SP Plus Corp (SP) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second-quarter 2010 Standard Parking earnings conference call. My name is Matt 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 and instructions will be given at that time. 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, Matt, and good morning, everybody. I'm Marc Baumann, Chief Financial Officer of Standard Parking, and I'm your primary Investor Relations contact. Welcome to the conference call for the second quarter of 2010. I hope all of you have had a chance to review our earnings announcement which was released last evening. 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. 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. Good morning, everyone, thanks for joining us this morning. Overall we're very pleased with the Q2 results primarily as it's largely free of much of the noise that affected us over last several quarters. You know that maybe for the last four or five quarters Marc and I have taken a lot of time trying to walk you through on a transparent basis the performance of the underlying business during the economic downturn. So, we're pleased that we don't have to spend a whole lot of time talking about that sort of noise as we've gotten the business past that.

For instance, if you'll recall in 2009 we had some significant legal-related costs which largely did not occur this year to date. And going the other way, in the second quarter of 2009 our decision to suspend our performance-based bonus program for the last year resulted in our reversing out the amounts we had accrued for it in the first quarter of 2009.

This caused the G&A to be unusually low for the second quarter of last year, so a resumption of the bonus program for 2010 produces what appears as a large year-over-year increase in the G&A line. It was actually more indicative of the appropriate run rate for G&A.

I would also remind you that we suspended salary increases in 2009 for our people and restored salary increases in 2010. So if you look at the amount of money that we -- or the amount we spent on compensation increases this year over last in terms of restoration of raises and bonuses, our run rate for G&A is actually going where we want it, which is to be running the business efficiently as it continues to grow.

And we've talked about the benefits of some of the initiatives and investments we've made over the last several years to get there. And we would be glad to talk about this a little later as we saw that there were some questions of this on the overnight report.

With this quarter's results there are some hopeful signs. We saw our same location gross profit growth for the first time since late 2008. We've also begun to see what we believe to be a conclusion of pricing pressures on management fees and negotiations for contracts that have been renewed. In essence we believe that we've been through that period now as the economy begins to flatten out.

I don't certainly want to use the word grow at this point. But as the economy flattens out we think we've been through during the renewal stages of our contracts an adjustment to market pricing based on losses of our dropped revenue at either the commercial institutional or municipal marketplaces that we serve. And we think that a lot of that pressure is over which got the results that I just spoke of.

We did see flattening in some of the markets that have been most affected by the deterioration of the economy over the last 18 plus months such as airports, hotels, retail and special events. We remain quite guarded, however, in our outlook for the travel-related and consumerism areas of our business as hotel and airline industry trends suggest a continuing softness in those areas for the remainder of this year.

I would refer you to some the most recent forecast that I saw this week indicate US airports and US airport employment are forecasted to be no better than flat for the remainder of the year. They've been on average flat for 2010 compared to 2009, some months up three or four points some months down three or four points. But if you look at the activity through June, really the marketplace has been flat.

The forecast that we're seeing based on the services that we subscribe to would imply that that flatness this will continue through the third and fourth quarters of this year. While the Asian markets and the Eurasian markets have 3%, 4%, 5% growth attached to it the US market is projected to be flat, so we're -- using that information.

In the hotel markets we tend to look at some statistics that imply where hotel revenues and hotel overnight stays are compared to those peak times in 2006, 2007. And why some markets have recovered to less than double-digit comparisons to 2008 and I would highlight New Orleans and some markets in the South Atlanta. I think the New Orleans data, because we operate hotels in New Orleans, I think the New Orleans market is being driven a lot by the fuel spill in the Gulf, which has probably an unusual amount of hotel stays along with a normal New Orleans tourism business.

But if you get to the bottom of the top 25 markets you still find New York and Chicago and Houston and markets where we have hotel -- significant hotel investments as much as 30% off from their peaks of several years ago in all of the three that I mentioned in the band between 25% to 30% off from that area.

So I thought I'd add some color to this report to give you an idea of the numbers of that I have in my head when I think about the economy. And you've heard me talk the last three or four calls about really any lack of solid clarity about growth trends in those areas.

More positively, however, the institutional municipal market place appears to be strong. Our new business pipeline in those areas is full and our acquisition of the Gameday business is adding to the bottom line as well. Our location retention rate remains solid at 89% and our location operating profit retention remained at 97%. As a reminder this statistic means that only 3% of our last 12 months profit came from locations that we no longer operate.

Just to wrap up a little bit -- I talked about that new business pipeline and I've been talking about our penetration into the municipal marketplace as a result of privatization -- either partnering with infrastructure funds who might be purchasing city-owned assets or the outright privatization of the operation by the municipality itself.

To give you an idea, we had eight news start-up municipal contracts so far in 2010 or maybe over the last seven or eight months. And there are 43 opportunities that we're actively bidding across the US now in terms of potential.

So that marketplace continues to grow. If we were having this same discussion just five years ago, and certainly before the economic downturn and the pressure on municipalities began to occur, there might have been half a dozen opportunities a year on outsourcing for the operation of either on-street or off-street municipally owned assets. So I again wanted to use that statistic to give you an idea of what's going on out there.

Before I hand the call over to mark I want to comment on our outlook for the remainder of the year. As the release describes, we've adjusted our earnings per or guidance range to $1.05 to $1.10. Although our core business is performing well, as we look out at the remainder of the year, there were several items that we didn't anticipate that we felt we should take into account now.

One is that we project to incur more legal expenses than we originally expected over the next several months to close out those few lingering prior-year legal matters that I've spoke of in the past that just simply can't get closed. And I could go on all day about the legal system, but I won't. But they certainly haven't resolved themselves in the manner and time that we had expected.

Another is a significant reduction in the scope of services to be provided at one of our upcoming Gameday events. Certainly without identifying the event, as you might suspect, large events, whether they are NASCAR events or PGA golf tour events or Baseball this summer or lots of the stadiums and concert type events that we do and are certainly affected in this economy.

One of the large events that we had planned to -- not planned, that we will run this summer for the Gameday arm is just expecting significantly lower attendance and we're adjusting our numbers as such for that one event. The last item is a change in our expectation for currency exchange rates that affects our growing Canadian operations, the Canadian dollar has fallen against the US dollar and we have taken that into account for forecasting the rest of the year.

If you put all of those one-time or the events that I just spoke of together -- I just don't see the opportunity given the economic situation that I laid out earlier that we would depend on the economy to recover for those few pennies of shortfall that I mentioned in the nonrecurring events. We just didn't feel there was enough strength in the economy for the third and fourth quarter to cover these items that I just mentioned.

So taken all together along with we felt the prudent thing to do was to adjust our EPS and narrow it down to the range that we put out last night. With that, I'll turn the call back over to Marc so that he can lead you to a more detailed discussion of our financial performance and then we'll open the call up for Q&A.

Thanks, Jim, and hello again, everybody. Let's now take a look at our financial results for the quarter. Excluding reimbursed management contract expenses total revenue for the second quarter of 2010 grew by 4% over the same period of 2009. While lease revenue was down by 4%, management contract revenue grew nicely by 13% primarily due to the addition of new locations and the addition of the Gameday acquisition locations.

Gross profit for the second quarter of 2010 increased by 13% year over year due to several factors including an increase in gross profit at same locations, which Jim mentioned earlier, the addition of new airport and transportation contracts, primarily Atlanta, Dulles and Reagan National, the acquisition of Gameday and the fact that our legal-related costs in the quarter were less than they were in the second quarter of 2009.

G&A expense for the second quarter of 2010 increased by 18% as compared with the second quarter of 2009. And I know Jim explained this in his remarks; I think it's important to highlight that 15% of the increase was due to the compensation issues that Jim talked about. The underlying G&A grew by only 3% and was in line with the run rate guidance we gave at the end of the first quarter of this year, which was around $12 million per quarter.

The second-quarter G&A was slightly higher than that run rate due to the timing of stock grants to the Board of Directors. We give an annual stock grant to our Board, it is typically done in the second quarter. Last year it was in the third quarter. And that's a little over $200,000 of the G&A in the quarter. Looking forward for the rest of the year we still believe that we'll average around $12 million per quarter for the remaining two quarters on average.

As a result of all these things second-quarter 2010 operating income increased 7% as compared to the same period of 2009 and net income attributable to the Company for the second quarter of 2010 also increased by 7% over the second quarter of 2009. However, the increase in earnings per share was lower at 4% due to the increase in the weighted average shares outstanding as a result of stock option exercises.

Free cash flow was negative $1.4 million during the second quarter of 2010 as compared with $6 million generated in the second quarter of last year. During the second quarter of this year working capital was consumed by a temporary increase in accounts receivable from several large airport and municipal locations. And we estimate that up to $10 million was overdue at June 30.

We're not concerned about collecting those funds and, based on what has been collected since June 30 and discussions we've had with these clients, we expect that the accounts receivable balances at these locations will be substantially lower by year-end. As a result we are able to reaffirm our free cash flow guidance of $20 million to $25 million for the year.

Now I'll touch briefly on the year-to-date results. Gross profit for the first half of 2010 increased by 5% over the same period last year. Factors contributing to the gross profit increase include the addition of several large airport and transportation contracts that I mentioned, the acquisition of Gameday and, again, the legal-related expenses were much less in 2010 than they were last year.

G&A expense for the first half of 2010 increased by 3% over the same period of last year primarily due to the restoration of the performance-based compensation programs this year and some incremental G&A associated with the Gameday operations. These increases were obviously offset by the absence of the legal-related expenses that we incurred last year that didn't recur in this year to the same extent and by cost efficiencies we're continuing to realize from the rollout of our IT initiatives.

Net income attributable to the Company for the first half of 2010 increased by 11% of the same period of 2009. Over the comparable time period EPS increased by 10% to $0.46. The growth in EPS was slightly lower than the increase in net income, again due to the increase in weighted average number of shares outstanding resulting from stock option exercises.

That concludes our formal comments. I'll turn the call back over to Matt in case you have any questions.

(Operator Instructions). Nate Brochmann, William Blair.

Good morning, gentlemen. I was wondering if you could talk a little bit -- I thought that the gross profit growth during the quarter was exceptionally or was improving in terms of the strength there. And you talked about some of the wins. We saw a big pickup in the number of management contracts that you won.

Just wonder if you could talk a little bit about the color a little bit more within the business and what you're seeing? And I know that you talked a little bit about still expecting softness relative to history in the travel markets, but also if you could expand a little bit -- it feels like it is at least stabilizing for you.

Yes, I'll be happy to take the first part first. In terms of the gross profit growth, I think that you're seeing some return to normalcy to the business model that we've talked to you in the past about. My management contracts and leases tend to grow organically year over year by virtue of the language in those documents that allow us to up-charge to CPI or some negotiated percent, Nate. And leases will tend to grow where we can raise prices.

Normal gross profit growth is also supported over those areas by winning new contracts and hopefully bringing in those contracts on an average that generate at least as much if not more than our average growth. So that's all good. I think we've been seeing that over the last several years occur, but that's been weighted down by some of the renegotiations that we've had to go through as contracts renew.

While our contracts are stated fee usually and we're relatively insulated for the most part from downturns in the economy, as contracts begin to expire or roll over and revenues have gone down at those facilities, then the clients want the management fees to be in line as a percentage of revenue, which is usually the foundation of that negotiation.

So I think we've seen, as I said earlier in my comments, we've seen some of that price pressure begin to go away as we settled into this economic situation. If we've done our job we've negotiated as part of that extension upside opportunity so that if, in fact, we are taking a percentage of the gross of our management fee, that as the gross returns to past historical levels then we can ride that up a little bit. So we're willing to give a little bit as long as there's a get on the back end.

In regards to the airport industry, the travel-related industry, what we're saying is we think we're saying that those industries compared to 2007 have bottomed out. And that there has not been a consistent -- at least the trend lines for the last quarter -- that we haven't seen further erosion in overnight room stays in those markets that I highlighted or further erosion in employment or and the results and paid exits at our airports.

So I think what we're really saying is we've seen that begin to bottom out. But there's nothing in those numbers that would tell us that those numbers are going to go away or go up again in the third and fourth quarter.

So we are not -- while we're somewhat heartened that we think that they've stabilized and that we can look to the current levels for comparison and re-forecasting into Q3 and Q4, there's nothing in those numbers that are telling us or if you read the jobs reports or any of the other economic data that you might have a look at there is nothing in those numbers that would cause us to be overly buoyant about our trends back in the upward direction.

That is fair enough and thanks for the color. Switching gears just a little bit. I want to talk about the acquisition pipeline and the environment. I think that we've all read that there's a lot of small company owners out there who might be interested in doing something ahead of next year in tax changes. I was wondering what you're seeing in your pipeline and whether that's getting even a little bit more fall and some of those deals might be a little bit closer to closing?

Yes, yes, yes and yes. We're pretty busy in that area right now. We are seeing I think some recognition of what market pricing ought to be and owners with a more realistic assessment of pricing and we're then working multiples with them that get us where we want to be in terms of our ultimate returns on those.

So, yes, we're pretty busy right now. Whether we can get deals closed before the end of the year will be entirely up to the sellers. I can tell you that since we spoke last, since it last quarter at there has been an uptick in activity, we're pretty busy on -- I don't want to say how many fronts, but I can tell you it's more than three. And we'll see if we can get some of those deals closed as long as we can reach what we think to be a fair deal for both buyer and seller. We maintain deal discipline. As I've said before I don't need to reach and I won't reach.

And actually to that front, could you talk about whether you're seeing any competition for those deals? And if so on what front?

No, we are really not. As far as we know the deals that we've been working on for the last four or five months we've been working on -- it's not part of an auction, we don't feel any way, that we are part of a process with a whole lot of competition. We think that the agreements that we've entered into would sort of imply for us that we're sole sourcing those deals at the moment.

Great. I'll turn it over to someone else, thanks a lot.

Thanks, Nate.

Bye now.

Bob Labick, CJS Securities.

This is actually [Jared William] calling for Bob. Ancillary services growth in the core part of your strategy. Could you provide us your outlook on growth given the current economic environment and then also what new products are on the horizon?

Well, and I think you've heard us talk over the last several quarters about successes that we've had in the area of transportation. And we're running a considerable amount of buses every day, a lot more than we were running just several -- a couple, three years ago. So certainly the transportation and SP Plus transportation has gotten traction literally and figuratively by virtue of its brand.

We spoke about the [ENWA] contract all year and that is a significant win for us. There are other transportation contracts, some affiliated with airports and others that aren't, that we're actively pursuing as part of our pipeline opportunity. So I would think that transportation is certainly the ancillary service that is maturing the most rapidly.

That being said, our people have done a pretty good job this year of integrating our cleaning and maintenance services into our existing location in certain geographies. So, in a broad statement we've had much more success so far east than we have west in integrating additional ancillary maintenance services into our client -- our existing either parking or transportation base.

So, maintenance has also gotten (inaudible). We don't break out these segments for you financially, but maintenance is certainly gaining traction and we would expect even more so particularly in the west in 2011.

Security is still in our incubation stage. Most of you understand margins and securities and multiples being paid for security. So we're not as ambitious to be rushing the securities segment into our portfolios until we see some stabilization of that marketplace, whether it's manned security or video monitoring of security services.

I think I would still -- Marc and I would still advise you that those initiatives, whether they are property management security, transportation and maintenance, make up less than 10% of our gross profit.

And we will continue -- we think they will grow on a material basis quicker than our historical parking revenues would grow. How much will be determined on how good of a job we can bring those services to market and attract our existing clients, and already in the case of some of our transportation clients, third-party clients who are unrelated to our parking portfolio.

Thanks. And the second question I have is maybe you could just provide an update on the municipal outlooks, just particularly as it relates to RFPs for Pittsburgh, LA, Indianapolis, and any other cities that are on the horizon?

Well, I did that earlier in my presentation if you heard it. So if you weren't on the call you might want to listen to the replay because I gave some numbers on (multiple speakers).

Oh, I'm sorry -- any specific cities that were --?

Yes, proposals have been accepted by Pittsburgh and Los Angeles. We're part of teams for both of those and the cities have those proposals under consideration with no definitive timeframe for an answer.

Okay, thank you.

Kevin Steinke, Barrington Research.

Good morning. I was just wondering if you could provide a little bit more color on the nature and the size of the contracts in the municipal market that you've signed and that you're seeing in the pipeline. Are they generally on street parking contracts or are you seeing opportunities for your other services?

Well, Kevin, they really go across the spectrum. They can range from managing off street assets in the city of Miami to managing both the off street and on street assets as well as ticket enforcement writing and other responsibilities, collection of parking ticket revenue.

As I've talked about maybe for the last year or so on these calls, municipalities -- we think the smart municipalities are saying to themselves, before we consider selling this asset we need to really understand what the full revenue producing opportunity is in order to create the proper valuation for sales that we choose to do so.

So there are a lot of municipalities that are saying, hey, we will privatize the management and operations of all of the issues whether they are ticket writing, meter collection, meter provision, off street garages, collection of the revenue and some in different phases we'll get there. And then we'll enter into a three- or five-year contract.

In terms of their size, as I said earlier on the call today, the size of our fees and opportunity for profit are linked to the revenues that are provided by those facilities. So, the very large cities, you could get a contract for $300,000 or $400,000. In mid-sized cities it might be $100,000 to $200,000, and in smaller cities $50,000 to $100,000. And again, it's depending on the scope of services.

So, they sort of our all over the place. And when I talked about 43 opportunities that are active right now, which means that they are either in the RFP stage or RFPs have been submitted and are awaiting approval or decisions have been made and are awaiting contract signatures. Those are significant, but all across the spectrum in terms of opportunity.

Hopefully what I've given you is at least the range and depending on where you get success (inaudible). We think that that process then after they've gone through a three- or five-year process of maximizing the value.

Then they will look for the infrastructure funds if they are in the same debt or economic predicament at the end of that time period to try to make up either debt deficits or operating budget deficits by virtue of selling or long-term leasing or sale-leaseback is a popular sort of infrastructure move at the moment towards expediting the use of their revenues to deal with some of their problems.

And we've seen Pittsburgh and Los Angeles move sort of in that direction. Obviously Chicago had been almost the pioneer in short-circuiting that sort of a process and just going to market with a valuation of those facilities based on historical and then selling the assets to the most qualified bidder.

Great, that's really helpful. And just following up on that, it's probably hard to characterize a typical sales cycle in the municipal market. But if you could maybe try and do that and also what sort of competition you generally face when competing for these contracts? Thanks.

Yes, that's a good question. The lead time depending on -- it really depends on how you look at it. Usually once an RFP goes out on the street then it's a six- to eight-month process by the time you bid and the bids are evaluated. It's typically in government a little longer than on the private side in that there are more barriers and hurdles to cross.

Usually there's a local parking administrator and a purchasing agent who will make a recommendation to a department head who will then have to carry their decision to a city council who then ultimately has to take it to a mayor depending on the strong mayor, weak mayor scenario in some cities.

So, it might be a year by the time an RFP gets issued to the time you get a signed contract and go to work. The lead time is expanded over that in terms of our sales people being out in those communities encouraging communities to bid and get to the RFP process.

So if there is a municipality that's not actively in the preparation stage of an RFP or an RFQ and we're working with them towards the development, from the time we make the initial contact with the municipal administrator or Chief Financial Officer, or maybe it's the mayor's office who's querying about what the potential is, it could be two years by the time we go to work.

So, much like the airport business the sales cycle is longer than the typical urban business. I think that's a pretty good synopsis. And we're seeing that. Most of these -- if an RFP goes out it's a year, about a year until we go to work.

Great, thank you. And one last question. It sounds to me like the reduction and the scope of services on the Gameday contract is related to the economic headwinds you've been discussing here just in terms of reduced attendance at this particular event. Is that a fair assessment?

Yes.

Okay, great. Thanks a lot. That's all I had.

Thanks, Kevin.

(Operator Instructions). David Gold, Sidoti.

Hi, good morning. If you can, would it be possible between the three factors that you pointed to for changing guidance or reduction in guidance, to weight those a little bit for us?

Yes, sure, we can do that. Definitely the legal is the number one. And obviously this Gameday event would be number two, and the exchange rate will be the third one.

Okay. And on the legal side, can you give -- I mean, without getting into anything too specific to make you guys uncomfortable. Can you give just some specifics to just sort of how things ramped up or was it -- did you have maybe there were settlements going on that didn't quite work or things accelerated or what changed to ramp that up for the second half?

Sure. I mean, first of all, none of these are new matters, so these are legal matters that were going on last year that we talked about extensively on the calls. We expected that all three of them would be basically wrapped up by year end. And as far as any settlements or costs of that nature, we weren't expecting any of those to really flow into 2010.

What's happened, and this is inevitable I guess with litigation, sometimes things take a little longer as you cross i's and dot t's just to get officially wrapped up. And that's really what's happening. And as things stand now we don't really see any of these spilling over into 2011; we do fully expect them to get fully resolved this year. But just given the amount of legal costs that we're incurring to bring these to a complete close, we really felt that it was important to call that out as we looked at our guidance for the rest of the year.

I think what we're saying, all of you and David, because you're on with us now and in the release last night, is that the combination of these three things, we were tracking to where we thought we'd be for the entirety of the year in terms of our initially provided guidance range and feel pretty good about that given what was going on.

But it's a very simple issue if you look at it, the three issues that Marc just reviewed -- the legal, some of the legal issues, the Gameday issue and the Canadian currency issue, were enough of a hit that I wasn't comfortable that there was enough of an upturn coming in the economy to offset that over where the business would have been going without these three things. That's really all we did.

Okay, okay. Fair. And then second, the Gameday piece, I think I get it but just to be clear. Basically the change there is lower attendance expected at the event, it's not that they've brought in any other vendor to do any part of that when you say reduced scope?

No, it's just us. And I mean I can give you a little more color on that. I mean, if you can look at an event, and again, I really don't want to talk about what the specific event was, but assume that there's a large event that occurs every year. And if you would look to that event for the last 15 years and they were drawing 300,000 or 400,000 people over the course of the event, right.

And you get into this sort of an economy for the type of event that is and all of a sudden they're expecting to do 50,000 or 75,000 instead of hundreds of thousands of people over the period of the event, that's what we're talking about. So it's not because we're doing -- that anybody else is doing any work or that there's a change in the vendor for the work, it's just that there's less work.

Right, got you, got you. All right, and then just one last -- I think last quarter, Jim, you gave a number for paid exits being down I think it was order of magnitude about 20%.

20% paid exits down, and maybe we're talking about in the airport area?

I think it was more specific than that, but I think yes, some of that was airport.

Yes, it depends on what timeframe, David. But I think what we've been saying, particularly on the airport sector and certainly in the hotel sector, is that paid exits have been down in that area that you mentioned from their peaks in 2008 in 2007. I think what we have been saying now the last couple calls is we're getting comfortable around the fact that it's not getting any worse and that they have begun to bottom out.

But with forecasts in those particular areas that we mentioned of kind of being flat to where we are now for the next couple quarters. So, you read the papers and you watch the shows as often as we do. And again, the most frustrating part about being me right now, and the most frustrating part about having been me for the last five or six quarters, is this lack of clarity that I'm talking about.

Whether it's negative jobs or housing starts or whatever these drivers are in the economy, interest rates, investments, debt markets, etc., there's not anything in there that wows me to say that things are going to get better anytime soon.

There's a lot of talking heads on TV that balance one against the other. And I try to take it all in and I'm just not overly -- the stimulus package has run its course. Is there going to be a new one? I don't know. Did the stimulus package help for the long term? I don't know that either.

I know a lot about parking cars. And I've always based my forecast on trends that we felt were supportable so that when we get to calls like this we could be as transparent as we could on why we're thinking the way we're thinking.

And I think one thing I can add to what Jim said is that on a same-store basis we're not seeing overall declines in paid exits now, but we're not really seeing much of any growth either.

Got you, got you. Okay, a flattening out there. All right, thank you both. I appreciate it.

Yes, sorry for the speech, David, it might have been more appropriate for a soapbox. But I'm just trying to give you an idea of what we're thinking.

No, no, that's fine. And that's actually helpful.

Clint Fendley, Davenport.

Thank you. Good morning, gentlemen. Not to beat a dead horse here, but on Gameday could you remind us on the goodwill that was booked on that originally and any triggers here like free cash flow generation that could cause you guys to reevaluate that for a possible write-off?

We haven't finalized all of our accounting, Clint, for the Gameday acquisition. But this is a very profitable acquisition for Standard Parking. It's clear that there are some large events that stand out and the one that we're talking about is one of them. We've talked about the Vancouver Olympics and the Super Bowl being big events and those events went very well this year. So, there is -- it's not even close to being an issue where there would be any goodwill write-offs for Gameday.

Okay. And so just to be clear, there aren't any events that you have lost that were in your pipeline for the remainder of the year then?

I think the important thing about Gameday to remember is that in many ways Gameday is a consulting firm and it's a little different from the parking business. And they have relationships with lots of folks who run events and those are very, very good relationships. And generally speaking, the Gameday people come back year in, year out and run those same events.

And as we've talked before, I mean I think they've done the Super Bowl for 10 years. So, there's a lot of continuity. That being said, because the event business is susceptible to economic conditions and may be more so than say a hospital or a university, events do get canceled, events do get scaled back and things happen that are surprising.

So, for us part of it is learning to forecast what Gameday will actually do in a forward-looking 12-month period is a little different than forwarding parking. And just to give you an example on the plus side, they ended up doing all the parking for the G8/G20 Summit in Toronto that occurred last month.

And that was something that wasn't expected at the time that we did our budgets and forecasts. And that turned out to be a very big event that was a good one for us. So, it's going to be a business that has a little volatility to it and maybe is a little less predictable parking.

And some of our markets, maybe in a broader scope because we weren't asked about it today. From a broader perspective, why we might not be optimistic about the short-term of the economy, if history has taught us anything it's that there is an inevitability to these ups and downs in the economy and we think there will be a return to -- the demographics would tell you, the number of cars being built would tell you, the pent up demand for vacations and airport travel and all of those things that you guys read about every day will be there.

The overall posture of the Company is that during this recession we've gotten through it and grown some the way we have, but we've never stopped continuing to invest on the technology side for either becoming more efficient in process, and we've talked ad nauseam with you about that over the last couple of years, or investing in technologies that our clients may find more appealing whether it's automated bank reconciliation or compliance to electronic forms of payment or being able to sell Click and Park over the net onto cell phones, all of that investment on our side continues.

We've also made significant investments in human resources. We all took it in the shorts last year for our bonuses and raises, we did not stop hiring in resources that were specifically to be focused on the municipal and institutional markets where we see pipeline opportunity for us.

Or in hiring resources on a geographic basis that we felt that we could increase our reach in our business development area so that when the inevitable recovery would occur that this company was postured to take advantage of it as a new economy emerges that's much more technologically driven, it's much more outsourced and privatized driven.

It's -- it is much more a diversification of our service offering in terms of having a transportation product and having a security product and having a maintenance and property management product that we can sell side by side as the real estate industry, not only institutional and municipal but commercial, change over the next 10 years and not one nickel less was invested in putting this company in a position to be there at the end of this than we've done.

We have an increased G&A, but we've gotten some efficiencies in G&A because of some investment we've made in the past. But if we're net zero on G&A we really added the headcount and we've had the technology and dust. So there are a lot of good things. I want to make sure that our tone isn't negative for where we think the long-term positioning given our competition is going to take us.

No, no, thank you. That's very helpful. On the foreign exchange, I don't think anyone has asked about that. But I was trying to understand why that was expected to be unfavorable going forward. Is it mostly due to Canada?

It's only Canada, Clint. And really this is a case of our own expectations. I think in the past we haven't paid a lot of attention to the exchange rate with Canada, but now that our business in Canada has grown more significantly I think we need to do a letter better job of anticipating where exchange rates are going to be moving between the United States and Canada. It's not so much that rates are moving all that much, it's just that they've moved differently than what we expected.

I know that's something that for most of my companies has helped them in the last quarter or two. Are you profitable in Canada then?

Absolutely. I mean, we have a nice business even before the Gameday acquisition that led to both the Vancouver Olympics and, as I just mentioned, the G8/G20 summit contract. It's been a nicely profitable business for us for a long time.

But as you know, given the amount of shares we have outstanding, we don't really -- it doesn't take much to cause a $0.01 fluctuation in our earnings per share. We think Canada is a fantastic market for us and there's actually a lot of opportunity to grow there.

Okay. And last question. I mean, any thoughts I guess regarding the higher legal fees? I mean, just any thoughts to providing maybe a pro forma or an operating EPS number? And I guess if you could just speak to maybe your expectation as to the recurring nature of these possible legal costs going maybe beyond the second half of this year?

Sure. I mean, I think everybody business has legal costs all the time and we're no exception to that. The reason that we've highlighted these three is because these -- or these legal costs is because we had some significant matters in 2009 that had a major impact on our reported results last year. And we're bringing those three matters to a close and we really believe that as we look past 2010 we won't be incurring any more legal costs for any of them.

So, I think that is something that will come to a close. Not if you take those legal costs and you take the Gameday and the Canadian exchange, I think what Jim was really saying is that the combination of those three is what really led us to make the decision to lower the bottom end of our guidance range by $0.05. And I think it's safe to say that in the absence of those we wouldn't have. So I think that gives you some sense of the magnitude of those items.

Thank you, guys.

Thanks.

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

I think we made all of those. We enjoyed having you on today. Thank you very much for the questions that you asked. I think they really engage us in a transparent dialogue of what we're thinking about. So, thanks again for joining us and we look forward to talking to you next quarter. Goodbye, everybody.

Thanks.

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