SP Plus Corp (SP) 2012 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2012 Standard Parking earnings conference call. My name is Shannon 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. (Operator instructions). As a reminder, today's call is being recorded. I would now like to turn the conference over to your host for today's call, Mr. Marc Baumann, Chief Financial Officer of Standard Parking. Please proceed, sir.

Thank you, Shannon, and good morning, everybody. As Shannon just said, I'm Marc Baumann, Chief Financial Officer of Standard Parking. Welcome to the conference call for the third quarter of 2012. I hope all of you have had a chance to review our earnings announcement which was released last evening. The 10-Q will be filed later this week. We will begin our call today with a brief overview by Jim Wilhelm, our President Chief Executive Officer, and then I will discuss some of the financials in a little more detail. After that we will open up the call for a Q&A session.

During the call we will make some remarks that will be considered forward-looking statements, including statements as to our 2012 financial guidance and statements regarding the Company's strategies, plans, intentions, future operations and expected financial performance. Actual results, performance and achievements could differ materially from those expressed in or implied by these forward-looking statements due to a variety of risks, uncertainties or other factors, including those described in our earnings release issued yesterday, which is incorporated by reference for purposes of this call.

I would also like to refer you to the risk factor disclosure's made in the Company's filings with the Securities and Exchange Commission, including its definitive proxy statement filed with the SEC on August 3, 2012, in connection with the special meeting of the Company's stockholders relating to the merger with Central Parking.

Finally, before we get started, I want to mention that this call is being broadcast live over the Internet and that a replay of the call will be available for 30 days from now. With that I'll turn the call over to Jim.

Thanks, Mark, and good morning, everyone. Welcome to our call on election day in Chicago, which is always exciting and fun to watch unfold.

First of all, I'm very happy to welcome all of Central Parking's employees to our Standard Parking family. 2012 has been a momentous year for our Company. We announced the proposed merger on the last day of February of this year and completed the deal on October 2, in line with our plans. Overall, we are very pleased with how the process unfolded and I wanted to thank everyone involved, all of whom put in a lot of dedicated effort to ensure the deal closed successfully.

We have been operating as a combined company now for about a month and the work to integrate the operations and back-office function continues at a rapid pace. While there is still a lot of work to do, we are very pleased with how the teams are working together so far and look forward to providing more updates early next year.

In terms of Standard Parking's last quarter as a standalone company I'm pleased to say that the quarter was in line with our internal expectations. Most of the factors that impacted the year-over-year performance had been anticipated and taken into account when we initially provide our guidance for the year and in the follow-on sessions we've had with you since. The continuing impact of the five large contract re-trades that occurred at the end of last year as well as an increase in estimates for employment practice claims contributed to the year-over-year decrease in the same location gross profit growth for the quarter. Same location gross profit would have grown 2% over last year's third quarter without those factors.

In terms of other statistics we regularly monitor, paid exits at our least same locations were down 2% for the year-on-year quarter. These decreases occurred across multiple verticals, including airports, hotels, special events, office buildings and residential locations. Though our sample size for this metric is relatively small, we believe this is consistent with the country's soft macroeconomic trends. Nevertheless, we continued to retain 90% of our locations and 96% of our trailing 12-month operating profit which come from locations we still operate, both statistics being unchanged for the last quarter.

As we reported in a press release last night and last week, we've had several just fantastic wins in terms of new business. We were awarded the Dayton Airport, which we just began service on November 1, a five-year contract to provide valet parking services at the Jacksonville International Airport. We begin providing parking for the City of Oxford, Mississippi, where the university is located, for 407 on-street parking spaces. And we were selected to operate the Millennium-Knickerbocker Hotel and Omni Hotel, both in Chicago, to SP Plus Hotel Services who are amongst the most major wins. I can talk more on the Q&A, if you like, but the plan that we've had all summer long, which was to make sure that those people that were engaged in day-to-day operations and those people who do selling for us were not distracted by the events leading up to the merger have paid off in terms of really doing more new business than I thought we would do. There are some wins that we will be announcing before the end of the month as those contracts get executed. And it's really a testament to the focus of the organization. Some of those wins have come even since the merger was announced.

Again, the time that we've had to plan and the removal of the distractions of the merger for our ops people and our sales people have allowed them to focus on the clients that we obviously want to retain. And the first 90 days post merger for our field personnel have really been dedicated to two things. One is sitting with our clients and ensuring that the level of service that both organizations have provided in the past will still be provided while we develop a better back-office processes and better products from which they will benefit even more in the future. And that message has rang through to all of our 4200 or 4400 clients.

The second field activity obviously has been to assemble our employee teams and, as I said earlier, make sure that we have early on formed a collaborative effort between the Central Parking and Standard Parking staff. We have managed to retain all of the employees that we wanted to. We have, really, an all-star team that we have put together of people that will lead us on a move-forward basis. And I know from my experience in having done the Standard/APCOA deal now 12 or 13 years ago that just the spirit and camaraderie that is around the Company is much more exciting and has occurred much quicker than we saw when we did the last merger.

So based on what we know today, we still expect to achieve earnings per share in our guidance range of $1.25 to $1.35 for the full year. As always, this guidance doesn't include the impact of any costs incurred to date and any future revenues or costs related to the Central Park parking merger.

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 for the third quarter. Then we will open up the call for questions and answers.

Thanks, Jim, and hello again, everybody. Our third quarter results were laid out in quite a bit of detail in the earnings release we issued last night, so I'm just going to touch on a few of the key points.

So we are only one month into the integration. As Jim mentioned, we are extremely pleased with our progress so far and on the operating side of the business, which has been our initial focus, the organizational restructuring is effectively complete now.

In terms of the quarter's financial results, overall gross profit decreased 11%, as we noted earlier. The contract re-trades that Jim mentioned contributed about 4 percentage points to the overall decline. Another 2 percentage points was due to an unfavorable swing in estimates for employment practices claims and, finally, an unfavorable swing in insurance reserve estimates contributed 8 percentage points to the decline. And I know all that adds up to 14, but the net effect of taking those things out would have actually been about a 3% growth in gross profit underlying for the business. The insurance reserve estimate issue was really more of a negative this year against a positive last year, so the impact is magnified on a year-on-year basis.

G&A expenses excluding merger-related costs decreased 5% year-over-year from $11.5 million in the third quarter of 2011 to $10.9 million in the third quarter of 2012. All of the decrease was due to the fact that performance-based compensation expense was lower in the third quarter of this year compared to last year. But on a nine-month basis, performance-based compensation expense is very similar when comparing the two years, and year-to-date merger-adjusted G&A is down 2%. So overall we are still trending downward in our overall G&A expense when you exclude merger-related costs.

Due to all the factors we've just discussed, net income attributable to the Company for the third quarter of 2012 excluding merger-related costs and related tax impacts was $4.7 million or $0.29 a share compared to $6.2 million or $0.39 a share on the same basis for the third quarter of 2011. Merger-adjusted free cash flow was $3.3 million for the third quarter of 2012 before the $3.6 million cash flow impact from merger-related costs as compared to merger-adjusted negative free cash flow of $6.8 million for the third quarter of last year, which was also before some merger-related costs of about $400,000. Past-due balances at some of our large airports were unusually high at the end of this year's third quarter, and that has been a feature that we have seen over the past few years where, at one quarter end or another, airport past dues are up. But it is a continuing ongoing focus for us and we expect those past due balances to return to normal levels by the end of the year.

For the first nine months of 2012, merger-adjusted free cash flow was $16.7 million compared to $9.5 million on the same basis for last year's nine months. And given that our accounts receivable is unusually high at this year's third quarter, I think we feel pretty confident that we are going to attain our full-year adjusted free cash flow in the guidance range of $20 million of $25 million excluding merger-related revenue and expenses.

Touching briefly on other year-to-date results, gross profit increased 2% over the first nine months of 2011 as a larger than usual health insurance dividend earlier this year offset the impact of insurance reserve estimate changes that have taken place and the impact of those re-trades. So including and excluding the insurance reserve adjustment and the health insurance dividend for the nine-month period, it doesn't make any difference. We were still up 2% in either case.

Merger-adjusted G&A was down 2% year-over-year and merger-adjusted EPS was $0.98 for the first nine months of 2012 compared to a merger-adjusted EPS of $0.92 for the same period of 2011. That's an increase on merger-adjusted earnings per share of 7% year-over-year.

As Jim mentioned, based on year-to-date results, we are reaffirming our full-year guidance for merger-adjusted earnings per share in the range of $1.25 to $1.35 and merger-adjusted free cash flow of between $20 million and $25 million. And, as always, this guidance continues to exclude all merger-related costs incurred to date as well as any future revenues and expenses related to the merger with Central Parking, because obviously in the fourth quarter, we will have a full quarter's revenue and expenses from the combined business impacting what we report in next March.

That concludes our formal comments. I will turn the call back over to Shannon to begin the Q&A.

(Operator instructions) Nate Brochmann, William Blair.

Jim, I wanted to talk a little bit -- I know that you said that maybe the next phase after getting through some of the organizational things is making sure you're sitting down with your clients and explaining some things. But what has been the initial reaction so far from your clients just in terms of the scuttlebutt a little bit, if you will, from the deal in terms of their excitement or the additional opportunities or any skepticism?

Well, we are a little bit ahead of that, Nate, and I'm sorry if I wasn't clear. I think we have met with all of our clients. We had a very detailed plan for the dispatch of our relationship people, whether they were on the sales side on the operating side of the business, to, from the very first day, from October 2, to be out with a carefully collaborative message, put together a collaborative message to our clients about what their expectations would be. The fact that for at least the first nine months of the merger that they would see absolutely no change in terms of process or delivery of services and that, once we were able to combine companies -- begin to combine the companies onto a single platform in the future that we could even deliver a higher level of service. And again, all of those meetings have occurred.

Clients that I still maintain, longtime clients of Standard Parking and our very senior people, have really all met with our clients. And I think the best message, without going too far, is we haven't lost any clients. You can anticipate some of that. Our competition really had the summer to sell in. And I think that the level of service that our clients have been provided in the past, building around an excitement for what we will be able to deliver in the future in terms of taking advantage of technology to not only reduce their costs but increase their top line by virtue of marketing and branding and loyalty programs, has been well received. So the feedback that we've gotten through the organization -- and I really say organization now, because our people are acting as one -- has been very, very positive. And again, that has been proven by the fact that we have won contract award since the time that the merger was completed on proposals that had been put together this summer.

So it's a nice statement of confidence that those people who had been thinking about decisions, whether on the municipal side of the business or the commercial side of the business or some of the airports that we mentioned earlier, made those commitments to either extend us or award us new in a sort of a post-merger environment. And if you sit where I sit, that's the most exciting thing that could have happened.

That's great, that's very encouraging. And one question on the current environment a little bit. Obviously, I guess, with just a little bit macro slowdown it's not totally surprising to see paid exits down a little bit. But maybe if you could just give us a little bit more color on what you are seeing in terms of whether this is just a little bit of a lull here in the dynamics or whether you see a tipping point either way.

Well, I don't. I think business has been cautious throughout the summer, sort of awaiting the results of today and understanding where the business environment and the growth opportunities for business will exist after the decisions that are made today. Now, I'm not a macroeconomist nor am I a political analyst of the effects on the economy, but we sort of anticipated that, as we said in our release. And we have definitely seen a slowdown in travel on the airline side. We have pockets -- Chicago's hotels did very well this summer, but we had a lot of stuff going on here this summer in Chicago, in terms of conventions and political meetings and etc. And in the cities that we have -- we did both conventions, transportation for both conventions through our Gameday group. And that activity was terrific and a once in a four-year kind of activity.

But other than that, we really saw a slowdown. We saw lower attendance in baseball. We've seen lower attendance in football. We are not quite sure where the hockey season is going to take us. And I think that gets back to the consumer. So, as always, our business at the end of the day will track to the consumer. We have marketing plans in place. We are very savvy as it relates to pricing and encouraging people into our clients' facilities. But that's based on the basis of people that are out there.

So I get asked all the time, because I can tell you how many cars we parked yesterday, what is it telling us about the economy? And it's, in my mind, flat and trailing off some with business anticipating where the future is going to take us.

Okay, fair enough. And then just one last quick thing -- what was the final tally from the Olympics in terms of just anecdotally whether it was in line with your general internal expectations or a little bit above or a little bit below?

Yes, it was. There were some add-on events through the tail-end of the Olympics where we were able to get some work on the transportation side of the business and then the follow-on Paralympic Games. So it slightly exceeded our expectations as it related to this year's guidance. We weren't doing as much for the London Games as we did for Vancouver, for instance. So the activity that we knew we were contracted for we anticipated in the guidance and slightly exceeded that. That division did very, very well on the Republican National Convention that the transportation requirements were fairly complex down in Florida and we were able to provide a pretty high level of service for that convention. And we had a staff meeting around the business yesterday, and we are already talking to the organizers in Brazil of not only the next Olympic Games, but the World Cup games which will be held there in advance of that and the games that will be held in Scotland ahead of that.

So it's just -- certainly, having the continuity of doing all the Super Bowls and doing all of the Olympics adds to the brand, which enables us to continue to get these opportunities. So it's really interwoven, Nate, between realized profit and the future profit that we can expect that division to provide for us. And I'm sorry that I went on, on the macroeconomic discussion earlier. I could have just answered by saying I don't know, which is probably what most economists would tell you. But I can just tell you what we feel there in Chicago.

Yes, that's great. Thanks for all the color, and I'll turn it over.

Daniel Moore, CJS Securities.

Did not see any specific mention in the press release of the $20 million anticipated cost synergies to be realized over time with the Central merger. Is it safe to assume there's no change the timing and magnitude of those projections?

Yes.

Quick and easy, appreciate it. As we look out to Q4 and 2013, you just talked about your commitment to customer service and high degree of focus on customer retention and the fact that nothing will change from the customers' perspective for the first nine months. Given all of those and the requirements to retain some redundant staff and systems, is it fair to assume some initial dilution for the first couple of quarters before those cost savings start to kick in?

Yes. And as we get into February and March where we are talking about the year-end wrap-up and we're looking at guidance for next year, we will add some more color to that. We are verifying now through operating both companies all of the assumptions and projections that we made as a result of our diligence. Certainly, we will continue with redundant staff through the period of time until we roll out a centralized one-platform process across all of our geographies and the related redundancies that go into that. We are currently working on next -- now we are into Central Parking, we are able to get a much more crystallized and granular vision, as I said, about those projections. So we're working on budgets right now. And those budgets are location-driven. We have the good news around, certainly, the new business wins that we've either spoken of or will speak of by the end of the month, kind of mixed in with those redundancies on the G&A side of the business and getting old either reassigned or moved through that transition.

So I think we will be able to provide a little more color and granularity in the projections that we give you at year end. But I think it's safe to say that your assumption is correct. I don't know, Mark, if you want to add anything to that?

All I would add is that when we announced the merger back in February, I think we gave the indication based on the synergy estimates and the integration time line that Jim has been talking about, that it would take a couple years before the deal was accretive. We still have to do all of our purchase accounting and evaluation of intangible assets. So that work hopefully will be completed at least on a preliminary basis by the end of December of this year so we will have a much clearer picture of what the path toward earnings accretion looks like. But nothing has happened so far that would cause us to really change our views about that from what we announced back in February.

I appreciate it. And lastly, can you just remind us what the re-trade schedule looks like as you look out for both Standard and Central for 2013?

Well, yes, now that we have a look inside into the contract mix at Central, certainly, as well as our own, 2013 is not a very active year on the re-trade business. We've got a lot of our large contracts buttoned up and put away for another five years or so and Central has bid on the same airports and larger contracts. So we understand the totality of those as well and we understood going in that we did not face a lot of exposure excess of contract periods ending in 2013 on the major contracts. Of course, there's always some percentage of our portfolio at risk. But on the larger venues and the airport side, as I mentioned in a lot of the municipalities that we manage, 2013 doesn't have a whole lot of contract expirations for those.

Very helpful, I'll jump back in queue.

Kevin Steinke, Barrington.

Talk a little bit more about the new business pipeline here. Obviously, it has been nice and strong for Standard Parking. I'm just wondering from Central's perspective what their new business pipeline looks like, if they are bringing anything new to the table for you, or if you have in pretty much competing for the same deals and so that's perhaps not significantly additive on the new business side.

Well, it is, Kevin. Yes, I would say in 90% of the cases, we were both bidding on -- our pipelines were identical. Central has had some wins since the merger was announced on contracts that we hadn't bid, so that's one of the nice surprises. In a couple weeks, I am hopeful we will be able to get an announcement about that and some other things. But their pipeline is healthy. They were looking at the municipal market a little differently than we were, so the combination of our skill sets in that area is even further enhanced. We have always been looking to go to work for the municipalities in advance of the monetization of a particular municipality's parking assets.

Central had taken a little different approach in that they had developed really terrific relationships with those infrastructure funds that were looking to invest in monetizing city assets. And I know that the City of Cincinnati is out there right now and New York is out there right now, although New York is not a monetization issue. Both of us were changing it, but Central has a very significant presence in New York so they understand that market a little better than we do. The City of Los Angeles, on-street and off-street, is out there, and Central had some wins that they announced over the summer for municipal contracts in California where they actually beat us. And I never like to get beat, and we were surprised to ever get beat, but they had beat us in some municipalities in California.

So I would say, as I said at the beginning, Kevin, about 90% of the pipeline is identical but a little different approach to the marketplace, which we think is somewhat additive.

One thing I wanted to add to what Jim is saying is that, and this is something that has not really been highlighted too much, and that is that Central operates in probably 15 or 20 cities that Standard does not operate in. And as we have expanded the Standard business over the years, we have been careful about expanding our geographic footprint to really large cities where we felt we could really gain some traction, like New York over the past few years. But Central has fairly good-sized operations in cities like St. Louis and Detroit and other markets that Standard has not been active in previously. So from a new business pipeline point of view we are going to see some new deal flow coming from those Central-only markets.

Okay, great. And Jim, you mentioned New York, and just wondering if you have seen any significant disruption to your operations by the tragic storm that has occurred on the East Coast here.

I'm glad you asked, Kevin, because if no one did I was going to offer. It is awful. First of all, on that front I want to acknowledge our people from both sides of the business. And I'm looking forward to the day when we truly, from one brand, can just talk about our team. But we -- obviously, with the forecast for the storm and its severity giving us a few days to prepare, again, all of our clients were contacted and plans were put in place to begin to give us as much protection as we could get in terms of the exposure from the storm.

Fortunately, the markets, Washington, Baltimore, Philadelphia, Boston were not severely affected -- a little wind damage here and there in Philadelphia with some signage, but really nothing to speak to. But our people in New York and New Jersey who literally lived out of their cars downtown or got into a hotel and really, at the expense of their families, stayed close to our clients. New York and particularly New Jersey took the brunt of what happened. To give you -- we are still, I think, 16 of our locations in New York and New Jersey out of 446 that are not yet reopened and are still with some either water damage or some sort of wind damage that precludes them from reopening, but the rest are now reopened. But as you would suspect, business returning to those facilities -- for instance, the New Jersey transit lots that we operate, have been very slow to recover.

Now, given the experience that we had in dealing with Hurricane Katrina in New Orleans, we did a much better job of preparing for this storm than otherwise for not having that experience. So we understand and have people on the ground and here in Chicago and in Nashville processing claims on an almost around-the-clock basis for our clients and their customers. As we saw with Katrina, we know we will have claims on our garage keepers' legal liability policies for cars that might have been damaged although, again, I really want to acknowledge our people and getting cars out of garage basements and getting them to safe places, certainly with an effort to minimize the damage that we might have.

And then certainly there will be claims that will take, if our experience from Katrina holds true, that will take years to settle in terms of business interruption, not only from garages and facilities that were damaged that maybe we have leases on or reverse management contracts that affect our revenues, but losses from just no traffic in Manhattan for a few days.

So our claims and our risk management people have already been starting to calculate the damage. It will be months before we understand the totality and we begin to file claims just because of the lack of public transportation, getting our people to work on the subway systems, our garage attendants and valets and cashiers, was a very coordinated effort, and really our hats are off. I would like to acknowledge Steven Aiello from Standard and Hector Chevalier from Central, who represent our leadership team in New York now. And despite damage to their own residences, they were in the thick of things in Manhattan and New Jersey, holding clients' hands through power outages, now trying to get our equipment back online. You can imagine having electronic technology underwater is not good, particularly with salt water.

So because of our leverage in New York, we can mobilize the repair services from our vendors that much quicker, and our clients appreciate that. But we will, as we report fourth-quarter results next February and March, we will again carve out what we understand to be any impact on our bottom line by virtue of this storm.

So thanks for asking, Kevin.

Sure. Well, thanks for all the detail. Glad to hear that you managed through that well.

Nobody was hurt, Kevin, and that's the main thing. First of all, it's about our people and our family here. And we really didn't have anybody injured. Everything else we can clean up and get back to work.

Sure. Marc, on the management contract side, there was some particular strength in terms of parking services' revenue growth. Does that reflect perhaps the Olympics or some of the convention activity in the quarter?

It will reflect the new business that we have been talking about, Kevin. But, clearly, the flip side of that is that we didn't generate a commensurate increase in gross profit from management, and that's really a function of the insurance reserve adjustments that we talked about earlier.

Right, right. And are the insurance reserves adjustments -- is that something that you think is through for the year, or could something like that crop up again here? Or is that hard to predict?

Well, if you take a long-term view, when we set estimates for the year for our insurance programs -- and Central did this exactly the same way, so the merger doesn't really change the picture of this. We set the estimates on the basis that claims are more likely than not to be below our estimates. And taking a long-term view, Kevin, we have found that when we look at cumulative insurance reserve adjustments they are favorable. And we would expect that to continue. But in any given quarter, when the actuary looks at what has happened for another three months, there can be adjustments because we are talking about looking at many, many open years for claims. And so you will see some bumpiness from time to time. This is one of those quarters. But as we look forward to the fourth quarter, our own expectations when we set guidance and think about how we look forward in our own business would not be to expect either large favorable or large unfavorable adjustments. And in a typical quarter, it's usually a couple hundred grand one way or the other. It just so happened that this year was a little bigger with a negative $700,000, but it coincided with a positive $1.1 million in the same quarter last year; that was very unusual.

With regard to employment practices claims, it's very odd for those to be significant enough for us to talk about. And again, this was one of those situations where we had a $200,000 favorable in the quarter last year and a $200,000 unfavorable in the quarter this year. And the combination of those was large enough that it was worth mentioning. But typically, we would not expect those to fluctuate like that. I don't think that fluctuations that we saw this quarter are indicative of a new trend or a change in those patterns.

Okay, great, thank you for all the detail, as usual.

(Operator instructions) David Gold Sidoti.

Marc, just following up on that commentary on the claims, so just to put it out there, was there anything big that happened? Were there any big claims that basically pushed you to have to increase the reserves, or it was purely a number of smaller claims?

No, it's just a cumulative activity. And as you might imagine, David, in any one year, claims have moved up, claims have moved down as more information is known. But I can say that our claims experience, which we look at in terms of the value of claims as a percentage of the total payroll in the Company, that claims experience is near historic lows for the Company. So we have lost control around workers compensation and liability claims, well under control. And I think this is just an aberration of fluctuation that we've seen this quarter.

Okay, and then presumably you have looked at this or are conscious of how you compare with, say, Central's experience. But should we expect any significant adjustments post merger, or are the reserve levels sort of similar?

I don't know if we will see a whole lot of adjustments, David, initially. But what I can tell you is that that same metric that Marc mentioned, which are our incurred losses versus our payroll -- there is significant room for improvement on that very same metric coming over from Central. So it's a question of our risk management team analyzing that and trying to take advantage of our historic rates and our safety programs to try to put Central into the same metric, the same percentage of payroll as we have been able to enjoy. I would be disappointed in our leadership if they weren't able to tackle that. And I know we have already managed to do that. We have already taken advantage of our loss experience and collateralization against insurance programs where Central had maybe a little different balance sheet to trade from where we have been a little stronger and have been able to take advantage of that on a move-forward basis. So there are some synergy benefits other than just G&A, as you might suspect, in terms of headcount and office space.

Got you, perfect. One other for you, Jim. Your profit retention has been rock solid, very steady at the 96% level. And location retention has also been holding in the low 90s. It's impressive. But when we think about the disparity, has there been a conscious effort on management's part to basically pass or move on from, say, the locations with lower profit for you in favor of the better profit locations? Or is it just a function of mix?

Well, I think over time -- and that's a terrific question. Over time, we are casting away losers. Right? Which have an effect on that. If we have a contract that either loses money or provides us marginal profitability, we take a pretty hard look at that because obviously we have a cost just to open the doors as it relates to what we're doing in Chicago. Central has the same issue when they were thinking about Nashville. So I think we look at margins in terms of decisions on how far we will go on a re-trade and how that affects G&A. Marc talked again about continuing to lower our G&A spend as a percentage of growth, and we are within the target area that we really set a couple of years ago. Now the target is to get Central to the same level of efficiency and to re-trade on the Central side as well because -- I think you have been with me long enough to know that we talked about pages and pages of losers that Standard Parking had that we have now reduced to a single column on one page, and -- if that anymore. Central Parking has some longer-term leases that still have termed but they are expiring next year and the year after and the year after that, with significant losses against those leases. And we will obviously want to attack those. When you could make money just by canceling, it's a nice thing to do.

So I think we've got most of our site cleaned up. There's not a real conscious decision, because sometimes, David, it can be as granular as linkage to another client. So we will take one that generates 12,000 a year because we are doing 10 others for a client that might do 40 or 50 a year. So you have to be somewhat strategic about it, but certainly we don't tolerate a lot of losers nor are we going to tolerate a whole lot of loss leader losers in terms of our go-forward strategy. So yes, there is some sort of conscious decision on the bottom.

Perfect, as I'd expect, thank you both.

Clint Fendley, Davenport.

Jim and Marc, a question here around guidance -- I'm wondering if you were to still exclude the merger-related costs in the fourth quarter but did include the revenue and expenses from Central, would you still be within the $1.25 to $1.35 guidance? I understand the variable on the purchase price allocation, but just any color that you could add here would be appreciated.

There's a little bit of complexity around taxes, and I think that makes it a little bit hard to answer the question quite as cleanly as you would like. But I would say, if you take out everything related to Central, including the merger-related costs and revenues and including the tax impacts of the transaction, the underlying standard business should perform within that range. That's our expectation.

And we will try to do the best job we can of removing, whether it's New York City noise or Central noise, from the fourth quarter. But it just ain't going to happen. There's so much in terms of -- we have some people now that are running both types of facilities. We have some intermingling as it relates, certainly, to the field ops side of the business and how do you bucket that appropriately. So we will do the best job we can on trying to synthesize it backwards into Standard Parking as a standalone business. But it certainly won't be as exacting as what you have been used to in the past.

And that leads to the other area, which is as we get into projections for next year and the year after and the year after that, we will attempt to segregate those items that are synergy related or potentially synergy related, report on the status of how we are doing versus the integration and carve out those expenses that we won't expect to see on a move-forward basis and making that consideration to remove as much of that noise for you as we look at 2013-2014 and on into the future. But again, that is a very liquid process that will continue through next year. But we're sensitive to how we think you are going to want us, all of you are going to want us to report, and we are preparing our methodology for reporting with that consideration.

But we are not really going to be able to sort out every single nickel and dime out of the fourth quarter.

Okay, fair enough. Your commentary regarding 2013 in the release and today seems somewhat cautious. Should we anticipate -- any other color you could add there, I guess, would be appreciated. And I guess, based on the timing of your reporting, will we get -- at the next updated outlook for your business I guess we would receive, what, next March, then?

Yes.

Thank you.

Daniel Moore, CJS Securities.

Since you mentioned it, Jim, if there were to be no hockey season, would there be a measurable impact on same-store gross profit, as much as 100 basis points, or just too tough to measure?

Well, it does considering Central, because Central has some event venues as well that are affect by hockey. So when I mentioned the fact that we are just now into the projections for 2013 and the 2013 budget that we will present to our Board in December, hockey has bubbled up as an issue to be considered. We are thinking at this point that there won't be any hockey for the remainder of 2012. And we have no level of optimism that there will be a full season beginning in 2013, but that's where you lose any sort of clarity.

So, much like New York and much like carving out things like the Olympics and some of the other one-time events of the past, we will comment on what the impact has been regarding revenue lost to the hockey season, if in fact the whole season is lost.

But I think I read the other day that with the cancellation of the November games that there's really not a way they can fit the full season in now. So there will be some revenue lost, it's just a question of is it the whole season, is it half? As we go along, we will separate that noise as well from the rest of the business.

And lastly, you mentioned some of the opportunities in the munis like New York, Cincinnati and LA. The general trend, are lead times and decision-making process continue to be stretched out? Any change over last 90 to 100 days, or just anything you might comment on there?

Well, there's just more of them out there. The decision time is about the same as airports. We are the only parking company that really segregates our sales and support effort on that business. SP Plus Municipal Services has been singularly developed with talent both on the sales side and the technology side and the ops side to be able to respond. So our pipeline has gotten bigger.

But what we have learned is the decision-making, because of the municipal purchasing bureaucracies, is about as long as an airport contract, where we can submit a request for proposals and that will have been the result of a year lead time of getting it that far. So the lead time, as you mentioned, is much longer than our typical commercial deals.

But given the fact that the volume is out there, and some of the awards we talked about, and I think I spoke about Oxford, Mississippi today and a couple others in our release. I think we talked about the city of Harrisburg in our release, which is a big one. The pipeline now, because it has been in place for a while, should be able to yield some tangible results in the short-term just knowing that those decisions are coming up over the next six months.

Perfect, appreciate it.

And again, all of you should recognize that for us to make a public announcement on a win requires our client to give us approval. And certainly, the municipalities are much more cautious in terms of making sure that contracts are signed and transition plans are in place and affected personnel have been notified. So, while we might have good news, we are very, very subservient to the clients' desires of when we make those announcements relative to when we know we have won. So it's almost like having a 12-second delay on a television or radio show.

Perfect, appreciate that.

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

Thank you very much, Shannon. As always, we thank all of you for participating on the call today. The topics to be discussed on this call in the future are rather exciting. I think you can sense fact that I'm very, very excited and pleased with how the integration of the two companies has gone so far and just now beginning to work on marketing plans and branding plans for the organization, getting past the Department of Justice restrictions. And we hope to have some great news for you when we talk to you in March. And thanks again for calling in today.

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