SP Plus Corp (SP) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the Fourth Quarter 2009 Standard Parking Earnings Conference Call. My name is Mary and I will be your operator for today.

At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session.

I will now 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, Mary. And good morning to everybody.

As Mary just said, I'm Marc Baumann, Chief Financial Officer of Standard Parking and I'm your primary investor relations contact. Welcome to our conference call for the fourth quarter of 2009.

I hope all of you had a chance to review our earnings announcement which was released yesterday afternoon. As usual, 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 the call up 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, standardparking.com. A replay will be available on the website for 30 days after the call.

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

Thanks, Marc. And good morning, everyone. Thanks for joining us.

2009 was a year of strong operating results for us, despite the severe slow down in the economy. Two items, however, significantly impacted our reported 2009 earnings per share of $0.90 and that had not been anticipated in our 2009 guidance of $1.05 to $1.11 that we provided at this time a year ago.

These two items, which accounted for $0.19 per share were comprised of cost interred in connection with the company's transfer and secondary offering of our former controlling shareholder shares and the tentative settlement of a couple of labor violation cases in California.

We've spoken at length in the past about our former controlling shareholder situation and we're pleased that the successful secondary offering has put that issue behind us.

We believe that we've also been able to put behind us a couple of labor violations cases in California that warrant a little bit more comment.

As you know, we have a long history of operating in California which has been, and continues to be, a key market for us. However, California is a challenging environment for employers, especially in these challenging economic times. We're not the only well-run company to get caught up in the state's regulatory [morass].

In any event, rather than fight an extended legal battle, we've reached a tentative settlement of these cases that, upon court approval, will put the issues behind us at a cost of $3.1 million in 2009.

Our location retention rate for the year was down to 87%, however, a significant part of that results from the fact that in the fourth quarter we lost a couple of contracts that represented a disproportionately large number of locations.

Fortunately, all of the locations that we lost during 2009 contributed only 3% to the year's total profit which means our profit retention, gross profit retention rate remained at 97%.

Offsetting these losses, our new business activity continues to remain strong. We are especially pleased to have been awarded the transportation management contracts for both Dulles International and Reagan National Airports in Washington D.C.

We'll operate a fleet of more than 70 buses that will transport 6 million passengers and employees per year.

Activity in New York continues to remain strong with the award of the Regal Center, which is a large new retail center developed by Vornado Realty Trust in Queens.

The parking garage at this center consists of 1,200 parking spaces and we were instrumental in overseeing the selection and installation of an automated pay-on-foot revenue control system at this facility.

In Denver, we were recently awarded a portfolio of three new properties by the City of Denver, consisting of the parking operations at the Denver Performing Arts Complex, the Cultural Center and the Justice Center. These garages add over 3,300 parking spaces to our portfolio.

Given the challenges presented by the state of the economy, we're pleased with what we were able to accomplish in 2009. For the most part, our business model, which is heavily management contract based, with wide geographic and vertical market diversity, has proved to be the right mix in this economic climate.

We did not see as big a downward of swing as others and competitors in our industry, though at the same time, we don't expect to see large upswings once the economy recovers. And all of you know about our business model in that setting.

In closing, we did what we said we were going to do in 2009. We could have done with a little less noise around the business due to the matters I discussed earlier and in our release last night, we emerged from 2009 as a fully independent company, having made continued investment in our brand's expansion, our service capabilities, our human and technological resources, and our processing efficiencies.

We feel that these investments, made while the overall business continued to grow during a difficult economic period, positioned the company well as a multi-talented, outsourcing choice to commercial, institutional and municipal real estate managers.

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 our thoughts on 2010.

Thanks, Jim, and hello again everybody.

Let's take a look now at our financial results for the quarter.

Excluding reimbursed management contract expenses, total revenue for the fourth quarter of 2009 decreased by 2% to $73 million, from $74.7 million for the same period of [2009], due to a 9% decrease in revenue from lease locations, offset by a 5% increase in revenue from managed locations.

Gross profit for the fourth quarter of 2009 decreased by 20% to $17.7 million. 11 percentage points of that year-over-year decrease is attributable to the anticipated settlement of the California labor violations cases.

The remaining year-over-year decline was primarily due to continued weakness in the travel, retail, and special event areas of the business, which tend to be more tied to discretionary spending.

G&A expense for the fourth quarter of 2009 decreased by 15% to $10.3 million, primarily as the result of steps taken this year to reduce compensation expenses, which was offset by $600,000 of cost incurred in connection with the secondary offering in the quarter.

Given the anticipated improvement in the business in 2010, and therefore the restoration in 2010 of our performance-based compensation program, we expect G&A for 2010 to be closer to $12 million to $12.5 million per quarter.

As the result of these things, operating income was $6.1 million in the fourth quarter of 2009, compared with $8.4 million in the 2008 fourth quarter.

Lower interest rates, combined with lower borrowings, resulted in a $600,000 decrease in year-over-year interest expense for the fourth quarter.

Resulting net income attributable to the company for the fourth quarter of 2009 decreased to $3.3 million from $4.4 million in 2008.

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 $0.21 in the fourth quarter of 2009, versus $0.27 in the same period of 2008.

The 2009 fourth quarter earnings per share was impacted by $0.10 on account of the pending California legal settlement, and $0.03 attributable to secondary offering costs.

So without these unusual items, we would have seen a significant increase in earnings per share year-over-year.

In terms of free cash flow, the company generated $6.3 million during the fourth quarter of 2009, which was not much different from the $6.7 million generated in the fourth quarter of 2008.

Touching briefly on the full year results -- gross profits for the full year 2009 decreased by 13% to $78.8 million.

Nine percentage points of the year-over-year decline was attributable to the combination of the company's 2008 receipt of its Hurricane Katrina insurance settlement proceeds, changes in insurance loss reserve estimates relating to prior years, a 2008 insurance dividend, a 2008 gain from the sale of certain assets, and certain 2009 legal related expenses, including the California settlements that we've been talking about.

The remaining 4 percentage points of the decline 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 others.

G&A expense in 2009 decreased 6% to $44.7 million, from $47.6 million in 2008, primarily due to steps taken to reduce compensation expenses.

Although, that savings is partially offset by expenses incurred in 2009, related to the transfer and subsequent secondary offering of shares and certain other legal items, as well as six additional months of costs related to the July 2008 restricted stock unit grant to senior management.

In 2008, we only had six months of cost. In 2009, we had 12 months of cost for that.

Adjusting for these items, legal and the restricted stock unit grant costs and the expenses relating to the transfer of the shares, so those three items, G&A expense in 2009 would have decreased by 14% compared to 2008.

Net income attributable to the company decreased by 26% in 2009, whereas earnings per share declined only 16%, because there were fewer shares outstanding.

Again, to get a clearer comparison of the year-over-year results, 2008 earnings per share of $1.07 reflected a $0.07 benefit due to the 2008 Hurricane Katrina settlement and a $0.04 benefit as a result of only half year of restricted stock unit grant expense.

The 2009 earnings per share of $0.90 reflects a $0.12 hit due to the California labor settlement and a $0.07 hit related to the share transfer and secondary offering.

Without these large items, year-over-year earnings per share would have increased 14%.

Jim will now give you some thoughts on our outlook for 2010.

Thanks, Marc.

Our internal budgets anticipate modest same location growth in 2010. And the key to our continued growth will be, kind of as always, first the retention of our locations without deteriorating fees, continuing addition of new business opportunities, the advance for a lot of complimentary service and products at existing locations, and the control of overhead growth.

That being said, everyone in the business tightened their belts in 2009 by foregoing salary increases and bonuses, as all of us recognized our responsibility to our shareholders.

And assuming that the business performs as expected, and along with the removal of the aforementioned 2009 exceptional items, we anticipate in 2010 a full restoration of our performance based bonus program and modest salary increases in line with cost of living increases.

Consequently, we expect 2010 earnings per share to be in the range of $1.10 to $1.20. This reflects an increase of up to 33% on reported 2009 EPS of $0.90, or 10% on as adjusted earnings per share of $1.09.

While we're cautiously optimistic that the economic environment will improve in 2010, our business model tempers the potential upside of that improvement which is the other side of the coin in a business model such as ours, which provides a measure of protection during difficult economic periods.

Due to continuing limitations on the use of net operating losses, we expect our cash tax rate to be in the range of 25% to 30% in 2010, as compared with 13% in 2009, resulting in an expected increase in cash income tax of approximately $5 million to $6 million over 2009.

Nevertheless, 2010 free cash flow is expected to be in the range of $20 million to $25 million, an increase over the $17.2 million generated in 2009.

As usual, our outlook does not anticipate the impact of any acquisitions that might be completed during 2010.

That concludes our formal comments. I'll turn the call back over to Mary to begin our question and answer session.

Thank you. (Operator Instructions).

Our first question today comes from Mr. Nate Brochmann of William Blair and Company.

Good morning, gentlemen.

Morning.

Hi, Nate.

Hey, why don't you talk a little bit about looking at the lease business which was under pressure a little bit in 2009 and just kind of looking at some of the travel trends?

I would think that that's starting to stabilize. But just wanted to see if you could comment a little bit about that in terms of where that business is now and what the outlook is for 2010.

Yeah, that's a great question, Nate.

As I said earlier, the guidance that we just gave and the numbers that we've looked at in our budgets don't assume even stabilization or improvement in that sector.

Certainly the leases that we have or concession agreements that we have at some of the mid-sized airports, where service has been cut, or in the hotel industry, where room rates have not yet recovered in most of our markets, and in the retail sector, where we have leases that are tied to retail activity, we did not assume for 2010 any improvement in those numbers.

Now, we didn't assume things getting a whole worse. Nate, you've heard me talk on maybe the past four or five quarters now, that the thing that keeps me up most at night is I don't have a real clear picture on where the economy is headed.

I've talked about all the talking heads that I look at on TV at night and real smart people like you guys who take a real detailed look at these industries, but we are sometimes at the forefront of those statistics for those industries.

So, for instance, as we began to look at December numbers and January numbers, there was no improvement year-over-year in hotel room occupancy. As a matter of fact, we have seen it go backwards some.

There was no significant improvement in [employment], particularly at those mid and small sized airports that are dependent on only a few flights a day.

As a matter of fact, some of the industry data that I subscribe to began to temper some of the forecasts for at least 2010 and 2011, one as most recently as yesterday.

So, we're not buoyant on the recovery. Nor did we assume a whole lot of recovery in the numbers that we gave this morning.

Okay, thank you. That's helpful.

And then second, I was wondering if you could talk a little bit about some of the business that you decided to either walk away from or that you lost in terms of some of those management contracts. I know you specifically mentioned the ones in Chicago. And if you could just give a little bit of color there in terms of why that was and also when that occurred within the quarter?

Yeah, the reason, from a broader perspective, is just discipline.

We refuse -- we have really no need to look at strategic market positioning in terms of taking loser locations or loss leaders. And we've remained pretty disciplined as an organization to that end.

So if we see RFPs or opportunities where competitors have put in numbers that we know to cause that contract to be not profitable, we'll walk away. And that was certainly the instance here in Chicago.

And I think we saw a little bit of that in December, but most of that impact will be felt in 2010. But as I said earlier, those contracts weren't necessarily profitable to begin with.

We were making something and then with the new bid we saw that it was just crazy. And that's about discipline within the organization.

Now that said, there have been leadership changes at our large competitors. We've seen tempering of some of the lack of discipline in the industry in terms of, all of us remember that we're in the business as a for-profit organization. And we begin to see some of that.

Certainly we've taken advantage of our business model and our success to invest in those markets that we see available to us in the future. And that discipline in not taking losing contracts helps us invest in that.

I would hope, and as I've said, we've begun to see some tempering of taking locations, our competitors taking locations just for the sake of raising their location count, but to the exposure of the bottom line.

So, we'll continue to do that. I don't care about having 2,200 locations or 4,000 locations or 2,000 locations. What I'm concerned about is earnings per share and generating revenue from the opportunities we have in the marketplace.

We definitely appreciate that. And just to clarify on that, it sounds like, based on your commentary, that this is kind of a one-off situation here and there. And that's something that might be indicative of contracts coming up for renewal where there might be some pricing pressure, etcetera. It sounds like this was kind of specific just to this contract.

Yeah, you're hitting it right on the head.

Marc and I just came off the road. We try to spend February out on the road with our operating divisions kind of having some really detailed discussions about what's going on out there.

And certainly 2009 was a year where we faced downward pressure on pricing. It was certainly the single largest issue affecting our field people in terms of contract retention opportunity.

And like everyone else, during this sort of recessionary period, we struggled through that downward pressure.

I can tell you that I think most of that's done. What we've been hearing now from the results of those meetings in February and March that a lot of that downward pressure has reached its level.

And again, hopefully there's some clarity within the competitors within our industry and within our sphere that reasonableness will begin to prevail.

Again, I think that the management shake-ups, those people that compete with us, will cause those competitors to take a look.

Great. I'll go ahead and turn it over to somebody else. Thank you.

Thanks, Nate.

Our next question comes from Bob Labick from CJS Securities.

Yes, good morning. Actually it's Fred Buonocore calling in for Bob.

Hi, Fred.

Just wanted to see in terms of the Game Day acquisition, how that performed at the Olympics as well as Super Bowl and kind of if you can elaborate on the growth opportunities for that business.

Yeah, they did great. We did great. All of the feedback that we've gotten from [Vannock], the Olympic Committee responsible for organization up there, and the IOC and the follow on media is that we just did a terrific job getting people where they needed to be.

And some of the technology that we deployed with our Click and Park and Click and Ride products caused those people that wanted to get to the events to get there in a very efficient manner.

So the feedback has been great.

The feedback from the South Florida organizing committee for the Super Bowl was also terrific. The Super Bowl went off very well. We had an additional opportunity down there this year because the National Football League decided that they were going to have their All-Star game the week between the end of the play-offs and the Super Bowl. So it was an additional profit opportunity for us.

So both of those went great. The feedback has been terrific. And in terms of the larger question, now that we've gotten the capabilities of Game Day around to our, if you will, the parent company operators in the field, the product that we feel that we can now deploy in stadium and special events is unrivaled, given our operating history at football venues or baseball venues or concert arenas.

The addition of Game Day and the talents that we bring along in terms of congestion planning and technology solutions and the Click and Park product that I mentioned earlier, really give us a sort of one stop shop opportunity for those operators. And that's beginning to gain some traction.

Certainly, you've seen us advance in that arena with what we've been doing at Yankee Stadium and with the Los Angeles Dodgers. We're pleased to announce that we'll be working with the California Angels and continuing to expand the horizons that we have in that venue.

And Game Day has fit like a glove and we just welcome those team members aboard our family.

And just to add a specific comment about the financial performance, it performed during the first half of our half year ownership that we had in 2009, right in line with our expectations at the time we did the acquisition.

We obviously have bigger expectations for 2010 because of the fact that Game Day's existing business base is concentrated in the first half of the year.

So clearly, expecting some big things from it and that will be an important part of what will cause us to have our expectation of having gross profit growth in 2010.

Great, that helpful. And then turning to the Metropolitan Washington Airport Authority contract, congratulations on that. And wanted to see if you could kind of quantify for us maybe the size of that piece of business in some way.

Yeah, it is certainly six figures for sure and up towards the higher end of that range. 70 buses and responsibilities as we outlined in the release last night Fred, certainly our compensation would be commensurate with that.

It certainly also points to some of the comments I made earlier about, in the transportation case, literal traction, but the complimentary services that we've been working on and investing in, whether it is maintenance or transportation or security or small asset property management, the addition of the Game Day product into our arsenal of talent skills.

And then the investments that we've made in bringing specific resources aboard for the hotel industry, the office building industry, the municipal outsourcing and privatization efforts that are going around the country.

All of those initiatives that we've been investing in over the last three, four, five years now, are beginning to pay off and gain some traction around North America.

You heard me talk about the fact, although that we deferred our own salary increases and our own bonuses last year, I didn't lay anybody off. As a matter of fact, I hired more people into the company to provide resources into the business to position us for the future.

As disappointed as I am about the noise created around the business, whether it was the secondary offering of our shares or the controlled shareholder debate, or the issues we had to face in California on a labor perspective, why certainly they were distracting.

It really didn't distract us from our very simple mission, which is expand the amounts of products that we can offer to our client base and position ourselves on a support platform here in Chicago that can efficiently support those businesses.

And we didn't spend one penny less in making those investments in 2008 or 2009 nor do we intend to abate or slow down that investment in 2010.

Great, now that's helpful. And just a quick follow up on the Washington contract. It was just interesting that you did get the transportation, but I guess the incumbents kept the parking contract. I just wanted to get some color on how that parking contract was determined and what made it difficult to unseat the incumbent there, if you will?

Price.

Price.

Yeah, I'd say price was one of the determining factors. And sometimes when you find an institutional or municipal group that's responsible, in that case there were four different contracts, two transportation, two parking.

Sometimes it's the safe play for those administrators up front to spread the award around rather than operating all four components to one operator.

We've seen that before on the west coast in Los Angeles and in New York at the New York airports where the decision makers amongst the bureaucracies tend to want to be somewhat cautious in making the award to one vendor.

Hopefully, we can demonstrate that we'll do such a good job on the transportation side that there won't be any hesitation about continuing to expand our relationships with those airports.

Great, thank you very much. I'll jump back in queue.

You're welcome, Fred.

(Operator Instructions).

Our next question comes from Justin Webb from Robert W. Baird.

Yeah, thanks for taking my question.

Morning.

Good morning, Justin.

I was wondering if we could talk a little bit more about the 2010 guidance because I guess I'm just having a little bit of difficulty making the [MACs] work when you're talking about gross profit expectations being relatively modest.

And then adding in the additional G&A expense from the salary increases at the $12.5 million per quarter guidance you're giving. I'm getting something like, that's an additional $7 million or so of costs that you're adding back in.

So just trying to understand a little bit more what you're expecting on kind of the growth and the margins for 2010 and also maybe what your tax rate assumption is.

Okay. A couple of things I think I can help you with some clarity.

I don't think it's the right conclusion to say that we're assuming gross profit is going to grow modestly. We had some big hits in 2009 that affected the gross profit line.

We've talked about the California cases, that's $3.1 million, that occurred in 2009 for those cases.

We had about $1 million of other legal settlements that also hit gross profit that we talked about in the third quarter and second quarter of the year.

So, right there you've got about $4 million that's not going to, we don't expect and shouldn't, [certainly] won't for those cases, recur in 2010.

And then as I mentioned earlier, we're expecting not only the full year effect of Game Day, but much more than the full year effect of Game Day because of the fact that their business is so concentrated in the first half of the year normally and then this year in particular with the Vancouver Olympics.

So, I think all of those things are going to drive gross profit up substantially and our expectation, if we take away the legal settlements and just kind of look at underlying gross profit, we're really expecting that that is going to grow at comparable level to our historical growth rates.

And that's going to be from a combination of new business, some of which we've talked about over the past few quarters, and obviously Game Day's contribution to gross profit growth.

So, I think you'll see us get back to the underlying gross profit growth. If you take out all those legal items I mentioned, gross profit should grow substantially greater, at a greater rate than the underlying historical rates.

And how much of that is from Game Day? Is that half of your growth? I mean, I guess I'm just trying to understand how much of a contribution that's going to make.

We really don't break out that kind of information. There's a lot of estimates that go into trying to forecast what's going to happen and it's just not something that we break out.

Okay.

But it will be a major contributor along with the other elements that I mentioned.

Okay. And the tax rate, just because it looked like it was a little bit lower this quarter than it was the rest of the quarters in '09. Do you have kind of an expectation for your book tax rate?

We do and I think probably for planning purposes, you should use 40. We do sometimes find it as we get down to year-end we have tax credits from hiring people.

There's a lot of jobs tax credits and other incentives that are given to employers to hire folks. And those credits aren't really determined until we get down to the end of the year.

So, just like last year, you saw our effective tax rate dip a little bit in the fourth quarter. That happened in 2008 as well.

So, when we go into a year and we formulate our earnings guidance, we're expecting 40. And I think our hope and expectation is that it would come in slightly lower than that.

Okay. Great. And I guess just the last question in terms of the margins -- with your IT investment, any update on that? I think you talked about in the past that that was supposed to contribute maybe $1 million to $2 million in G&A savings, maybe towards the back end of this year. Any update on that front?

Yes. I was just going to say you're right on with your numbers and we're expecting in our 2010 results to actually get the full amount of those benefits.

We got some of that benefit in 2009. The rest of it is included in our 2010 budget.

We have now basically rolled out all the [time and attendance] wage planning and control systems for HR. That's fully done.

We're now in a heavy roll out period for our procure-to-pay. So all of our online procurement and also automated accounts payable systems is in the midst of a major roll out right now. And we expect that to be fully completed in the first half of this year. So, those will basically be completed.

Our monthly parker system has been rolled out to some clients. We're continuing to make some modifications to that system to add to its functionality. And we expect to begin rolling that out to additional clients throughout 2010.

So that will not be fully implemented in 2010, but some of that will roll over into 2011. And I think once that is fully deployed, there could be some additional G&A savings opportunities in the business that we haven't identified.

But the $2 million that we identified for you said that we anticipated we would get, we expect will have been realized by the end of this year.

Great, thanks very much. Very helpful.

Just to add to that, in terms of the specifics around those cuts -- we've already downsized the support offices that we had in Los Angeles and up in Canada and brought those processes here to Chicago in order to continue the underlying theme of the business, which is our entrepreneurs reside in the field and our processing, our data processing and support processing occur on a centralized basis.

So, those jobs have already been moved to Chicago on a more efficient basis. And it's resulted in somewhat of a net, not somewhat, but a significant net result in reduced head count.

Great, thank you very much.

Thanks, Justin.

Our next question comes from David Gold from Sidoti.

Hey, good morning.

Morning, David.

Hi, David.

Marc, was hopeful, I guess I'm a little bit confused on the G&A goes ins and goes outs, I guess for this year. You gave a number of 12 to 12.5, which I guess on the high side suggests pretty aggressive growth on the G&A side.

I understand you're going back to [accruent] for bonuses and cost of living adjustments, but I guess at the times, we should have some savings from the roll over from the new procurement systems and whatnot.

Can you just go through that for me one more time? I may have missed some of the numbers or just gotten confused with it.

Sure. I mean, obviously, some big things impacted G&A in 2009 and we've talked about all of those previously.

The entire change of control we had that lead ultimately to the secondary offering was $1.7 million and that affected 2009 G&A.

We also had some cost relating to other legal matters. And we used to have cost associated with the Office of the Chairman. So, all of those are costs that aren't going to recur in 2010. Obviously, you know all of that.

On the other side of that, we're expecting a further G&A savings that we talked about from the roll out of these IT systems and that might be close to $1 million in 2010.

So we're looking at a substantial improvement in our G&A cost base from the deployment of those IT systems.

That being said, the growth in Game Day's organization and the full year impact of Game Day, adds substantially to G&A. So while there will be a nice boost on the gross profit line, and frankly, a nice boost on the operating income line, there's going to be a big increase in G&A related to that.

Because they have a large organization, it's really a virtual organization, but when these big events come along they have a lot of costs.

And then, of course, the restoration of the bonuses. And I think we talked in the past that that's several million dollars.

So, if you were to exclude some of those big things and look at the year-on-year year growth in G&A, we're really talking about our underlying G&A growing at rates that are comparable to what we have grown in the past, kind of the 4% range.

But our total sort of headline G&A will clearly grow at a faster rate because of the effects of all those items I've mentioned, David.

Okay. Perfect, that's helpful.

And then, couple more things. Labor violations -- are there other of those cases out there that we should sort of know about or worry about or just be up on?

No.

No. Okay.

I'm knocking on the top of my head, David. In this sort of an environment, it gets rather litigious.

I'm not saying, intentionally wouldn't be the right word. I wanted to, given where that case was going and some of the other settlements we did in the secondary offering and the stock issue, we wanted to put all of these issues behind us in order to add the transparency and color that we're doing today and in the release last night.

But, remove some of that stuff from distracting us on the primary business mission, on a move forward basis. So, it was a long answer.

The short answer to you is no. We don't have any of those cases out there right now, pending.

Okay. And then, on the free cash flow side, planned uses at this point?

Well, nothing has really changed. Obviously, we've gone through a period of changes in our board of directors and spent a lot of time focused in 2009 on the change that took place with the controlling shareholder.

And early in 2009, a decision was made by the board to discontinue share buy-backs so that the company could navigate through those changes and also the economic period that we're in right now.

But I think looking forward, the three basic uses of free cash flow that we've talked about for many years, are really unchanged.

The business gets the capital that it needs to grow, and it isn't very much because we operate with negative working capital. We don't have to spend much on CapEx for ourselves.

But first and foremost, we're looking at acquisitions as an opportunity to grow strategically in important markets, like the Game Day acquisition last year.

So, to the extent we can complete attractive acquisitions at good multiples, that will be the primary use, I think, of our free cash flow.

And then, clearly over time, we understand that there's no value to shareholders in having zero debt on the company. And so, we'll have to reconsider and advise and consult with and get the board's decision on how we give value back to shareholders.

And whether there would be a resumption of share buy-backs or not in 2010, I think, is something that's yet to be discussed.

Um hmm.

And in the absence of all that, we pay down on our revolving credit line.

Gotcha. And then just one last, I'm not sure if I missed it, but did you give a retention number?

We gave a retention number for locations of 87%, which, as we said in the release, was impacted significantly by the [COYO] contract where we lost 47 locations.

But Jim mentioned in his comments, that our profit retention was 97%, which is really in line with where we have been in the last several quarters.

Gotcha. Perfect. Thank you both.

Okay, thanks.

You're welcome.

Our next question comes from Bob Labick from CJS Securities.

Just a quick follow up. Noticed that the [Sacretoga], the city that had historically free parking and then was working on putting a parking contract in place to bring in revenue from their parking in the downtown area.

Actually, pulled this parking contract and it just kind of interested me as it relates to municipal trends. Can you shed some light on what you're seeing from municipalities around the country and what the opportunities look like there?

Yeah, we can't keep up.

Yep.

It's a nice issue.

You've heard me talk in the past about rolling out the SP Plus brand, which is enabling us, complimentary services in markets that we're targeting for the future, based on where we see the industry and opportunity heading.

On the municipal side, there are dozens and dozens of municipalities now that are facing operating budget shortfalls that are making the three choices that I outlined for you last quarter.

Either they're entering into a concession agreement for a long term, in essence, lease of their revenue generating assets or some sort of a [lease-lease] back opportunity in order to get a one-time sort of check written to balance budgets or just privatizing the operation while keeping control of the operation's pricing and management, but using companies like ours who are much better at percentage collection, ticket writing collection, and then managing the labor to get that done.

And we created SP Plus Municipal Services as part of our expanding package some time ago. And we brought on several resources who have either managed for municipalities or consulted to municipalities the privatization effort.

We've also got strategic alliances with several technology companies that might enable solutions that we haven't yet either generated in-house or we don't have an [intention] to generate in-house for ticket writing or campus administration or using Click and Park, which is a product we do own, all of that geared to address these issues.

So, I wasn't all together joking earlier when I said a hard time keeping up. There are just so many opportunities in those three areas.

And we're aligning ourselves with the infrastructure funds that might be buying these assets. And hopefully convincing that we're certainly the most attractive vendor in terms of being able to perform the operations.

We're on the ground in all of the cities that are contemplating privatization efforts. There probably isn't an opportunity around the country that we're not aware of that isn't in our pipeline.

So it is certainly an area that we've invested on and it took us four or five years to get to the point we're at now, which was timing the market almost perfectly in terms of these opportunities.

Most of you have probably read that the city of Los Angeles is privatizing their off-street garages. There are similar opportunities in Pittsburgh, Indianapolis, Las Vegas, Hartford, Connecticut. I could sit here and have this chat all day.

But fortunately we have the resources, geographically, and talent-wise to keep up. And it is certainly an opportunity for us.

Now, I won't talk to you about the politics of the municipalities making these decisions, but with the opportunities being out there, we're certainly prepared to address them.

That's great. Thank you very much.

There are no more questions at this time. I would like to turn the presentation back over to Mr. Jim Wilhelm for closing remarks.

Mary, thank you very much and thank you for everybody for being on the call this morning and engaging us in the dialogue.

We look forward to either talking to you next quarter or seeing all of you some time between now and then.

Have a great spring.

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.