Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other parts of this Form 10-K contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as "future," "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "will," "would," "could," "can," "may," and similar terms. Forward-looking statements are not guarantees of future performance, and SP Plus Corporation’s (“we”, "us" or "our") actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A. "Risk Factors" of this Form 10-K, which are incorporated herein by reference. The following discussion should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Part IV, Item 15. "Exhibits and Financial Statement Schedules" of this Form 10-K. Each of the terms "We" and "Our" as used herein refers collectively to SP Plus Corporation and its wholly-owned subsidiaries, unless otherwise stated. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.
A discussion regarding our financial condition and results of operations for the year-ended December 31, 2022 compared to the year-ended December 31, 2021 can be found in Part II Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the Securities and Exchange Commission on February 24, 2023.
Recent Developments
On October 4, 2023, we entered into the Merger Agreement by and among us, Metropolis and the Merger Sub. See Note 1. Significant Accounting Policies and Practices within the Notes to the Consolidated Financial Statements for further discussion.
General Overview
As of December 31, 2023, in our Commercial segment, we operated approximately 88% of our locations under management type contracts and 12% under lease type contracts, while in our Aviation segment, we served 159 airports across North America and Europe.
In evaluating our financial condition and operating performance, our primary area of focus is on our operating income. 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, our operating income under lease type contracts will be comparable to the operating income under management type contracts.
We believe that sophisticated clients 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, our clients are able to capture additional profit and improve customer experiences by leveraging the unique technology, operational skills and controls that an experienced services and technology solutions provider can offer. Our ability to consistently deliver a uniformly high level of services to our clients, including the use of various technology solutions and enhancements, allows us to maximize the profit and/or customer experience for 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 94% and 93% for the years ended December 31, 2023 and 2022, respectively, for our Commercial segment facilities.
Commercial Segment Facilities
The following table reflects our Commercial facilities (by contractual type) operated on the dates indicated:
December 31,
Managed facilities
Leased facilities
Total Commercial segment facilities
The increase as of December 31, 2023 included 22 unique facilities added as a result of the acquisition of Roker.
Aviation Segment - Airports Served
The following table reflects the number of airports where at least one of our services is provided as of the dates indicated:
December 31,
North America
Europe
Total Airports
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Revenue
We recognize services revenue from our contracts and certain fees for using our technology-driven mobility solutions as the related services are provided. Substantially all of our revenue comes from the following two sources:
Management type contracts. Consists of management fees, including fixed, variable and/or performance-based fees, and in some cases e-commerce technology fees, customer convenience fees and monthly subscription fees related to the use of our technology solutions 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, worker’s compensation and health care claims by maintaining a large per-claim deductible. As a result, we generate 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, 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 facility. In addition, management type contract revenue includes revenue related to our other aviation services. Other aviation services include our baggage delivery, curbside concierge, remote airline check-in and other miscellaneous services provided to our airport and airline clients.
Lease type contracts . Consists of all revenue received at lease type locations, including gross receipts (net of local taxes), e-commerce technology fees and customer convenience fees. As discussed in Note 4. Revenue within the Notes to the Consolidated Financial Statements, revenue from lease type contracts includes a reduction for certain expenses (primarily rent expense) related to service concession arrangements.
Reimbursed Management Type Contract Revenue. C onsists of the direct reimbursement from the client for operating expenses incurred under a management type contract.
Cost of Services (Exclusive of Depreciation and Amortization)
Our cost of services consists of the following:
Management type contracts. Expenses under a management type contract are generally the responsibility of the client. As a result, these costs are not included in our cost of services. However, "reverse" management type contracts, which typically provide for larger management fees, do require us to pay for certain costs, which are included in cost of services. In addition, certain costs related to providing our other aviation and ancillary services are included in cost of services.
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.
Reimbursed Management Type Contract Expense. Consists of directly reimbursed costs incurred on behalf of a client under a management type contract.
Gross Profit
Gross profit equals our revenue less the cost of generating such revenue (“cost of services”), lease impairment and depreciation and amortization expenses related to cost of services activities.
General and Administrative Expenses
General and administrative expenses include salaries, wages, incentive compensation, stock-based compensation, payroll taxes, insurance, travel and office related expenses for our headquarters, field offices and supervisory employees. Additionally, acquisition-related expenses are included in general and administrative expenses.
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 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 lives.
Operating Income
Operating income represents revenue less cost of services, general and administrative expense and depreciation and amortization. This is the key metric our Chief Operating Decision Maker (“CODM”) uses for making decisions, assessing performance and allocating resources to our Operating Segments, Commercial and Aviation.
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 the CODM. The CODM is our CEO. The CODM uses this separate discrete financial information by segment to allocate resources and assess performance, primarily based on operating income.
Our operating segments are Commercial and Aviation, which are described below.
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 providing technology-driven mobility solutions, 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, as well as providing technology-driven mobility solutions.
The Other segment includes costs related to our operational support teams and common and shared infrastructure, including finance, accounting, information technology, human resources, procurement, legal and corporate development.
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Analysis of Results of Operations
New business relates to contracts that started during the current period. Contract terminations relate to contracts that have expired or terminated early during the current period but where we were operating the business in the prior year.
Acquisition-related, restructuring and other costs include expenses related to the proposed merger with Metropolis, compensation expenses related to organizational changes, acquisition-related expenses, including integration expenses related to our recent acquisitions, and severance and other costs primarily related to workforce reductions.
2023 Compared to 2022
Consolidated results during the years ended December 31, 2023 and 2022, respectively, included the following notable items:
December 31,
Variance
(millions)
Amount
Services revenue
Cost of services (exclusive of depreciation and amortization) (1)
General and administrative expenses
Depreciation and amortization
Operating income
Interest expense
Income tax expense
Net income attributable to SP Plus Corporation
Included lease impairment of $3.7 million during the year ended December 31, 2022.
Services revenue increased by $228.8 million, or 14.7%, attributable to the following:
Services revenue for management type contracts increased $71.3 million, or 13.7%, primarily due to an increase in activity associated with volume related to our baggage delivery businesses and other volume-based management type contracts as a result of continued recovery in travel and fewer restrictions on mobility, as well as increased volume related to other aviation services, new business and revenue from acquisitions of $4.5 million, partially offset by terminations.
Services revenue for lease type contracts increased $17.5 million, or 6.3%, primarily due to an increase in transient and monthly parking revenue as a result of the continued recovery in travel and fewer restrictions on mobility and new business, partially offset by terminations and lower cost concessions related to service concession arrangements of $11.1 million during the year ended December 31, 2023 as compared to $12.0 million during the year ended December 31, 2022.
Reimbursed management type contract revenue was $899.1 million and $759.1 million during the years ended December 31, 2023 and 2022, respectively. The $140.0 million increase in reimbursed management type contract revenue was primarily due to the continued recovery in travel and fewer restrictions on mobility, new business and revenue from acquisitions of $2.0 million, partially offset by terminations.
Cost of services (exclusive of depreciation and amortization) increased by $196.5 million, or 14.8%, attributable to the following:
Cost of services (exclusive of depreciation and amortization) for management type contracts increased $45.4 million, or 13.2%, primarily due to higher operating costs as a result of the continued recovery in travel and fewer restrictions on mobility related to our baggage delivery businesses, reverse management contracts and other aviation related services, as well as new business and acquisitions, partially offset by terminations.
Cost of services (exclusive of depreciation and amortization) for lease type contracts increased $14.8 million, or 6.6%, primarily due to higher operating costs as a result of the continued recovery in travel and fewer restrictions on mobility, new business and lower cost concessions related to rent concessions of $4.1 million during the year ended December 31, 2023 as compared to $6.2 million during the year ended December 31, 2022, partially offset by terminations.
We recognized $3.7 million of impairment charges related to operating lease ROU assets during the year ended December 31, 2022.
Reimbursed management type contract expense was $899.1 million and $759.1 million during the years ended December 31, 2023 and 2022, respectively. The $140.0 million increase in reimbursed management type contract cost of services was primarily due to the continued recovery in travel and fewer restrictions on mobility, new business and acquisitions of $2.0 million, partially offset by terminations.
General and administrative expenses increased $31.3 million, or 28.7%, primarily due to higher compensation and non-cash stock-based compensation expenses and higher acquisition-related, restructuring and other costs of $18.3 million during the year ended December 31, 2023 as compared to $3.7 million during the year ended December 31, 2022, as well as our continued investment in business development, technology deployment and growth initiatives.
Depreciation and amortization expenses increased $6.4 million, or 21.5%, primarily due to the amortization of other intangible assets related to the recent acquisitions and our continued investment in technology and growth initiatives.
Our effective tax rate was 28.7% and 26.7% during the years ended December 31, 2023 and 2022, respectively. The increase in the effective tax rate is primarily due to certain non-deductible expenses as a result of the proposed merger with Metropolis.
The following tables summarize our revenues (excluding reimbursed management type contract revenue), gross profit, general and administrative expenses, depreciation and amortization, and operating income (expense) by segment during the years ended December 31, 2023 and 2022.
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Commercial
Commercial
Variance
(millions)
Amount
Services revenue
Management type contracts
Lease type contracts
Total services revenue
Gross profit
Management type contracts
Lease type contracts
Lease impairment
Depreciation and amortization
Total gross profit
General and administrative expenses
Depreciation and amortization (1)
Operating income
Primarily related to amortization of intangible assets and general and administrative depreciation and amortization.
Gross Profit
Management type contracts. Gross profit increased $15.5 million, or 12.6%, to $138.9 million during the year ended December 31, 2023, compared to $123.4 million during the year ended December 31, 2022. Gross profit increased primarily due to an increase in activity associated with volume-based management type contracts as a result of the continued recovery in travel and fewer restrictions on mobility and new business, partially offset by terminations.
Lease type contracts. Gross profit increased $3.1 million, or 6.9%, to $47.8 million during the year ended December 31, 2023, compared to $44.7 million during the year ended December 31, 2022. Gross profit increased primarily due to increases in transient and monthly parking revenue as a result of the continued recovery in travel and fewer restrictions on mobility and new business, partially offset by lower cost concessions related to rent concessions and service concession arrangements of $4.1 million and $7.4 million, respectively, during the year ended December 31, 2023 as compared to $6.2 million and $7.5 million, respectively, during the year ended December 31, 2022, as well as terminations.
Lease impairment . We recognized $3.7 million of impairment charges related to operating lease ROU assets during the year ended December 31, 2022.
Depreciation and amortization. Depreciation and amortization expenses increased $0.4 million, or 5.1%, to $8.3 million during the year ended December 31, 2023, compared to $7.9 million during the year ended December 31, 2022.
General and administrative expenses increased $7.3 million, or 24.9%, to $36.6 million during the year ended December 31, 2023, compared to $29.3 million during the year ended December 31, 2022. The increase was primarily related to higher compensation and non-cash stock-based compensation expenses, as well as higher restructuring and other costs of $3.7 million during the year ended December 31, 2023 as compared to $0.8 million during the year ended December 31, 2022 and our continued investments in growth initiatives.
Operating Income increased $13.0 million, or 10.7%, to $135.0 million during the year ended December 31, 2023, compared to $122.0 million during the year ended December 31, 2022, primarily due to the factors noted above, partially offset by increased amortization expenses related to the other intangible assets acquired as a result of the acquisitions of DIVRT and Roker.
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Aviation
Aviation
Variance
(millions)
Amount
Services revenue
Management type contracts
Lease type contracts
Total services revenue
Gross profit
Management type contracts
Lease type contracts
Depreciation and amortization
Total gross profit
General and administrative expenses
Depreciation and amortization (1)
Operating income
Primarily related to amortization of intangible assets and general and administrative depreciation and amortization.
Gross Profit
Management type contracts. Gross profit increased $10.4 million, or 20.0%, to $62.5 million during the year ended December 31, 2023, compared to $52.1 million during the year ended December 31, 2022. Gross profit increased primarily due to an increase in activity associated with volume-based management type contracts as a result of the continued recovery in travel and fewer restrictions on mobility, increased activity related to other aviation services, as well as new business and acquisitions, partially offset by terminations.
Lease type contracts. Gross profit decreased $0.4 million, or 7.7%, to $4.8 million during the year ended December 31, 2023, compared to $5.2 million during the year ended December 31, 2022. Gross profit decreased primarily due to lower cost concessions related to service concession arrangements of $3.7 during the year ended December 31, 2023 as compared to $4.5 million during the year ended December 31, 2022 and terminations, partially offset by an increase in transient revenue as a result of the continued recovery in travel and fewer restrictions on mobility.
Depreciation and amortization. Depreciation and amortization expenses increased $0.3 million, or 5.2%, to $6.1 million during the year ended December 31, 2023, compared to $5.8 million during the year ended December 31, 2022.
General and administrative expenses increased $4.6 million, or 36.5%, to $17.2 million during the year ended December 31, 2023, compared to $12.6 million during the year ended December 31, 2022 primarily due to our continued investments in growth initiatives, as well as higher restructuring and other costs of $2.0 million during the year ended December 31, 2023 as compared to a benefit of $0.4 million during the year ended December 31, 2022.
Operating Income increased $4.4 million, or 13.1%, to $37.9 million during the year ended December 31, 2023, compared to $33.5 million during the year ended December 31, 2022, primarily related to the factors noted above, partially offset by increased amortization expenses related to the other intangible assets acquired as a result of the acquisition of KMP.
Other
Operating expenses within the Other segment increased $22.8 million, or 31.4%, to $95.4 million during the year ended December 31, 2023, compared to $72.6 million during the year ended December 31, 2022, primarily due to higher acquisition-related, restructuring and other costs of $12.6 million during the year ended December 31, 2023 as compared to $3.3 million during the year ended December 31, 2022, as well as higher compensation and non-cash stock-based compensation expenses and our continued investments in business development, technology deployment and growth initiatives.
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 or assets, joint ventures, capital expenditures, distributions to noncontrolling interests, stock repurchases and payments on our outstanding indebtedness.
As of December 31, 2023, we had $19.1 million of cash and cash equivalents and $227.5 million of borrowing availability under our Senior Credit Facility (as defined in Note 11. Borrowing Arrangements within the Notes to the Consolidated Financial Statements). 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
As of December 31, 2023, we had total indebtedness of approximately $352.1 million, an increase of $7.9 million from $344.2 million as of December 31, 2022. The $352.1 million included:
$326.9 million under our Senior Credit Facility; and
$25.2 million of other debt, primarily related to finance lease obligations.
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As of December 31, 2023, we were in compliance with our debt covenants under the Amended Credit Agreement (as defined in Note 11. Borrowing Arrangements within the Notes to the Consolidated Financial Statements).
As of December 31, 2023, we had $36.9 million of letters of credit outstanding under the Senior Credit Facility and borrowings against the Senior Credit Facility aggregated to $329.5 million.
The weighted average interest rate on our Senior Credit Facility was 6.5% and 5.6% during the years ended December 31, 2023 and 2022, respectively. That rate included the letters of credit for both years and the interest rate collars during the year ended December 31, 2022. The weighted average interest rate on all outstanding borrowings, not including letters of credit, was 7.0% and 6.0% during the years ended December 31, 2023 and 2022, respectively.
During the year ended December 31, 2022, we incurred approximately $2.5 million for fees and other customary closing costs in connection with the Amended Credit Agreement.
Stock Repurchases
In February 2023, our Board authorized us to repurchase, on the open market, shares of our outstanding common stock in an amount not to exceed $60.0 million in aggregate.
In May 2022, our Board authorized us to repurchase, on the open market, shares of our outstanding common stock in an amount not to exceed $60.0 million in aggregate. During the year ended December 31, 2023, we repurchased 285,700 shares of common stock at an average price of $36.53 under this program. As of December 31, 2023, $0.2 million remained available for repurchase under this program.
As of December 31, 2023, $60.2 million remained available for repurchase under the May 2022 and February 2023 stock repurchase programs. Under the programs, repurchases of our common stock may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades or by other means in accordance with Rules 10b-18, to the extent relied upon, and 10b5-1 under the Exchange Act at times and prices considered to be appropriate at our discretion. The stock repurchase programs do not obligate us to repurchase any particular amount of common stock, have no fixed termination date, and may be suspended at any time at our discretion.
As a condition of the Merger Agreement, beginning on October 4, 2023, we are restricted from repurchasing our common stock.
Stock repurchase activity under the May 2022 stock repurchase program during the years ended December 31, 2023 and 2022 was as follows:
(millions, except for share and per share data)
December 31, 2023
December 31, 2022
Total number of shares repurchased
Average price paid per share
Total value of common stock repurchased
The remaining authorized repurchase amount under the May 2022 and February 2023 repurchase programs as of December 31, 2023 was as follows:
(millions)
December 31, 2023
Total authorized repurchase amount
Total value of shares repurchased
Total remaining authorized repurchase amount
Letters of Credit
We provided letters of credit totaling $30.9 million and $30.8 million to our casualty insurance carriers to collateralize our casualty insurance program as of December 31, 2023 and 2022, respectively.
We provided $6.5 million and $7.7 million in letters of credit to collateralize other obligations as of December 31, 2023 and 2022, respectively.
Interest Rate Collars
In May 2019, we entered into three-year interest rate collar contracts with an aggregate notional amount of $222.3 million. The interest rate collar contracts matured in April 2022. The interest rate collars were used to manage interest rate risk associated with variable interest rate borrowings under the Credit Agreement (as defined in Note 11. Borrowing Arrangements within the Notes to the Consolidated Financial Statements). The interest rate collars established a range where we paid the counterparties if the one-month London Interbank Offered Rate ("LIBOR") fell below the established floor rate, and the counterparties paid us if the one-month LIBOR exceeded the established ceiling rate of 2.5%. The interest rate collars settled monthly through the maturity date. No payments or receipts were exchanged on the interest rate collar contracts unless interest rates rose above or fell below the pre-determined ceiling or floor rates. The notional amount amortized consistently with the term loan portion of the Senior Credit Facility under the Credit Agreement prior to the third amendment to the Credit Agreement (the “Third Amendment”). The fair value of the interest rate collars was a Level 2 fair value measurement, as the fair value was determined based on quoted prices of similar instruments in active markets.
On May 6, 2020, concurrent with entering into the Third Amendment, we de-designated the 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 was being reclassified to Other expense within the Consolidated Statements of Income on a straight-line basis through April 2022, which was 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 were included in Other expense within the Consolidated Statements of Income. During the years ended December 31, 2022 and 2021, $0.8 million and $2.5 million, respectively, was paid in interest related to the interest rate collars.
We do not enter into derivative instruments for any speculative purposes.
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 based on 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 receipts and
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disbursements. 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 these reasons, from time to time, we carry a significant cash balance, while also utilizing our Senior Credit Facility.
Cash and Cash Equivalents
We had cash and cash equivalents of $19.1 million and $12.4 million as of December 31, 2023 and 2022, respectively. The cash balances reflect our ability to utilize funds deposited into our bank accounts. Availability, timing of deposits and the subsequent movement of cash into our corporate bank accounts may result in significant changes to our cash balances.
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 during the years ended December 31, 2023, 2022 and 2021 were as follows:
Years ended December 31,
(millions)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Operating Activities
Net cash provided by operating activities decreased $37.5 million to $55.8 million during the year ended December 31, 2023 from $93.3 million during the year ended December 31, 2022. The decrease resulted from the payment of $21.7 million of acquisition-related, restructuring and other costs, primarily related to the proposed merger with Metropolis, and per the terms of the Merger Agreement, certain incentive compensation earned in 2023, which usually would be paid in 2024, during the year ended December 31, 2023. In addition, the decrease related to the receipt of the $20.5 million U.S. Federal income tax refund during the year ended December 31, 2022, as well as higher interest payments during the year ended December 31, 2023 of $27.7 million as compared to $16.9 million during the year ended December 31, 2022, partially offset by growth in the business and improved working capital.
Net cash provided by operating activities increased $39.9 million to $93.3 million during the year ended December 31, 2022 from $53.4 million during the year ended December 31, 2021. The increase primarily resulted from higher operating income, net of non-cash related items, due to improving business conditions, as well as the receipt of the $20.5 million U.S. Federal income tax refund related to our ability to carry back our 2020 U.S. Federal NOL and lower interest payments, partially offset by the payment of performance-based compensation and higher income tax installment payments during the year ended December 31, 2022.
Investing Activities
Net cash used in investing activities was $26.6 million during the year ended December 31, 2023, a decrease of $27.4 million from $54.0 million during the year ended December 31, 2022. The decrease was primarily due to the acquisitions of businesses and other intangible assets, net of cash acquired, of $3.1 million during the year ended December 31, 2023 as compared to $32.3 million during the year ended December 31, 2022, as well as the noncontrolling interest buyout of $2.4 million during the year ended December 31, 2023.
Net cash used in investing activities was $54.0 million during the year ended December 31, 2022, an increase of $44.9 million from $9.1 million during the year ended December 31, 2021. The increase was primarily due to the acquisitions of businesses and other intangible assets, net of cash acquired, of $32.3 million during the year ended December 31, 2022. Cash used to purchase property and equipment, primarily related to our investments in internal-use software, was $21.9 million during the year ended December 31, 2022 as compared to $9.6 million during the year ended December 31, 2021, reflecting our continued investment in technology initiatives during the year ended December 31, 2022.
Financing Activities
Net cash used in financing activities was $22.3 million during the year ended December 31, 2023, a decrease of $20.1 million from $42.4 million during the year ended December 31, 2022. The decrease was primarily related to the $11.1 million purchase of common stock during the year ended December 31, 2023 as compared to $48.7 million during the year ended December 31, 2022, partially offset by borrowings under our Senior Credit Facility during the year ended December 31, 2022 that were used, in addition to cash on hand, to fund the acquisitions noted above and $5.8 million related to payments of withholding taxes on share-based compensation during the year ended December 31, 2023.
Net cash used in financing activities was $42.4 million during the years ended December 31, 2022 and 2021. During the year ended December 31, 2022 we repurchased $48.7 million of common stock under our May 2022 stock repurchase program, partially offset by an increase in borrowings under our Senior Credit Facility that were used, in addition to cash on hand, to fund the acquisitions noted above. During the year ended December 31, 2021, we paid down debt by $40.1 million.
Summary Disclosures about Contractual Obligations and Commercial Commitments
The following table summarizes certain contractual obligations as of December 31, 2023 and the effect such obligations are expected to have on our liquidity and cash flow in future periods. We do not have significant short-term purchase obligations.
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Payments Due by Period
2029 and
(millions)
Total
thereafter
Contractual obligations
Operating leases (1)
Finance leases
Service concession arrangements (2)
Noncontrolling interests buyout
Total contractual obligations
Represents minimum rental commitments, excluding (i) contingent rent provisions under all non-cancelable leases; and (ii) sublease income.
Represents lease type contracts that meet the definition of service concession arrangements under Topic 853.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("US GAAP") requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities within the Consolidated Financial Statements and accompanying notes. The SEC has defined critical accounting policies and estimates as the ones that are most important to the portrayal of the financial condition and results of operations, and which require the most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We base these estimates and judgments on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Certain accounting estimates are particularly sensitive because of their complexity and the possibility that future events affecting them may differ materially from our current judgments and estimates.
This listing of critical accounting policies is not intended to be a comprehensive list of all of our accounting policies. We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results, which are included in Note 1. Significant Accounting Policies and Practices within the Notes to the Consolidated Financial Statements included in Part IV, Item 15. "Exhibits and Financial Statement Schedules."
Goodwill and Other Intangible Assets
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, 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, and 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 its carrying amount. If we determine it is more likely than not that the fair value is less than the carrying amount, we would need to perform a quantitative assessment. The determination of fair value of a reporting unit utilizes cash flow projections that assume certain future revenue and cost levels, comparable marketplace data, comparable company market valuations, 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 intangible assets represent assets with finite lives that are amortized on a straight-line basis over their estimated useful lives. We evaluate 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, and 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 forecasts. Although we believe the historical assumptions and estimates are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results.
Long-Lived Assets
We evaluate long-lived assets, including ROU assets, leasehold improvements, equipment and construction/development 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 that demonstrates continuing losses associated with the use of a long-lived asset or asset group. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset or asset group to future undiscounted cash flows expected to be generated by the asset or 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.
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 economic volatility, or other factors, that could decrease revenues and profitability of existing locations and changes in the cost structure of existing facilities, such as increasing labor and benefit costs.
Insurance Reserves
We purchase comprehensive casualty insurance covering certain claims that arise in connection with our operations. In addition, we purchase umbrella/excess liability coverage. Under the various liability and workers' compensation insurance policies, we are obligated to pay directly or reimburse the insurance carrier for the deductible / retention amount of each loss covered by our general / garage, automobile, workers' compensation and garage keepers legal liability policies. As a result, we are effectively self-insured for all claims within the deductible / retention amount of each loss. Any loss over the deductible / retention is the responsibility of the third-party insurer. The expense recognition is based upon our determination of an unfavorable outcome of a claim being deemed as probable and capable of being reasonably estimated. This determination requires the use of judgment in both the estimation of probability and the amount to be recognized as an expense. We utilize historical claims experience and exposures specific to each type of insurance, along with actuarial methods performed quarterly by a third party actuarial adviser in determining the required level of insurance reserves. As of December 31, 2023, the insurance reserve for general, garage, automobile
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and workers’ compensation liabilities was $50.3 million, of which $24.9 million and $25.4 million was recorded in Accrued and other current liabilities and Other noncurrent liabilities, respectively, within the Consolidated Balance Sheets. Future information regarding historical loss experience may require changes to the level of insurance reserves and could result in increased expense in the future.
Allowance for Doubtful Accounts
Accounts receivable, net of the allowance for doubtful accounts, represents our estimate of the amount that ultimately will be realized in cash. We review the adequacy of the allowance for doubtful accounts on an ongoing basis, primarily using a review of specific accounts, as well as historical collection trends and aging of receivables, and record adjustments to the allowance as necessary. Changes in economic conditions or other circumstances could have an impact on the collection of existing receivable balances or future allowance considerations.
Income Taxes
Deferred income taxes are computed using the asset and liability method, such that deferred tax assets and liabilities are recognized for deductible temporary differences between US GAAP amounts and the tax basis of existing assets and liabilities based on currently enacted tax laws and tax rates in effect for the periods in which these temporary differences are expected to reverse or be settled. Income tax expense (benefit) is the tax payable (receivable) for the period plus the change during the period in deferred income taxes. We have certain state NOL carry forwards which expire in 2043. We consider a number of factors in our assessment of the recoverability of our NOL carryforwards including their expiration dates and the limitations imposed due to the change in ownership, as well as future projections of income. Future changes in our operating performance, along with these considerations, may significantly impact the amount of NOLs ultimately recovered, and our assessment of their recoverability.
We recognize deferred tax liabilities related to taxes on certain foreign earnings that are not considered to be permanently invested. In addition, we have recognized deferred tax liabilities on nondeductible intangible assets.
When evaluating our tax positions, we account for uncertainty in income taxes within our Consolidated Financial Statements. The evaluation of a tax position is a two-step process, the first step being recognition. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon tax examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position and the weight of available evidence. If a tax position does not meet the more-likely-than-not threshold, which is more than 50% likely of being realized, the benefit of that position is not recognized in our financial statements. The second step is measurement of the tax benefit. The tax position is measured as the largest amount of benefit that is more-likely-than-not of being realized, which is more than 50% likely of being realized upon ultimate resolution with a taxing authority.
Legal and Other Contingencies
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 uncertainty, we believe 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 we determine 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 if material, 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. We regularly evaluate current information available to determine whether an accrual should be established or adjusted. Estimating the probability that a loss will occur and the amount of a loss or a range of loss involves significant estimation and judgment.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk
Interest Rates
Our primary market risk exposure consists of risk related to changes in interest rates. We use the variable rate Senior Credit Facility to finance our operations. The Senior Credit Facility exposes us to variability in interest payments due to changes in interest rates. If interest rates increase, interest expense increases and conversely, if interest rates decrease, interest expense also decreases. We believe that it is prudent to limit our exposure to an increase in interest rates. See Note 11. Borrowing Arrangements within the Notes to the Consolidated Financial Statements for further discussion.
A one percent increase in the average market rate would result in an increase in our annual interest expense of $3.3 million related to borrowings outstanding on our Senior Credit Facility.
Foreign Currency Risk
We are exposed to the impact of foreign currency fluctuations in certain countries in which we operate. The exposure to foreign currency movements is limited in our Canada and India subsidiaries because the operating revenues and expenses are substantially in the local currency in which they operate. Even though our United Kingdom subsidiary transacts business in many countries, their exposure to foreign currency fluctuations is considered not significant. We had $1.6 million of foreign denominated cash instruments and no debt instruments denominated in foreign currencies as of December 31, 2023. We do not hold any hedging instruments related to foreign currency transactions.
We monitor foreign currency positions and may enter into certain hedging instruments in the future if we determine the exposure to foreign exchange risk has increased.
Item 8. Financial Statemen ts and Supplementary Data
1. All Financial Statements
Index to Consolidated Financial Statements
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Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Audited Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2023 and 2022
For the years ended December 31, 2023, 2022 and 2021
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
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Report of Independent Regist ered Public Accounting Firm
To the Stockholders and the Board of Directors of SP Plus Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SP Plus Corporation (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 27, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of insurance reserves for claims incurred but not reported
Description of the Matter
As discussed in Note 1 to the consolidated financial statements, the Company purchases comprehensive liability insurance covering certain claims that occur in its operations, including coverage for general, garage and automobile liabilities. In addition, the Company purchases workers' compensation insurance coverage for all eligible employees and umbrella/excess liability insurance coverage. Under these various insurance policies, the Company is effectively self-insured for all claims up to the retention amount of each loss. Any loss over the retention is the responsibility of the third-party insurer. The Company’s insurance reserves for claims that have been incurred but not reported (IBNR) are based upon historical claims experience and actuarial methods performed by a third-party actuarial advisor. As of December 31, 2023, the insurance reserves for general, garage, automobile and workers’ compensation liabilities are recorded in Accrued and other current liabilities and Other noncurrent liabilities in the Consolidated Balance Sheets for $24.9 million and $25.4 million, respectively.
Auditing management's insurance reserves was complex due to the estimation required in determining the reserves, which requires the use of actuarial methods and is dependent on claims experience history that is utilized in the actuarial analysis.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s IBNR process, including controls over management’s review of the actuarial analysis and the data inputs provided to the actuary to perform the analysis.
To test the insurance reserves, we performed audit procedures over the completeness and accuracy of the underlying claims data provided to management’s third-party actuarial advisers, which is the basis used to estimate total ultimate dollar value of claims and the expected amount of IBNR claims.
Furthermore, we involved our actuarial specialist to assist in our evaluation of the methodologies and assumptions applied by management’s third-party actuarial advisers in measuring the actuarially determined reserve. We compared the Company’s recorded reserves to a range which our actuarial specialist developed based on independently selected assumptions. We also reconciled management’s third-party actuarial advisers’ report to the Company’s insurance liability reserve to amounts recorded by the Company.
/s/ ERNST & YOUNG LLP
We have served as the Company’s auditor since 1989.
Chicago, Illinois
February 27, 2024
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Report of Independent Regist ered Public Accounting Firm
To the Stockholders and the Board of Directors of SP Plus Corporation
Opinion on Internal Control Over Financial Reporting
We have audited SP Plus Corporation’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, SP Plus Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 27, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
February 27, 2024
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SP Plus Corporation
Consolidated B alance Sheets
December 31,
(millions, except for share and per share data)
Assets
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Right-of-use assets
Goodwill
Other intangible assets, net
Deferred income taxes
Other noncurrent assets
Total noncurrent assets
Total assets
Liabilities and stockholders' equity
Liabilities
Accounts payable
Accrued and other current liabilities
Short-term lease liabilities
Current portion of long-term borrowings
Total current liabilities
Long-term borrowings, excluding current portion
Long-term lease liabilities
Other noncurrent liabilities
Total noncurrent liabilities
Total liabilities
Stockholders' equity
Preferred Stock, par value $ 0.01 per share; 5,000,000 shares authorized as of December 31, 2023 and 2022, respectively; no shares issued or outstanding
Common stock, par value $ 0.001 per share; 50,000,000 shares authorized as of December 31, 2023 and 2022; 23,593,626 and 19,798,884 shares issued and outstanding as of December 31, 2023, respectively, and 23,276,329 and 19,767,287 shares issued and outstanding as of December 31, 2022, respectively
Treasury stock at cost; 3,794,742 and 3,509,042 shares as of December 31, 2023 and December 31, 2022, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total SP Plus Corporation stockholders' equity
Noncontrolling interests
Total stockholders' equity
Total liabilities and stockholders' equity
See Notes to Consolidated Financial Statements.
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SP Plus Corporation
Consolidated Stat ements of Income
Years Ended December 31,
(millions, except for share and per share data)
Services revenue
Management type contracts
Lease type contracts
Reimbursed management type contract revenue
Total services revenue
Cost of services (exclusive of depreciation and amortization)
Management type contracts
Lease type contracts
Lease impairment
Reimbursed management type contract expense
Total cost of services (exclusive of depreciation and amortization)
General and administrative expenses
Depreciation and amortization
Operating income
Other expense (income)
Interest expense
Interest income
Other income
Total other expenses
Earnings before income taxes
Income tax expense
Net income
Less: Net income attributable to noncontrolling interests
Net income attributable to SP Plus Corporation
Common stock data
Net income per common share
Basic
Diluted
Weighted average shares outstanding
Basic
Diluted
See Notes to Consolidated Financial Statements.
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SP Plus Corporation
Consolidated Statements of Comprehensive Income
Years Ended December 31,
(millions)
Net income
Reclassification of de-designated interest rate collars
Foreign currency translation gain (loss)
Comprehensive income
Less: Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to SP Plus Corporation
See Notes to Consolidated Financial Statements
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SP Plus Corporation
Consolidated Statements of Stockholders' Equity
Common Stock
Number
Accumulated
Retained
Additional
Other
Earnings
Shares
Par
Paid-In
Comprehensive
(Accumulated
Treasury
Noncontrolling
(millions, except share data)
Issued
Value
Capital
Loss
Deficit)
Stock
Interests
Total
Balance at January 1, 2021
Net income
Foreign currency translation
Reclassification of de-designated interest rate collars
Issuance of stock grants
Issuance of restricted stock units
Issuance of performance stock units
Non-cash stock-based compensation
Distributions to noncontrolling interests
Balance at December 31, 2021
Net income
Foreign currency translation
Reclassification of de-designated interest rate collars
Issuance of stock grants
Issuance of restricted stock units
Non-cash stock-based compensation
Repurchases of common stock
Noncontrolling interests buyout
Distributions to noncontrolling interests
Balance at December 31, 2022
Net income
Foreign currency translation
Issuance of stock grants
Issuance of restricted stock units
Issuance of performance stock units
Payments of withholding taxes on share-based compensation
Non-cash stock-based compensation
Repurchases of common stock
Noncontrolling interests buyout
Distributions to noncontrolling interests
Balance at December 31, 2023
See Notes to Consolidated Financial Statements.
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SP Plus Corporation
Consolidated Statem ents of Cash Flows
Year Ended December 31,
(millions)
Operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
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 receivable
Prepaid expenses and other current assets
Accounts payable
Accrued liabilities and other
Net cash provided by operating activities
Investing activities
Purchases of property and equipment
Acquisitions of businesses, net of cash acquired
Acquisition of other intangible assets
Proceeds from sale of property and equipment
Noncontrolling interests buyout
Net cash used in investing activities
Financing activities
Proceeds from credit facility revolver
Payments on credit facility revolver
Proceeds from credit facility term loan
Payments on credit facility term loan
Payments of debt issuance costs
Payments on other long-term borrowings
Payments of withholding taxes on share-based compensation
Distributions to noncontrolling interests
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 year
Supplemental disclosures
Cash paid (received) during the period for:
Interest
Income taxes, net
See Notes to Consolidated Financial Statements
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SP Plus Corporation
Notes to Consolidated Financial Statements
(millions, except share and per share data)
1. Significant Accounting Policies and Practices
The Company
SP Plus Corporation (the "Company") develops and integrates technology with operations management and support to deliver mobility solutions that enable the efficient and time-sensitive movement of people, vehicles and personal travel belongings. The Company is committed to providing solutions that make every moment matter for a world on the go while meeting the objectives of the Company's diverse client base in North America and Europe, which includes aviation, commercial, hospitality and institutional clients. The Company typically enters into contractual arrangements with property owners or managers as opposed to owning facilities.
On October 4, 2023, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") by and among the Company, Metropolis Technologies, Inc. ("Metropolis") and Schwinger Merger Sub Inc., a direct, wholly owned subsidiary of Metropolis (“Merger Sub”), in an all-cash transaction with a total enterprise value of approximately $ 1.5 billion. Pursuant to the Merger Agreement, subject to terms and conditions therein, Merger Sub will acquire all of the outstanding shares of the Company’s common stock for $ 54.00 per share, without interest, and merge with the Company, with the Company surviving as a wholly owned subsidiary of Metropolis. The Company’s stockholders approved the transaction on February 9, 2023. The transaction is expected to close in 2024, subject to other customary closing conditions, including the receipt of regulatory approvals. Upon completion of the transaction, the Company’s shares will no longer trade on the Nasdaq Global Select Market. As of December 31, 2023, the Company had incurred $ 9.7 million in expenses related to the proposed merger with Metropolis.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries, and Variable Interest Entities ("VIEs") in which the Company is the primary beneficiary. The Company is the primary beneficiary of a VIE when the Company has the power to direct activities that most significantly affect the economic performance of the VIE. If the Company is not the primary beneficiary in a VIE and has significant influence, the Company accounts for the investment in the VIE as an equity method investment in accordance with applicable accounting principles generally accepted in the United States (“U.S. GAAP”). As of December 31, 2023 and 2022 , assets related to consolidated VIEs were $ 51.4 million and $ 57.1 million, respectively, which were primarily related to right-of-use (“ROU”) assets and property and equipment, net. As of December 31, 2023 and 2022 , liabilities related to consolidated VIEs were $ 43.5 million and $ 50.9 million, respectively, which were primarily related to operating and finance lease liabilities. All intercompany profits, transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current environment.
Foreign Currency Translation
The Company has foreign operations in Canada, Puerto Rico, the United Kingdom and India. Assets and liabilities of the Company's foreign operations are translated into U.S. dollars at the rate in effect on the respective balance sheet date, while income and expenses are translated at the average rates during the respective periods. Translation adjustments resulting from the fluctuations in exchange rates are recorded as a separate component of Accumulated other comprehensive loss in Stockholders’ equity within the Consolidated Balance Sheets, while transaction gains and losses are recorded within the Consolidated Statements of Income. Deferred taxes are not recorded on cumulative foreign currency translation adjustments when the Company expects the foreign earnings to be permanently reinvested.
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 $ 0.2 million and $ 0.6 million as of December 31, 2023 and 2022 , respectively, and were included in Cash and cash equivalents within the Consolidated Balance Sheets.
Allowance for Doubtful Accounts
Accounts receivable, net of the allowance for doubtful accounts, represents the Company's estimate of the amount that ultimately will be realized in cash. The Company reviews the adequacy of its allowance for doubtful accounts on an ongoing basis, primarily using a review of specific accounts, as well as historical collection trends and aging of receivables, and records adjustments to the allowance as necessary. Changes in economic conditions or other circumstances could have an impact on the collection of existing accounts receivable balances or future allowance considerations.
Transactions affecting the allowance for doubtful accounts during the years ended December 31, 2023, 2022 and 2021 were as follows:
(millions)
December 31, 2023
December 31, 2022
December 31, 2021
Beginning Balance
Provision for credit losses
Write offs and other
Ending Balance
Property and Equipment, net
Property and equipment includes the Company's equipment, internal-use software, vehicles, leasehold improvements and construction/development in process. Property and equipment are stated at cost, less accumulated depreciation and amortization, whenever applicable.
Certain costs incurred in the planning and evaluation stage of internal-use software projects are recorded to expense as incurred. Costs associated with directly obtaining, developing or upgrading internal-use software are capitalized and included as Software in Property and equipment, net, within the Consolidated Balance
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Sheets. When the internal-use software is ready for its intended use, it is amortized on a straight-line basis over the estimated useful life of the internal-use software, which is typically 3 years .
Equipment and vehicles are depreciated on a straight-line basis over the estimated useful lives ranging from 1 to 10 years . Expenditures for major renewals and improvements that extend the useful life of property and equipment, other than internal-use software, are capitalized. Leasehold improvements are amortized on a straight-line basis over the terms of the respective leases or the useful lives of the improvements, whichever is shorter.
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 it is more likely than not that the fair value is less than the carrying amount, the Company would need to perform a quantitative assessment. The determination of fair value of a reporting unit utilizes cash flow projections that assume certain future revenue and cost levels, comparable marketplace data, comparable company market valuations, 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. The Company completed a qualitative test of goodwill as of October 1, 2023, and concluded that it is more likely than not that the estimated fair values of each of the Company’s reporting units exceeded the carrying amount of net assets assigned to each reporting unit.
Other Intangible Assets, net
Other intangible assets represent assets with finite lives that are amortized on a straight-line basis over their estimated useful lives. The Company evaluates 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, and 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 the Company 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 the Company's judgments and estimates which could, in turn, result in impairment charges. Future events that may result in impairment charges include economic volatility, 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, such as increasing labor and benefit costs.
Long-Lived Assets
The Company evaluates long-lived assets, including ROU assets, leasehold improvements, equipment and construction/development 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 that demonstrates continuing losses associated with the use of a long-lived asset or asset group. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset or asset group to future undiscounted cash flows expected to be generated by the asset or 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.
The Company determined impairment testing triggers had occurred for ROU assets associated with certain asset groups during the years ended December 31, 2022 and 2021. See Note 3. Leases for further discussion.
The Company determined no impairment testing triggers had occurred for long-lived assets during the year ended December 31, 2023.
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 economic volatility or other factors that could decrease revenues and profitability of existing locations and changes in the cost structure of existing facilities, such as increasing labor and benefit costs.
Accrued and Other Current Liabilities
Components of Accrued and other current liabilities as of December 31, 2023 and 2022 were as follows:
(millions)
December 31, 2023
December 31, 2022
Accrued rent
Compensation and payroll withholdings
Property, payroll and other taxes
Accrued insurance
Contract liabilities
Contingent consideration
Accrued expenses
Accrued and other current liabilities
Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate their fair value due to the short-term nature of these financial instruments. Book overdrafts o f $ 31.0 million and $ 30.9 million were included in Accounts payable within the Consolidated Balance Sheets as of
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December 31, 2023 and 2022 , respectively. Long-term debt has a carrying value that approximates fair value because the instruments bear interest at variable market rates.
Insurance Reserves
The Company purchases comprehensive casualty insurance covering certain claims that arise in connection with the Company’s operations. In addition, the Company purchases umbrella/excess liability coverage. Under the various liability and workers' compensation insurance policies, the Company is obligated to pay directly or reimburse the insurance carrier for the deductible / retention amount of each loss covered by the Company’s general / garage, automobile, workers' compensation and garage keepers legal liability policies. As a result, the Company is, effectively self-insured for all claims within the deductible / retention amount of each loss. Any loss over the deductible / retention is the responsibility of the third-party insurer. The expense recognition is based upon the Company's determination of an unfavorable outcome of a claim being deemed as probable and capable of being reasonably estimated. This determination requires the use of judgment in both the estimation of probability and the amount to be recognized as an expense. The Company utilizes historical claims experience and exposures specific to each type of insurance, along with actuarial methods performed quarterly by a third party actuarial adviser in determining the required level of insurance reserves. As of December 31, 2023 and 2022 , the insurance reserve for general, garage, automobile and workers’ compensation liabilities was $ 50.3 million and $ 48.4 million, respectively, of which $ 24.9 million and $ 24.0 million was recorded in Accrued and other current liabilities within the Consolidated Balance Sheets as of December 31, 2023 and 2022 , respectively, and $ 25.4 million and $ 24.4 million was recorded in Other noncurrent liabilities within the Consolidated Balance Sheets as of December 31, 2023 and 2022 , respectively. Future information regarding historical loss experience may require changes to the level of insurance reserves and could result in increased expense in the future.
Legal and Other Commitments and Contingencies
The Company is subject to litigation in the normal course of its business. The Company uses guidance from internal and external legal counsel on the potential outcome of litigation in determining the need to record liabilities for potential losses and the disclosure for pending legal claims. See Note 16. Legal and Other Commitments and Contingencies for further discussion.
Services Revenue
The Company's revenues are primarily derived from management type and lease type contracts; whereby the Company provides parking services, parking management, ground transportation services, baggage handling services and other ancillary services to commercial, hospitality, institutional, municipal and aviation clients. Ancillary services include fees associated with using the Company's technology-driven mobility solutions, as well as on-site parking management, facility maintenance, ground transportation services, event logistics, remote airline check-in, security services, municipal meter revenue collection and enforcement services, and scheduling and supervising all service personnel, as well as providing customer service, marketing, accounting and revenue control functions necessary to complete such services. Ancillary services also include payments received for exercising termination rights, consulting development fees, gains on sales of contracts, insurance (general, workers' compensation and health care) and other value-added services. In accordance with the guidance related to revenue recognition, entities are required to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company recognizes gross receipts (net of taxes collected from customers) as revenue from lease type contracts, and management fees for services, as the related services are performed. Ancillary services are primarily included in management type contracts and are recognized as revenue as those services are provided.
Reimbursed Management Type Contract Revenue and Expense
The Company recognizes both revenues and expenses, in equal amounts, that are directly reimbursed by the Company’s clients for operating expenses incurred under a management type contract. The Company has determined it is the principal in these transactions as the nature of the Company's 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 provided to the customer.
Cost of Services
The Company recognizes costs for lease type contracts, non-reimbursed costs from management type contracts and reimbursed management type contract expenses as cost of services. Cost of services consists primarily of rent, payroll related costs and other miscellaneous expenses.
Stock-Based Compensation
Stock-based payments to employees, including grants of restricted stock and performance-based share units, are measured at the grant date, based on the estimated fair value of the award, and the related expense is recognized over the requisite employee service period or performance period (generally the vesting period) for awards expected to vest. The Company also grants stock to its Board of Directors (the “Board”) on an annual basis, which is recorded as expense at the grant date, based on the fair value of the award. The Company accounts for forfeitures of stock-based awards as they occur. See Note 6. Stock-Based Compensation for further discussion.
Equity Investment in Unconsolidated Entities
The Company has ownership interests in 26 active partnerships, joint ventures or similar arrangements that operate parking facilities, of which 20 are consolidated under the VIE or voting interest models and 6 are unconsolidated where the Company’s ownership interests range from 30 - 50 percent and for which there are no indicators of control. The Company accounts for such investments under the equity method of accounting, and the Company’s underlying share of each investee’s equity of $ 12.2 million and $ 11.9 million as of December 31, 2023 and 2022 , respectively, was included in Other noncurrent assets within the Consolidated Balance Sheets. As the operations of these entities are consistent with the Company’s underlying core business operations, the equity in earnings of these investments were included in Services revenue within the Consolidated Statements of Income. The equity earnings in these related investments were $ 2.6 million, $ 4.6 million and $ 1.4 million during the years ended December 31, 2023, 2022 and 2021 , respectively.
Noncontrolling Interests
Noncontrolling interests represent the noncontrolling holders' percentage share of income (losses) from the subsidiaries in which the Company holds a controlling, but less than 100 percent, ownership interest. The results of these subsidiaries are consolidated and included in the Company’s Consolidated Financial Statements.
During the year ended December 31, 2023, the Company recognized a $ 1.0 million liability, which was recorded in Other noncurrent liabilities within the Consolidated Balance Sheets as of December 31, 2023, related to its estimate of additional consideration (“contingent consideration”) due to a former minority partner that held a noncontrolling interest in a joint venture with the Company. The Company purchased the minority partner’s interest in the joint venture in 2020. The contingent consideration is contingent on the performance of certain parking-related operations of the Bradley International Airport. The contingent consideration is not capped and, if any amount is due, would be payable to the former minority partner in April 2025. The $ 1.0 million was determined based on a probability weighting of potential payouts and recorded in Additional paid-in capital within the Consolidated Balance Sheets. In addition, the Company recorded a
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deferred tax asset of $ 0.3 million related to the contingent consideration during the year ended December 31, 2023, which was also recorded in Additional paid-in capital within the Consolidated Balance Sheets. The Company will continue to evaluate the criteria for making these payments in the future and adjust the liability when deemed necessary.
Additionally, during the year ended December 31, 2023, the Company paid a former minority partner $ 2.4 million per the terms of an agreement between the Company and the former minority partner. As of December 31, 2022, the Company entered into an agreement with the former partner to purchase the former minority partner’s entire noncontrolling interest in a joint venture with the Company. Per the terms of the agreement, the Company is required to make additional payments to the former minority partner over a ten-year period, starting in 2023, amounting to a total of $ 4.5 million to be paid to the former minority partner. The $ 2.4 million that was paid during the year ended December 31, 2023 was included in Accrued and other current liabilities within the Consolidated Balance Sheets as of December 31, 2022. As of December 31, 2023 and 2022, the liability for the payment to the former minority partner was $ 1.7 million and $ 4.0 million, respectively, of which $ 0.4 million and $ 2.4 million was recorded in Accrued and other current liabilities within the Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively, and $ 1.3 million and $ 1.6 million was recorded in Other noncurrent liabilities within the Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively.
Income Taxes
Deferred income taxes are computed using the asset and liability method, such that deferred tax assets and liabilities are recognized for deductible temporary differences between US GAAP amounts and the tax basis of existing assets and liabilities based on currently enacted tax laws and tax rates in effect for the periods in which these temporary differences are expected to reverse or be settled. Income tax expense (benefit) is the tax payable (receivable) for the period plus the change during the period in deferred income taxes. The Company has certain state net operating loss (“NOL”) carry forwards which expire in 2043. The Company considers a number of factors in its assessment of the recoverability of its NOL carryforwards including their expiration dates and the limitations imposed due to the change in ownership as well as future projections of income. Future changes in the Company's operating performance, along with these considerations, may significantly impact the amount of NOLs ultimately recovered, and the Company’s assessment of their recoverability.
The Company recognizes deferred tax liabilities related to taxes on certain foreign earnings that were not considered to be permanently reinvested. In addition, the Company has recognized deferred tax liabilities on nondeductible intangible assets.
When evaluating the Company’s tax positions, the Company accounts for uncertainty in income taxes in its Consolidated Financial Statements. The evaluation of a tax position by the Company is a two-step process, the first step being recognition. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon tax examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position and the weight of available evidence. If a tax position does not meet the more-likely-than-not threshold, which is more than 50% likely of being realized, the benefit of that position is not recognized in the Company’s financial statements. The second step is measurement of the tax benefit. The tax position is measured as the largest amount of benefit that is more-likely-than-not of being realized, which is more than 50% likely of being realized upon ultimate resolution with a taxing authority. See Note 13. Income Taxes for further discussion.
Recently Issued Accounting Pronouncements
Accounting Pronouncements to be Adopted
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07, Improvements to Reportable Segment Disclosures. Public companies are required to disclose significant segment expenses and other segment items on an interim and annual basis and provide all disclosures about a reportable segment’s profit or loss and assets in interim periods. Entities are also permitted to disclose more than one measure of a segment’s profit or loss if such measures are used by the chief operating decision maker ("CODM") to allocate resources and assess performance, as long as at least one of those measures is determined in a way that is most consistent with the measurement principles used to measure the corresponding amounts in the Consolidated Financial Statements. These amendments aim to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The guidance is applied retrospectively to all periods presented in the Consolidated Financial Statements, unless doing so is impracticable, and early adoption is permitted. The ASU is effective for fiscal years beginning after 15 December 2023. The Company is currently assessing the impact of adopting the standard on the Company’s financial statement disclosures.
Income Taxes (Topic 740): Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. These amendments require disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. Companies are required to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and provide more details about the reconciling items in some categories if items meet a certain quantitative threshold. The guidance will require all entities to disclose income taxes paid, net of refunds, disaggregated by federal (national), state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a certain quantitative threshold. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. The ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact of adopting the standard on the Company’s financial statement disclosures.
2. Acquisitions
2023 Acquisition
On July 25, 2023 , the Company acquired certain assets of Roker Inc. ("Roker"), a United States based provider of fully-integrated parking solutions that simplify permit, violation and enforcement management for organizations and municipalities, for approximately $ 3.1 million. The Company utilized borrowings under its Senior Credit Facility and cash on hand to fund the acquisition. Roker's operations are included in the Commercial segment.
The acquisition enhances the Company's position as a global provider of frictionless technology solutions that is not dependent on the Company's legacy parking management related operations. Roker has been accounted for as a business combination, and the assets acquired and liabilities assumed were recorded at their fair values as of the acquisition date. Goodwill was measured as the excess of the consideration over the assets acquired, including other intangible assets, less liabilities assumed. Tax deductible goodwill related to the acquisition was $ 1.0 million. The results of Roker's operations were reflected in the Consolidated Financial Statements from the date of the acquisition.
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During the year ended December 31, 2023, Roker contributed $ 0.2 million of services revenue and $ 0.4 million of losses before income taxes, primarily due to the amortization related to the acquired other intangible assets.
During the year ended December 31, 2023, the Company incurred acquisition-related costs of $ 0.2 million related to Roker.
The fair values of the assets acquired and liabilities assumed were as follows:
(millions)
Other intangible assets
Goodwill
Accounts payable
Net cash paid
As discussed above, during the year ended December 31, 2023, the Company recorded additions to other intangible assets of $ 2.3 million. The other intangible assets acquired were recorded at their fair value on the acquisition date as follows:
(millions)
Estimated Life
Fair Value
Proprietary know how
8.0 Years
Customer relationships
5.4 Years
Fair value of identified intangible assets
The fair values of other intangible assets acquired were determined to be Level 3 under the fair value hierarchy. The fair value for all identifiable intangible assets was based on assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset.
The fair value of the Proprietary know how were determined using the multi-period excess earnings method under the income approach utilizing projected financial information for the technology that was acquired. The fair value of the customer relationships was determined using the distributor method under the income approach.
2022 Acquisitions
On October 11, 2022 , the Company acquired K M P Associates Limited ("KMP"), a United Kingdom based software and technology provider serving aviation and commercial parking clients, primarily through its Aeroparker technology, throughout the United States and Europe for approximately $ 13.8 million, less cash acquired of $ 0.9 million, and assumed KMP's debt of $ 0.3 million. Immediately following the acquisition, the Company repaid all of the debt assumed. KMP's operations are included in the Aviation segment.
On November 10, 2022 , the Company acquired certain assets of DIVRT, Inc. ("DIVRT"), a developer of innovative software and technology solutions that enables frictionless parking capabilities, for approximately $ 17.6 million. In addition, the Company may be required to pay the former owner of DIVRT a maximum amount of $ 7.0 million in contingent consideration if certain targets related to the number of the Company's locations using the DIVRT technology are met by October 31, 2025. Based on a probability weighting of potential payouts, the Company accrued $ 4.0 million in projected contingent consideration as of the acquisition date, which was determined to be Level 3 under the fair value hierarchy. During the year ended December 31, 2023, the Company determined that the first two targets were met as of October 31, 2023, which was the second milestone date. As a result, the Company paid the former owner $ 2.8 million during the first quarter of 2024. Based on the achievement of the first two targets and the Company’s forecast for future payments, the Company evaluated the estimated contingent consideration and determined no additional accruals were needed. The Company will continue to evaluate the potential payouts in the future and adjust the contingent consideration for any changes in the estimated fair value each reporting period. DIVRT's operations are included in the Commercial segment. See Note 10. Fair Value Measurement for further discussion.
During the year ended December 31, 2023, KMP and DIVRT contributed $ 6.3 million of services revenue and losses before income taxes of $ 4.0 million, primarily due to the amortization related to the acquired other intangible assets.
During the year ended December 31, 2022, the Company incurred acquisition-related costs of $ 2.6 million related to KMP and DIVRT.
The Company finalized its purchase price allocations for KMP and DIVRT during the year ended December 31, 2023. There were no measurement period adjustments recorded during the year ended December 31, 2023. The fair value of the assets acquired and liabilities assumed were as follows:
(millions)
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets
Other intangible assets
Goodwill
ROU asset
Accounts payable
Accrued and other current liabilities
Deferred income taxes
Other long-term borrowings
Net assets acquired and liabilities assumed
Less: cash and cash equivalents acquired
Less: contingent consideration payable
Net cash paid
In addition to the acquisitions discussed above, on April 18, 2022, the Company acquired certain other intangible assets for a purchase price of $ 1.8 million.
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As discussed above, during the year ended December 31, 2022, the Company recorded additions to other intangible assets of $ 23.5 million. The other intangible assets acquired were recorded at their fair value on the acquisition dates as follows:
(millions)
Estimated Life
Fair Value
Proprietary know how
7.4 Years
Customer relationships
5.8 Years
Trade names
13.2 Years
Covenant not to compete
4.2 Years
Estimated fair value of identified intangible assets
The fair values of the other intangible assets acquired were determined to be Level 3 under the fair value hierarchy. The fair value for all identifiable intangible assets was based on assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset.
The fair values of the Proprietary know how were determined using the multi-period excess earnings method under the income approach utilizing projected financial information for each technology that was acquired. The fair value of the customer relationships was determined using the distributor method under the income approach. The fair values of the trade names were determined using the relief from royalty savings method under the income approach. The Company considered the return on assets and market comparable methods when estimating an appropriate royalty rate for the trade names.
3. 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.
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. ROU assets include 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 these leases are not recorded within the Consolidated Balance Sheets.
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 with the landlord. 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.
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.
During the year ended December 31, 2022, the Company determined impairment testing triggers had occurred for an ROU asset associated with a certain asset group within the Commercial segment. Therefore, the Company performed an undiscounted cash flow analysis for the ROU asset as of December 31, 2022. Based on the undiscounted cash flow analysis, the Company determined the ROU asset had a net carrying value that exceeded its estimated undiscounted future cash flows and the fair value for the ROU asset. The fair value of the ROU asset measured on a non-recurring basis, which was classified as Level 3 in the fair value hierarchy, was determined based on estimates of future discounted cash flows. The estimated fair value was compared to the net carrying value, and as a result, the ROU asset held and used with a carrying amount of $ 8.4 million was determined to have a fair value of $ 4.7 million, resulting in an impairment charge of $ 3.7 million. The impairment charge of $ 3.7 million during the year ended December 31, 2022 was included in Lease impairment within the Consolidated Statements of Income. Additionally, during the year ended December 31, 2021, the Company recorded impairment charges of $ 3.6 million, of which $ 3.5 million and $ 0.1 million were recorded in the Commercial and Aviation segments, respectively. The impairment charge of $ 3.6 during the year ended December 31, 2021 was included in Lease Impairment within the Consolidated Statements of Income.
In April 2020, the FASB provided accounting elections for entities that receive or provide lease-related concessions to mitigate the economic effects of the COVID-19 pandemic ("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. These concessions were recognized as a reduction of rent expense in the month they occurred and were recorded in Cost of services - lease type contracts within the Consolidated Statements of Income.
As a result of COVID-19, the Company was able to negotiate lease concessions with certain landlords. These rent concessions were recorded in accordance with the guidance noted above. Accordingly, the Company recorded $ 4.1 million, $ 6.2 million and $ 16.6 million as a reduction to Cost of services - lease type contracts within the Consolidated Statements of Income during the years ended December 31, 2023, 2022 and 2021, respectively.
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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 within the Consolidated Balance Sheets as of December 31, 2023 and 2022 were as follows:
(millions)
Classification
Assets
Operating
Right-of-use assets
Finance
Property and equipment, net
Total leased assets
Liabilities
Current
Operating
Short-term lease liabilities
Finance
Current portion of long-term borrowings
Noncurrent
Operating
Long-term lease liabilities
Finance
Long-term borrowings, excluding current portion
Total lease liabilities
The components of lease cost and classification within the Consolidated Statements of Income during the years ended December 31, 2023, 2022 and 2021 were as follows:
(millions)
Classification
Operating lease (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
Included expense related to leases for office space recorded in General and administrative expenses within the Consolidated Statements of Income of $ 3.8 million, $ 4.0 million and $ 4.1 million during the years ended December 31, 2023, 2022 and 2021, respectively.
Included rent concessions of $ 4.1 million, $ 6.2 million and $ 16.6 million during the years ended December 31, 2023, 2022 and 2021 , respectively.
Sublease income during the years ended December 31, 2023, 2022 and 2021 was $ 2.1 million, $ 1.4 million and $ 1.4 million, respectively.
The Company entered into new operating lease arrangements as of December 31, 2023 that commence in future periods. The total amount of ROU assets and lease liabilities related to these arrangements are immaterial.
Maturities, lease term and discount rate information of lease liabilities as of December 31, 2023 were as follows:
Operating
Finance
(millions)
Leases
Leases
Total
After 2028
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 periods shown above was excluded as the amounts are not material.
Supplemental cash flow information related to leases during the years ended December 31, 2023, 2022 and 2021 were as follows:
(millions)
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 lease liabilities
Leased assets obtained in exchange for new finance lease liabilities
4. Revenue
The Company recognizes revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services.
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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: Management type and Lease type contracts.
Management type contracts
Management type contract revenue consists of management fees, including both fixed and performance-based fees, and in some cases e-commerce technology fees, customer convenience fees and monthly subscription fees related to the use of the Company's technology solutions. 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 to 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 over the term of the contract.
Lease type contracts
Lease type contract revenue includes gross receipts (net of local taxes), e-commerce technology fees and customer convenience fees. Performance obligations related to lease type contracts include parking for transient and monthly parkers. Revenue is recognized over time as the Company provides services. 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.
Service concession arrangements
Certain expenses (primarily rental expense), as well as depreciation and amortization, related to service concession arrangements for lease type contracts, are recorded as a reduction of Service revenue - lease type contracts.
The Company recorded $ 11.1 million, $ 12.0 million and $ 24.4 million of cost concessions related to service concession arrangements (recognized as an increase to revenue) during the years ended December 31, 2023, 2022 and 2021, respectively.
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 have 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 the 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
For certain management type contracts, the Company recognizes both revenues and expenses, in equal amounts, that are directly reimbursed from the property owner or client for operating expenses incurred by the Company on behalf of the clients. 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 client. 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 17. 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 an integrated 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. For management type contracts, the Company is generally entitled to receive base management fees and, in some cases, an incentive management fee, which is generally based on a measure of the parking facility’s revenue or profitability. 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 Company recognizes the base management fees on a monthly basis over the term of the contract. For contracts that include incentive management fees, the Company recognizes incentive management fees on a monthly basis over the term of the contract based on each parking facility’s financial results, as long as the Company does not expect a significant reversal due to projected future performance. For lease type contracts, the Company typically recognizes revenue on a daily basis, as the customers utilize the Company's services and products and the Company has performed its performance obligations.
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.
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As of December 31, 2023 , the Company had $ 199.3 million related to performance obligations that were unsatisfied or partially unsatisfied for which the Company expects to recognize revenue. This amount excludes variable consideration primarily related to contracts where the Company and customer share the gross revenues or operating profit for the location and contracts where transaction prices include performance incentives that are constrained at contract inception. These performance incentives are based on measures that are ascertained exclusively by future performance and therefore cannot be estimated at contract inception by the Company. The Company applies the practical expedient that permits exclusion of information about the remaining performance obligations that have original expected durations of one year or less.
The Company expects to recognize the remaining performance obligations as revenue in future periods as follows:
Remaining Performance
(millions)
Obligations
2029 and thereafter
Total
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 or client. Both management and lease 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 liabilities. The Company, on occasion, receives advances or deposits from customers and clients 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 receivable, net and Accrued and other current liabilities, respectively, within the Consolidated Balance Sheets. See Note 1. Significant Accounting Policies and Practices for additional discussion on the write-off of accounts receivable. There were no impairment charges recorded on contract assets and liabilities during the years ended December 31, 2023, 2022 and 2021.
The following table provides information about accounts receivable, contract assets and contract liabilities with customers and clients as of December 31, 2023 and 2022:
(millions)
Accounts receivable
Contract asset
Contract liability
Changes in contract assets, which include the recognition of additional consideration due from the client, 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. The following table provides information about changes to contract assets during the years ended December 31, 2023 and 2022:
(millions)
Balance, beginning of year
Additional contract assets
Reclassification to accounts receivable
Balance, end of year
Changes in contract liabilities primarily include additional contract liabilities and reductions of contract liabilities when revenue is recognized. The following table provides information about changes to contract liabilities during the years ended December 31, 2023 and 2022:
(millions)
Balance, beginning of year
Acquisitions
Additional contract liabilities
Recognition of revenue from contract liabilities
Balance, end of year
Cost of contracts, net
Cost of contracts, net, represents the cost of obtaining contractual rights associated with providing services for management type contracts. Costs 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.
Cost of contracts, net, as of December 31, 2023 and 2022 was as follows:
December 31,
(millions)
Cost of contracts
Accumulated amortization
Cost of contracts, net
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Cost of contracts expense related to service concession arrangements and certain management type contracts are recorded as a reduction of revenue. Cost of contracts expense during the years ended December 31, 2023, 2022 and 2021, which was included as a reduction to Services revenue – management type contracts within the Consolidated Statements of Income, was as follows:
Year Ended December 31,
(millions)
Cost of contracts expense
Weighted average life (years)
5. Net Income per Common Share
Basic net income per common share is computed by dividing net income by the weighted daily average number of shares of common stock outstanding during the period. Diluted net income per common share is based upon the weighted daily average number of shares of common stock outstanding during the period plus all potentially dilutive stock-based awards, including restricted stock and performance share 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.
Basic and diluted net income per common share and a reconciliation of the weighted average basic common shares outstanding to the weighted average diluted common shares outstanding during the years ending December 31, 2023, 2022 and 2021 was as follows:
Year Ended December 31,
(millions, except share and per share data)
Net income 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 per common share
Basic
Diluted
There were no additional securities that could dilute basic earnings per share in the future that were not included in the computation of diluted net income per common share, other than those disclosed.
6. Stock-Based Compensation
The Company measures stock-based compensation expense at the grant date, based on the estimated fair value of the award based on assumptions, primarily the stock price, as of the grant date. The expense is recognized on a straight-line basis over the requisite employee service period or performance period (generally the vesting period) for awards expected to vest. For stock grants in which there is no requisite service period, the Company immediately recognizes the compensation expense. If an award is later modified, the Company may measure the award based on the estimated fair value at the modification date and recognize expense over the remaining requisite employee service period or performance period. The Company accounts for forfeitures of stock-based awards as they occur.
The Company has an amended and restated long-term incentive plan (the "Plan") under which the Company may grant future awards. In March 2021, the Board approved an amendment to the Plan that increased the number of shares of common stock available under the Plan from 3,775,000 to 4,775,000 . The Company's stockholders approved the Plan amendment in May 2021. Forfeited awards under the Plan generally become available for reissuance. As of December 31, 2023 , 832,273 shares remained available for grant under the Plan.
Stock Grants
Stock-based compensation expense related to vested stock grants were included in General and administrative expenses within the Consolidated Statements of Income. The Company’s vested stock grants to the Board and related expense for the years ended December 31, 2023, 2022 and 2021, was as follows:
Year Ended December 31,
(millions, except stock grants)
Vested stock grants
Stock-based compensation expense
Restricted Stock Units ("RSU's")
During the year ended December 31, 2023 , the Company granted 126,931 restricted stock units to certain executives that vest over three years .
During the year ended December 31, 2022 , the Company granted 1,057 and 187,574 restricted stock units to certain executives and employees at a weighted average grant-date fair value of $ 31.82 that vest over one and three years , respectively.
During the year ended December 31, 2021 , the Company granted 160,843 and 152,659 restricted stock units to certain executives and employees at a weighted average grant-date fair value of $ 34.45 that vested over two and three years , respectively.
On October 23, 2023, the Board approved a change in the vesting date for the RSU’s granted in 2021 that were originally expected to vest as of December 31, 2023, to December 1, 2023. The change in the vesting date was considered a Type 1 modification, as the acceleration of the vesting date did not change the expectation that the awards would ultimately vest, and accordingly, the remaining compensation expense related to the awards was recognized and did not result in any additional compensation expense.
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Nonvested RSU's as of December 31, 2023, and changes during the year ended December 31, 2023 were as follows:
Shares
Weighted
Average
Grant-Date
Fair Value
Nonvested as of December 31, 2022
Granted
Vested
Forfeited
Nonvested as of December 31, 2023
During the years ended December 31, 2022 and 2021, 188,887 and 5,615 RSU's, respectively, vested at a weighted average grant-date fair value of $ 33.88 and $ 26.71 , respectively.
The Company's stock-based compensation expense related to RSU's during the years ended December 31, 2023, 2022 and 2021, which was included in General and administrative expenses within the Consolidated Statements of Income, was as follows:
Year Ended December 31,
(millions)
Stock-based compensation expense
Unrecognized stock-based compensation expense related to RSU's and the respective weighted average periods in which the expense will be recognized as of December 31, 2023 was as follows:
Year Ended December 31,
(millions)
Unrecognized stock-based compensation
Weighted average (years)
Performance Share Units (“PSU’s”)
In September 2014, the Board authorized a performance-based incentive program under the Plan (“Performance-based Incentive Program”), whereby the Company may issue PSU’s to certain individuals that represent shares potentially issuable in the future. The objective of the Performance-Based Incentive Program is to link compensation to business performance, encourage the ownership of the Company’s common stock, retain key employees and reward executives' performance. The Performance-Based Incentive Program provides participants with the opportunity to earn vested common stock if certain performance targets are achieved over the cumulative three-year period starting in the year of grant and the participants satisfy service-based vesting requirements. The stock-based compensation expense associated with PSU’s is recognized on a straight-line basis over the shorter of the vesting period or minimum service period and dependent upon the probable outcome of the number of shares that will ultimately be issued based on the achievement of the performance target defined in the award over the cumulative three-year period.
The Company granted awards during the years ended December 31, 2023, 2022 and 2021 of 126,921 , 132,304 and 50,868 , respectively, under the Performance-Based Incentive Program at a weighted average grant-date fair value of $ 34.57 , $ 30.80 and $ 34.97 , respectively. The performance target for the PSU awards is based on the achievement of a certain level of operating income, excluding depreciation and amortization, subject to certain discretionary adjustments by the Board, over three-year performance periods. The ultimate number of shares issued could change depending on the Company's results over the performance period. The maximum amount of shares that could be issued for the PSU awards granted in 2023 ("2023 PSU's") and 2022 ("2022 PSU's") are 253,842 and 258,114 , respectively. The Company is currently recognizing expense for the 2023 PSU's and 2022 PSU's based on an expected payout of 129,459 shares and 196,167 shares, respectively.
On October 23, 2023, the Board approved a change in the vesting date for the PSU’s granted in 2021 (“2021 PSU’s”) that were originally expected to vest as of December 31, 2023, to December 1, 2023. In addition, the Board approved the maximum payout for the awards. The Company had been recognizing expense based on the maximum payout before the modification. The changes to the 2021 PSU’s noted above were considered a Type 1 modification, as the fair value of the awards before and after the modification were the same, and accordingly, the remaining compensation expense related to the 2021 PSU’s was recognized and did not result in any additional compensation expense.
Nonvested PSU’s as of December 31, 2023, and changes during the year ended December 31, 2023 were as follows:
Shares
Weighted
Average
Grant-Date
Fair Value
Nonvested as of December 31, 2022
Granted
2021 PSU's (1)
Vested
Forfeited
Nonvested as of December 31, 2023
During the year ended December 31, 2023, the Company issued an additional 47,730 shares due to the maximum performance targets being achieved for the 2021 PSU’s. As noted above, the 2021 PSU’s vested on December 1, 2023 .
During the years ended December 31, 2022 and 2021, 80,979 and 112,328 PSU’s, respectively, expired at a weighted average grant-date fair value of $ 37.89 and $ 33.28 , respectively, due to the performance targets not being met.
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The Company's stock-based compensation expense related to PSU’s during the years ended December 31, 2023, 2022 and 2021, which was included in General and administrative expenses within the Consolidated Statements of Income, was as follows:
Year Ended December 31,
(millions)
Stock-based compensation expense
Unrecognized stock-based compensation expense related to PSU’s based on current projections and the respective weighted average periods in which the expense will be recognized as of December 31, 2023 was as follows:
Year Ended December 31,
(millions)
Unrecognized stock-based compensation
Weighted average (years)
The Company could recognize additional future stock-based compensation of $ 4.2 million and $ 1.9 million for the 2023 PSU's and 2022 PSU's, respectively, if the maximum performance targets are achieved.
7. Property and Equipment, net
Property and equipment, and the related accumulated depreciation and amortization as of December 31, 2023 and 2022, were as follows:
December 31
(millions)
Estimated Useful Life
Equipment
1 - 10 Years
Software
3 Years
Vehicles
1 - 10 Years
Other
3 Years
Shorter of lease term or economic life up to
Leasehold improvements
10 years
Construction in progress
Property and equipment, gross
Accumulated depreciation and amortization
Property and equipment, net
Asset additions are recorded at cost, which includes interest on significant projects. Depreciation is recorded on a straight-line basis over the estimated useful lives. For leasehold improvements, depreciation is recorded over the estimated useful life or the terms of the respective leases, whichever is shorter. Property and equipment is reviewed for impairment when conditions indicate an impairment may be present. If the assets are determined to be impaired, they are either written down to their estimated fair value or the useful life is adjusted to the remaining period of the estimated remaining useful life.
The Company's depreciation and amortization expense related to property and equipment during the years ended December 31, 2023, 2022 and 2021, which was included in Depreciation and amortization expense within the Consolidated Statements of Income, was as follows:
Year Ended December 31,
(millions)
Depreciation expense and amortization
8. Other Intangible Assets, net
The components of other intangible assets, net, as of December 31, 2023 and 2022, were as follows:
December 31,
Weighted
Average
Intangible
Intangible
Intangible
Intangible
Life
Assets,
Accumulated
Assets,
Assets,
Accumulated
Assets,
(millions)
(Years)
Gross
Amortization
Net
Gross
Amortization
Net
Management contract rights
Proprietary know how
Customer relationships
Trade names and trademarks
Covenant not to compete
Other intangible assets, net
Amortization expense related to other intangible assets during the years ended December 31, 2023, 2022 and 2021, which was included in Depreciation and amortization within the Consolidated Statements of Income, was as follows:
Year Ended December 31,
(millions)
Amortization expense
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The expected future amortization of other intangible assets as of December 31, 2023 was as follows:
(millions)
Intangible asset
amortization
2029 and thereafter
Total
9. Goodwill
The changes in the carrying amounts of goodwill during the years ended December 31, 2023 and 2022 were as follows:
(millions)
Commercial
Aviation
Total
Net book values as of January 1, 2022
Goodwill
Accumulated impairment losses
Total
Acquisitions
Foreign currency translation
Net book value as of December 31, 2022
Goodwill
Accumulated impairment losses
Total
Acquisitions
Foreign currency translation
Net book value as of December 31, 2023
Goodwill
Accumulated impairment losses
Total
10. Fair Value Measurement
Fair Value Measurements-Recurring Basis
In determining fair value, the Company uses various valuation approaches within the fair value measurement framework. Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. Applicable accounting literature establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The fair value hierarchy is based on observable or unobservable inputs to valuation techniques that are used to measure fair value. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect the Company's pricing based upon its own market assumptions. Applicable accounting literature defines levels within the hierarchy based on the reliability of inputs as follows:
Level 1: Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable and market-corroborated inputs, which are derived principally from or corroborated by observable market data.
Level 3: Inputs that are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.
Cash and cash equivalents are financial assets measured at fair value on a recurring basis. See Note 1. Significant Accounting Policies and Practices for further discussion.
Contingent consideration liabilities are measured at fair value on a recurring basis using Level 3 inputs under the fair value hierarchy. The Company is subject to contingent consideration arrangements in connection with the acquisition of certain assets of DIRVT, as well as the purchase of a former minority partner’s share in a joint venture with the Company. Liabilities for contingent consideration are measured at fair value each reporting period, with the acquisition-date fair value for DIVRT included as part of the consideration payable for the acquired assets and subsequent changes in fair value recorded in operating expenses within the Consolidated Statements of Income. Subsequent changes in the fair value of the contingent consideration related to the purchase of a former minority partner’s share in a joint venture are recorded in Additional paid-in capital within the Consolidated Balance Sheets. See Note 1. Significant Accounting Policies and Practices and Note 2. Acquisitions for further discussion.
C hanges to the contingent consideration during the years ended December 31, 2023 and 2022 were as follows:
(millions)
Balance, beginning of year
Acquisitions
Additions
Changes in fair value
Balance, end of year
Nonrecurring Fair Value Measurements
Certain assets are measured at fair value on a nonrecurring basis, generally as a result of acquisitions or the remeasurement of assets resulting in impairment charges. The purchase price of business acquisitions is primarily allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based
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on their estimated fair values on the acquisition dates, with the excess, if applicable, recorded as goodwill. The Company utilizes Level 3 inputs in the determination of the initial fair value using certain assumptions.
Non-financial assets, such as goodwill, other intangible assets, and property and equipment are subsequently measured at fair value when there is an indicator of impairment and recorded at fair value when impairment is recognized. The Company assesses the impairment of intangible assets whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. The fair value of the Company’s goodwill or other intangible assets are not estimated if there is no change in events or circumstances that indicate the carrying amount of the goodwill and intangible assets may not be recoverable. During the years ended December 31, 2022 and 2021, the Company measured certain assets at fair value, which resulted in impairment charges. The fair value of these assets were determined using a discounted cash flow (“DCF”) model, which estimated the present value of net cash flows that the asset or asset group was expected to generate. The key inputs to the DCF model included the Company’s future projections of cash operating income, capital expenditures and current discount rates.
During the year ended December 31, 2023, the Company did no t recognize impairment charges.
For those assets and asset groups for which impairment was recorded, the fair value as of the measurement date, net book value as of December 31, 2022 and 2021, and the related impairment charges during the years ended December 31, 2022 and 2021, were as follows:
Year ended December 31, 2022
December 31, 2022
As of Measurement Date
(millions)
Measurement Date
Impairment Charge
Fair Value Measurement (Level 3)
Net Book Value of Assets Assessed for Impairment
ROU assets
December 31, 2022
Total of ROU assets impaired
Year ended December 31, 2021
December 31, 2021
As of Measurement Date
(millions)
Measurement Date
Impairment Charge
Fair Value Measurement (Level 3)
Net Book Value of Assets Assessed for Impairment
ROU assets
March 31, 2021
ROU assets
September 30, 2021
Total of ROU assets impaired
Financial Instruments Not Measured at Fair Value
The fair value of the Senior Credit Facility and other obligations approximates the carrying amount due to variable interest rates and would be classified as Level 2 in the fair value hierarchy. See Note 11. Borrowing Arrangements for further information.
11. Borrowing Arrangements
Long-term borrowings, as of December 31, 2023 and 2022, in order of preference, were as follows:
Amount Outstanding
December 31,
(millions)
Maturity Date
Senior Credit Facility, net of original discount on borrowings (1)
April 21, 2027
Other borrowings (2)
Various
Deferred financing costs
Total obligations
Less: Current portion of long-term borrowings
Long-term borrowings, excluding current portion
Included discount on borrowings of $0 .9 million and $ 1.3 million as of December 31, 2023 and 2022, respectively.
Included finance lease liabilities of $ 24.1 million and $ 23.2 million as of December 31, 2023 and 2022, respectively. See Note 3. Leases for further discussion.
T he future maturities of debt, including finance leases, as of December 31, 2023, were as follows:
(millions)
Thereafter
Total
Senior Credit Facility
On April 21, 2022 (the “Fifth Amendment Effective Date”), the Company entered into a fifth amendment (the “Fifth Amendment”) to the Company’s credit agreement (as amended prior to the Fifth Amendment Effective Date, the “Credit Agreement”; the Credit Agreement, as amended by the Fifth Amendment, the “Amended Credit Agreement”) with Bank of America, N.A. (“Bank of America”), as Administrative Agent, swing-line lender and a letter of credit issuer; certain subsidiaries of the Company, as guarantors; 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”). The Senior Credit Facility permits aggregate borrowings of $ 600.0 million consisting of (i) a revolving credit facility of up to $ 400.0 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 $ 200.0 million. The maturity date of the Senior Credit Facility is April 21, 2027 .
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As of December 31, 2023, the Company was in compliance with its debt covenants under the Amended Credit Agreement.
As of December 31, 2023, the Company had $ 36.9 million of letters of credit outstanding under the Senior Credit Facility and borrowings against the Senior Credit Facility aggregated to $ 329.5 million.
The weighted average interest rate on the Company's Senior Credit Facility was 6.5 % and 5.6 % during the years ended December 31, 2023 and 2022 , respectively. That rate included the letters of credit for both years and interest rate collars during the year ended December 31, 2022. The weighted average interest rate on all outstanding borrowings, not including letters of credit, was 7.0 % and 6.0 % during the years ended December 31, 2023 and 2022, respectively.
During the years ended December 31, 2022 and 2021, the Company incurred approximately $ 2.5 million and $ 1.3 million for fees and other customary closing costs in connection with the Fifth Amendment and the fourth amendment to the Credit Agreement, respectively.
Interest Rate Collars
In May 2019, the Company entered into three-year interest rate collar contracts with an aggregate notional amount of $ 222.3 million. The interest rate collar contracts matured in April 2022. The interest rate collars were used to manage interest rate risk associated with variable interest rate borrowings under the Credit Agreement. The interest rate collars established a range where the Company paid the counterparties if the one-month London Interbank Offered Rate ("LIBOR") fell below the established floor rate, and the counterparties paid the Company if the one-month LIBOR exceeded the established ceiling rate of 2.5 %. The interest rate collars settled monthly through the maturity date. No payments or receipts were exchanged on the interest rate collar contracts unless interest rates rose above or fell below the pre-determined ceiling or floor rates. The notional amount amortized consistently with the term loan portion of the Senior Credit Facility under the Credit Agreement prior to the third amendment to the Credit Agreement (the “Third Amendment”). The fair value of the interest rate collars was a Level 2 fair value measurement, as the fair value was determined based on quoted prices of similar instruments in active markets.
On May 6, 2020, concurrent with entering into the Third Amendment, the Company de-designated the 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 was being reclassified to Other expense within the Consolidated Statements of Income on a straight-line basis through April 2022, which was 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 were included in Other expense within the Consolidated Statements of Income. During the years ended December 31, 2022 and 2021, $ 0.8 million and $ 2.5 million was paid in interest related to the interest rate collars, respectively.
See Note 15. Comprehensive Income for the amount reclassified from Accumulated other comprehensive loss to Other expense within the Consolidated Statements of Income.
Subordinated Convertible Debentures
The Company acquired Subordinated Convertible Debentures ("Convertible Debentures") as a result of the October 2, 2012 acquisition of Central Parking Corporation. As of October 2, 2012, the convertible debentures were no longer redeemable for shares. The Convertible Debentures mature April 1, 2028 at $ 25 per share. The subordinated debenture holders have the right to redeem the Convertible Debentures for $ 19.18 per share upon acceleration or earlier repayment of the Convertible Debentures. There were no redemptions of Convertible Debentures during the years ended December 31, 2023 and 2022, respectively. The approximate redemption value of the Convertible Debentures outstanding as of December 31, 2023 and December 31, 2022 was $ 1.1 million.
12. Stock Repurchase Program
In February 2023, 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 $ 60.0 million in aggregate. No shares have been repurchased under this program.
In May 2022, 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 $ 60.0 million in aggregate. During the year ended December 31, 2023 , the Company repurchased 285,700 shares of common stock at an average price of $ 36.53 under this program. As of December 31, 2023, $ 0.2 million remained available for repurchase under this program.
As of December 31, 2023 , $ 60.2 million remained available for repurchase under the May 2022 and February 2023 stock repurchase programs. Under the programs, repurchases of the Company's common stock may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades or by other means in accordance with Rules 10b-18, to the extent relied upon, and 10b5-1 under the Exchange Act at times and prices considered to be appropriate at the Company's discretion. The stock repurchase programs do not obligate the Company to repurchase any particular amount of common stock, has no fixed termination date, and may be suspended at any time at the Company's discretion.
As a condition of the Merger Agreement , beginning on October 4, 2023, the Company is restricted from repurchasing its common stock.
Stock repurchase activity under the May 2022 stock repurchase program for the years ended December 31, 2023 and 2022 was as follows:
(millions, except for share and per share data)
December 31, 2023
December 31, 2022
Total number of shares repurchased
Average price paid per share
Total value of common stock repurchased
The Company recorded $ 0.1 million in Additional paid-in capital within the Consolidated Balance Sheets during the year ended December 31, 2023, related to the excise tax on net repurchases of common stock that was a provision of the Inflation Reduction Act of 2022.
The remaining authorized repurchase amount under the May 2022 and February 2023 stock repurchase programs as of December 31, 2023 was as follows:
(millions)
December 31, 2023
Total authorized repurchase amount
Total value of shares repurchased
Total remaining authorized repurchase amount
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13. Income Taxes
Earnings before income taxes during the years ended December 31, 2023, 2022 and 2021, was as follows:
Year Ended December 31,
(millions)
United States
Foreign
Total
The components of income tax expense (benefit) during the years ended December 31, 2023, 2022 and 2021 were as follows:
Year Ended December 31,
(millions)
Current
U.S. Federal
Foreign
State
Total current
Deferred
U.S. Federal
Foreign
State
Total deferred
Income tax expense
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for U.S. GAAP purposes and the amount used for income tax purposes.
The c omponents of the Company's deferred tax assets and liabilities as of December 31, 2023 and 2022 were as follows:
December 31,
(millions)
Deferred income tax assets
NOL carry forwards and tax credits
Lease liabilities
Accrued expenses
Accrued compensation
Depreciation
Other
Total deferred income tax assets
Valuation allowances
Net deferred income tax assets
Deferred income tax liabilities
ROU assets
Depreciation and amortization
Goodwill
Equity investments in unconsolidated entities
Other
Total deferred income tax liabilities
Total net deferred income tax asset
Amounts per Consolidated Balance Sheets
Deferred income tax assets
Deferred income tax liabilities (included in Other noncurrent liabilities)
Total net deferred income tax asset
Changes affecting the valuation allowances on deferred tax assets during the years ended December 31, 2023, 2022 and 2021, were as follows:
December 31,
(millions)
Beginning Balance
Current year (benefit) expense
Ending Balance
The accounting guidance for income taxes requires the Company to assess the realizability of deferred tax assets at each reporting period. These assessments generally consider several factors including the reversal of existing temporary differences, projected future taxable income and potential tax planning strategies. The Company has valuation allowances of $ 6.8 million and $ 9.0 million as of December 31, 2023 and 2022, respectively, primarily related to the Company’s state NOLs, foreign tax credits and state tax credits that the Company believes are not likely to be realized based on its estimates of future foreign and state taxable income, limitations on the uses of its state NOLs and the carryforward life over which the state tax benefit is realized.
The Company has $ 17.7 m illion of tax effected state NOLs, foreign tax credits and state tax credits as of December 31, 2023 , which will expire in the years 2024 through 2043 . As noted above, the utilization of NOLs of the Company are limited.
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A reconciliation of differences between the U.S. Federal statutory income tax rate and the Company's effective income tax rate during the years ended December 31, 2023, 2022 and 2021, was as follows:
Year Ended December 31,
(percentages)
Tax at statutory rate
Permanent differences
State and local income taxes, net of federal benefit
Foreign taxes
Federal NOL carryback rate differential
Noncontrolling interest
Recognition of tax credits
Change in valuation allowance
Effective tax rate
Due to the Coronavirus Aid, Relief, and Economic Security Act in 2020, the Company was able to carry back its 2020 U.S. Federal taxable loss to the 2015 and 2016 tax years, which had a higher corporate tax rate. As a result, based on the Company’s initial estimates as of December 31, 2020, the Company recorded an income tax refund receivable of $ 15.4 as of December 31, 2020. During the year ended December 31, 2021, the Company finalized its 2020 U.S. Federal income tax return, which resulted in a $ 5.1 million increase of the income tax refund receivable, of which $ 2.0 million related to the additional benefit recognized due to the ability to carryback the Company’s 2020 U.S. Federal taxable loss to tax years 2015 and 2016. The $ 20.5 million income tax refund was received during the year ended December 31, 2022.
Taxes paid were $ 10.2 million, $ 13.8 million and $ 0.8 during the years ended December 31, 2023 , 2022 and 2021, respectively. Taxes refunded were $ 0.2 million, $ 20.9 million and $ 0.3 million during the years ended December 31, 2023, 2022 and 2021, respectively.
As of December 31, 2023 and 2022, the Company had not identified any uncertain tax positions that would have a material impact on the Company's financial position.
The Company would recognize potential interest and penalties related to uncertain tax positions, if any, in income tax expense. The tax years that remain subject to examination for the Company's major tax jurisdictions as of December 31, 2023 and 2022 were as follows:
United States - federal income tax
United States - state and local income tax
Foreign - Canada and Puerto Rico
14. Benefit Plans
Deferred Compensation Arrangements
The Company offered deferred compensation arrangements for certain key executives. Certain employees are offered supplemental pension arrangements, subject to their continued employment by the Company, in which the employees will receive a defined monthly benefit upon attaining age 65 . As of December 31, 2023 and 2022 , the Company had $ 2.7 million and $ 2.8 million, respectively, recorded in Other noncurrent liabilities within the Consolidated Balance Sheets, representing the present value of the future benefit payments. Expenses related to these plans was $ 0.2 million during the years ended December 31, 2023, 2022 and 2021.
In addition, the Company has agreements with certain former executives that provide for aggregate annual payments over periods ranging from 10 years to life, beginning when the executive retires or upon death or disability. Under certain conditions, the amount of the deferred benefits can be reduced. Compensation cost was $ 0.2 during the years ended December 31, 2023, 2022 and 2021. As of December 31, 2023 and 2022 , the Company had $ 1.3 million and $ 1.4 million, respectively, recorded in Other noncurrent liabilities within the Consolidated Balance Sheets, associated with these agreements.
Life insurance contracts with a face value of approximately $ 4.1 million as of December 31, 2023 and 2022 , respectively, have been purchased to fund, as necessary, the benefits under the Company's deferred compensation agreements. The cash surrender value of the life insurance contracts was approximately $ 3.4 million and $ 3.3 million as of December 31, 2023 and 2022, respectively, and classified in Other noncurrent assets, net, within the Consolidated Balance Sheets. The plan is a non-qualified plan and not subject to ERISA funding requirements.
Defined Contribution Plans
The Company sponsors savings and retirement plans whereby the participants may elect to contribute a portion of their compensation to the plans. The plan is a qualified defined contribution plan 401(k). The Company contributes an amount in cash or other property as a Company match equal to 50 % of the first 6 % of contributions as they occur. As a result of COVID-19, during the second quarter of 2020 and through September 30, 2021, the Company suspended the Company match under the plan. The Company reinstituted the Company match during the fourth quarter of 2021. Expenses related to the Company's 401(k) were $ 2.6 million, $ 2.0 million, and $ 0.6 million during the years ended December 31, 2023, 2022 and 2021, respectively.
Additionally, the Company offers a non-qualified deferred compensation plan to those employees whose participation in the 401(k) plan is limited by statute or regulation. This plan allows certain employees to defer a portion of their compensation, limited to a maximum of $ 0.1 million per year, to be paid to the participants upon separation of employment or distribution date selected by the employee. To support the non-qualified deferred compensation plan, the Company has elected to purchase Company Owned Life Insurance ("COLI") policies on certain plan participants. The cash surrender value of the COLI policies is designed to provide a source for funding the non-qualified deferred compensation liabilities. As of December 31, 2023 and 2022 , the cash surrender value of the COLI policies was $ 22.5 million and $ 19.2 million, respectively, and classified in Other noncurrent assets, net, within the Consolidated Balance Sheets. The liabilities for the non-qualified deferred compensation plan were $ 24.9 million and $ 19.4 million as of December 31, 2023 and 2022, respectively, and included in Other noncurrent liabilities within the Consolidated Balance Sheets.
Multi-Employer Defined Benefit and Contribution Plans
The Company contributes to multiemployer defined benefit plans under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:
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Assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.
If the Company chooses to stop participating in one of its multiemployer plans, it may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
The Company's contributions represented more than 5% of total contributions to the Teamsters Local Union No. 727 and Local 272 Labor Management Benefit Funds during the plan years ending October 31, 2023 and August 15, 2023, respectively. The Company does not contribute more than 5% to any other fund. The Company's participation in these plans for the annual periods ended December 31, 2023, 2022 and 2021, is presented in the table below. The "EIN/Pension Plan Number" column provides the Employee Identification Number ("EIN") and the three-digit plan number, if applicable. The zone status was based on information that the Company received from the plan and was certified by the plan's actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. The "FIP/RP Status Pending/Implementation" column indicates plans for which a Financial Improvement Plan ("FIP") or a Rehabilitation Plan ("RP") is either pending or has been implemented. Finally, the " Expiration Date of Collective Bargaining Agreement " column lists the expiration dates of the agreements to which the plans are subject.
Zone
Status
Pension Protection
as of the
Expiration
EIN/
Zone Status
Contributions (millions)
Most
Date of
Pension
FIP/FR
Recent
Collective
Plan
Pending
Surcharge
Annual
Bargaining
Pension
Number
Implementation
Imposed
Report
Agreement
Teamsters Local
Union 727
Green
Green
Green
Local 272 Labor
Management
Green
Green
Green
Net expenses for contributions not reimbursed by clients related to multiemployer defined benefit and defined contribution benefit plans were $ 1.0 million, $ 0.9 million and $ 0.8 million during the years ended December 31, 2023, 2022 and 2021, respectively.
The Company currently does not have any intentions to cease participating in these multiemployer pension plans.
15. Comprehensive Income
The components of other comprehensive income and the income tax benefit allocated to each component during the years ended December 31, 2023, 2022 and 2021, were as follows:
(millions)
Before Tax Amount
Income Tax
Net of Tax Amount
Before Tax Amount
Income Tax
Net of Tax Amount
Before Tax Amount
Income Tax
Net of Tax Amount
Translation adjustments
De-designation of interest rate collars
Other Comprehensive income
The changes to accumulated other comprehensive loss by component during the years ended December 31, 2023, 2022 and 2021, were as follows:
Total
Foreign
Accumulated
Currency
Other
Translation
Interest Rate
Comprehensive
(millions)
Adjustments
Collars
Loss
Balance as of January 1, 2021
Other comprehensive loss before reclassification
Amounts reclassified from accumulated other comprehensive loss
Balance as of December 31, 2021
Other comprehensive income before reclassification
Amounts reclassified from accumulated other comprehensive loss
Balance as of December 31, 2022
Other comprehensive income before reclassification
Balance as of December 31, 2023
Reclassifications from accumulated other comprehensive loss during the years ended December 31, 2023, 2022 and 2021, were as follows:
(millions)
Classification in the Consolidated Statements of Income
Interest Rate Collars:
Net realized loss
Other expenses
Reclassifications before tax
Income tax benefit
Reclassifications, net of tax
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16. 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 uncertainty, the Company believes the final outcome will not have a material adverse effect on its financial position, results of operations or cash flows.
The Company accrues a charge when it 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 not record liabilities for reasonably possible loss contingencies, but does disclose a range of reasonably possible losses if they are material and the Company is able to estimate such a range. If the Company cannot provide a range of reasonably possible losses, it explains the factors that prevent it from determining such a range. The Company regularly evaluates current information available to determine whether an accrual should be established or adjusted. Estimating the probability that a loss will occur and the amount of a loss or a range of loss involves significant estimation and judgment.
17. 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 general and administrative expenses. The CODM assesses the performance of each operating segment using information about operating income (loss) as its primary measure of performance, but does not evaluate segments using discrete asset information. Therefore, assets are not presented at the segment level. There were no material inter-segment transactions during the years ended December 31, 2023, 2022 and 2021, and the Company does not allocate other expense (income), interest expense (income) or income tax expense (benefit) to the operating segments. The accounting policies for segment reporting are the same as for the Company as a whole.
The Company’s operating segments are Commercial and Aviation:
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 providing technology-based mobility solutions, shuttle and ground transportation services, valet services, taxi and livery dispatch services and event planning, including shuttle and transportation services.
Aviation encompasses the Company's services in aviation (i.e., airports, airline and certain hospitality clients with baggage and parking services) as well as ancillary services, which includes shuttle and ground transportation services, valet services, baggage handling, baggage repair and replacement, remote air check-in services, wheelchair assist services and other services, as well as providing technology-based mobility solutions.
The Other segment includes costs related to the Company's operational support teams and costs related to common and shared infrastructure, including finance, accounting, information technology, human resources, purchasing, legal and corporate development.
Revenue, operating income (loss), general and administrative expenses and depreciation and amortization by operating segment during the years ended December 31, 2023, 2022 and 2021 were as follows:
Year Ended December 31,
(millions)
Services revenue
Commercial
Management type contracts
Lease type contracts
Total Commercial
Aviation
Management type contracts
Lease type contracts
Total Aviation
Reimbursed management type contract revenue
Total services revenue
Operating income (loss)
Commercial
Aviation
Other
Total operating income
General and administrative expenses
Commercial
Aviation
Other
Total general and administrative expenses
Depreciation and amortization
Commercial (1)
Aviation (2)
Other
Total depreciation and amortization
Included depreciation and amortization expenses related to cost of services activities of $ 8.3 million, $ 7.9 million and $ 7.9 million during the years ended December 31, 2023, 2022 and 2021, respectively.
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Included depreciation and amortization expenses related to cost of services activities of $ 6.1 million, $ 5.8 million and $ 4.6 million during the years ended December 31, 2023, 2022 and 2021 , respectively.
