SP Plus Corp (SP) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q4 2008 Standard Parking Earnings Conference Call. My name is Becky and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions).

I would now like to turn the presentation over to your host for today's call, Mr. Marc Baumann, Executive Vice President and Chief Financial Officer. Please proceed.

Thank you and good morning, everybody. As Becky just said, I'm Marc Baumann, Chief Financial Officer of Standard Parking and I'm you're primary Investor Relations contact. Welcome to our conference call for the fourth quarter of 2008. I hope all of you have had the chance to review our earnings announcement which was released after the market closed yesterday and we expect to file our 10-K for 2008 by tomorrow.

We'll begin our call today with a brief overview by Jim Wilhelm, our President and Chief Executive Officer, and then I'll discuss some of the financials in a little more detail. After that, Jim will provide guidance for 2009 and we'll open the call up for any questions that you may have.

During the call, we'll make some statements that will be considered forward-looking regarding the Company's strategy, operations and financial performance. Those statements are subject to many uncertainties in the Company's operations and business environment. I refer you to the complete forward-looking statement disclosure in our earnings release which is incorporated by reference for purposes of this call. I'd also like to refer you to disclosures made in the Company's quarterly and annual filings with the Securities and Exchange Commission.

We do not intend to address or entertain any questions today regarding the potential sale by Steamboat Industries LLC, our parent company, of a majority and potentially their entire stake in our Company. We refer you to the Form 8-K which the Company filed on February 6th, 2009.

Finally, before we get started, I want to mention that this call is being broadcast live over the internet and can be accessed on our website standardparking.com and also at earnings.com. There'll be a replay available on either website for 30 days after the call.

With that, I'll turn the call over to Jim.

Thanks, Marc, and good morning, everyone. Thanks again for joining us this quarter. Particularly in light of the challenging economic state, we are pleased with the results of the fourth quarter and for the year -- calendar year ending 2008. As we talked about last quarter, this downturn certainly has affected the volumes of parkers entering and exiting our facilities.

But as we've talked about for the last several years, we've created a business model around being risk averse and trying to spread that risk both geographically and economically. So, therefore with the amount of management contracts the business has as opposed to the amount of leases and exposure we have to volume counts, the business performed very well, certainly better than industries and businesses that we compete with in our own sphere.

This economy also brings us opportunities. Some of the hits that the Company has taken through the third and fourth quarter and we expect to take in 2009 are being mitigated by those opportunities and I'll talk more about that later. But typically, as has been my experience in this industry now for 25 years, we've -- have a rather full pipeline of opportunities as clients, property management companies, municipalities, our traditional client list begin to look for the qualitative side of our business in order to minimize their exposures during this environment which brings us lots of new opportunities.

We spoke in our press release last night about retaining a vast majority of our business. Our retention rate staying up in -- around the 90 percentile that we've experienced and as the Company's general goal in that area. And we've retained 96% of the Company's profit, which means we're obviously retaining those facilities that are more valuable to us.

That being said, on a full year basis, earnings per share is up 19% over 2007 and the fourth quarter of 2008 was unchanged at $0.27. We have retained, as I said, about 90% of our locations and 96% of our 2008 operating profit from same stores.

We continue to win new businesses I described. 2008 was our best new business year, writing about $3.5 million of new business during that period. We added 84 net new locations. We've begun operations at the Denver and Richmond Airports in the fourth quarter, adding almost 50,000 parking spaces to our operating portfolio. We continue to add to our university parking portfolio with the addition of Columbia University in New York City.

We've also expanded our relationship with CIM Group, our real estate fund manager that invests in urban communities throughout North America. We were awarded four new facilities in the fourth quarter of 2008, bringing to six the total number of facilities we manage for that group.

We also expanded our relationship with Jamison Services, Inc. with the addition of 12 parking locations and two security operations. The Company has been a service provider to Jamison, one of the largest privately held real estate firms in southern California, for over 15 years. And with the addition of the Drake Hotel on Chicago's Magnificent Mile, we continue to add marquee names to our parking portfolio.

We've done a good job of controlling our G&A costs during this time and cost control will continue to be an area of focus, both for ourselves and on behalf of our clients. We tasked the Company during 2007 and 2008 to undertake our process initiatives and we remain on schedule to begin to recognize G&A savings later this year. And I'll speak more about this a little later when I talk to 2009.

The business generated $6.7 million of free cash flow during the fourth quarter and $22.2 million during the full year 2008. While these levels are down from the comparable periods of 2007, it was not unexpected as working capital investments in new client relationships as well as reduced revenue at client locations impacted our free cash flow by as much as $6 million in 2008.

To wrap up, we're pleased with our overall performance through these difficult economic times. We expect that the next several quarters will continue to be challenging, but anticipate that our business model will continue to enable us to withstand the economic downturn somewhat better than the other companies as I was mentioning before that did not have a business model based on fixed fee management contracts with both geographic and market diversity.

With that, I'll turn the call back over to Marc so that he can lead you through a more detailed discussion of our financial performance, and I will return to provide guidance in 2009 a little later in this conversation.

Thanks, Jim. Hello again, everybody. Let's take a look now at our financial results for the quarter. Total revenue for the fourth quarter of 2008, excluding reimbursement of management contract expenses increased by $5 million or 7% to $74.7 million from $69.7 million in the same period a year ago, primarily as the result of new business and acquisitions.

Gross profit for the fourth quarter of '08 decreased by 2% to $22.1 million from $22.7 million a year ago, largely due to reduced activity at lease locations, particularly at airports and hotels. While we did not see gross profit growth at same locations in the fourth quarter, we're continuing to focus on expense control to ride out the current economic environment of decreased activity at leased parking and shuttle operations.

G&A expenses for the fourth quarter of '08 increased 3% to $12.2 million from $11.8 million in the fourth quarter of '07, primarily due to a $0.5 million restricted stock unit grant in the fourth quarter of '08 which we did not have a year earlier. Excluding this restricted stock unit cost, underlying Q4 G&A actually decreased 1% versus 2007. On a sequential quarter basis, fourth quarter 2008 G&A expense was relatively unchanged from the third quarter.

Due to the foregoing, and an increase of 11% in depreciation and amortization expense resulting primarily from the amortization of the cost of contracts purchased in 2008 from our acquisitions, operating income decreased 11% to $8.4 million from $9.5 million in the fourth quarter of last year.

Net interest expense increased by $0.5 million or over 30% over the fourth quarter of '07 as reduced interest rates were offset by increased borrowings to fund acquisitions and the stock repurchase program. The effective income tax rate decreased to 30% in the fourth quarter of 2008 as compared with 35% in the fourth quarter of last year, primarily as a result of tax credits.

Resulting net income for the fourth quarter of 2008 decreased by 13% to $4.4 million from $5 million a year ago. However, due to the stock repurchase program, fully diluted shares outstanding have decreased, resulting in earnings per share of $0.27 in the fourth quarter of '08 which was unchanged from the fourth quarter of 2007.

In terms of free cash flow, as Jim said, the Company generated $6.7 million of free cash flow in the fourth quarter compared with $9.7 million during the same quarter last year, largely due to increased capital expenditures in the fourth quarter of 2008 as well as certain fluctuations in working capital that were less favorable in 2008 than in 2007. Free cash flow generated in the fourth quarter of 2008 along with available cash and borrowings under the revolving credit facility was used to repurchase $22.5 million of common stock during the quarter.

Touching briefly on full year results, gross profit in 2008 increased by 6% over 2007. General and administrative expenses in 2008 increased by 6% to $47.6 million from $44.8 million last year. The $1 million cost of restricted stock unit grants in 2008 contributed 2% of the growth in year-over-year G&A expense. G&A as a percentage of gross profit remained relatively unchanged at about 52.4% in '08 versus 52.3% last year. Net income was $19 million in 2008 or $1.07 per share, an increase of 10% on net income and 19% in earnings per share over 2007.

In terms of free cash flow, the Company generated $22.2 million of free cash flow during 2008 compared with $32.1 million in 2007, while spending $2.4 million more on CapEx and $1.4 million more for cash taxes in 2008 versus 2007. As we discussed during the Q3 conference call and as Jim mentioned earlier, certain working capital movements impacted the generation of free cash flow during the third quarter of '08 by as much as $6 million and these factors as expected did not reverse out by year end.

With that, I'll turn the call back over to Jim who will provide our 2009 guidance and other comments.

Thanks, Marc. While we expect for this year to be a challenging one, we nonetheless expect earnings per share to be in the range of $1.05 to $1.11 per share, an increase of up to 4% over 2008. This outlook does not anticipate any of the following -- the impact of any acquisitions or mergers that might be completed during 2009, any stock repurchases beyond the 200,000 shares we have already repurchased this year and three, any costs associated with the potential sale of the Steamboat shares that Marc alluded to earlier.

Our 2008 results were affected by certain items that we do not expect to reoccur and therefore have not been factored into our guidance for 2009. As such and as I discussed it during our third quarter call, I want to give you a more apples-to-apples comparison of what the 2009 earnings per share range really means in terms of growth over 2008.

The 2008 results include only a half year's worth of the cost of the restricted stock unit grant given to senior management, whereas a full year's cost will impact 2009. Had the restricted stock unit grant affected the full year of 2008, the 2008 results would have been lower by $0.035. And the Company received a final settlement on its Hurricane Katrina claim in New Orleans, which contributed $0.07 to 2008 earnings per share.

2008 EPS, therefore, excluding these items would have been $0.97. Therefore, we expect in 2009 earnings per share to be up to 14% higher than 2008 when measured against this base line number, which I feel is a testament to our business model for bringing the business through these trying times and realizing growth as I mentioned earlier in the call.

Also as we mentioned earlier, the investment in and the development of talent across the business with expanded expertise in the areas of security, transportation, municipal services, maintenance and campus services has been well underway for several years as we continue to expand the service capabilities of our brand.

That stocking of talent within the organization is now completed, as well as the development and hiring of the talent required to manage the transformation of our processing and support offices as we continue to move to a more efficient, automated platform. The completion of this talent acquisition has allowed us to return to a more normalized SG&A spend in 2009, consistent and on target with our business model.

We are certainly aware, however, of the sacrifices of our clients that -- are -- and the sacrifices our clients are having to make during this time and we have asked our management team from top to bottom to forego annual salary increases for 2009 in consideration of managing client costs as well as our own.

That being said, our 2009 guidance assumes no staff layoffs and no delay in the aforementioned process and IT improvement programs initiated several years ago and discussed almost quarterly on these calls and, as such, we want to make sure that we are continuing to invest for long-term growth and efficiency. Therefore, we are maintaining our commitment to invest between $6 million to $7 million on capital projects during 2009.

Finally, due to limitations on the use of NOLs, we expect our cash tax rate to be approximately 18% in 2009 as compared with 8% in 2008, resulting in an expected increase of cash income tax of up to $2.8 million over 2008. As a result, 2009 free cash flow is expected to remain in the range of $20 million to $25 million.

I'd also like to talk just about -- for a minute about quarterly earnings. While we don't guide to quarters and we will not guide to quarters in the future, oftentimes the analysts that follow us tend to flat line our earnings across the four quarters of a year. I can tell you but for one time events that have occurred historically at any given quarter throughout the year, we tend to have our best quarters as the year goes on.

In having leases and reverse management contracts that are tied to airports and hotels, traditionally the first quarter of the year is the slowest for that area and people tend to travel less, whether it's business travel or vacation travel where we reap the reward in the first quarter. So, I just wanted to talk about that and give some color to quarterly performance and again, that's sort of bored out by our history -- if you look at our quarterly performances year-over-year.

That concludes our -- mine and Marc's formal comments for now. I'll turn the call back over to the operator to begin the Q&A session.

Thank you very much. (Operator Instructions).

And your first question comes from the line of Bob Labick of CJS Securities. Please proceed.

Good morning.

Good morning, Bob.

Hi. A couple of questions. First, I wanted to just ask in your release, you address your use of cashes to maintain the appropriate debt level. Could you just talk a little bit about the debt level and, given the current environment, what you view as appropriate now, where you in the future -- assuming the credit markets ease -- where it would go or how you're thinking about the company debt?

Well, I can give you a broad perspective from where I sit, Bob, and then Marc could talk with some specificity if you like. As we mentioned, we don't contemplate continuing the share repurchase program other than what I just talked about.

That was a fairly conscious decision that we made at the Board level given the fact that one of our desires is to maintain rather low leverage, particularly during this environment because we see opportunities out there. I hear all the very smart people talking about terms like keeping your powder dry and I'm not quite sure what all that means. All I know is that it seems prudent to us to keep our leverage ratios down.

Marc and the rest of us renegotiated our bank agreement last year with an eye towards giving the Company sufficient if not abundant capital opportunity with no maturity to that agreement until 2013, and I think we're just being prudent by looking where the opportunities are, not necessarily committing ourselves to a large share repurchase where other opportunities might exist or the opportunity to bring our debt down even further.

The only thing I would add to that, Jim, is that our expectations for 2009 would not be for our leverage to increase during the year from where it is today.

Okay, great. And then, just moving on to more operational opportunities. We've seen a lot of bids out there for airports and such. I was wondering if you could comment on any and specifically, your name has come up as it relates to Cleveland and Atlanta recently. I don't know if there's a possibility to comment on those specifically or just broadly about the bidding environment.

Well, I can comment broadly. Certainly, we are involved in the two airports that you've mentioned, fairly far along in the Atlanta process and we feel real good about that. The Cleveland process is in its infant stage and I'm not quite sure given some comments that the airport director in Cleveland made last week about where that airport is headed in terms of its future. There's discussion about building garages and real estate plays, so that's much more nebulous than the process that's going on in Atlanta.

I can only tell you that with the wins in Denver and the wins in Richmond and some of the other wins that we had in 2008 combined with what the pipeline looks like for 2009 with Salt Lake City and Washington National and Washington Dulles, as well as a decision on Atlanta, we feel very good about our airport product right now and our ability to compete favorably in this environment. Our team based in Cleveland that does airports is unsurpassed in terms of its knowledge base and expertise and this is the type of environment where they're allowed to shine.

Okay, great. That's helpful. And then, just in general, you've discussed the municipal market and institutional market and other opportunities for growth. Could you give -- just give us an update on where you stand there and how you intend to address those and how those markets are being impacted by the current economic environment?

Yes, it's good for us, Bob. The -- when municipalities are faced with angry taxpayers who are looking for efficiency in government and I think we're only at the tip of that now, I think there's a general awareness brought on by the new administration of government spending and higher taxes and not only at the federal level, but certainly at the state and local and county and sales tax level where I think that -- I continue to read about demands for government to become more efficient.

I think we're beginning to see the first results of that with an increase in the number of bids that we're seeing come out for the outsourcing of municipal on street and off street services. They're not necessarily limited to just collecting the revenue at parking meters or operating off street parking facilities for municipalities, but everything from ticket writing to revenue collection on the parking tickets to the pursuance of scofflaws, whether its through the courts and collection agencies or outright booting of vehicles which we do.

And as I said earlier, we've taken the time over the last three or four years and the resources, both human and capital in investing in subject matter experts who are now maturing with us that are capable of providing guidance throughout the geography of the organization when these bids come. So, we feel much more competitive in that area as we sort of predicted the volume of these bids would increase as we got to times like this and 2009 and beyond. So, we feel real good about our chances and we're seeing a definite uptick in volume.

The city of Los Angeles, for instance, has just announced the beginning of a process to outsource its entire on-street operation. We are in the middle of a process in the city of Atlanta to convert their parking meters and to provide outsource services for the revenue collection process, very similar to the types of machines in the operation that we have in New Orleans. We understand the city of Miami Beach is unhappy with its current operator and there's some announcements about potential change in that area. So again, we're seeing quite a bit of volume come out and we're able to respond to that volume.

Great. Thank you very much. I'll get back in queue.

Thanks, Bob.

And your next question comes from the line of David Gold of Sidoti. Please proceed.

Hi, good morning.

Hi, David.

A couple of questions for you. First, when we look at the guidance and the growth that you have imbedded there, walk us through if you can a little bit of how to think about -- or let's say how you're thinking about things. Is it we're going to take advantage of some of this pipeline of opportunities, or is it more a function of improving profitability?

Well, both. I mean, from the overall company perspective, we're continuing to drive change across the organization to make us more efficient on the SG&A side. So as I said, there -- we have not contemplated in the guidance that we've given and for this year's budget or anticipated performance any slowdown of the process change that we've initiated across the organization in terms of workforce management relative to time and attendance and scheduling.

Our accounts payable process, and our procure to pay product which we're rolling out, or our monthly parker billing system, which is also now in beta testing and running live in southern California. So that there's no slowdown caused by this sort of an environment in taking advantage of the efficiencies that we get through automation and platform change.

Okay, and then -- I'm sorry.

And then, on the top line as you mentioned, the opportunities for us in terms of not only protecting -- certainly protecting ourselves on our existing same stores because it's easier to keep facilities than to go out and win new ones -- but certainly focusing the sales organization on opportunities that we have that are the result of this economy.

But now, having gone through three years of education with our sales staff in terms of competencies in transportation and competencies in maintenance and competencies in municipal and campus planning where they're going out now looking at a pretty wide -- with a wider net as to what sort of opportunities we can take on. So, it's kind of working both ways for us right now.

Okay, and then just to follow up on your comments about G&A and I guess Marc's comments as well, when we think about the year presumably, I think Marc had said that there'd be some tail off in the second half of the year as the spending subsides, can you give a little more sort of color on that and how we should think about it for modeling purposes?

What I would say to that, David, is that we've talked for a long time about the roll out of our bigger IT projects and our goal is really to accelerate and really get moving on the roll out in a larger way in the second half of the year. So, I think it's the second half of the year where we will start to see some of the G&A benefits from rolling out those applications.

I see. And I mean, is there a way to sort of think about that either percentage wise or sort of otherwise, or how much of a maybe pull back in spend there is?

Not yet. But I think, as Jim said, we've made the investments we need to make. Now, we'll start to see the benefits inuring to the business beginning in the second half and then obviously increasing in 2010.

Okay. And then, just lastly if I might, on the acquisition front. Jim, you sounded more excited I think than maybe some others in this environment about the prospects of sort of what's out there. Is that a function of -- I mean, are you seeing competitors have enough trouble where you might be able to get some real good deals there or is it just sort of cautious optimism I guess?

Well, it -- I don't know if excited was the word, but as always we're looking at opportunities and there are opportunities out there. And this environment works to our benefit in the form of pricing, so we have not discontinued or broken off discussions with people that we might have been talking to. We got a small deal done, as you know, in the fourth quarter -- sorry, last year in Seattle and we continue to talk to people as they knock on our door.

As I mentioned to Bob Labick earlier in terms of our capital structure and our balance sheet, we want to make sure that we give the Company ample room to succeed in this environment, so I don't think you'll see us going out there doing highly leveraged deals any time soon. But I think that for the small, tuck in type of acquisition that you've seen us do in the past in those cities where we think we either have a major presence or we'd like to have a major presence, I think that you'll continue to see us active in that area.

Got you. Very good. I appreciate it. Thank you both.

You're welcome.

You're welcome.

And your next question comes from the line of Clint Fendley of Davenport. Please proceed.

Good morning, Jim and Marc.

Good morning.

Hi, Clint.

I wondered if you could provide an outlook for gross profit per facility on both the lease and managed basis?

We really don't give guidance at those levels. I think what you've seen over the last few quarters is a slowdown in growth of same store sales and I mentioned earlier in my remarks that there was really no growth in same store sales in the fourth quarter. So, clearly we're seeing the impacts of the economy primarily on the lease side of the business. As Jim has mentioned in previous calls, some of our reverse management contracts also are impacted when the economy softens.

So, I would say right now, we're working hard to do the things that we always do which is to try to increase the penetration of ancillary services and get growth that way. As Jim mentioned, last year was a record year for us on new business and we clearly see these economic times as good ones for us from the point of view of winning new business because more and more contracts go out to bid. So, those will be the things that we're going to be working hard on to try to get gross profit growth.

And Clint, just to give a little more flavor to that, there's a reason that we don't guide to those sorts of numbers or metrics. We -- where we have larger airport leases -- the -- one airport lease in a small airport in Michigan or a small airport in Missouri would have an undue -- an unfair affect on the remainder of the portfolio.

So again, with 2,200 facilities, we can have just a few airports or a few hotels that might keep our average for same stores kind of flat, but it's not representative of what's going on with the base business model. And that itself is somewhat confusing without listing the profitability of all 2,200 locations, so we don't do it that way.

I mean, an overall commentary is it's unfortunate as everybody is experiencing that we're going through this recession and a couple of ticks away on GDP from a depression. It's unfortunate certainly on us because -- but for the loss that we're seeing in gross profit as a result of some of these leases and reverse managements tied to the airport and hotel sector, the Company's sort of doing better than it's normal growth cycle.

Okay. Understood. Thank you, guys.

Thank you.

(Operator Instructions).

And your next question comes from the line of Nate Brochmann of William Blair. Please proceed.

Good morning, gentlemen. Nice quarter.

Thank you.

Hi, Nate.

Hi. Hey, I just wanted to ask a couple more questions talking about the pipeline a little bit of potential new contracts and activity that you're seeing out there. Is that kind of dispersed across all your verticals or is that kind of more maybe targeted in some of the newer ones, whether it's some of the hospitals or educational facilities?

And then, also if you could comment on what you're kind of seeing on the pricing of new contracts. I definitely applaud your ability to retain a lot of your current customers as well as win a lot of new ones with your strong value proposition, but what the pricing is looking like when you're signing on some of those new customers that may be undergoing a little bit more hardship?

Well, let me address the first part first and that is we remain a parking company at our core. So, most of our pipeline is -- consists of parking opportunities. The nice part about having expanded our service range and as we get in later into the year, we'll be making much more significant press releases and announcements about the changeover of our brand and the expansion of our brand as we worked hard now to bring that expertise forward.

And again, the core of our business is parking, but we're seeing more contracts where -- particularly in the airport sector and some in the hotel sector where we're able to manage the parking facility associated with it, provide valet parking services with it, and provide some sort of transportation opportunity with it.

On the campus side of things, there's almost always additional services other than our core performance in the parking area where we have an opportunity now to bid. Whether it is with transportation across the country, or being able to clean those facilities, we now have the ability to clean in almost all of our core markets, or in our southern California market supplemented with the opportunity to provide security services.

So, we are seeing expanded opportunities for us to respond to RFPs with the ancillary services. I don't want to distort though the fact that the primary pipeline that we follow and that we see as having lots of volume to it. It is in our core parking capability with an opportunity to continue to grow those services into the future.

As I've been saying for quite some time, the development of those core services around the parking brand, our long-term growth plan that supplements where we might have downturns in some of our core markets where we have as much market share as we're going to get in parking and we're planning for five years from now and 10 years from now where we'll also be the premier provider of not only parking services but cleaning services of parking garages, security services, transportation services, and other businesses that we see related to the model.

So, that's on the pipeline side. The second part of that in terms of pricing certainly in this sort of an environment, we are asked by clients to review our pricing and that happens almost every day as we renew nearly a quarter or a third of the portfolio every year. But I think our people have done a good job through this cycle of demonstrating our value to our client base so that we're allowed to continue to at least grow by the business model in terms of getting basic CPI growth or if not greater.

We can make a compelling argument that just hiring a low price or a low priced operator into a complex campus, municipal, airport, hotel or mixed use environment puts as much as 10% to 15% of the top line at risk because they don't provide the same level of supervision or audit or daily marketing reviews and safety reviews on the facility that we do. Again, because we don't have to invest our resources in bricks and mortar or long-term lease payments or any of the other things that might be damaging a parking business across this sort of an environment, we continue to focus and invest in quality.

And I think that that investment in quality pays off during these cycles as we are able to demonstrate that value to clients and while we take some price hits where we have long-term, wide ranging clients in order to sort of understand what's going on, that is certainly not the primary concern that we have in pricing the business this year.

Great. And then, just one other question kind of talking about how you're kind of managing through some of the pressure that you're probably seeing on some of the reverse management contracts or some of the leases. Can you talk a little bit about what your opportunities are to kind of right size your infrastructure there and how quickly that happens in order to adjust for maybe lower top line numbers?

Yes, it happens in two areas. Out in the field, we look at staffing all the time. Our people in most of our major markets now are equipped with the new software that we brought aboard for our workforce management and scheduling and that enables them to be more efficient in terms of scheduling lots of labor into facilities.

We're also seeing an up tick in the amount of facilities we're converting to automated or pay on foot situations. We talked about the capital that we have planned to invest in not only our own back office platform enhancement, but into facilities where clients would like us to make investments on their behalf in the form of automation to reduce staffing requirements and that moves along.

Fortunately, and it gets to the earlier question about leverage, the benefit of having low leverage in our business model or in any parking business model is our ability to use our balance sheet to provide either operating leases for those sorts of clients that need capital infusion, to provide for the automation and reduce overall costs in a short period of time that a high balance sheet would not enable you to do.

So in essence, we don't have to invest our own capital for the most part to get new buses for an airport or to get automated pay on foot equipment for a university or a hospital or a retail center. We're able to do that through operating leases because we've brought our leverage down so much.

So again, it's opportunity that gets created in this environment that we're able to apply towards reducing not only our own G&A, but the client's G&A at those locations during the period. That applies on the same basis, Nate, to reverse management contracts and leases where we have full responsibility for managing the labor costs. And again, labor costs and the costs associated with labor represent nearly 70% of operating expenses at a parking facility.

Great. Thank you very much.

And there are no further questions at this time. I would now like to turn the call back over to Jim Wilhelm for closing remarks.

We'd like to thank everybody for participating in the call this morning. I thought the questions were terrific and right on for certainly the economic conditions we're experiencing. We're glad to share our answers with you and we look forward to talking to you at the end of the first quarter. Thanks, everybody.

Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.