staff provided accounting elections for entities that receive or provide lease-related concessions to mitigate the economic effects of COVID-19 on lessees. The Company elected not to evaluate whether certain concessions provided by lessors in response to COVID-19, that are within the scope of additional interpretation provided by the FASB in April 2020, were lease modifications and also elected not to apply modification guidance under Topic 842. These concessions were recognized as a reduction of rent expense in the month they occurred and were recorded within Cost of parking services within the Condensed Consolidated Statements of Income (Loss).
As a result of COVID-19, the Company was able to negotiate lease concessions with certain landlords. These rent concessions have been recorded in accordance with the guidance noted above. As a result, the Company recorded $
Costs associated with the right to use the infrastructure on service concession arrangements are recorded as a reduction of revenue in accordance with the scope of ASU No. 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services. See Note 4. Revenue for further discussion on service concession arrangements.
The components of ROU assets and lease liabilities and the classification on the Condensed Consolidated Balance Sheet as of June 30, 2021 (unaudited) and December 31, 2020 were as follows:
|
(millions) |
|
Classification |
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
Right-of-use assets |
|
$ |
|
|
|
$ |
|
|
|
Finance |
|
Leasehold improvements, equipment and construction in progress, net |
|
|
|
|
|
|
|
|
|
Total leased assets |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
Short-term lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
Finance |
|
Current portion of long-term obligations under Senior Credit Facility and other long-term borrowings |
|
|
|
|
|
|
|
|
|
Noncurrent |
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
Long-term lease liabilities |
|
|
|
|
|
|
|
|
|
Finance |
|
Long-term borrowings, excluding current portion |
|
|
|
|
|
|
|
|
|
Total lease liabilities |
|
|
|
$ |
|
|
|
$ |
|
|
11
The components of lease cost and classification in the Condensed Consolidated Statement of Income (Loss) for the three and six months ended June 30, 2021 and 2020 (unaudited) were as follows:
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
|
(millions) |
|
Classification |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||||
|
Operating lease cost (a)(b) |
|
Cost of services - lease type contracts |
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
Short-term lease (a) |
|
Cost of services - lease type contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable lease |
|
Cost of services - lease type contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of leased assets |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on lease liabilities |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease impairment |
|
Lease impairment |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net lease cost |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
(a) |
Operating lease cost included in General and administrative expenses are related to leases for office space amounting to $ |
|
(b) |
Includes rent concessions amounting to $ |
Sublease income was $
The Company has not entered into operating lease arrangements as of June 30, 2021 that commence in future periods.
Maturities of lease liabilities, lease term, and discount rate information as of June 30, 2021 (unaudited) were as follows:
|
(millions) |
|
Operating Leases Liabilities |
|
|
Finance Leases Liabilities |
|
|
Total |
|
|||
|
2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
After 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Imputed interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Weighted-average remaining lease term (years) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average discount rate |
|
|
|
% |
|
|
|
% |
|
|
|
|
Future sublease income for the above periods shown was excluded as the amounts are not material.
Supplemental cash flow information related to leases for the six months ended June 30, 2021 and 2020 (unaudited) was as follows:
|
|
|
Six Months Ended |
|
|||||
|
(millions) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||
|
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
|
|
|
Operating cash outflows related to operating leases |
|
$ |
|
|
|
$ |
|
|
|
Operating cash outflows related to interest on finance leases |
|
|
|
|
|
|
|
|
|
Financing cash outflows related to finance leases |
|
|
|
|
|
|
|
|
|
Leased assets obtained in exchange for new operating liabilities |
|
|
|
|
|
|
|
|
|
Leased assets obtained in exchange for new finance lease liabilities |
|
|
— |
|
|
|
|
|
12
3. Restructuring and Other Integration Related Costs
The Company has incurred certain restructuring and other integration related costs related to pre-acquisition matters that were expensed as incurred, which include:
|
|
• |
Costs (primarily severance and relocation costs) related to a series of Company initiated workforce reductions to increase organizational effectiveness and provide cost savings that can be reinvested in the Company's growth initiatives, during 2021 and 2020 (included within Cost of services and General and administrative expenses within the Condensed Consolidated Statements of Income (Loss)); and |
|
|
• |
Other integration related costs related to pre-acquisition matters (included within Cost of services and General and administrative expenses within the Consolidated Statements of Income (Loss)). |
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
|
(millions) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||||
|
Cost of services - lease type contracts |
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
Cost of services - management type contracts |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accrual for restructuring and other integration related costs related to pre-acquisition matters of $
4. Revenue
Contracts with customers and clients
The Company accounts for a contract when it has the approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Once a contract is identified, the Company evaluates whether the contract should be accounted for as more than one performance obligation. Substantially all of the Company's revenues come from the following two types of arrangements: Lease type and Management type contracts.
Lease type contracts
Under lease type arrangements, the Company pays the property owner a fixed base rent, percentage rent that is tied to the facility’s financial performance, or a combination of both. The Company operates the parking facility and is responsible for most operating expenses, but typically is not responsible for major maintenance, capital expenditures or real estate taxes. Performance obligations related to lease type contracts include parking for transient and monthly parkers. Revenue is recognized over time as the Company provides services. Certain expenses, primarily rental expense for the contractual arrangements that meet the definition of service concession arrangements, are recorded as a reduction of revenue.
Management type contracts
Management type contract revenue consists of management fees, including both fixed and performance-based fees. In exchange for this consideration, the Company may have a bundle of integrated services that comprise one performance obligation and include services, such as managing the facility, as well as ancillary services such as accounting, equipment leasing, consulting, insurance and other value-added services. Management type contract revenues do not include gross customer collections at the managed facilities, as these revenues belong to the property owners rather than the Company. Management type contracts generally provide the Company with management fees regardless of the operating performance of the underlying facilities. Revenue is recognized over time as the Company provides services.
Service concession arrangements
Service concession agreements include both lease type and management type contracts. Revenue generated from service concession arrangements is accounted for under the guidance of Topics 606 and 853. Certain expenses (primarily rental expense) related to service concession arrangements and depreciation and amortization, have been recorded as a reduction of Service revenue - lease type contracts.
As a result of COVID-19, the Company was able to negotiate cost reductions on certain lease type contracts related to service concession arrangements. The Company recorded $
13
Contract modifications and taxes
Contracts are often modified to account for changes in contract specifications and requirements. The Company considers contract modifications to exist when the parties to the contract have approved changes to or new enforceable rights and obligations, which may include changes to the contract consideration due to the Company or creates new performance obligations. The Company assesses whether a contract modification results in either a new separate contract, the termination of the existing contract and creation of a new contract, or modifies the existing contract. Typically, modifications are accounted for prospectively.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, which are collected by the Company from a customer, are excluded from revenue.
Reimbursed management type contract revenue and expense
The Company recognizes both revenues and expenses, in equal amounts, that are directly reimbursed from the property owner for operating expenses incurred under a management type contract. The Company has determined it is the principal in these transactions, as the nature of its performance obligations is for the Company to provide the services on behalf of the customer. As the principal to these related transactions, the Company has control of the promised services before they are transferred to the client.
Disaggregation of revenue
The Company disaggregates its revenue from contracts with customers by type of arrangement for each of the reportable segments. The Company has concluded that such disaggregation of revenue best depicts the overall economic nature, timing and uncertainty of the Company's revenue and cash flows affected by the economic factors of the respective contractual arrangement. See Note 14. Segment Information for further information on disaggregation of the Company's revenue by segment.
Performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer or client, and is the unit of account under Topic 606. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company's contracts have a single performance obligation that is not separately identifiable from other promises in the contract and therefore not distinct, comprising the promise to provide a bundle of monthly services or parking services for transient or monthly parkers.
The contract price is generally deemed to be the transaction price. Some management type contracts include performance incentives that are based on variable performance measures. These incentives are constrained at contract inception and recognized once the customer has confirmed that the Company has met the contractually agreed upon performance measures as defined in the contract.
The Company's performance obligations are primarily satisfied over time as the Company provides the related services. Typically, revenue is recognized over time on a straight-line basis as the Company satisfies the related performance obligation. There are certain management type contracts where revenue is recognized based on costs incurred to date plus a reasonable margin. The Company has concluded this is a faithful depiction of how control is transferred to the customer.
The time between completion of the performance obligation and collection of cash is typically not more than 30 - 60 days. In certain contractual arrangements, such as monthly parker contracts, the payment is typically collected in advance of the Company commencing its performance obligations under the contractual arrangement.
On June 30, 2021, the Company had $
The Company expects to recognize the remaining performance obligations as revenue in future periods as follows:
|
(millions) (unaudited) |
|
Remaining Performance Obligations |
|
|
|
2021 |
|
$ |
|
|
|
2022 |
|
|
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 and thereafter |
|
|
|
|
|
Total |
|
$ |
|
|
14
Contract balances
The timing of revenue recognition, billings and cash collections results in accounts receivable, contract assets and contract liabilities. Accounts receivable represent amounts where the Company has an unconditional right to the consideration and therefore only the passage of time is required for the Company to receive consideration due from the customer. Both lease and management type contracts have customers and clients where amounts are billed as work progresses or in advance in accordance with agreed-upon contractual terms. Billing may occur subsequent to or prior to revenue recognition, resulting in contract assets and contract liabilities. The Company, on occasion, receives advances or deposits from customers and clients, on both lease and management type contracts, before revenue is recognized, resulting in the recognition of contract liabilities.
Contract assets and liabilities are reported on a contract-by-contract basis and are included in Accounts and notes receivable, net, and Accrued and other current liabilities, respectively, on the Condensed Consolidated Balance Sheets. There were
The following table provides information about accounts receivable, contract assets and contract liabilities with customers and clients as of June 30, 2021 (unaudited) and December 31, 2020:
|
(millions) |
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
|
Accounts receivable |
|
$ |
|
|
|
$ |
|
|
|
Contract asset |
|
|
|
|
|
|
|
|
|
Contract liability |
|
|
( |
) |
|
|
( |
) |
Changes in contract assets which include recognition of additional consideration due from the customer are offset by reclassifications of contract asset balances to accounts receivable when the Company obtains an unconditional right to consideration, thereby establishing an accounts receivable.
|
|
|
Six Months Ended |
|
|||||
|
(millions) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||
|
Balance, beginning of period |
|
$ |
|
|
|
$ |
|
|
|
Additional contract assets |
|
|
|
|
|
|
|
|
|
Reclassification to accounts receivable |
|
|
( |
) |
|
|
( |
) |
|
Balance, end of period |
|
$ |
|
|
|
$ |
|
|
Changes in contract liabilities primarily include additional contract liabilities and reductions of contract liabilities when revenue is recognized.
|
|
|
Six Months Ended |
|
|||||
|
(millions) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||
|
Balance, beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
Additional contract liabilities |
|
|
( |
) |
|
|
( |
) |
|
Recognition of revenue from contract liabilities |
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
( |
) |
|
$ |
( |
) |
Cost of contracts, net
Cost of contracts, net, represents the cost of obtaining contractual rights associated with providing services for management type contracts. Incremental costs incurred to obtain service contracts are amortized on a straight line basis over the estimated life of the contracts, including anticipated renewals and terminations. The amortization period is consistent with the timing of when the Company satisfies the related performance obligations. Estimated lives are based on the contract life.
Amortization expense related to cost of contracts not considered service concession arrangements is included within Depreciation and amortization in the Condensed Consolidated Statements of Income (Loss).
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
|
(millions) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||||
|
Amortization expense |
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|
15
As of June 30, 2021 and December 31, 2020, cost of contracts net of accumulated amortization included on the Condensed Consolidated Balance Sheets within Other noncurrent assets was $
5. Legal and Other Commitments and Contingencies
The Company is subject to claims and litigation in the normal course of its business, including those related to labor and employment, contracts, personal injury and other related matters, some of which allege substantial monetary damages and claims. Some of these actions may be brought as class actions on behalf of a class or purported class of employees. While the outcomes of claims and legal proceedings brought against the Company are subject to significant uncertainty, management believes the final outcome will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.
The Company accrues a charge when management determines that it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. When a loss is probable, the Company records an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, the Company records the lowest amount in the estimated range of loss, and if material, discloses the estimated range. The Company does
6. Other Intangible Assets, net
The components of other intangible assets, net, at June 30, 2021 (unaudited) and December 31, 2020 were as follows:
|
|
|
|
|
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||||||||||||||||||
|
(millions) |
|
Weighted Average Life (Years) |
|
|
Intangible Assets, Gross |
|
|
Accumulated Amortization |
|
|
Intangible Assets, Net |
|
|
Intangible Assets, Gross |
|
|
Accumulated Amortization |
|
|
Intangible Assets, Net |
|
|||||||
|
Covenant not to compete |
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Trade names and trademarks |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Proprietary know how |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Management contract rights |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Customer relationships |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Other intangible assets, net |
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Amortization expense related to intangible assets for the three and six months ended June 30, 2021 and 2020, (unaudited), respectively, which was included in Depreciation and amortization within the Condensed Consolidated Statements of Income (Loss), was as follows:
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
|
(millions) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||||
|
Amortization expense |
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|
As discussed in Note 1. Significant Accounting Policies and Practices, due to the impact of COVID-19 on the Company’s expected future operating cash flows, the Company determined certain impairment triggers had occurred for Proprietary know how intangible assets as of June 30, 2020. Accordingly, the Company analyzed undiscounted cash flows for these intangible assets as of June 30, 2020, and determined the carrying value for the Proprietary know how intangible assets was higher than their projected undiscounted cash flows. The fair value of the Proprietary know how intangible assets, which was classified as Level 3 in the fair value hierarchy, was determined based on estimates of future discounted cash flows using the relief from royalty approach. Proprietary know how intangible assets with a carrying amount of $
16
7. Goodwill
The changes to the carrying amount of goodwill for the six months ended June 30, 2021 (unaudited) were as follows:
|
(millions) |
|
Commercial |
|
|
Aviation |
|
|
Total |
|
|||
|
Net book value as of December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Accumulated impairment losses |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value as of June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Accumulated impairment losses |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
8. Borrowing Arrangements
Long-term borrowings as of June 30, 2021 (unaudited) and December 31, 2020, in order of preference, were as follows:
|
|
|
Amount Outstanding |
|
|||||
|
(millions) |
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
|
Senior Credit Facility, net of original discount on borrowings(1) |
|
$ |
|
|
|
$ |
|
|
|
Other borrowings |
|
|
|
|
|
|
|
|
|
Deferred financing costs |
|
|
( |
) |
|
|
( |
) |
|
Total obligations |
|
|
|
|
|
|
|
|
|
Less: Current portion of long-term obligations under Senior Credit Facility and other long-term borrowings |
|
|
|
|
|
|
|
|
|
Total long-term borrowings, excluding current portion |
|
$ |
|
|
|
$ |
|
|
|
|
(1) |
Includes discount on borrowings of $ |
Senior Credit Facility
On February 16, 2021 (the “Fourth Amendment Effective Date”), the Company entered into the fourth amendment (the “Fourth Amendment”) to the Company’s credit agreement (as amended prior to the Fourth Amendment Effective Date (as defined below), the “Credit Agreement”) with Bank of America, N.A. (“Bank of America”), as Administrative Agent, swing-line lender and a letter of credit issuer; Wells Fargo Bank, N.A., as syndication agent; BMO Harris Bank N.A., JPMorgan Chase Bank, N.A., KeyBank National Association and U.S. Bank National Association, as co-documentation agents; Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as joint lead arrangers and bookrunners; and the lenders party thereto (the “Lenders”), pursuant to which the Lenders have made available to the Company a senior secured credit facility (the “Senior Credit Facility”). Prior to the Fourth Amendment Effective Date and pursuant to the third amendment (the “Third Amendment”) to the Credit Agreement, which was entered into on May 6, 2020, the Senior Credit Facility permitted aggregate borrowings of $
Borrowings under the Senior Credit Facility bear interest, at the Company’s option, at a rate per annum based on the Company’s consolidated total debt to EBITDA ratio for the
Also pursuant to the Fourth Amendment, (a) the Company is subject to a Minimum Liquidity test (as described in the Amended Credit Agreement) that required the Company to have liquidity of at least $
17
Payments and Prepayments of Subordinated Debt (each as defined in the Amended Credit Agreement), through the delivery of the compliance certificate for the fiscal quarters ending March 31, 2022 or June 30, 2022, as applicable.
Prior to the Fourth Amendment Effective Date, the Company was required to maintain a maximum consolidated total debt to EBITDA ratio of between
During the six months ended June 30, 2021, the Company incurred approximately $
Under the terms of the Amended Credit Agreement, term loans under the Senior Credit Facility are subject to scheduled quarterly payments of principal in installments equal to
Events of default under the Credit Agreement include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, the occurrence of any cross default event, non-compliance with other loan documents, the occurrence of a change of control event, and bankruptcy and other insolvency events. If an event of default occurs and is continuing, the Administrative Agent can, with the consent of the required Lenders, among others, (i) terminate the commitments under the Credit Agreement, (ii) accelerate and require the Company to repay all the outstanding amounts owed under the Credit Agreement, and (iii) require the Company to cash collateralize any outstanding letters of credit.
Each wholly owned domestic subsidiary of the Company (subject to certain exceptions set forth in the Credit Agreement) has guaranteed all existing and future indebtedness and liabilities of the other guarantors and the Company arising under the Credit Agreement. The Company’s obligations under the Credit Agreement and such domestic subsidiaries’ guaranty obligations are secured by substantially all of their respective assets. The Senior Credit Facility matures on
At June 30, 2021, the Company had $
The weighted average interest rate on the Company's Senior Credit Facility was
Interest Rate Collars
In May 2019, the Company entered into interest rate collar contracts with an aggregate notional amount of $
On May 6, 2020, concurrent with entering into the Third Amendment, the Company de-designated the three-year interest rate collars. Prior to de-designation, the effective portion of the change in the fair value of the interest rate collars was reported in Accumulated other comprehensive loss. Upon de-designation, the balance in Accumulated other comprehensive loss is being reclassified to Other expense (income) in the Condensed Consolidated Statements of Income (Loss) on a straight-line basis through April 2022, which is over the remaining life for which the interest rate collars had previously been designated as cash flow hedges. Changes in the fair value of the interest rate collars after de-designation are included within Other expense (income) in the Condensed Consolidated Statements of Income (Loss). For the three and six months ended June 30, 2021, respectively, $
18
See Note 13. Comprehensive Income (Loss) for the amount of loss recognized in Other Comprehensive income (loss) on the interest rate collars and the loss reclassified from Accumulated other comprehensive loss to the Condensed Consolidated Statements of Income (Loss) during the three and six months ended June 30, 2021 and 2020, respectively.
Subordinated Convertible Debentures
The Company acquired Subordinated Convertible Debentures ("Convertible Debentures") as a result of the October 2, 2012 acquisition of Central Parking Corporation. The subordinated debenture holders have the right to redeem the Convertible Debentures for $
9. Stock Repurchase Program
In July 2019, the Company's Board of Directors (“Board”) authorized the Company to repurchase, on the open market, shares of the Company’s outstanding common stock in an amount not to exceed $
In March 2020, the Board authorized the Company to repurchase, on the open market, shares of the Company’s outstanding common stock in an amount not to exceed $
As of June 30, 2021, $
Share repurchase activity under the stock repurchase programs during the three and six months ended June 30, 2021 and 2020 (unaudited) was as follows:
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
|
(millions, except for share and per share data) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||||
|
Total number of shares repurchased |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
|
|
|
Average price paid per share |
|
$ |
— |
|
|
$ |
— |
|
$ |
— |
|
|
$ |
|
|
|
Total value of shares repurchased |
|
$ |
— |
|
|
$ |
— |
|
$ |
— |
|
|
$ |
|
|
The remaining authorized repurchase amounts in the aggregate under the July 2019 and March 2020 repurchase programs as of June 30, 2021 (unaudited) was as follows:
|
(millions) |
|
June 30, 2021 |
|
|
|
Total authorized repurchase amount |
|
$ |
|
|
|
Total value of shares repurchased |
|
|
|
|
|
Total remaining authorized repurchase amount |
|
$ |
|
|
10. Bradley Agreement
In February 2000, the Company, through a partnership agreement with a minority partner (the “Partnership”), entered into a
Under the terms of the Bradley Agreement, the parking garage was financed through the issuance of State of Connecticut special facility revenue bonds and provided that the Company deposited, with the trustee for the bondholders, all gross revenues collected from operations of the garage and surface parking. From those gross revenues, the trustee paid debt service on the special facility revenue bonds outstanding, operating and capital maintenance expenses of the garage and surface parking facilities, and specific annual guaranteed minimum payments to the State. All of the cash flows from the parking facilities were pledged as the security of the special facility revenue bonds and were collected and deposited with the bond trustee. Each month the bond trustee made certain required monthly distributions, which were characterized as “Guaranteed Payments.” To the extent the monthly gross receipts generated by the parking facilities were not sufficient for the bond trustee to make the required Guaranteed Payments, the Company was obligated to deliver the deficiency amount to the bond trustee, with such deficiency payments representing interest bearing advances to the bond trustee.
19
On June 30, 2020, the Company and the State agreed to terminate the Bradley Agreement, with an effective date of
Under the terms of the Bradley Management Agreement, the Company is no longer required to make deficiency payments. In addition, other than the contingent consideration discussed below, the Company has no other ongoing obligations under the Bradley Agreement.
On June 30, 2020, concurrent with the termination of the Bradley Agreement and effective as of May 31, 2020, the Company entered into an agreement to purchase the minority partners’ share in the Partnership previously established to execute the Bradley Agreement for a total cash consideration of $
11. Stock-Based Compensation
Stock Grants
There were
Restricted Stock Units
During the six months ended June 30, 2021, the Company granted
Nonvested restricted stock units as of June 30, 2021, and changes during the six months ended June 30, 2021 (unaudited) were as follows:
|
|
|
Shares |
|
|
Weighted Average Grant-Date Fair Value |
|
||
|
Nonvested as of December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
Nonvested as of June 30, 2021 |
|
|
|
|
|
$ |
|
|
The Company's stock-based compensation expense related to the restricted stock units for the three and six months ended June 30, 2021 and 2020 (unaudited), respectively, which is included in General and administrative expenses within the Condensed Consolidated Statements of Income (Loss), was as follows:
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
|
(millions) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||||
|
Stock-based compensation expense |
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|
As of June 30, 2021, there was $
Performance Share Units (“PSU’s”)
During the six months ended June 30, 2021, the Company granted
Due to the impact of COVID-19 on the Company’s operations, the Company expects the targets for the PSU awards granted in 2019 (“2019 PSU’s) and 2020 (“2020 PSU’s) to not be achieved, which are based on the achievement of certain free cash flow targets before cash tax and interest payments, subject to certain discretionary adjustments by the Board, over the three-year performance periods of 2019 through 2021 and 2020 through 2022, respectively. As such, during the six months ended June 30, 2020, the Company reversed $
20
ended June 30, 2020, the Company reversed $
Nonvested PSU’s as of June 30, 2021, and changes during the year ended June 30, 2021 (unaudited) were as follows:
|
|
|
Shares |
|
|
Weighted Average Grant-Date Fair Value |
|
||
|
Nonvested as of December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
|
Nonvested as of June 30, 2021 |
|
|
|
|
|
$ |
|
|
The Company's stock-based compensation expense (net reduction of expense) related to PSU’s during the three and six months ended June 30, 2021 and 2020 (unaudited), respectively, which is included in General and administrative expenses within the Condensed Consolidated Statements of Income (Loss), was as follows:
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
|
(millions) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||||
|
Stock-based compensation expense |
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
$ |
( |
) |
As of June 30, 2021, there was $
12. Net Income (Loss) per Common Share
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted daily average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is based upon the weighted daily average number of shares of common stock outstanding for the period plus dilutive potential common shares, including restricted stock units, using the treasury-stock method. Unvested performance share units are excluded from the computation of weighted average diluted common shares outstanding if the performance targets upon which the issuance of the shares is contingent have not been achieved and the respective performance period has not been completed as of the end of the period. In periods where the Company has a net loss, restricted stock units are excluded from the calculation of net income (loss) per common share, as their inclusion would be anti-dilutive.
Basic and diluted net income (loss) per common share and a reconciliation of the weighted average basic common shares outstanding to the weighted average diluted common shares outstanding for the three and six months ended June 30, 2021 and 2020 (unaudited) was as follows:
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
|
(millions, except share and per share data) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||||
|
Net income (loss) attributable to SP Plus Corporation |
|
$ |
|
|
|
$ |
( |
) |
$ |
|
|
|
$ |
( |
) |
|
Basic weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive impact of share-based awards |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Diluted weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
|
|
|
$ |
( |
) |
$ |
|
|
|
$ |
( |
) |
|
Diluted |
|
$ |
|
|
|
$ |
( |
) |
$ |
|
|
|
$ |
( |
) |
Due to the net loss during the three and six months ended June 30, 2020, common stock equivalents arising from
There were
21
13. Comprehensive Income (Loss)
The components of other comprehensive income (loss) and income tax benefit allocated to each component for the three and six months ended June 30, 2021 and 2020 (unaudited) were as follows:
|
|
|
Three Months Ended June 30, 2021 |
|
|
Six Months Ended June 30, 2021 |
|
||||||||||||||||||
|
(millions) |
|
Before Tax Amount |
|
|
Income Tax |
|
|
Net of Tax Amount |
|
|
Before Tax Amount |
|
|
Income Tax |
|
|
Net of Tax Amount |
|
||||||
|
Translation adjustments |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Change in fair value of interest rate collars |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Three Months Ended June 30, 2020 |
|
|
Six Months Ended June 30, 2020 |
|
||||||||||||||||||
|
(millions) |
|
Before Tax Amount |
|
|
Income Tax |
|
|
Net of Tax Amount |
|
|
Before Tax Amount |
|
|
Income Tax |
|
|
Net of Tax Amount |
|
||||||
|
Translation adjustments |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
Change in fair value of interest rate collars |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive income (loss) |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The changes to accumulated other comprehensive loss by component for the six months ended June 30, 2021 (unaudited), were as follows:
|
(millions) |
|
Foreign Currency Translation Adjustments |
|
|
Change in Fair Value of Interest Rate Collars |
|
|
Total Accumulated Other Comprehensive Loss |
|
|||
|
Balance as of December 31, 2020 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive loss before reclassification |
|
|
|
|
|
|
- |
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The changes to accumulated other comprehensive loss by component for the six months ended June 30, 2020 (unaudited), were as follows:
|
(millions) |
|
Foreign Currency Translation Adjustments |
|
|
Change in Fair Value of Interest Rate Collars |
|
|
Total Accumulated Other Comprehensive Loss |
|
|||
|
Balance as of December 31, 2019 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive loss before reclassification |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Amounts reclassified from accumulated other comprehensive loss |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2020 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Reclassifications from accumulated other comprehensive loss for the three and six months ended June 30, 2021 and 2020 (unaudited) were as follows:
|
(millions) |
|
Three Months Ended June 30 |
|
|
Six Months Ended June 30 |
|
|
Classification in the Condensed Consolidated Statements of Income (Loss) |
||||||||||
|
Interest Rate Collars: |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
|
||||
|
Net realized loss |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other expenses (income) |
|
Reclassifications before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications, net of tax |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
22
14. 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 assess 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 are 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
In July 2020, the Company changed its internal reporting segment information reported to the CODM. Certain hospitality locations previously reported under Aviation are now included in Commercial. All prior year amounts have been reclassified to conform to the Company’s current reporting structure.
|
|
• |
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 include 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 and certain unallocated items, such as and including certain insurance reserve adjustments and other corporate items. |
23
Revenue and gross profit by segment for the three and six months ended June 30, 2021 and 2020 (unaudited) were as follows:
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
(millions) |
|
June 30, 2021 |
|
|
Gross Margin % |
|
|
June 30, 2020 |
|
|
Gross Margin % |
|
June 30, 2021 |
|
|
Gross Margin % |
|
|
June 30, 2020 |
|
|
Gross Margin % |
|
||||||||
|
Services Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease type contracts |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
Management type contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aviation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease type contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management type contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aviation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease type contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management type contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reimbursed management type contract revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total services revenue |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
Gross Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease type contracts |
|
$ |
|
|
|
|
|
% |
|
$ |
( |
) |
|
|
( |
)% |
$ |
|
|
|
|
|
% |
|
$ |
( |
) |
|
|
( |
)% |
|
Management type contracts |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Lease impairment |
|
|
— |
|
|
N/M |
|
|
|
( |
) |
|
N/M |
|
|
— |
|
|
N/M |
|
|
|
( |
) |
|
N/M |
|
||||
|
Total Commercial |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Aviation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease type contracts |
|
|
|
|
|
|
|
% |
|
|
( |
) |
|
|
( |
)% |
|
|
|
|
|
|
% |
|
|
— |
|
|
|
|
% |
|
Management type contracts |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Lease Impairment |
|
|
— |
|
|
N/M |
|
|
|
— |
|
|
N/M |
|
|
( |
) |
|
N/M |
|
|
|
— |
|
|
N/M |
|
||||
|
Total Aviation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease type contracts |
|
|
|
|
|
N/M |
|
|
|
|
|
|
N/M |
|
|
|
|
|
N/M |
|
|
|
|
|
|
N/M |
|
||||
|
Management type contracts |
|
|
|
|
|
N/M |
|
|
|
|
|
|
N/M |
|
|
|
|
|
N/M |
|
|
|
|
|
|
N/M |
|
||||
|
Total Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross profit |
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
|
|
|
N/M - Not Meaningful
24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our results of operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto contained in this Quarterly Report on Form 10-Q and the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Important Information Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q is being filed by SP Plus Corporation (“we”, “us” or “our”) with the Securities and Exchange Commission (“SEC”) and contains forward-looking statements, including statements regarding the anticipated further impact of the COVID-19 pandemic (“COVID-19”) on our operations and financial condition. These statements are typically accompanied by the words “expect,” “estimate,” “intend”, “will,” “predict,” “project,” “may,” “should,” “could,” “believe,” “would,” “might,” “anticipate,” or similar terms and phrases, but such words, terms and phrases are not the exclusive means of identifying such statements. These expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as enacted under the Private Securities Litigation Reform Act of 1995. These forward looking statements are made based on management’s expectations, beliefs and projections concerning future events and are subject to uncertainties and factors relating to operations and the business environment, all of which are difficult to predict and many of which are beyond management’s control. These forward-looking statements are not guarantees of future performance and there can be no assurance that our expectations, beliefs and projections will be realized. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Our actual results, performance and achievements could be materially different from those expressed in, or implied by, our forward-looking statements. Important factors which could cause or contribute to our actual results, performance or achievements being different from those expressed in, or implied by, our forward-looking statements include, but are not limited to, those discussed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and other documents we file with the SEC, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and except as expressly required by the federal securities laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances, future events or for any other reason.
Overview
Our Business
Primarily through our technology-driven mobility solutions, we facilitate the efficient movement of people, vehicles and personal belongings with the goal of enhancing the consumer experience while improving bottom line results for our clients. We provide technology-driven mobility solutions, professional parking management, ground transportation, remote baggage check-in and handling, facility maintenance, security, and event logistics to aviation, commercial, hospitality, healthcare and government clients across North America. We typically enter into contractual relationships with property owners or managers as opposed to owning facilities.
We primarily operate under two types of arrangements: management type contracts and lease type contracts.
|
|
• |
Under a management type contract, we typically receive a fixed and/or variable monthly fee for providing our services, and we may also receive an incentive fee based on the achievement of certain performance objectives. We also receive fees for ancillary services. We believe that we can generally purchase required insurance for the facility and facility operations at lower rates than clients can obtain on their own because we are effectively self-insured for all liability, workers’ compensation and health care claims by maintaining a large per-claim deductible. As a result, we generate operating income on the insurance provided under management type contracts by focusing on risk management efforts and controlling losses. Typically, all of the underlying revenue and expenses under a standard management type contract flow through to our client rather than to us. However, some management type contracts, which are referred to as “reverse” management type contracts, usually provide for larger management fees and require us to pay various costs. |
|
|
• |
Under a lease type contract, we generally pay our clients either a fixed annual rent, a percentage of gross customer collections, or a combination of both. Under a lease type contract, we collect all revenue and are responsible for most operating expenses, but typically are not responsible for major maintenance, capital expenditures or real estate taxes. Margins for lease type contracts vary significantly, not only due to operating performance, but also due to variability of parking rates in different cities and varying space utilization by parking facility type and location. |
As of June 30, 2021, we operated approximately 86% of our locations under management type contracts and 14% under lease type contracts.
In evaluating our financial condition and operating performance, one of our primary areas of focus is on our gross profit. Revenue from lease type contracts includes all gross customer collections derived from our leased locations (net of local taxes), whereas revenue from management type contracts only includes our contractually agreed upon management fees and amounts attributable to ancillary services. Gross customer collections at facilities under management type contracts, therefore, are not included in our revenue. Accordingly, while a change in the proportion of our operating agreements that are structured as lease type contracts may cause significant fluctuations in reported revenue and cost of services, those changes will not artificially affect our gross profit. Therefore, gross profit is one of our primary areas of focus.
25
General Business Trends
We believe that sophisticated clients (which also include property owners) recognize the potential for technology-driven mobility solutions, parking services, parking management, ground transportation services, baggage handling services and other ancillary services to be a profit generator and/or a service differentiator to their customers. By outsourcing these services, they are able to capture additional profit and improve customer experiences by leveraging the unique operational skills and controls that an experienced services company can offer. Our ability to consistently deliver a uniformly high level of services to our clients, including the use of various technological enhancements, allows us to maximize the profit and/or customer experience to our clients and improves our ability to win contracts and retain existing clients. Our focus on customer service and satisfaction is a key driver of our high retention rate, which was approximately 91% and 94% for the twelve-month periods ended June 30, 2021 and 2020, respectively, for our Commercial segment facilities.
Impact of COVID-19
COVID-19 has impacted, and may continue to impact, our operations and results. The ultimate impact of COVID-19 on future operations is hard to predict, as new guidance is continually being communicated by the U.S. Department of State, Centers for Disease Control and Prevention and local governments. New guidance has and may include heightened government regulations and travel advisories, which could impact our clients’ operations. In addition, certain industries have been impacted by workforce disruptions as a result of COVID-19. Currently, our operations have not experienced material disruptions as a result of employees who are unable or unwilling to work because of illness or fear of contracting COVID-19, or for other reasons. However, we have recently seen higher than normal open positions at our Company and if this continues, our ability to grow and expand our business could be negatively impacted.
Commercial Segment Facilities
In order to mitigate some of the effects from COVID-19, we converted many of our lease locations to management locations during the past year. In addition, we were able to exit many less profitable contracts, which were for both lease and management locations. The following table reflects our Commercial facilities (by contractual type) operated on the dates indicated:
|
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
|
June 30, 2020 |
|
|||
|
Leased facilities |
|
|
421 |
|
|
|
445 |
|
|
|
522 |
|
|
Managed facilities |
|
|
2,560 |
|
|
|
2,539 |
|
|
|
2,561 |
|
|
Total Commercial segment facilities |
|
|
2,981 |
|
|
|
2,984 |
|
|
|
3,083 |
|
Revenue
We recognize services revenue from our contracts as the related services are provided, as well as certain fees for using our technology-driven mobility solutions. Substantially all of our revenue comes from the following two sources:
Lease type contracts. Consists of all revenue received at lease type locations, including gross receipts (net of local taxes), consulting and real estate development fees, gains on sales of contracts and payments for exercising termination rights. Revenue from lease type contracts includes a reduction for service concessions.
Management type contracts. Consists of management fees, including fixed, variable and/or performance-based fees, and amounts attributable to ancillary services such as accounting, equipment leasing, baggage services, payments received for exercising termination rights, consulting, developmental fees, gains on sales of contracts, insurance and other value-added services. We believe we generally can purchase required insurance at lower rates than our clients can obtain on their own because we effectively self-insure for all liability and worker’s compensation and health care claims by maintaining a large per-claim deductible. As a result, we have generated operating income on the insurance provided under our management type contracts by focusing on our risk management efforts and controlling losses. Management type contract revenues do not include gross customer collections at those facilities, as those revenues belong to the client rather than to us. Management type contracts generally provide us with a management fee regardless of the operating performance of the underlying management type contract.
Reimbursed Management Type Contract Revenue. Consists of the direct reimbursement from the client for operating expenses incurred under a management type contract, which are reflected in our revenue.
Cost of Services
Our cost of services consists of the following:
Lease type contracts. Consists of contractual rents or fees paid to the client and all operating expenses incurred in connection with operating the leased facility. Contractual rents or fees paid to the client are generally based on either a fixed contractual amount, a percentage of gross revenue or a combination thereof. Generally, under a lease type arrangement we are not responsible for major capital expenditures or real estate taxes.
Management type contracts. Cost of services under a management type contract is generally the responsibility of the client. As a result, these costs are not included in our results of operations. However, our reverse management type contracts,
26
which typically provide for larger management fees, do require us to pay for certain costs and those costs are included in our results of operations.
Reimbursed Management Type Contract Expense. Consists of directly reimbursed costs incurred on behalf of a client under a management type contract, which are reflected in our cost of services.
Gross Profit
Gross profit equals our revenue less the cost of generating such revenue (“cost of services”). This is the key metric we use to examine our performance because it captures the underlying economic benefit to us of both lease and management type contracts.
General and Administrative Expenses
General and administrative expenses include salaries, wages, payroll taxes, insurance, travel and office related expenses for our headquarters, field offices and supervisory employees.
Depreciation and Amortization
Depreciation is determined using a straight-line method over the estimated useful lives of the various asset classes, or in the case of leasehold improvements, over the initial term of the operating lease or its useful life, whichever is shorter. Intangible assets determined to have finite lives, usually acquired through the acquisition of businesses, are amortized over their remaining estimated useful life.
Goodwill and other Intangible Assets, net
Goodwill
Goodwill represents the excess of purchase price paid over the fair value of net assets acquired. In accordance with the Financial Accounting Standards Board's ("FASB") authoritative accounting guidance on goodwill, we evaluate goodwill for impairment on an annual basis, or more often if events or circumstances change that could cause goodwill to become impaired. We have elected to assess the impairment of goodwill annually on October 1 or at an interim date if there is an event or change in circumstances indicating the carrying value may not be recoverable. The goodwill impairment test is performed at the reporting unit level; our reporting units represent our operating segments, consisting of Commercial and Aviation. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the use of acquired assets or our business strategy, or significant negative industry or economic trends.
We may perform a qualitative, rather than quantitative, assessment, to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount. The determination of fair value of a reporting unit utilizes cash flow projections that assume certain future revenue and cost levels, comparable marketplace data, assumed discount rates based upon current market conditions and other valuation factors, all of which involve the use of significant judgment and estimates. We also assess critical areas that may impact our business including economic conditions, market related exposures, competition, changes in service offerings and changes in key personnel.
Other Intangibles Assets, net
Other intangible assets represent assets with finite lives that are amortized over their estimated useful lives and reviewed for impairment when circumstances change that would indicate the carrying value may not be recoverable. Intangible assets are amortized on a straight-line basis over their estimated useful lives. We evaluate the remaining useful life of the other intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to their remaining useful lives. Assumptions and estimates about future values and remaining useful lives of our intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors, such as changes in our business strategy and internal forecasts. Although management believes the historical assumptions and estimates are reasonable and appropriate, different assumptions and estimates could materially impact reported financial results.
For both goodwill and intangible assets, future events may indicate differences from our judgments and estimates which could, in turn, result in impairment charges. Future events that may result in impairment charges include extended unfavorable economic impacts of COVID-19, increases in interest rates, which would impact discount rates, or other factors which could decrease revenues and profitability at existing locations and changes in the cost structure of existing facilities.
Long-Lived Assets
We evaluate long-lived assets, primarily including right-of-use (“ROU”) assets, leasehold improvements, equipment and construction in progress for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. We group assets at the lowest level for which cash flows are separately identified in order to measure an impairment. Events or circumstances that would result in an impairment review include a significant change in the use of an asset, the planned sale or disposal of an asset, or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset group. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future undiscounted cash flows expected to be generated by the asset group. If it is
27
determined to be impaired, the impairment recognized is measured by the amount by which the carrying value of the asset exceeds its fair value.
Assumptions and estimates used to determine cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity. Any future changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in additional impairment charges. Future events that may result in impairment charges include extended unfavorable economic impacts of COVID-19, or other factors which could decrease revenues and profitability at existing locations and changes in the cost structure of existing facilities.
Segments
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 our chief operating decision maker (“CODM”), in deciding how to allocate resources. Our CODM is our chief executive officer.
The operating segments are reported to our CODM as Commercial and Aviation.
|
|
• |
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 ground transportation services, valet services, taxi and livery dispatch services and event planning, including shuttle and transportation services. |
|
|
• |
Aviation encompasses our services in aviation (e.g., 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 and certain unallocated items, such as and including certain insurance reserve adjustments and other corporate items. |
In July 2020, we changed our internal reporting segment information reported to the CODM. Certain hospitality locations previously reported under Aviation are now included in Commercial. All prior year amounts have been reclassified to conform to our current reporting structure.
Analysis of Results of Operations
Three Months Ended June 30, 2021 Compared to Three Months June 30, 2020
As a result of COVID-19, we have executed on a strategy to successfully convert certain lease type contracts to management type contracts or terminate certain lease type contracts, which should provide a higher gross profit over the contract term. In addition, for those locations that have remained leases, we have worked with landlords to either receive rent concessions or change lease terms to be more favorable to us. Expired business relates to contracts that have expired during the current period but we were operating the business in the comparative period presented. Conversions relate to contracts that were converted from lease type contracts to management type contracts after the prior year period.
Consolidated results for the three months ended June 30, 2021 and 2020, respectively, include the following notable items:
|
|
|
Three Months Ended |
|
|
Variance |
|
||||||||||
|
(millions) (unaudited) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
Amount |
|
|
% |
|
||||
|
Services revenue (1) |
|
$ |
141.2 |
|
|
$ |
93.0 |
|
|
$ |
48.2 |
|
|
|
51.8 |
% |
|
Cost of services (2) |
|
|
94.7 |
|
|
|
89.7 |
|
|
|
5.0 |
|
|
|
5.6 |
% |
|
Lease impairment |
|
|
— |
|
|
|
16.7 |
|
|
|
(16.7 |
) |
|
|
(100.0 |
)% |
|
Gross profit |
|
|
46.5 |
|
|
|
(13.4 |
) |
|
|
59.9 |
|
|
|
447.0 |
% |
|
General and administrative expenses |
|
|
22.0 |
|
|
|
22.8 |
|
|
|
(0.8 |
) |
|
|
(3.5 |
)% |
|
Depreciation and amortization |
|
|
6.2 |
|
|
|
7.9 |
|
|
|
(1.7 |
) |
|
|
(21.5 |
)% |
|
Impairment of intangible assets |
|
|
— |
|
|
|
3.7 |
|
|
|
(3.7 |
) |
|
|
(100.0 |
)% |
|
Operating income (loss) |
|
|
18.3 |
|
|
|
(47.8 |
) |
|
|
66.1 |
|
|
|
138.3 |
% |
|
Income tax expense (benefit) |
|
|
3.5 |
|
|
|
(13.4 |
) |
|
|
16.9 |
|
|
|
126.1 |
% |
28
|
(1) |
Excludes Reimbursed management type contract revenue of $134.5 million and $110.4 million for the three months ended June 30, 2021 and 2020, respectively. |
|
(2) |
Excludes Reimbursed management type contract expense of $134.5 million and $110.4 million for the three months ended June 30, 2021 and 2020, respectively. |
Services revenue increased by $48.2 million, or 51.8%, attributable to the following:
|
|
• |
Services revenue for lease type contracts increased $20.7 million, or 68.5%, primarily due to an increase in transient revenue as a result of improving business conditions as compared to the second quarter of 2020, which was significantly impacted by COVID-19, partially offset by lower cost concessions of $14.1 million related to service concessions, as well as conversions and expired business. |
|
|
• |
Services revenue for management type contracts increased $27.5 million, or 43.8%, primarily due to an increase in volume based management type contracts as a result of improving business conditions as compared to the second quarter of 2020, which was significantly impacted by COVID-19, as well as revenue from new business and conversions, partially offset by expired business. |
Gross profit increased by $59.9 million, or 447.0%, attributable to the following:
|
|
• |
Gross profit for lease type contracts increased $24.3 million, or 188.4%, and gross profit percentage increased to 22.4% for the three months ended June 30, 2021, compared to negative 42.7% for the three months ended June 30, 2020. Gross profit for lease type contracts increased due to an increase in transient revenue as noted above, a decrease in overall net operating costs and conversions, partially offset by lower cost concessions of $14.1 million related to service concessions and $2.8 million related to rent concessions. |
|
|
• |
Gross profit for management type contracts increased $18.9 million, or 116.7%, while gross profit percentage for management type contracts increased to 38.9% for the three months ended June 30, 2021, compared to 25.8% for the three months ended June 30, 2020. Gross profit for management type contracts increased primarily due to an increase in volume based management type contracts as noted above, new business and conversions. |
|
|
• |
We recognized $16.7 million of impairment charges related to operating lease ROU assets in the Commercial segment during the three months ended June 30, 2020. |
General and administrative expenses decreased $0.8 million, or 3.5%, for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, primarily due to lower restructuring and other integration related costs and cost reduction initiatives, partially offset by higher performance based compensation.
We recognized $3.7 million of impairment charges related to certain Proprietary know how intangible assets during the three months ended June 30, 2020 in the Aviation segment.
Our effective tax rate was 26.3% and 25.2% for the three months ended June 30, 2021 and 2020, respectively, due to higher earnings in our foreign jurisdictions during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.
The following tables summarize our revenues (excluding reimbursed management type contract revenue) and gross profit by segment for the three months ended June 30, 2021 and 2020.
Commercial segment: Services Revenue
|
|
|
Three Months Ended |
|
|
Variance |
|
||||||||||
|
(millions) (unaudited) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
Amount |
|
|
% |
|
||||
|
Lease type contracts |
|
$ |
48.7 |
|
|
$ |
28.8 |
|
|
$ |
19.9 |
|
|
|
69.1 |
% |
|
Management type contracts |
|
|
53.7 |
|
|
|
41.7 |
|
|
|
12.0 |
|
|
|
28.8 |
% |
|
Total Commercial Revenue |
|
$ |
102.4 |
|
|
$ |
70.5 |
|
|
$ |
31.9 |
|
|
|
45.2 |
% |
Lease type contracts. Revenue increased $19.9 million, or 69.1%, to $48.7 million for the three months ended June 30, 2021, compared to $28.8 million for the three months ended June 30, 2020, primarily due to an increase in transient revenue as a result of improving business conditions as compared to the second quarter of 2020, which was significantly impacted by COVID-19, cost concessions of $2.4 million related to service concessions and revenue from new business, partially offset by expired business and conversions.
Management type contracts. Revenue increased $12.0 million, or 28.8%, to $53.7 million for the three months ended June 30, 2021, compared to $41.7 million for the three months ended June 30, 2020, primarily due to an increase in volume based management type contracts as a result of improving business conditions as compared to the second quarter of 2020, which was significantly impacted by COVID-19, as well as revenue from new business and conversions, partially offset by expired business.
29
Commercial segment: Gross Profit
|
|
|
Three Months Ended |
|
|
Variance |
|
||||||||||
|
(millions) (unaudited) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
Amount |
|
|
% |
|
||||
|
Lease type contracts |
|
$ |
9.5 |
|
|
$ |
(13.8 |
) |
|
$ |
23.3 |
|
|
|
168.8 |
% |
|
Management type contracts |
|
|
21.8 |
|
|
|
11.8 |
|
|
|
10.0 |
|
|
|
84.7 |
% |
|
Lease impairment |
|
|
— |
|
|
|
(16.7 |
) |
|
|
16.7 |
|
|
|
100.0 |
% |
|
Total Commercial Gross Profit |
|
$ |
31.3 |
|
|
$ |
(18.7 |
) |
|
$ |
50.0 |
|
|
|
267.4 |
% |
Lease type contracts. Gross profit increased $23.3 million, or 168.8%, to $9.5 million for the three months ended June 30, 2021, compared to a loss of $13.8 million for the three months ended June 30, 2020. Gross profit percentage increased to 19.5% for the three months ended June 30, 2021, compared to negative 47.9% for the three months ended June 30, 2020. Gross profit increased primarily due to increases in transient revenue as noted above, decreases in net operating costs and higher cost concessions of $2.4 million related to service concessions, partially offset by lower cost concessions of $2.8 million related to rent concessions and conversions.
Management type contracts. Gross profit increased $10.0 million, or 84.7%, to $21.8 million for the three months ended June 30, 2021, compared to $11.8 million for the three months ended June 30, 2020. Gross profit percentage increased to 40.6% for the three months ended June 30, 2021, compared to 28.3% for the three months ended June 30, 2020. Gross profit increased primarily due to an increase in volume based management type contracts as noted above, as well as new business and conversions, partially offset by expired business.
Aviation segment: Services Revenue
|
|
|
Three Months Ended |
|
|
Variance |
|
||||||||||
|
(millions) (unaudited) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
Amount |
|
|
% |
|
||||
|
Lease type contracts |
|
$ |
2.1 |
|
|
$ |
1.3 |
|
|
$ |
0.8 |
|
|
|
61.5 |
% |
|
Management type contracts |
|
|
34.7 |
|
|
|
19.6 |
|
|
|
15.1 |
|
|
|
77.0 |
% |
|
Total Aviation Revenue |
|
$ |
36.8 |
|
|
$ |
20.9 |
|
|
$ |
15.9 |
|
|
|
76.1 |
% |
Lease type contracts. Revenue increased $0.8 million, or 61.5%, to $2.1 million for the three months ended June 30, 2021, compared to $1.3 million for the three months ended June 30, 2020, primarily due to an increase in transient revenue as a result of improving business conditions as compared to the second quarter of 2020, which was significantly impacted by COVID-19, partially offset by lower cost concessions of $16.5 million related to service concessions and conversions.
Management type contracts. Revenue increased $15.1 million, or 77.0%, to $34.7 million for the three months ended June 30, 2021, compared to $19.6 million for the three months ended June 30, 2020, primarily due to an increase in volume based management type contracts as a result of improving business conditions as compared to the second quarter of 2020, which was significantly impacted by COVID-19, revenue from new business and conversions, partially offset by expired business.
Aviation segment: Gross Profit
|
|
|
Three Months Ended |
|
|
Variance |
|
||||||||||
|
(millions) (unaudited) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
Amount |
|
|
% |
|
||||
|
Lease type contracts |
|
$ |
0.9 |
|
|
$ |
(0.3 |
) |
|
$ |
1.2 |
|
|
|
400.0 |
% |
|
Management type contracts |
|
|
9.0 |
|
|
|
2.2 |
|
|
|
6.8 |
|
|
|
309.1 |
% |
|
Total Aviation Gross Profit |
|
$ |
9.9 |
|
|
$ |
1.9 |
|
|
$ |
8.0 |
|
|
|
421.1 |
% |
Lease type contracts. Gross profit increased $1.2 million, or 400.0%, to $0.9 million for the three months ended June 30, 2021, compared to a loss of $0.3 million for the three months ended June 30, 2020. Gross profit percentage increased to 42.9% for the three months ended June 30, 2021, compared to negative 23.1% for the three months ended June 30, 2020. Gross profit increased primarily due to an increase in transient revenue as noted above, conversions and a decrease in overall net operating costs, partially offset by lower cost concessions of $16.5 million related to service concessions.
Management type contracts. Gross profit increased $6.8 million, or 309.1%, to $9.0 million for the three months ended June 30, 2021, compared to $2.2 million for the three months ended June 30, 2020. Gross profit percentage increased to 25.9% for the three months ended June 30, 2021, compared to 11.2% for the three months ended June 30, 2020. Gross profit increased primarily due to increases in volume based management type contracts as noted above, a decrease in overall net operating costs, conversions and new business, partially offset by expired business.
“Other” segment
“Other” consists of ancillary revenue and costs and certain unallocated items, such as and including certain insurance reserve adjustments and other corporate items. Total service revenue in “Other” increased by $0.4 million, or 25.0%, to $2.0 million for the three months ended June 30, 2021, compared to $1.6 million for the three months ended June 30, 2020. Gross profit for “Other” increased $1.9 million, or 55.9%, to $5.3 million for the three months ended June 30, 2021, compared to $3.4 million for the three months ended June 30, 2020, primarily due to higher insurance reserve adjustments.
30
Six Months Ended June 30, 2021 Compared to Six Months June 30, 2020
Consolidated results for the six months ended June 30, 2021 and 2020, respectively, include the following notable items:
|
|
|
Six Months Ended |
|
|
Variance |
|
||||||||||
|
(millions) (unaudited) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
Amount |
|
|
% |
|
||||
|
Services revenue (1) |
|
$ |
269.9 |
|
|
$ |
311.8 |
|
|
$ |
(41.9 |
) |
|
|
(13.4 |
)% |
|
Cost of services (2) |
|
|
185.0 |
|
|
|
261.2 |
|
|
|
(76.2 |
) |
|
|
(29.2 |
)% |
|
Lease impairment |
|
|
0.1 |
|
|
|
94.2 |
|
|
|
(94.1 |
) |
|
|
(99.9 |
)% |
|
Gross profit |
|
|
84.8 |
|
|
|
(43.6 |
) |
|
|
128.4 |
|
|
|
294.5 |
% |
|
General and administrative expenses |
|
|
43.0 |
|
|
|
43.5 |
|
|
|
(0.5 |
) |
|
|
(1.1 |
)% |
|
Depreciation and amortization |
|
|
12.5 |
|
|
|
15.4 |
|
|
|
(2.9 |
) |
|
|
(18.8 |
)% |
|
Impairment of intangible assets |
|
|
— |
|
|
|
3.7 |
|
|
|
(3.7 |
) |
|
|
(100.0 |
)% |
|
Operating income (loss) |
|
|
29.3 |
|
|
|
(106.2 |
) |
|
|
135.5 |
|
|
|
127.6 |
% |
|
Income tax expense (benefit) |
|
|
4.9 |
|
|
|
(30.2 |
) |
|
|
35.1 |
|
|
|
116.2 |
% |
|
(1) |
Excludes Reimbursed management type contract revenue of $252.5 million and $301.3 million for the six months ended June 30, 2021 and 2020, respectively. |
|
(2) |
Excludes Reimbursed management type contract expense of $252.5 million and $301.3 million for the six months ended June 30, 2021 and 2020, respectively. |
Services revenue decreased by $41.9 million, or 13.4%, attributable to the following:
|
|
• |
Services revenue for lease type contracts decreased $18.3 million, or 16.4%, primarily due to a decrease in transient revenue as a result of COVID-19, lower cost concessions of $0.7 million related to service concessions and conversions, partially offset by revenue from new business. |
|
|
• |
Services revenue for management type contracts decreased $23.6 million, or 11.8%, primarily due to a decrease in volume based management type contracts as a result of COVID-19, partially offset by revenue from new business and conversions. |
Gross profit increased by $128.4 million, or 294.5%, attributable to the following:
|
|
• |
Gross profit for lease type contracts increased $30.2 million, or 264.9%, and gross profit percentage increased to 20.1% for the six months ended June 30, 2021, compared to negative 10.2% for the six months ended June 30, 2020. Gross profit for lease type contracts increased primarily due to a decrease in overall net operating costs, conversions and higher cost concessions of $2.2 million related to rent concessions, partially offset by decreases in transient revenue as a result of COVID-19 and lower cost concessions of $0.7 million related to service concessions. |
|
|
• |
Gross profit for management type contracts increased $4.1 million, or 6.6%, while gross profit percentage for management type contracts increased to 37.5% for the six months ended June 30, 2021, compared to 31.0% for the six months ended June 30, 2020. Gross profit for management type contracts increased primarily due to a decrease in overall net operating costs and conversions, partially offset by a decrease in volume based management type contracts as a result of COVID-19. |
|
|
• |
We recognized $0.1 million of impairment charges related to an abandoned office lease in the Aviation segment during the six months ended June 30, 2021. We recognized $94.2 million of impairment charges related to operating lease ROU assets in the Commercial segment during the six months ended June 30, 2020. |
General and administrative expenses decreased 0.5 million, or 1.1%, for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, primarily due to lower restructuring and other integration related costs and cost reduction initiatives, partially offset by higher performance based compensation.
We recognized $3.7 million of impairment charges related to certain Proprietary know how intangible assets during the six months ended June 30, 2020 in the Aviation segment.
Our effective tax rate was 26.3% and 26.1% for the six months ended June 30, 2021 and 2020, respectively.
The following tables summarize our revenues (excluding reimbursed management type contract revenue) and gross profit by segment for the six months ended June 30, 2021 and 2020.
Commercial segment: Services Revenue
|
|
|
Six Months Ended |
|
|
Variance |
|
||||||||||
|
(millions) (unaudited) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
Amount |
|
|
% |
|
||||
|
Lease type contracts |
|
$ |
90.0 |
|
|
$ |
105.1 |
|
|
$ |
(15.1 |
) |
|
|
(14.4 |
)% |
|
Management type contracts |
|
|
108.7 |
|
|
|
116.2 |
|
|
|
(7.5 |
) |
|
|
(6.5 |
)% |
|
Total Commercial Revenue |
|
$ |
198.7 |
|
|
$ |
221.3 |
|
|
$ |
(22.6 |
) |
|
|
(10.2 |
)% |
31
Lease type contracts. Revenue decreased $15.1 million, or 14.4%, to $90.0 million for the six months ended June 30, 2021, compared to $105.1 million for the six months ended June 30, 2020, primarily due to a decrease in transient revenue as a result of COVID-19 and conversions, partially offset by the recognition of certain cost concessions of $12.2 million related to service concessions.
Management type contracts. Revenue decreased $7.5 million, or 6.5%, to $108.7 million for the six months ended June 30, 2021, compared to $116.2 million for the six months ended June 30, 2020, primarily due to a decrease in volume based management type contracts as a result of COVID-19, partially offset by conversions.
Commercial segment: Gross Profit
|
|
|
Six Months Ended |
|
|
Variance |
|
||||||||||
|
(millions) (unaudited) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
Amount |
|
|
% |
|
||||
|
Lease type contracts |
|
$ |
15.7 |
|
|
$ |
(14.7 |
) |
|
$ |
30.4 |
|
|
|
206.8 |
% |
|
Management type contracts |
|
|
42.7 |
|
|
|
37.5 |
|
|
|
5.2 |
|
|
|
13.9 |
% |
|
Lease impairment |
|
|
— |
|
|
|
(94.2 |
) |
|
|
94.2 |
|
|
|
100.0 |
% |
|
Total Commercial Gross Profit |
|
$ |
58.4 |
|
|
$ |
(71.4 |
) |
|
$ |
129.8 |
|
|
|
181.8 |
% |
Lease type contracts. Gross profit increased $30.4 million, or 206.8%, to $15.7 million for the six months ended June 30, 2021, compared to a loss of $14.7 million for the six months ended June 30, 2020. Gross profit percentage increased to 17.4% for the six months ended June 30, 2021, compared to negative 14.0% for the six months ended June 30, 2020. Gross profit increased primarily due to the recognition of certain cost concessions of $12.2 million related to service concessions, as well as decreases in variable rent and overall net operating costs, higher cost concessions related to rent concessions of $2.2 million and conversions, partially offset by decreases in transient revenue due to COVID-19.
Management type contracts. Gross profit increased $5.2 million, or 13.9%, to $42.7 million for the six months ended June 30, 2021, compared to $37.5 million for the six months ended June 30, 2020. Gross profit percentage increased to 39.3% for the six months ended June 30, 2021, compared to 32.3% for the six months ended June 30, 2020. Gross profit increased primarily due to a decrease in overall net operating costs, as well as new business and conversions, partially offset by a decrease in volume based management type contracts as a result of COVID-19.
Aviation segment: Services Revenue
|
|
|
Six Months Ended |
|
|
Variance |
|
||||||||||
|
(millions) (unaudited) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
Amount |
|
|
% |
|
||||
|
Lease type contracts |
|
$ |
3.4 |
|
|
$ |
6.5 |
|
|
$ |
(3.1 |
) |
|
|
(47.7 |
)% |
|
Management type contracts |
|
|
64.1 |
|
|
|
79.8 |
|
|
|
(15.7 |
) |
|
|
(19.7 |
)% |
|
Total Aviation Revenue |
|
$ |
67.5 |
|
|
$ |
86.3 |
|
|
$ |
(18.8 |
) |
|
|
(21.8 |
)% |
Lease type contracts. Revenue decreased $3.1 million, or 47.7%, to $3.4 million for the six months ended June 30, 2021, compared to $6.5 million for the six months ended June 30, 2020, primarily due to a decrease in transient revenue as a result of COVID-19 and conversions, partially offset by the recognition of certain cost concessions of $18.3 million related to service concessions during the six months ended June 30, 2020, as compared to $5.4 million during the six months ended June 30, 2021.
Management type contracts. Revenue decreased $15.7 million, or 19.7%, to $64.1 million for the six months ended June 30, 2021, compared to $79.8 million for the six months ended June 30, 2020, primarily due to a decrease in volume based management type contracts as a result of COVID-19, partially offset by revenue from new business and conversions.
Aviation segment: Gross Profit
|
|
|
Six Months Ended |
|
|
Variance |
|
||||||||||
|
(millions) (unaudited) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
Amount |
|
|
% |
|
||||
|
Lease type contracts |
|
$ |
1.3 |
|
|
$ |
— |
|
|
$ |
1.3 |
|
|
|
100.0 |
% |
|
Management type contracts |
|
|
15.8 |
|
|
|
16.5 |
|
|
|
(0.7 |
) |
|
|
(4.2 |
)% |
|
Lease impairment |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(0.1 |
) |
|
|
(100.0 |
)% |
|
Total Aviation Gross Profit |
|
$ |
17.0 |
|
|
$ |
16.5 |
|
|
$ |
0.5 |
|
|
|
3.0 |
% |
Lease type contracts. Gross profit increased $1.3 million, or 100.0%, for the six months ended June 30, 2021, compared to no gross profit for the six months ended June 30, 2020. Gross profit percentage increased to 38.2% for the six months ended June 30, 2021, compared to no gross profit percentage for lease type contracts for the six months ended June 30, 2020. Gross profit increased primarily due to a decrease in compensation, benefits and overall net operating costs and conversions, partially
32
offset by decreases in transient revenue as a result of COVID-19 and higher cost concessions of $18.3 million during the six months ended June 30, 2020 as compared to $5.4 million during the six months ended June 30, 2021.
Management type contracts. Gross profit decreased $0.7 million, or 4.2%, to $15.8 million for the six months ended June 30, 2021, compared to $16.5 million for the six months ended June 30, 2020. Gross profit percentage increased to 24.6% for the six months ended June 30, 2021, compared to 20.7% for the six months ended June 30, 2020. Gross profit decreased primarily due to decreases in volume based management type contracts as a result of COVID-19, partially offset by a decrease in compensation, benefits and overall net operating costs and conversions.
“Other” segment
“Other” consists of ancillary revenue and costs and certain unallocated items, such as and including certain insurance reserve adjustments and other corporate items. Total service revenue in “Other” decreased by $0.5 million, or 11.9%, to $3.7 million for the six months ended June 30, 2021, compared to $4.2 million for the six months ended June 30, 2020. Gross profit for “Other” decreased $1.9 million, or 16.8%, to $9.4 million for the six months ended June 30, 2021, compared to $11.3 million for the six months ended June 30, 2020, primarily due to the decrease of insurance reserves during the six months ended June 30, 2020 as a result of the reduction in the workforce due to COVID-19, partially offset by lower legal expenses during the six months ended June 30, 2021.
Analysis of Financial Condition
Liquidity and Capital Resources
General
We continually project anticipated cash requirements for our operating, investing and financing needs, as well as cash flows generated from operating activities available to meet these needs. Our operating needs can include, among other items, commitments for cost of services, operating leases, payroll, insurance claims, interest and legal settlements. Our investing and financing spending can include payments for acquired businesses, joint ventures, capital expenditures, cost of contracts, distributions to noncontrolling interests, share repurchases and payments on our outstanding indebtedness.
As of June 30, 2021, we had $15.8 million of cash and cash equivalents and $148.0 million of borrowing availability under our Senior Credit Facility, of which $40.0 million was our Minimum Liquidity requirement, as described in the Amended Credit Agreement. COVID-19 and the resulting global disruptions have negatively affected the global economy as well as our business and the businesses of our customers and clients. The full impact of COVID-19 on our business and the businesses of our customers and clients is unknown and highly unpredictable and could continue beyond the containment of the COVID-19 outbreak. In order to lessen the impacts from COVID-19, we have taken actions to improve our liquidity, including, without limitation, reducing operating expenses and capital expenditures and suspending repurchases of our common stock. Based on these actions and our expectations regarding the impact of COVID-19, we believe we will be able to generate sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants for the next twelve months.
Outstanding Indebtedness
On June 30, 2021, we had total indebtedness of approximately $348.0 million, a decrease of $14.1 million from December 31, 2020. The $348.0 million in total indebtedness as of June 30, 2021 includes:
|
|
• |
$320.9 million under our Senior Credit Facility (as defined below); and |
|
|
• |
$27.1 million of other debt including finance lease obligations. |
Senior Credit Facility
On February 16, 2021 (the “Fourth Amendment Effective Date”), we entered into a fourth amendment (the “Fourth Amendment”) to our credit agreement (as amended prior to the Fourth Amendment Effective Date (as defined below), the “Credit Agreement”) with Bank of America, N.A. (“Bank of America”), as Administrative Agent, swing-line lender and a letter of credit issuer; Wells Fargo Bank, N.A., as syndication agent; BMO Harris Bank N.A., JPMorgan Chase Bank, N.A., KeyBank National Association and U.S. Bank National Association, as co-documentation agents; Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as joint lead arrangers and bookrunners; and the lenders party thereto (the “Lenders”), pursuant to which the Lenders have made available to us a senior secured credit facility (the “Senior Credit Facility”). Prior to the Fourth Amendment Effective Date and pursuant to the third amendment (the “Third Amendment”) to the Credit Agreement, which was entered into on May 6, 2020, the Senior Credit Facility permitted aggregate borrowings of $595.0 million consisting of (i) a revolving credit facility of up to $370.0 million at any time outstanding, which includes a letter of credit facility that is limited to $100.0 million at any time outstanding, and (ii) a term loan facility of $225.0 million (the entire principal amount of which we drew on November 30, 2018). Pursuant to the Credit Agreement as amended by the Fourth Amendment (the “Amended Credit Agreement”), the aggregate commitments under the revolving credit facility decreased by $45.0 million to $325.0 million.
Borrowings under the Senior Credit Facility bear interest, at our option, at a rate per annum based on our consolidated total debt to EBITDA ratio for the 12-month period ending as of the last day of the immediately preceding fiscal quarter, determined in accordance with (i) the applicable pricing levels set forth in the Credit Agreement (the “Applicable Margin”) for London Interbank Offered Rate (“LIBOR”) loans, subject to a “floor” on LIBOR of 1.00%, or a comparable or successor rate to LIBOR approved by
33
Bank of America, plus the applicable LIBOR rate, or (ii) the Applicable Margin for base rate loans plus the highest of (x) the federal funds rate plus 0.5%, (y) the Bank of America prime rate and (z) a daily rate equal to the applicable LIBOR rate plus 1.0%, except that the Fourth Amendment provided that, for the period from May 6, 2020 until the date on which we deliver a compliance certificate for the fiscal quarter ending June 30, 2022, (i) the interest rate applicable to both the term loan and revolving credit facilities was fixed at LIBOR plus 2.75% per annum and (ii) the per annum rate applicable to unused revolving credit facility commitments was fixed at 0.375% (the “Fixed Margin Rates”).
Also pursuant to the Fourth Amendment, (a) we are subject to a Minimum Liquidity test (as described in the Amended Credit Agreement) that required us to have liquidity of at least $40.0 million at each of March 31, 2021 and June 30, 2021, and (b) we are subject to a requirement that, at any time cash on hand exceeds $40.0 million for a period of three consecutive business days, we must repay revolving loans in an amount equal to such excess. Certain other negative and financial covenants were amended, which included restrictions on certain Investments, Permitted Acquisitions, Restricted Payments and Prepayments of Subordinated Debt (each as defined in the Amended Credit Agreement), through the delivery of the compliance certificate for the fiscal quarters ending March 31, 2022 or June 30, 2022, as applicable.
Prior to the Fourth Amendment Effective Date, we were required to maintain a maximum consolidated total debt to EBITDA ratio of between 5.50:1.0 and 3.50:1.0 (with such ratio being waived for the fiscal quarter ended June 30, 2020 and with certain step-ups and step-downs described in, and as calculated in accordance with, the Credit Agreement). In addition, we were required to maintain a minimum consolidated fixed charge coverage ratio of not less than 3.50:1.0 (with certain step-ups and step-downs described in the Credit Agreement). Under the terms of the Fourth Amendment, the maximum consolidated debt to EBITDA ratio was waived for each of the quarters ending March 31, 2021 and June 30, 2021. Starting with the quarter ending September 30, 2021, we will be required to maintain a maximum consolidated total debt to EBITDA ratio (as calculated in accordance with the Fourth Amendment) of not greater than 5.25:1.0 (with certain step-downs described in the Amended Credit Agreement). As of June 30, 2021, we were required to maintain a minimum consolidated fixed coverage ratio of not less than 2.75:1:0 (with certain step-ups and step-downs described in the Amended Credit Agreement).
During the six months ended June 30, 2021, we incurred approximately $1.2 million for fees and other customary closing costs in connection with the Amended Credit Agreement.
Under the terms of the Amended Credit Agreement, term loans under the Senior Credit Facility are subject to scheduled quarterly payments of principal in installments equal to 1.875% of the initial aggregate principal amount of such term loan.
Events of default under the Credit Agreement include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, the occurrence of any cross default event, non-compliance with other loan documents, the occurrence of a change of control event, and bankruptcy and other insolvency events. If an event of default occurs and is continuing, the Administrative Agent can, with the consent of the required Lenders, among others (i) terminate the commitments under the Credit Agreement, (ii) accelerate and require the Company to repay all the outstanding amounts owed under the Credit Agreement, and (iii) require the Company to cash collateralize any outstanding letters of credit.
Each of our wholly owned domestic subsidiaries (subject to certain exceptions set forth in the Credit Agreement) has guaranteed all existing and future indebtedness and liabilities of the other guarantors and the Company arising under the Credit Agreement. Our obligations under the Credit Agreement and such domestic subsidiaries’ guaranty obligations are secured by substantially all of their respective assets. The Senior Credit Facility matures on November 30, 2023. The proceeds from the Senior Credit Facility may be used to finance working capital, capital expenditures and acquisitions, as well as for other general corporate purposes. The Amended Credit Agreement did not change the guarantors, collateral, maturity date or permitted uses of proceeds, except as otherwise described above.
As of June 30, 2021, we had $49.0 million letters of credit outstanding under the Senior Credit Facility and borrowings against the Senior Credit Facility were $323.5 million (excluding debt discount of $0.7 million and deferred financing costs of $1.9 million). As of June 30, 2021, we were in compliance with the covenants under the Amended Credit Agreement, and we had $148.0 million of borrowing availability under the Senior Credit Facility, of which $40.0 million was our Minimum Liquidity requirement, as described in the Amended Credit Agreement.
Stock Repurchases
On March 10, 2020, we suspended stock repurchases in order to help improve liquidity in response to the impacts of COVID-19.
In July 2019, our Board of Directors (the “Board”) authorized us to repurchase, on the open market, shares of our outstanding common stock in an amount not to exceed $50.0 million in aggregate. Under this program, we have repurchased 393,975 shares of common stock at an average price of $38.78 during the three and six months ended June 30, 2020.
In March 2020, the Board authorized a new program to repurchase, on the open market, shares of our outstanding common stock in an amount not to exceed $50.0 million in aggregate. We have yet to repurchase shares under this program.
34
Since commencement, under all three programs, we have repurchased 2,034,742 shares of common stock through June 30, 2021. The remaining authorized repurchase amounts in aggregate under the July 2019 and March 2020 repurchase programs as of June 30, 2021 was as follows:
|
(millions) |
|
June 30, 2021 |
|
|
|
Total authorized repurchase amount |
|
$ |
100.0 |
|
|
Total value of shares repurchased |
|
|
40.6 |
|
|
Total remaining authorized repurchase amount |
|
$ |
59.4 |
|
Daily Cash Collections
As a result of day-to-day activity at our parking locations, we collect significant amounts of cash. Lease type contract revenue is generally deposited into our local bank accounts, with a portion remitted to our clients in the form of rental payments according to the terms of the leases. Under management type contracts, clients may require us to deposit the daily receipts into one of our local bank accounts, with the cash in excess of our operating expenses and management fees remitted to the clients at negotiated intervals. Other clients may require us to deposit the daily receipts into client designated bank accounts and the clients then reimburse us for operating expenses and pay our management fee subsequent to month-end. In addition, our clients may require segregated bank accounts for the receipts and disbursements at locations. Our working capital and liquidity may be adversely affected if a significant number of our clients require us to deposit all parking revenues into their respective accounts.
Our liquidity also fluctuates on an intra-month and intra-year basis depending on the contract mix and timing of significant cash payments. Additionally, our ability to utilize cash deposited into our local accounts is dependent upon the availability and movement of that cash into our corporate accounts. For all of these reasons, from time to time, we carry a significant cash balance, while also utilizing our Senior Credit Facility.
Summary of Cash Flows
Our primary sources of liquidity are cash flows from operating activities and availability under our Senior Credit Facility. Our cash flows for the six months ended June 30, 2021 and 2020, respectively, were as follows:
|
|
|
Six Months Ended |
|
|||||
|
(millions) |
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||
|
Net cash provided by operating activities |
|
$ |
23.3 |
|
|
$ |
26.0 |
|
|
Net cash used in investing activities |
|
|
(5.2 |
) |
|
|
(8.6 |
) |
|
Net cash used in financing activities |
|
|
(16.3 |
) |
|
|
(23.1 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
0.1 |
|
|
|
(0.3 |
) |
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
1.9 |
|
|
$ |
(6.0 |
) |
Operating Activities
Net cash provided by operating activities was $23.3 million for the six months ended June 30, 2021 as compared to $26.0 million during the six months ended June 30, 2020. The decrease in net cash provided by operating activities primarily resulted from our significant efforts during March 2020 to control working capital to prepare for the uncertainty of COVID-19 and higher interest payments, partially offset by higher operating income, net of non-cash related items, due to improving business conditions.
Investing Activities
Net cash used in investing activities was $5.2 million for the six months ended June 30, 2021, a decrease of $3.4 million from $8.6 million during the six months ended June 30, 2020. Cash used to purchase leasehold improvements and equipment was $4.5 million during the six months ended June 30, 2021 as compared to $8.0 million during the six months ended June 30, 2020, reflecting our investment in technology initiatives during the six months ended June 30, 2020.
Financing Activities
Net cash used in financing activities was $16.3 million for the six months ended June 30, 2021, as compared to $23.1 million during the six months ended June 30, 2020. The decrease in net cash used in investing activities was primarily due to the repurchases of common stock during the six months ended June 30, 2020 that were suspended on March 10, 2020, partially offset by higher payments on debt during the six months ended June 30, 2021.
Cash and Cash Equivalents
We had Cash and cash equivalents of $15.8 million and $13.9 million at June 30, 2021 and December 31, 2020, respectively. The cash balances reflect our ability to utilize funds deposited into our bank accounts.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
35
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, we conducted an evaluation, under supervision and with the participation of management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (the "Evaluation") at a reasonable assurance level as of the last day of the period covered by this Form 10-Q.
Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer, principal financial officer and principal accounting officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosures.
Based on the Evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2021.
Changes in Internal Control Over Financial Reporting
There have been no significant changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2021, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
Inherent limitations of the Effectiveness of Internal Control
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.
36
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to claims and litigation in the normal course of our business, including those related to labor and employment, contracts, personal injury and other related matters, some of which allege substantial monetary damages and claims. Some of these actions may be brought as class actions on behalf of a class or purported class of employees. While the outcomes of claims and legal proceedings brought against us are subject to significant uncertainty, our management believes the final outcome will not have a material adverse effect on our financial position, results of operations or cash flows.
We accrue a charge when our management determines that it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and disclose the estimated range. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. In addition, we accrue for the authoritative judgments or assertions made against us by government agencies at the time of their rendering regardless of our intent to appeal. We regularly evaluate current information available to us to determine whether an accrual should be established or adjusted. Estimating the probability that a loss will occur and estimating the amount of a loss or a range of loss involves significant estimation and judgment.
Item 1A. Risk Factors
Investors should carefully consider the discussion of risk factors and the other information described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in subsequent filings by us with the SEC. New risks could emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our financial performance. There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
37
Item 2. Unregistered Sales of Equity and Use of Proceeds
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
38
Item 6. Exhibits
Index to Exhibits
|
|
|
|
|
|
|
Incorporated by Reference |
||
|
Exhibit Number |
|
Description |
|
Form |
|
Exhibit |
|
Filing Date/Period End Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1+ |
|
SP Plus Corporate Long-Term Incentive Plan, as Amended and Restated, adopted as of March 4, 2021 |
|
S-8 |
|
10.1 |
|
May 14, 2021 |
|
|
|
|
|
|
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase |
|
|
|
|
|
|
|
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101.PRE*
104**
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Inline XBRL Taxonomy Extension Presentation Linkbase
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 |
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+ Management contract or compensation plan, contract or agreement
* Filed herewith
** Furnished herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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SP PLUS CORPORATION |
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Date: July 30, 2021 |
By: |
/s/ G MARC BAUMANN |
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G Marc Baumann |
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Chairman and Chief Executive Officer |
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(Principal Executive Officer) |
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Date: July 30, 2021 |
By: |
/s/ KRISTOPHER H. ROY |
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Kristopher H. Roy |
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Chief Financial Officer |
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(Principal Financial Officer, and Principal Accounting Officer) |
40