SP Plus Corp (SP) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second-quarter 2011 Standard Parking earnings conference call. My name is Stephanie and I'll be your operator for today. At this time all participants are in a listen-only mode. 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, Stephanie, and good morning, everybody. As Stephanie just said, 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 2011. I hope all of you have had a chance to review our earnings announcement which was released last evening. We expect to file the 10-Q by August 12. We're taking some extra time this quarter due to the new XBRL rules.

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 the Investor Relations page of our website at StandardParking.com. A replay will be available 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. As you saw in our press release last night, we're obviously pleased to report another solid quarter, particularly in this environment, which was ahead of our internal expectations.

We had expected gross profit growth to be a challenge in the first half of this year as the loss of some contracts at the end of 2010, as well as the nonrecurring nature of our Gameday gross profit from the Vancouver Olympics, made it more difficult to post year-over-year gains in that area. As a result total gross profit was off 3% on the year-over-year quarter.

However, what we didn't discuss, at least in our release last night, was the fact that gross profit was negatively impacted by an unexpected $750,000 increase in insurance reserve estimates relating to prior years. That came about as a result of the Company changing its TPA or claims adjustment process to a different firm. And we think that those -- the initial claim review might have been somewhat conservative.

And as we work through the rest of the year with that new claims administrator and our actuaries we'll see if there's not some change. But we did book the full $750,000 increase in those reserve adjustments. So that's a couple cents to $0.03 a share.

At the same time we saw solid location gross profit growth of 3% which in this uncertain economy is a definite accomplishment. Other encouraging metrics for the second quarter year over year are a 4% increase in top-line revenue and a 10% increase in paid exits at our same store leases. Our location retention remains steady at 91% and our operating profit retention statistic remains solid at 96%.

We continue to control G&A expenses which were 5% lower than last year's second quarter. We achieved that even though we incurred $400,000 of cost in evaluating a significant acquisition which ultimately was not pursued. Without these costs G&A would've been reduced even more by 9% from last year as we continue to see the benefit from the process and efficiency improvements we've put in place over the last year or so.

In our earnings release we highlighted several solid new business wins in the SP Plus Municipal Service, SP Plus Healthcare Services, SP Plus Transportation, SP Plus University Services and SP Plus Gameday markets. I did that just to illustrate some of -- these are just a part of our most recent contract wins. But they were dead on in terms of the strategy particularly as we look to grow our market share and our market basis by looking at the municipal and the institutional sector while continuing obviously to focus in our core or our historic markets on the commercial side of the business.

Looking forward to the second half of 2011, obviously no one knows about the economic recovery. Just driving into work today there are -- you could talk to 10 people and obviously get 10 different opinions about what the most recent activity, whether it was in Congress or what's going on in Europe or with the job growth or job statistics that will be announced tomorrow, what does the crystal ball look like, and we just don't see any clarity yet in any sort of prolonged recovery.

I can weigh that somewhat though against the fact that, as I mentioned, we are seeing improvement in our paid exits at leases that we have at hotels and airports. So for the first half of the year there was some recovery in the travel sector, which helped ameliorate some of the year-over-year change that I spoke to earlier regarding Olympic events and some contract change at the end of last year.

But we continue to look to new geographic markets in evaluating new business lines to augment our core parking business such as the shuttle bus maintenance services -- such as shuttle bus maintenance services we now provide through our new SP Plus Logistics operating division. What that means is in several of the opportunities that have been created for us in the shuttle bus area, weather at airports or campuses; we think it is more efficient for us to maintain our own buses.

And if the mass -- the critical mass that we've assembled in a particular city enables us to set up maintenance services to maintain our own buses, then we will pursue that. And we've done that at a couple beta cases in the Southwest and they have improved our bottom line as a result of not having to bring in a third party for maintenance services.

I think you'll continue to see us active on the acquisition front. There are opportunities out there that we continue to pursue every day. But I think discipline remains the key word for us. Relative to the economic situation on a prolonged continued basis, I think that discipline remains the word.

The deals that we've announced over the last 18 months or so are all doing well I think because we reached a fair and [equitable] agreement with the seller and we've been able to add to the company's platform and bring to it our expertise in some of these SP Plus related areas that I mentioned that the companies that we acquired didn't have in those geographies where we've moved.

So I think you'll continue to see us active. Obviously in our discussions we've been -- relative to free cash flow and leverage and our balance sheet, we're in a position to be able to be very, very flexible right now. In terms of looking at acquisitions, funding client improvements and returning value to shareholders, as Marc will discuss in a minute and our release discussed last night around a quarter-to-quarter share repurchase program.

Based on what we've seen to date our guidance for the year remains unchanged with earnings per share to be in between $1.10 and $1.20 for the year. Based on our first-half free cash flow we're raising our free cash flow expectation to at least $20 million for the year.

With that I'll turn the call back over to Marc for now so that he can lead you through a more detailed discussion of our financial performance for the quarter and first half. And then we'll open up the call up to some Q&A.

Thanks, Jim, and hello again, everybody. Our earnings release laid out the financial results in a lot of detail, so I'm just going to focus on a couple of the highlights. As Jim mentioned, overall gross profit for the quarter decreased by 3% year over year. We do note, however, that same location gross profit increased by 3% and it was the overall impact of certain anticipated location terminations, including nonrecurring Gameday events, as well as costs incurred to close out a long-term lease that collectively contributed to the overall decrease in gross profit for the quarter.

G&A decreased by 5% compared to the second quarter of 2010 due primarily to process improvement initiatives. Without the $400,000 in acquisition costs related to an acquisition that we didn't pursue, G&A would have been decreased by even more, up to 9% year over year. We believe that G&A for the first half of the year is indicative of what to expect for the second half in aggregate.

Net income attributable to the Company for the second quarter was slightly ahead of 2010 by 1% while earnings per share was unchanged. The acquisition-related costs that I just mentioned earlier represent $0.02 on EPS, so without this expense earnings per share would have been $0.30, an increase of 7% over 2010.

In terms of free cash flow, the Company generated $10.1 million of free cash flow during this year's second quarter compared to a negative $1.4 million during the second quarter of 2010. Favorable movements in working capital contributed to the year-over-year increase.

While some of the favorable movements are timing related, June 30 this year fell on a very advantageous date for working capital and receivable collections, and some of this we do expect will reverse out by year end. Nevertheless we do expect free cash flow to be at least $20 million for the year which exceeds the top end of our previous guidance range of $15 million to $20 million.

Let me touch briefly on a couple of things relating to the first half. Gross profit for the first half increased 1% over the same period last year and same location gross profit increased by 6% and that's a nice metric to show how the underlying business is performing. So we're very pleased to see that.

The nonrecurring nature of certain Gameday events such as the Vancouver Olympics and the World Equestrian Games, both of which took place in 2010, and the effect of some terminated locations more than offset same location growth and gross profit from new locations. I want to emphasize though that those terminated locations were anticipated by us as we developed our guidance for 2011. And so as Jim said earlier, our results for the quarter actually exceeded our own expectations for the quarter.

G&A expense for the first half of 2011 decreased by 4% over the same period last year, again due to the continuing benefit from cost reductions due to process and productivity improvement initiatives. Net income attributable to the Company for the first half of 2011 increased by 13% compared to the same period in 2010. And first-half EPS also increased by 13% to $0.52.

And I think as you know, last year was a good year for us as well without a lot of unusual things happening, so we clearly had solid growth in the bottom-line for 2011 over a very good 2010. This concludes our formal comments. I'd like to turn the call back over to Stephanie in case you have some questions.

(Operator Instructions). Nate Brochmann, William Blair & Co.

Good morning, everyone, and congratulations on being the only thing green on my screen this morning.

Thanks, Nate.

Hi, Nate.

Are you thinking about the ecosystem?

Yes, right. Either one I'm happy for. A really good job on the SG&A numbers this quarter. You talked, Marc, a little bit about expecting that as a run rate when we exclude the unusual item. But you keep kind of beating our expectations there. I was wondering how much further that can go as you continue to implement various productivity improvements, etc.?

Well, I think in terms of 2011 what I said is how we see things. So we're clearly not going to see additional benefits this year from productivity improvement investment, but, as we've talked before, we continue to make those investments; there is additional opportunity for us to take G&A.

I think it's going to take a little while for some of that to be realized just given the fact that we have to develop some technology to go along with the changes in process. So, clearly as we look forward I think there will be opportunities to further reduce G&A expense. And certainly as we look to 2012 and '13 we're going to attempting to really not see growth in G&A if possible.

That's great. And then --.

I'll give you a little more specificity, Nate. We've talked about getting the payroll and timekeeping module finished, the accounts payable module finished, we've just rolled out the procurement module for our people in the field. As well as just a fantastic monthly parker billing system that's targeted towards office buildings, where we're able to interpret very, very complicated leases much more efficiently and effectively for our clients. And we've already gained some traction in terms of that being rolled out in some beta cases in California and Texas.

So those modules are out there. But sort of the other thing to think about is as we complete those modules and as we do the tuck-in acquisitions part of this strategy, five or six years ago when we first started talking about it with you, was that we'd be able to absorb the gross profit and platform of a company that we were acquiring in a geography and then change its G&A profile as a percentage of that gross profit by having a much more centralized and efficient system in Chicago. So there are a couple components that lead to what the expectations are for that continued rollout in the future.

Great. And then also to maybe Jim. Maybe could you expand a little bit on some of your commentary regarding the color around the current environment? I know everybody is a little bit uncertain, as you alluded to. But it does seem that your trends are kind of moving in the right direction continually here for a couple quarters now.

And just wonder if you could talk a little bit about those sides of the business and management and lease. And then also, Marc, maybe if you could just shed a little bit of light on when we look at the drop in the management contracts in terms of the known location exits, etc., how much of that was Gameday and how much of that was walking away from unprofitable business?

Would you like to go first or like me to go first?

I can go first. I mean I think the impact from terminations is probably about evenly split between Gameday and some deals that we lost. We talked about one deal that we lost, I think it was in Q3 or 4 in the release, that clearly the full-year impact of that important deal is flushing itself through our financials and we'll see that continuing impact in Q3 I think as well. So it's a bit of both.

The World Equestrian Games that I mentioned also benefited Q3 last year, so we'll definitely have a challenging Q3 comparison because of the non-recurrence of that. That being said, as we mentioned in the release, we are winning some contracts relating to the London Olympics and we're starting to book profits related to that and that's offsetting some of the loss of the Gameday events from 2010.

Okay.

I think in terms of the overall view of the Company relative to the economy, who knows, is what I think I've been saying. However, given the fact that the foundation of our business is in cost plus management contracts, what we have been seeing is a slowdown or at least -- a slowdown and an even steadier steady pricing structure.

You know, we're not -- you heard me talk for the last eight quarters or so about marginalization on the fee side of the business. Decisions being made over $200 a month in management fees. And that's affecting our sort of normal margins during the economic downturn. I can tell you, as I have for the last couple quarters, Nate, that we've begun to see that flatten out and fees sort of flattening where they're at, even if not improving.

I think a lot of our clients have figured out that making a $200 a month cut in management fees on a monthly basis don't go a long way towards $1 million in gross parking revenues being at stake by somebody who's incompetent or doesn't apply the same sort of control systems or skilled management group or technology deployment for revenue collection.

So we've even had instances where we've been -- we walked away or were canceled at a deal several years ago and sort of held our own in terms of maintaining our price structure and then we've been brought back after the lower cost discount operator didn't perform. So I'm hearing more and more of that out of our field team.

So given the fact that that's more than 80% of our business basis that's obviously good news. Where we have the volatility in the business is on the lease side and the concession side of airports. And I speak to that volatility every quarter for what I know. Trends for the last two quarters on some of the hotels, as I mentioned, are good; trends at the airports have been okay on some specific airports, not so great at others.

As I spoke about last quarter, we can be doing great in Chicago and New York and not doing so great in Montana or California depending on what's going on in the business cycle. And the business cycle is the key word there, Nate. And I just don't -- I think I've told you when asked what makes me the most uncomfortable about this call or giving guidance is the uncertainty of the business that has a percentage of volatility to it for the reason I'm mentioning.

And you know, I read the papers like you guys every day. And I just don't have the ability to put any sort of concrete forecasting on the recovery of the travel business or business in the United States and Canada in general.

Fair enough. Well, that's very helpful. Thank you very much. I'll pass it along.

Okay.

David Gold, Sidoti.

Hey, good morning. So just a couple of things. One, just following up on the G&A question. I guess there's a longer-term goal of getting that towards the 50% range, we're certainly making good progress. But curious does that goal still sort of hold and do you have a sense for timing there?

David, the goal does still hold. Clearly one of the challenges in getting to it is that we've seen during this economic period that gross profit has not grown as rapidly as our historical business model has generated. And so that's really caused the debt line to go out a little bit for us or the goal line to go out a little for us.

Clearly as we've taken real G&A costs out of the business reducing G&A in absolute dollars has made the progress that you're seeing so far. But I think we said on the last call that we were hoping to get close to that 50% goal by the end of the year, maybe not for the year but certainly be at that kind of level of run rate. That's what we're still targeting for ourselves. But a lot depends on what we see with gross profit and that's one that's a little harder to predict.

Sure, sure, okay. And then Marc, on the change in your free cash flow guidance, can you just speak a little bit to that? What's happening a little differently in the second half of the year?

Sure, one thing that I think we saw during the recession is that movements in working capital consumed free cash flow and actually worked against us. And so as you saw in, 2010 we struggled a little bit to get to the free cash flow numbers that we would expect to have happened.

One of the things about our business, as you know, we operate with negative working capital, it's a business that doesn't need working capital to grow. But at certain times, whether we're taking on large contracts with municipalities which tend to require receivables, or during recessionary periods where the economy is not performing and the business activity of our clients is contracting, we don't generate positive free cash flow from working capital movements.

What we saw this quarter for the first time in some time is that working capital went in a positive direction. We saw receivables coming down, we saw payables and accruals going up a little bit. And of course, as I said a few minutes ago in my remarks, some of that was just due to when June 30 fell.

December 31 this year falls at a time that is not good, it falls at the end of a week and we have payroll right, payroll taxes right at the end of the month that will have to be paid before January 1. And as a result we know that some of what we generated in the first half is going to go back the other way by year end.

The other thing is that we had -- I talked about this before, we had a fairly large legal settlement relating to a class-action lawsuit that we settled in 2009. We took a fairly large P&L charge at that time. But the legal process has finally wound its way to conclusion. So in July this year we had to pay out the settlement amount which was $2.5 million.

So clearly some of the positive free cash flow that we've had for the first half, those factors we think will continue but they're going to be moderated a little bit by the items that I just mentioned. And that's why, while we felt comfortable raising the guidance to $20 million based on the year to date, we didn't raise it any further.

Got you, got you, that's all helpful. Maybe one more. More broadly on the acquisition front, can you give a sense for what you're seeing out there? And then also what -- just to the extent that it adds some color, a sense of -- which sounds like maybe a larger acquisition that didn't quite work out during the quarter -- what sort of stopped it?

Well, I can tell you what stopped it was price. There still continue to be buyers out there that don't do their diligence, don't really understand the business and we'll put a number out there and we're trying to remain -- not trying to remain, we will remain disciplined through that purchase process. I can do better growing organically than making a mistake on the purchase price for an acquisition.

So in that case, David, it was almost -- it was kind of about ridiculous or sort of unsupported pricing and you've just got to be smart enough to walk away. I think that the strategy remains the same, that we're looking at geographies in two ways.

One is are there any geographies left where we think there's a viable market for the SP Plus range of products that we're not in and can be more easily fit into that geography by virtue of acquiring what's usually a family owned or historically family-owned business to offer opportunity to that family given our base -- our access to our capital structure, access to our purchasing power and access to our technology bases and risk management opportunities which we've done historically.

The second is if it's in a city where we already have a sizable presence then we can leverage the G&A side on not only the back office that I referred to earlier, but in the field organization. For instance, when we did the two acquisitions in Chicago a couple years ago, we not only centralized the back office of the acquired firms, but we were able to gain significant efficiencies in the field organization by virtue of our ratio of senior managers and facility managers to location.

So that's pretty much the acquisition structure we're looking at. I think that those will continue sort of in the parking bases because I think it's parking where we can then grow -- we can bring a parking product into a geography and then spread across that acquired platform the transportation and maintenance services.

I don't think we need to, at least in the next quarters or the next four or five quarters, I don't need to be thinking about acquisitions in transportation or maintenance or even security necessarily. I think the idea remains the same. And regardless of the economy that's why the economies they have (inaudible) we get that, but we're not diminishing our efforts in terms of organic and acquired growth in order to put forward the whole SP Plus brand and concept as we expand the product base.

So I think you'll see us do parking companies and then begin to spread transportation, risk management, maintenance and security opportunities along that acquired base. And then obviously the G&A synergies that come from centralization.

One thing I'd like to add to what Jim said is that coming out from under the -- let's call it the hangover of being a controlled company, back in those days we really were forced to pursue these very small acquisitions. And you saw us to do eight or nine small acquisitions over the last few years. Now we don't have that constraint any longer; we're able to pursue acquisitions of all sizes and of course that sometimes means we have to incur costs to explore these.

So it's not -- it would not be unusual to see us from time to time have the situation that we had in Q2 where we spent some money, we had some folks helping us. And obviously we hope that some of these deals will get to the finish line, but we can -- you could expect that we may have some of these kinds of costs on a prospective basis.

Got you, got you. That's all very helpful. Just one last if I can. I guess in the release you spoke to a 10% increase in paid exits at the same locations. Curious, A, was there a variance between what you were seeing at the leased locations versus at the managed? And then two, I know -- I mean it sounds from the tone of your comments that you're as cautious as everyone else is right now. What can we read into it if anything?

Well, there's a -- I think we talked about a 10% increase in paid exits at our leases, which is good. And that typically -- those leases, David, typically occur at a hotel or an airport. So being travel -- somewhat travel driven is the message there in terms of the first half of the year.

But I can -- you don't have to listen to me all day long, although I'll tell you, I had an interesting -- I don't mean to digress much, but I did an interview with Bloomberg radio where they now recognize us as a leading indicator of activity, right, in selected fields you know, because we -- I get the data on how many cars parked yesterday at a hotel or an airport or an office building, that kind of stuff. So it was kind of an intriguing interview.

But what I said to them and what I'm telling you is some of the sectors where we have leases we saw a pickup in the first two quarters. And I spoke specifically to the hotel business and to some selected airports. But commercial office buildings and commercial retail centers and -- are following the same plight that you would read in the reports on retail sales that came out today by a couple of merchants that I read.

Or the performance or the trading prices of commercial office buildings which are changing hands a little more frequently these days, that hopefully the market has bottomed out. So it is almost industry-related in terms of where we might have those leases as opposed to those management contracts.

I can tell you that we're not seeing double-digit increases in paid exits at most office buildings, there might be some -- a run-up in leasing in a particular building for some reason that may cause a variation other than the national theme. But I can tell you quite frankly we're not seeing double-digit increases in paid exits at retail centers or office buildings.

The institutional stuff, hospitals and universities, tend to stay rather predictable. They don't move a lot with the economy. Being somewhat government-subsidized they don't -- aren't exposed to the same sort of changes in capital or changes in capitalism that you might see at commercial office buildings or retail.

Where is the consumer spending their money and where are they forced to spend their money given gas prices, energy prices, etc.? And if you sort of follow that -- if you follow that can it will sort of lead you in the right direction in terms of where we're seeing increases in terms of picks up in the economy.

Got you, got you. Okay, that's helpful. I appreciate it. Thank you, both.

Thanks, David.

Kevin Steinke, Barrington Research.

Good morning. Hey congratulations on the nice new contract wins in the quarter. Following up on the acquisition question, in your press release announcing the share repurchase you talked about hoping to complete one or more acquisitions by year-end and now you decided to ultimately not pursue this particular acquisition. Does that decision affect your plans to complete acquisitions by year-end or do you think you're kind of still on track to get some things done there?

I think we're on track to do what we said. We have a pretty active acquisition pipeline and set of discussions going on. We have the -- obviously have the financial ability to get them done at the right price. And to the degree that we -- that a fair value is reached for an acquisition target in one of the markets that I described, I think we'll get it done. Given the number of folks that we're talking to right now it's not -- it's certainly not outside the line of thought that we won't get one or two or three of those done before the year is out.

Great.

I think the point is, Kevin, I don't have to do them. I'm not going to reach at a return level that I can just as easily get for our shareholders by doing something else. So acquisitions are enticing and they're rewarding when done right, but it takes you a little while to recover when you do one that's not so right.

Right, yes, that makes sense. And I wanted to go back to your first-quarter conference call, you talked about generally in the municipal and institutional markets, your contracts there tend to have higher gross profit per location. Is that the case with some of the wins you had this quarter or some of the things you're seeing in the pipeline now?

Yes, is the short answer. Yes, the contracts that we highlighted in the release, as I said, are around the institutional and municipal area and they are of size. And obviously size translates into margin for us in terms of fee structure. But pay close attention because several of those were transportation shuttle deals and I think I've told you in the past that those deals are -- on an average basis produce a higher level of revenue and have better margins than the average parking deal. So that's the reason I gave you the short answer of yes.

Good, good. And also going back to last quarter you talked about you felt you're pretty close to the completion of the transition to the SP Plus brand. Do you feel like that process is pretty much done now? And obviously you're having some success in attacking institutional, municipal and other markets. So do you feel good about that process being in place now?

I think that we're recognized -- in those markets where we have focused business development teams for universities, medical centers and municipalities that the SP Plus Municipal, SP Plus Healthcare, SP Plus University brand is recognized. Contractually and our people's uniforms and our buses are representative of that brand. So the client represents -- understands us to be there.

In terms of the ultimate conversion of the entire organization and the rebranding of the top level of the organization, we continue to do that slowly. We're recognized at our airports now as SP Plus Airport Services and we could be running shuttle buses at that airport under the SP Plus Transportation brand.

I think that I'm very comfortable with the pace that we've allowed that to take over the field applications, our website, our marketing materials. It's just the 80-year-old -- 70-year-old attachment to Standard Parking and the brand of Standard Parking that we want to slowly but surely change into being identified as one of the competencies of an overall outsourced -- outsourcing company to commercial, institutional, municipal real estate.

So in lots of places you only see us as SP Plus. But certainly at the corporate level where you interface with us all the time we're still Standard Parking. But that transition will continue I assume into 2012.

Okay, great. One last question. Marc, I was just curious, the $0.02 of acquisition due diligence expense in the quarter, is that incorporated in the EPS guidance -- the reiterated EPS guidance?

Wow, (inaudible) thought about that too much. I think we've said many times that acquisition-related costs are not really in our guidance. So I think, unless I reflect on it more later, right now my view would be that our guidance would exclude that.

Okay, okay. Thanks. Great, thanks a lot. That's all I had. Bye.

What I can tell you, Kevin, though, the $0.03 or the $750,000 of these insurance loss years catch-ups, which I obviously wasn't real happy about, that is included in the reforecast that we've given today.

Okay, thanks.

Thanks, Kevin.

(Operator Instructions). Clint Fendley, Davenport.

Thank you. Good morning, gentlemen, and congratulations on a good quarter here.

Thanks.

Thanks, Clint.

First question, similar to the last, I wondered -- you indicated, Marc, that the G&A expenses, what we've seen so far should be indicative of what to expect in the second half of the year. Would that be down 5% or down closer to the pro forma 9% then?

Right, I think rather than focus on percentages, which I have a hard time doing in my head, what I was trying to say is that the absolute dollar value of G&A for the first half should be replicated in the second half.

Okay, okay, thank you, that's very helpful. And then I just wondered, I mean another quarter here of good municipal and institutional wins. I wondered if you guys could give us an idea to the amount of savings on average that you're able to help a lot of your clients gain and how that compares to some of the other competitors within the industry here? It would almost appear that sort of your success has been getting success here because you're building on your streak.

Well, if the parking product of that municipality or that institution is buying from us, we've historically been able to improve gross profit or revenue for that facility by anywhere from 15% to 20%. There are extreme cases -- I think you all heard me tell the original O'Hare airport story and some others that are pretty extreme in terms of their percentages. But the real bottom-line addition is in our ability to control revenue.

The municipal market is no different. Whether it's the collection of revenue from parking meters or writing parking tickets and then ultimately collecting the revenue from those parking tickets, we're real good at that. So we're able to improve what has been a bureaucratic effort in the past and move the top-line.

And all of the income in the parking business is top-line driven; expenses don't make up a real significant portion of revenue in a parking environment. So while we're able to take advantage of usually lower labor rates or at least more disciplined labor in the field when we take over from an institution or municipality, the top-line growth is the most promotable and certainly what we advocate when we sell.

Now to that end, everything we buy in the parking realm is cheaper than what a smaller competitor or an institution could buy from simple things like uniforms and traffic cones and insurance and, as I said, contract labor. We like to be a union shop in those states where unions are recognized for our line of work.

We're able to negotiate a reasonable contract, but with an expectation that people show up every day, which isn't always the case on the municipal side or the institutional side of the ledger. So I think there's a value proposition that we bring, Clint, to both sides -- the revenue generation and the expense side.

When you get into transportation and maintenance and security, that is certainly more expense driven. But again, if we're able to procure buses or we're able to procure a hedged gasoline program, we're pretty good at the purchasing procurement side of the business because of our size that we can leverage. So again, we can tend to generate anywhere from 15% to 30% savings when we get into not only the parking area but the other product side of our business on the municipal and institutional side.

Great, thank you, that's very helpful. And last question here, obviously a very nice announcement on the share repurchase plan that you guys made. I just wondered further down the road what the Board's thoughts might be as the possibility of a dividend at some point in the future.

I mean obviously you look back over the last few years, you guys have held up incredibly well I think relative to most companies in what's been a difficult economic client. And wondering what the Board's thoughts might be as to the possibility of that for investors.

I think our Board is nimble. Given sort of the drama that went on through the period where we had a controlling shareholder and a Board makeup that wasn't necessarily always pointed in the same direction. I think the Board of Directors we have now considers ourselves to be nimble and we look at all opportunities.

Certainly we wouldn't be doing our job if we didn't think about share buybacks or dividends or other uses for deploying our capital. I think our current line of thinking is that our acquisition opportunity plate and our opportunity to invest capital in client-related deals, purchasing or taking over a large transportation contract that may require some capital investment is the best alternative or at least the highest rated alternative that we have in terms of creating shareholder value.

The alignment that I've spoke of for the last now year and a half around the business plan is the number one priority is how best do we increase shareholder value? We saw through this recessionary period that we kept our end of the bargain, we keep making improvements every quarter, our earnings are going up every quarter whether it's earnings per share or most of our key metrics. And I read in the paper about either peer companies or other companies who aren't doing as great, but sort of the state of the economy keeps the value of our share price down for our shareholders.

So I think that we were pretty quick to react to that and say enough is enough, let's go out and create some shareholder value by purchase of this share buyback program. But I think we will review that on a quarter-to-quarter basis and continue to deploy our cash flow, as I said, in the manner that best benefits the shareholder.

Great, thank you, guys.

Thanks, Clint.

Giri Krishnan, Credit Suisse.

Hi, good morning, Marc, Jim. Jim, I guess I had a question about the municipal marketplace. And I understand the dynamics are very different from commercial and its exposure to macro. But the recent weakening of sentiment or data, are there any signs that you're seeing or what you're hearing that would at least indicate the pipeline -- either the pipeline might be slowing? Or if it isn't slowing, at least the time it takes for you to close these contracts might be extending?

Well, two answers to the question. One is what is slowing on the municipal side are decisions by municipal administrators, whether they are mayors or city councils or commissions, to sell the parking assets themselves and take kind of that one-time payoff to fix municipal issues.

Certainly that market has slowed considerably since Chicago. Pittsburgh was pulled off the table -- I can name a half a dozen others where infrastructure funds have been chasing deals for the outright sale or long-term lease of municipal assets. That market is dead right now. Which is okay with us; we continue to work with those infrastructure funds where opportunities avail themselves. But I think the pressure has changed somewhat.

What municipalities are saying to themselves are we have this horrible, horrible application of government trying to do private industry's job. And one of those is certainly in our space. And maybe rather than selling that asset we should -- if we want to do it in a two-step process let's maximize the value of the asset.

So let's get somebody in here who knows what they're doing, whether it's managing the garages, providing security in the garages, cleaning the garages, snow removal for the garages, writing parking tickets, collecting revenue from an enhanced technology perspective at parking meters. So you've heard me talk about less -- you don't see a lot of a single head parking meters going in anymore, it's all -- you can govern a whole block with a pay on foot online piece of technology. We can deploy that stuff and we know how to maximize the revenue from it.

So municipalities, at least smart ones, are saying we've been so inefficient in this area and our costs are so high relative to private industry that, based on the pressure of our voters and our taxpayers saying no more, no more taxes, what are our alternatives? And outsourcing remains a viable alternative for the municipalities that are facing that.

And you can expand upon that into logical niches for us. Why are policemen at $100 an hour directing traffic on street corners when I can deploy similarly trained people at a much lower but fair wage and make sure they show up every day.

So, that pipeline remains very, very full for us and I think it will continue to be an opportunity where the pipeline expands as the success stories make their way through the various conferences that we attend and the associations that we belong to where we're able now to point at 30 or 40 real examples of savings and efficient management being brought to government.

And maybe a question for Marc. With respect to same location gross profit growth, did that actually -- the year-over-year growth, did that -- were there any one-offs that -- I think they have slowed from the first quarter and I just wanted to get a sense of what might have driven that. Is it just the location reductions?

Well, the preponderance of it was what we talked about and that's the Gameday events that aren't recurring, the terminated location. But obviously the insurance reserve adjustment that Jim mentioned also affects gross profit.

Okay, thank you.

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

I just want to thank everybody again for taking the time out of their day to join us today and hopefully we'll begin to see some brighter side of the economic news as we move into the third, fourth quarters of this year and into next year. Thanks again, everybody; looking forward to talking to you next quarter.

Ladies and gentlemen, that does conclude today's conference. You may all disconnect and have a wonderful day.