SP Plus Corp (SP) 2009 Q3 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the Third Quarter 2009 Standard Parking Earnings Conference Call. My name is Regina, and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session.

(OPERATOR INSTRUCTIONS)

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

Thank you, Regina, and good morning, everybody. As Regina just said, I'm Marc Baumann. I'm the Chief Financial Officer of Standard Parking. And I'll be your primary investor-relations contact

Welcome to our conference call for the third quarter of 2009. I hope all of you have had a chance to review our earnings announcement, which was released before the market opened today.

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, we'll open up the call for a Q&A session.

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.

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 at standardparking.com, and also at earnings.com. A replay will be available on either Website for 30 days after the call.

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

Thanks, Marc. Good morning, everyone. Thanks for being with us today, on Monday.

Obviously, in the press release that we issued this morning and last evening, you read that we are particularly pleased with what we saw in the third quarter and, now, year to date.

As we've talked about a year ago, now, with all of the noise around our business, whether it's litigation issues or equity transfers within the business, we wanted to make sure that when we issue a press release, that we took particular time and detail to point out some of those issues that affected the business, or are affecting the business on a one-time basis, whether it's as a result of the economic environment, or those things that I cited a moment ago, kind of all in an effort to act with a more transparent basis as far as what's really going on with our base business; and what are the results that the base business is producing out in the field or here at headquarters, as we attempt to continue to reduce costs and become more efficient.

So I think we did a pretty good job in the release. And we'll add some color and detail in our comments today. But I think that our real outlook in terms of our base business, and our outlook on the future, becomes much more clear when we remove some of this noise around the business.

Certainly, we saw in the third quarter a beginning of the flattening and some of the declines that we had seen in some of the key consumer areas that affect our business and our leases -- a flattening of almost 18 months of decline in passenger traffic at our airports, and flattening out of our occupancy nights at hotels and things like that.

As I've talked about almost every quarter, many of our leases where we -- our profit is subject to changes in volume -- are based upon consumer activity. And those -- consumer activity is driven predominantly at airports and hotels. So it was encouraging to see those trends and those declines flattening out some.

That being said, I do listen to the hundreds and thousands of talking heads that report in newspapers and talk on televisions about where the economy is headed. And, quite frankly, we just don't have enough of a picture in these trends to indicate whether the decline is stabilizing with upward movement in the future or not. The forecasts are kind of clouded, and everybody -- there's no one consensus of opinion on where they're headed, but at least we were buoyed by what we saw in the third quarter and forecasts for the fourth, as it relates to those key metrics for the business. And I think our third quarter began to show that.

I will give you some of the details that we talked about in the release. And, obviously, we're available to answer questions after this.

In the third quarter of 2008, we recognized a gain from the sale of certain contract rights. And we had favorable movements in our insurance reserve for both casualty and health, that didn't reoccur in this year's third quarter, as -- year over year, in history, those -- we have indicated that those things would begin to flatten out, as we get longer experience runs.

And we incurred some legal-related expenses in 2009 that were larger than normal, which may cloud the results of our underlying business activity. And I've talked about when you -- my experience in being here for almost 25 years is that when you get into this sort of an economic climate that the amount of litigation that we have to deal with increases significantly; and our costs that we wouldn't normally have to incur in a normalized period ratchet up -- whether it is employee claims or people slipping and falling or clients who don't want to pay their bills and things like that -- where we tend to take on a much higher level of litigation.

And we had a lot of those one-time expenses this year, as opposed to last. And, hopefully, with some sort of return to normalcy, those things will go away. And I can tell you that the amount of cases that we're dealing with currently are down from where they might have been last quarter, and the quarters before. So that, in itself, is good news.

If we exclude all of those items which I just mentioned which were unfavorable to us on a year-over-year basis, gross profit would have been essentially flat, which we think is a good thing, given this environment. Again, this is primarily a testament to the level of protection provided by our business model, which is predominantly management contracts that are diversified across geography, and different sectors of the economy.

We like to think of ourselves, and we think that our activity and our production and our performance during this environment would tend to lend credence and support to what we've talked about in attempting to posture our business as recession resistant. Certainly, anybody would be foolish to think that a business would be recession-proof, but we've always sort of advertised our business model as being relatively recession-resistant. And we're proving that out through this very difficult time.

The Gameday acquisition that we announced previously at the beginning of the third quarter also contributed to the results that we highlighted in our release. On top of this, as we discussed last quarter this year, we've taken steps to align our SG&A with the reduced level of business activity. As a result, SG&A was down 6% year over year.

So, although our reported third-quarter EPS declined 7% when compared with third quarter last year, when you adjust for these things that I have been talking about that affect the year-over-year gross-profit performance, 2009's third-quarter earnings per share would have increased by 25%.

Also, on a positive note, our location-retention rate has ticked up to 90% for the 12 months ended 9-30, and our profit retention rate remains solid at 97%.

Our new business activities continue to be strong this year, and we've been talking about significant wins we've had all year. This quarter, we -- and as discussed earlier, I guess -- was our Atlanta-airport contract win. We started our operations there October 1st, and had rather a seamless integration there. And we look forward to running Atlanta for a very long time.

We've also expanded our relationship with Boston University, with the award of the parking-management contract for the medical center at Boston University. The medical-center parking operation represents over 3,000 spaces, spread across nine locations. And it is, with an eye towards institutional and the municipal markets that we've ratcheted up sales efforts this year, because those, obviously, are those areas we'd like to be working with when you have depression in the consumer areas, whether it's retail or airports or hotels. So, certainly, we've had a lot of focus this year in the institutional and municipal market.

Other nice new wins in the quarter included the Sky View Park development in Queens, New York, one of the city's largest retail centers; and Union Station in Kansas City, which is a fully restored landmark, and one of the city's most prominent destinations for cultural and entertainment activities -- both of those under management contracts, I might cite.

As I've said, given the results and the results that we've talked about during this quarter, I want to be very firm about the fact that during this period -- while we've shaved SG&A where we felt it appropriate in these times. And we've taken a look at performance-based compensation across the business, in comparison to performance in the market, and adjusted for that. We have not lost one step of momentum in terms of the major initiatives that we are funding, whether it's on a capital basis, or with human resources, in order to prepare the Company for the future.

We continue to work towards a wider product base offered to our parking clients, marketed now under the SP Plus logo, and we've gotten some traction and some visibility with SP Plus, where we're offering more transportation services than we were in the past. We're offering more security services than we were in the past, particularly in California. We're offering more maintenance facilities in our parking garages around North America, through SP Plus Maintenance, and really tightening the focus on preparing this Company for the long term.

We've also not lost any momentum in terms of process enhancement with the business. We continue to roll out those products supported by our newer Oracle platform for managing time and attendance for 12,000 people. We're managing accounts payable across the organization. We're managing bank reconciliation on an automatic basis with the banks that we're lucky enough to be working with across North America as well. All of those products have been rolled out on time, and are cutting the workload -- the daily workload -- for those entrepreneurs that we have in the field, that are out offering our services to our clients, where they can be much more effective than having to process paperwork.

So the initial reports of those products being rolled out are favorable. And, as I said, we've also managed to take advantage of managing SG&A, and making those personnel cuts -- or, at least, transfers -- that we felt are the longer-term goal of reducing our SG&A as a percentage of gross profit.

Finally, in that area of product expansion, we announced during the quarter that we had completed our acquisition of Gameday Management, and their technology product, Click and Park.

Gameday focuses specifically on large-event venues. Clients include the NFL for the Super Bowl, NASCAR, the PGA Tour -- those large, large events, where parking-management and transportation services are being offered on a broad, broad scale -- certainly enhancing our skill set, and improving our skill set, in order to pre-engineer those sorts of events from a planning perspective, a logistics perspective, and then have the mainstream of our Standard Parking product serve those locations for -- whether the season or the ongoing performance -- wherever the Super Bowl might be, will be, for instance, in the future -- things like that.

That integration has gone very, very well. Our entire organization has been briefed on our additional capabilities. So whether it is our sales force or our operational team in the field that negotiates additional services for our clients, they have been the beneficiaries of a sound briefing on our additional capabilities and are out, as we speak, cross-selling services under the Standard Parking flag.

The back-office integration of Gameday has gone very well. Gameday did not have a significant back-office. So it was just a question of interpretation of accounting language and things like that. But we now have them fully integrated onto our systems.

We are very excited that Gameday's current -- a lot of the effort at the Gameday level is being focused on the Vancouver Olympics, which are coming up in a few months. They certainly will be the first Olympic Games that we get to touch, and are hopeful that -- and we know that the performance of Gameday will be solid in that area of planning for parking and ground-transportation needs, and supplying what the organizing committee in Vancouver needs. And we think that will certainly further our reputation as a parking operator, as we get into the benefits of cross-selling these enhanced services.

Finally, we were able to secure the trademark on the Click and Park product. We are able to be out there selling this new technology that we can spread across the organization. I don't want to spend a whole lot of time on it, but Click and Park is a technology tool by which you can pre-purchase your parking over your computer at home, or over your handheld mobile phone, or a variety of technological services which have been used in the past, mostly for special events -- the Gameday sort of events.

Now, we think we have the opportunity to spread that product across the base of our organization -- buying your airport parking in advance, buying hotel parking in advance -- being able to offer those customers discounts to parking rates in order to entice them into our facilities, all having been done on a pre-purchased basis.

And we think that, combined with the data venture that we are involved with -- controlling the data of the parking industries -- we'll be able to offer that Click and Park product for many, many years to come. And it's certainly the future as I see it, in terms of adapting our business to an ever-changing technology structure. So we look to -- once we have the final filing on Click and Park completed -- to be able to mainstream that product across our organization.

To wrap up, 2009 is continuing to perform as expected. Given our results year to date, we're maintaining our guidance range of $1.05 to $1.11 per share. But we expect to come in at the lower end of that range.

This guidance continues to exclude any cost we might incur in connection with our former majority-shareholder's transfer of shares, or the subsequent sale of those shares, which amounted to $0.04 per share in the year to date.

While we expect the Gameday acquisition to be accretive on an ongoing basis, due to the seasonality of the acquired business -- I talked about Olympic Games and Super Bowls and things like that -- we do not expect Gameday to add meaningfully to this year's earnings per share.

And, again, sort of in conclusion, we begin to enter the 2010 budgeting-and-forecasting season. But given all of the things that I talked about earlier, I'm kind of -- have much more -- I feel much better about 2010, obviously, than I did when we went into 2009.

And, with that, I'll turn the call over to Marc so that he can lead you through a more detailed discussion of the quarter's financial performance.

Thanks, Jim, and hello, again, everybody. Let's take a look at some of the financial results for the quarter.

Total revenue for the third quarter of '09, excluding reimbursed management-contract expenses decreased by 1%, to $74.8 million, from $75.5 million in the same period a year ago, primarily due to reduced parking activity at certain lease locations, such as those related to travel and retail, which are more susceptible to discretionary-spending reductions.

Gross profit for the third quarter decreased 9%, to $21.2 million, from $23.5 million a year ago. As Jim discussed earlier, several factors are contributing to this year-over-year decline. Favorable changes in insurance reserve estimates an insurance dividend, and a gain from the sale of certain contract rights in the third quarter of 2008 accounted for over two-thirds of the year-over-year decline, as these factors either did not recur in the third quarter of 2009, or were not significant.

Additionally, certain legal-related expenses incurred in the 2009 third quarter accounted for the remaining one-third of the year-over-year decline in gross profit.

Gross profit from the remaining business, without these items, was essentially unchanged on a year-over-year basis, as Jim mentioned.

On a sequential basis, reported gross profit was up 6% from the second quarter of this year, partly aided by the Gameday acquisition in July; although, I do want to mention, given what Jim just said, we don't expect Gameday to contribute meaningfully to the bottom line this year. It obviously did add to gross profit, and did add to G&A expense and D&A expense during the quarter.

G&A expenses for the third quarter of 2009 decreased by 6% to $11.3 million, from $12 million in the 2008 third quarter, primarily as the result of steps taken this year to reduce certain compensation expenses, including performance-based compensation. On a sequential-quarter basis, G&A expense increased 9% over the second quarter of 2009, due primarily to the Gameday acquisition, and the Company's annual grant of stock to members of its Board of Directors.

I want to clarify that this level of G&A that we saw in the third quarter is not indicative of what we expect in the fourth quarter. We expect G&A in the fourth quarter of this year to be in the range of $10.5 million to $10.7 million, much more in line with Q2 of this year. As a result, the foregoing operating income was $8.4 million, compared with $9.9 million in the year-ago quarter. Lower interest rates resulted in a $200,000 decrease in year-over-year interest expense for the third quarter.

The effective income-tax rate remained relatively unchanged, at 39% in Q3 '09, as compared with 38% in Q3 of 2008.

Resulting net income attributable to the Company for the third quarter of 2009 decreased to $4.2 million, from $5.1 million a year ago. However, the number of fully diluted shares outstanding has declined due to the impact of our stock-repurchase program, resulting in a decrease in earnings per share, to $0.27 in the third quarter of 2009, versus $0.29 in the year-ago period, which is only a 7% decline.

Again, as Jim discussed, without the favorable movements in insurance reserve, a gain in the sale of certain contract rights in 2008, and certain legal-related expenses in 2009, Q3 2009 net income would have been up 10%, and EPS would have been up 25% over the third quarter of 2008.

In terms of free-cash flow, the Company generated $6.4 million during the third quarter of 2009, as compared to $1.3 million in the third quarter of last year, primarily due to the timing and fluctuations in working-capital movements. During the first nine months of 2009, the Company generated $11 million of free-cash flow, as compared with $15.5 million in the same period in 2008.

Based on these year-to-date results, we continue to expect to generate between $15 million and $20 million of free-cash flow for the full year of 2009.

Touching briefly on the year-to-date results -- gross profit for the first nine months of 2009 decreased by 11%, to $61 million, from $68.7 million in the year-ago period. Nine percentage points of the year-over-year decline were attributable to the combination of the Company's Hurricane Katrina settlement in 2008, which was recorded in Q2 last year, changes in insurance-loss reserve estimates relating to prior years, a 2008 insurance dividend, a gain from the sale of certain assets in 2008 that I mentioned before, and certain 2009 legal-related expenses.

The remaining 2% of the decline in gross profit on a year-to-date basis of last year is largely attributable to the continuing impact of the economic downturn on certain areas of the business that are more sensitive to discretionary spending than our predominant fixed-fee contract business, which should translate into some opportunity for us, as the economy begins to recover.

General and Administrative expenses for the first nine months of 2009 decreased 3%, to $34.4 million, from $35.5 million a year earlier, as steps taken to reduce certain compensation expenses were partially offset by expenses incurred in 2009, relating to the transfer of shares by the Company's former majority shareholder, and certain other legal expenses. And we also had six additional months of costs relating to the July 2008 restricted-stock unit grant to senior management.

You'll recall we only had two quarters of costs and that was in the second half of last year. And, this year, we've already had three quarters of costs. So that makes a big difference.

Adjusting for these items -- the legal, the restricted-stock unit grant, the expenses related to the transfer of shares -- G&A for the first nine months of 2009 would have decreased by 12%, compared to the first nine months of 2008.

Net income attributable to the Company decreased 26%, to $10.8 million, for the first nine months of 2009, as compared with $14.7 million for the comparable period of 2008. On a per-share basis, the year-over-year decrease in earnings per share was less than the decrease in net income, because we had fewer shares outstanding due to the Company's share repurchases. The year-over-year decrease in earnings per share was 15%.

Let's recap some of the larger items that clouded the nine-month year-over-year comparison that Jim and I have been speaking about. The Hurricane Katrina settlement added $0.06 to 2008 earnings per share. Other insurance-related items added $0.07 to 2008, and took $0.04 from 2009. Legal-related items took $0.07 off 2009. The timing of the restricted-stock unit grant in July of 2008 lowered EPS by $0.04 on a year-over-year basis.

The gain on the sale of certain assets in 2008 added $0.01 in 2008. And, finally, legal costs and other related costs incurred in 2009, relating to the transfer of shares by our former majority shareholder took $0.04 off of 2009. Adjusting for all of these items, earnings per share would have been up 32% for the nine months of 2009, as compared with 2008.

With that, I'll turn the call back over to Regina to begin the Q&A session.

(Operator Instructions). And your first question today comes from the line of Bob Labick, with CJS Securities. And your line is open, sir.

Good morning.

Hi, Bob.

Good morning, Bob.

Hi. First question I wanted to ask you -- highlighted in the release, also, that you had some changes to your Board. I was wondering if you could talk a little bit about the changes in the Board, and if there's any new direction or message from the Board, or if you expect any major changes or just tweaks in the overall goals for the Company?

I can talk about that a little bit. Obviously, we -- given all the noise that we've been referring to, around the business, in terms of transfer of shares from our former controlling shareholder, to a new entity, the Board, I think, acted appropriately.

The changes that we made on the Board to reduce the size and the composition were related to who owns the shares of the business, to make sure that our shareholders are represented.

And I think that was -- that's the most compelling issue, Bob -- bringing aboard -- we announced that Tim White had been added to our Board. Tim represents the entity by which the shares were transferred to, from our previous Chairman and controlling shareholder -- certainly represents that interest; and having Bob Roath named a non-executive Chairman of our Board, I think, is reflective of the remainder of our shareholders. Bob has always been very steadfast about representing all of the shareholders who weren't part of the former 51%-controlled share of the business.

So I think that our new Board reflects the equity ownership of the business. And we have some clarity now on that. And I think it only enables us to move forward on reinforcing and strategically planning for our business model into the future.

I can tell you that all of the board members that I have are terrific. And I really enjoy working with them, and moving our agenda from management's perspective.

Okay, great. And, then, in terms of things like uses of cash or your outlook, or your direction -- be it more leverage or more acquisitions, or purely organic -- any expectation in changes there, or do you think you'll probably follow the same map you've been following?

Yes, I think so.

We have been -- as I've been saying this year, given the lack of clarity at the Board level, I think that we certainly felt that it would be prudent to -- one of the members keeps using the term -- and I read it in the papers -- "keeping your powder dry" in this sort of an environment. And I think we've managed to do that -- to the free-cash flow that Marc talked about. But getting Gameday and Click and Park done at the same time, is, I think, reflective of the exercise we would always go through.

The Company generates a significant amount of cash, given our size. And we have various levers to look at to return the maximum amount to our shareholders, whether it's an acquisition that adds value or an investment in process change and technology change across the organization to drive down costs, or looking at dividends, or looking at share-repurchase programs.

I think that we have always managed to look at that with somewhat of a balanced eye, by keeping our leverage in what we think to be a safe area. We have talked in the past about the exposure that this sort of a business has to a high range of leverage, whether it's due to the performance bonds that we issue at our airports, or insuring our insurance program, and things like that.

I don't think that the balance of those levers will change. And I think that we'll always continue to pull those levers that return the highest rate to our shareholders. That's really our goal. I like the parking-cars part. And if I can keep the target on maximum return to our shareholders, with a limited amount of levers to think about in terms of our use of free-cash flow -- again, I love spending my days driving buses and securing buildings and parking cars and cleaning parking garages. So I don't think that's going to change at all.

Okay, terrific. And, then, looking more micro, kind of, at the business -- you mentioned improving outlook, in general, that you're seeing from the locations and, I guess, the occupancy in those. And, also, I noticed a strong sequential growth in the managed-facility location versus Q2 -- and highest since the fourth quarter of last year.

Are these coincidental, or is the -- should we be reading into this? How do you see the trends in facilities, which had ticked down in the first half of the year and recovered -- anything to note from that?

Well, let me answer the first part, first. I guess if you would call a flattening of 18 months of declines "improving," that would be the case. Again, what we've started to see is "bottoming out," I hope, on the airport side and, particularly on the hotel side. We'd like to think that that's an encouraging trend, but we don't see it ticking up.

So when we go about our business of budgeting for next year, I think that we'll begin to make some assumptions on, "Have we hit bottom?" And taking in all the sound economic and financial advice that we're able to access from a variety of sources, sort of try to understand where those industries might be. I don't know, because I don't analyze retail on a daily basis, but we still have a lot of retail facilities around the country. I'm anxious to see how the holiday season is on the retail side; and, then, begin to budget for next year appropriately.

So I guess if you would call a flattening out or a bottoming out of negative trends, "positive," and I guess you could, yes. That is somewhat encouraging. We are seeing some better numbers across our airports. I think that the improvement in revenues at the leases that Marc spoke of, and that we had in our release, are indicative of those areas.

As you know, Bob, we don't focus on revenues a whole lot. But we do use them as somewhat of a barometer in the state of the economy, if we can compare them to same stores. We have lots of movement in the macro sense on revenues, as contracts shift from management contracts to leases, and vice versa. But when we begin to look at leases on a same-store basis and see revenues ticking up some, certainly the -- 80% of those revenues go to our clients on the lease side, but it tells us a little bit about the economic situation in those areas affected by consumers.

The second part of the question, as it relates to --

The increase in management.

Yes, the management locations -- I think the addition of Gameday -- Gameday's locations are almost all management contracts, Bob. They take their work on a cost-plus basis. We did add -- some of the new locations I talked about were the big ones. But we have been layering in. And our net location count, because our retention rate's going up, and we're winning new -- most of those that we're winning lately, including Atlanta airport, are management contracts. So I think there's a variety of reasons you've seen that spike.

Okay, great.

And, then, just given the state of the economy and some of the municipal budgets being stretched, I was wondering if you could talk a little about that opportunity. We've talked in the past about the outsourcing of municipal parking and on-street and things like that. Has this budget environment encouraged more outsourcing, or has it kind of frozen the municipalities right now into, "We'll focus on that later; we have to shore up our budget before" -- or anything like that? If you could, talk about the state of that outsourcing trend.

Yes, that's a great question, and right on, for this environment. It's a tricky time in that area right now. You know that we saw the opportunity several years ago. And one of the vertical markets that we have focused on in terms of the migration of the marketing to the SP Plus family of services is we have an entire division that we refer to as SP Plus Municipal Services, to take advantage of the human resources that we have brought on that specialize in providing outsourced services to municipalities, as well as expanding our technology-knowledge base to really be a full-service provider to those municipalities.

As a result of this economy, we are putting out more proposals every month than we ever had in the area of municipal opportunities for outsourcing. So I think we're doing, maybe, an average of two or three a month in terms of opportunity via RFP. And I've talked about some of the wins we've had this year, and our pipeline has a lot of municipal activity in it as it relates to outsourcing.

But a lot of that on the municipal side, Bob, now, is a -- maybe a fishing expedition, I suppose -- is the correct way. The municipalities are saying to themselves, "We can't make our budgets, and we really can't go back to the well on the revenue side because of consumer and tax activism. So where are those areas where we can lower our costs?"

And the areas that we specialize in are very high on that agenda because they can't replace the police department. They can't replace the fire department and the essential emergency services. But, certainly, providing parking-ticket writing and collection from meters and crossing attendents, and those sort of softer, non-emergency sort of roles are sweet spots on the bats for us, and in terms of cost.

I've talked in the past to you about how we have the ability to significantly reduce expense and be more efficient on the revenue-collection side for municipalities by virtue of our experience. So they're in a period right now where we're responding to a lot of RFPs. And I think as they are formulating their budgets for either calendars or fiscal years, based on what they're seeing, they then, begin to slowly trickle those out into contracts. So although we might be putting out, say, two to four proposals a month right now, decisions on those are maybe one every 60 days for those that we have out there.

So I tend to think of this as more of a transition period. Many of the clients that we've taken on, or expanded client base as a result of running their airports, and now we run their meters or their ticket-writing or whatever -- I think that they will slowly see the benefit of those in the numbers. And I would hope to see, given the additional pressures brought upon them, decisions on outsourcing. And I know that our product will enable us to win our fair share.

Okay.

Sorry for the long answer, but that's a very enticing and exciting market for us right now. And we're spending a lot of time on it.

Absolutely -- no, I appreciate the color on it. Thank you very much. I will get back in queue.

Your next question comes from the line of David Gold, with Sidoti. And your line is open, sir.

Hi. Good morning.

Good morning, David.

Hi, Dave.

A couple of questions -- first, Jim -- pleased to see the tick-up in retention. I was curious if you can add a little bit more color there. I guess there's a couple of things we -- could be attributed to. But I guess what I was curious about -- more of these a function of you folks being happy with sort of the mix of the customers that you're dealing with, or is it nothing more than, say, "Hey, we're doing a good job, and so we're holding on to more of our customers?"

Yes, I think it's the contrary. Our clients are saying, "We like you guys, and you've produced during this sort of period." We tend to be able to indicate and imply our value during these sorts of economies, because we have our people right in front of our property managers and our clients, saying, "Here's what you can be doing; here's a marketing plan; here's what you should do with pricing." We have computerized pricing models.

I think that we really begin to shine, as opposed to the others, that might not have made the investment in nurturing clients along, that tend to be more of a factory; that when you want to see somebody about what you might be doing to increase revenue at that particular garage, somebody's got to fly in and they'll be there next week. Our people tend to be right down the street, or, if not, in the same building. And I think that that certainly helps, now, Dave.

And I don't know that it's any more than that. And I'm not going to let our people be comfortable at 90%. As we press on, now, and improve the product line and expand it and enable additional processes in the field, I certainly want to put pressure on our people to perform at even higher levels.

How much do you think the slow real estate sales environment is helping you on that?

Well, there's less movement, certainly. I think that's what you're alluding to. With a lot of these owners not willing to take the hit, nor the lender is willing to take the hit on the valuation of the real estate, certainly, the environment's slowed down. So we haven't had a lot of the normal move in ownership or property-management changes.

It might be delaying the transfer of some real estate, but we work for such a diverse client base that I don't know that that has had an effect on our numbers.

Got you.

And I would argue with you that we have lost opportunity. Because, maybe, facilities that aren't being managed very well, that aren't performing, that are afraid to be sold right now, because of the environment -- we're not getting a chance in, because the owner has stayed the same.

Sure. No, I'm sure that's right. But that wouldn't play into the retention question.

No. But I would say it -- I would be happy with the retention issue. And I'm saying that our pipeline might be a little fuller if there was some -- we tend to win more than we lose. So I would think that it ratchets up.

I see. I see.

Okay. One other, by way of G&A -- a couple of things -- the technology implementation -- just sort of an update on that; and, then, two, Marc -- obviously, pleased with the progress you guys have made, but just sort of how to think about that on a go-forward -- is the fourth-quarter number that you've alluded to -- is that a good run rate as we start to think about 2010?

Okay. I'd be glad to touch on those things, David.

We've made tremendous progress on the technology front, and have virtually completed the deployment of our workforce-management system, which enables us to capture time accurately at the facilities, and also enables our facility management to budget and control working hours, which enables us to be very, very efficient there.

We've begun the deployment, now, of our procure-to-pay system, which will enable our facility folks to buy almost anything they need to use at the facility, whether it's goods or services, have those routed through the correct levels of authority for approval, and legal department oversight, and, then, ultimately getting those things billed to us electronically, and paid -- so some big efficiency opportunities there.

We rolled out -- we're doing it by vendor -- we've rolled out the A to D vendors. And our expectation is that we're going to roll out to the rest of our vendors by the end of the calendar year. So that will be completed.

And the other technology initiative is really our new applications for capturing revenue, and also managing monthly parkers and tenant leases in complicated office buildings. That system is in test at, I don't know, 40 locations right now. We're making some fine-tuning adjustments to that. It's a very complicated application. And our hope is that we will begin deploying it to additional locations during 2010, and in the earlier part of 2010. It will take us through most of 2010, and probably into 2011, to get that fully deployed across our business.

That being said, we've begun to look at the G&A organization that we need for our business in order to support these new applications. We've clearly added G&A cost here. But we've also looked at how the field processes and the headquarters processes will be different with these new applications.

And we've started making adjustments to our G&A as we've been able to, as we've begun the deployment of these applications. As we've looked at 2010, we clearly see the opportunity to make additional changes to G&A, and I think feel comfortable with our previous estimate of $1 million to $2 million of G&A savings on an ongoing basis, from the deployment of these applications.

Now, coming back to your specific questions about 2010 and run rates on G&A -- obviously, I mentioned a few minutes ago what we thought we would see for Q4 of this year. That would not be an indicative run rate for 2010.

Both Jim and I have mentioned the fact that performance-based compensation has been lower this year. I think we've also mentioned that we froze wages for a number of folks in 2009. And as we look forward to 2010, it's likely that those costs will be restored in our budgets and in our future forecasts, when we complete them.

So it's premature -- and, obviously, that depends upon the performance of the business. If we see 2010 performing along the lines of 2009, then, obviously, those things wouldn't get restored. So it's premature for us to really give you a run rate for 2010. We haven't completed our budgets, yet, for next year. But those things will be increasing factors -- the increasing reduction of G&A from the technology deployment will be going the other way.

So we're hopeful to keep our G&A growth as we go forward at levels far below the growth in gross profit, as our historical business model has done.

Perfect. Thank you. Thank you both.

Your next question comes from the line of Clint Fendley, with Davenport. And your line is open, sir.

Thank you.

Good morning, Jim and Marc.

Good morning.

Hi.

Obviously, you were very clear on the impact from Gameday on 2009 results.

Just wondering, for 2010 -- how should we think about the impact from events such as the Olympics and others, as far as the seasonal hit to the earnings?

Well, I made a couple of comments on that, Clint. First of all, we haven't figured out our accounting yet for Gameday. It's a very complicated process to determine how we're going to allocate the purchase price, to the various assets that we acquired and what might go to goodwill. And the answer to that question will have a big impact on the D&A expense that we would expect going forward.

The G&A costs of Gameday are fairly level and constant over the course of the year, not unlike the Standard Parking business. So the big variables, really, are going to be when those events take place. And, clearly, the portfolio of contract relationships that they have are heavily skewed into Q1, and into Q2, with the Vancouver Olympics in late February. You've got the Super Bowl and other bowl games on January 1st. So, clearly, it's a seasonal business.

And, so, from a point of view of impact on Standard, it's, I think, going to do something to maybe level out our overall performance a little bit, because Q1 has been our weak quarter. And that will moderate that normal weakness that we see in the underlying business, and make our overall performance more flat across the year.

The Click and Park element of this that Jim talked about is just starting to get ramped up. And that's something where you have transitional fees and processing transactions at a number of opportunities. They won't just be the Gameday events. Many of our existing clients also have opportunities to use Click and Park. And as those get embedded into their businesses, we'll have a more predictable profit stream from that activity.

So, right now it's premature for us to say more. Obviously, when we complete our budgets and formulate our guidance for 2010, which will be coming out in early March, we'll have a much greater visibility into the impacts of Gameday on the business for next year.

Okay. That's helpful. Thank you. And when thinking about the airport contracts -- you guys have had a string of impressive wins there over several quarters, now -- most recently with the Hartsfield contract. How aggressive have you been with regard to pricing, in order to win some of these deals?

I think that we consider the market. But we are -- I think, as we've said, we are never, ever the low bidder. We tend to spend a lot more time and resources on those bids that come out that valuate the qualitative side of the assessment, and our ability to deliver top-line to those airports.

So I don't think we've had to moderate our sort of fee structure. Given the environment -- I don't remember the Atlanta spreadsheet specifically -- but we were nowhere near the low bidder on fees. And we tend to do very well at those. We don't like to take an airport of the size of Atlanta or Denver or O'Hare or Cleveland-Hopkins and do those as a loss-leader on a giveaway, just to protect some sort of market share.

We are in there to make money. And we make money because we make the clients a lot more money than they otherwise would have.

I think that I've briefed almost all of you in the past about the O'Hare story. We took over in the mid-'90s, and they were doing somewhere around $40 million to $50 million a year in revenue. And within five or six years, they were making $110 million in revenue, with no increase in employments, no increase in spaces, and one or two rate changes along the way. And we like to get paid for those sorts of results.

We tend to not do a whole lot of discounting when we attack airports of that size. We like to get paid for the value that we bring.

Thank you.

(Operator Instructions). Your next question comes from the line of [Justin Hawk], with Robert W. Baird. And your line is open, sir.

Good morning, guys.

Hey.

Hi, Justin. Welcome.

Oh, hi. A quick question, just on thinking about the guidance for 4Q -- I mean, it just kind of looks like it's somewhat back-end loaded. I think it's implying about $0.32 at the low end of your range. I mean, I know G&A was a little higher this quarter, and it's going to come down. But without having any contribution from Gameday, I guess I was just hoping if you could give a little more color on kind of what your thinking is, going into 4Q.

Sure. I mean, I think our own calculations show us needing to do about $0.31 to hit the bottom of our range. As I mentioned -- I gave you a range for G&A. Gross profit doesn't really need to grow much in order to achieve that outcome. So, although $0.31 versus $0.27 might seem like a big difference, it's really driven primarily by the G&A number.

So I think what you'll see if you look at our results, gross profit does fluctuate a little bit. We feel pretty good about our estimates for the year. And that's how we get to the low end of our guidance range.

So I guess, just to be clear -- I mean, if I put in kind of $10.5 million for your G&A expense, it would imply that, sequentially, you're thinking that gross profit should increase in 4Q?

Yes.

Okay. Thank you very much.

Okay.

And your final question comes from the line of Nate Brochmann, with William Blair & Company. And your line is open, sir.

Good morning, Jim and Marc. How are you?

Good, thanks.

Good. And, Nate, how are you?

Great. Thank you very much. Hey, just wanted to follow up a little bit on some of the earlier questions, Jim, in terms of -- clearly the retention number is great. And it also implies the ability to continue to win your market share. And, obviously, there has been some changes this year, with some of your competitors.

I was just wondering if you could kind of give us a rundown of some of the competitive dynamics that you're seeing right now, maybe relative to the start of the year and, also, maybe, what some of the pricing impact has been on some of the new management contracts.

Sure. From the competitive side, there haven't been a whole lot of changes to historical. Given the contract mix that we like to have, and approach, the same competitors are in the market. We know that the competitors that we have out there tend to do a lot more leases and own a lot more properties. And they may be much more distracted by this economic situation than we are.

We haven't had to, as I said earlier, back down from any of the momentum that we have in our business about -- in terms of planning for the future, given technology changes and given some of the pricing pressures that we see across the industry.

I think we've recognized those, and we're adapting for a business plan that we see into the future to sort of take advantage of those changes, rather than have to suffer through them -- i.e., an additional line of products that we're able to offer to our parking clients, driving process change through the business. We have been able to continue our investment in that, where I don't think the competitors have been able to focus so much.

Certainly, there is some desperation in some pricing. We see some of that across the industry, where some of our competitors are trying to protect their existing holdings by bidding no-fee, or knowing that we -- knowing what we know from the numbers -- that they're taking them as loss-leaders to protect themselves in this environment.

Fortunately, we haven't had to do much, if any, of that. But it certainly creates a much more difficult competitor. Sometimes, the facts around a deal get lost, and there's some sector of being disingenuous. While everybody tends to play nice in the sandbox together when times are good, when we're in these sorts of environments, there is some behavior that we wouldn't condone in our own organization that occurs out in terms of pricing or chat or rumor or any -- or that kind of stuff. So that makes it tougher.

But I think that we tend to instruct and guide our organization along the lines of, "Listen, we think that our value comes through." It's heartening to be able to point at the retention rate -- and knowing that we're communicating that our value comes through. Certainly, the downward pressure that results on the clients' side -- clients are having a tough time, too. And they're looking to renegotiate as we renew, and they're pushing pricing down in some sectors.

It's rather predictable. I don't want to say that we're real smart guys, because, again, we're in the business of parking cars, so how smart can we be? But if you're in it long enough, you see some cycles that help you become a little bit smart. And you say, "Well, inevitably, there'll be some downward pricing pressures in some of these markets with our clients. So what can you do about it?"

So for the last couple years, you've been hearing me talk about taking on additional competencies -- how much more value can we be to those clients that we've had at that shopping center or at that airport?

I think the earlier question from Davenport that we got about Atlanta and downward pricing in the airport sector -- yes, I mean, there might be some of that if you're only capable of doing the parking for that airport. But if you can also manage their ground transportation and you can also run their buses from the remote lots to the core, and run employee parking lots from hangars to places of work, and you can police the curb front and write the parking tickets, and you can run maintenance crews throughout the facilities -- all with an eye towards additional fees, or, at least, protecting those fees that you otherwise were enjoying in the past from a pure parking perspective.

And I think the SP Plus branding move that we've been developing for the last three or four years, and bringing that brand to market, and focusing specific human resources with area of expertise protects us from that stuff. And, again, I talked about being -- maybe you can -- it's coming through a little bit, but I am excited about being able to lead this Company into 2010. Hopefully that adds a little color for you, Nate.

No, that's great color. Thank you very much.

Yes.

And as there are no more questions at this time, I'd like to turn the presentation back over to Mr. Wilhelm for closing remarks.

I have no closing remarks other than to say thank you for taking the time to be on our call today and supporting our business. And we look forward to talking to you again when we wrap up the year. And thanks again, everybody. Bye-bye.

Thank you.

Ladies and gentlemen, thank you very much for your participation in today's conference. This concludes our presentation, and you may now disconnect. Thank you and have a great day.