UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 7, 2011
ABM Industries
Incorporated
(Exact name of registrant as
specified in its charter)
| Delaware | 1-8929 | 94-1369354 | ||
| (State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 551 Fifth Avenue, Suite 300,
New York, New York |
10176 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 297-0200
| N/A |
| (Former name or former address if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On June 7, 2011, ABM Industries Incorporated (the “Company”) issued a press release announcing financial results related to the second quarter of fiscal year 2011. A copy of the press release is attached as Exhibit 99.1, which is incorporated into this item by reference.
As disclosed in the press release attached as Exhibit 99.1, the Company will hold a live web cast on June 8, 2011 relating to the Company’s financial results for the second quarter of fiscal year 2011. A copy of the slides to be presented at the Company’s web cast and discussed in the conference call relating to such financial results is being furnished as Exhibit 99.2 to this Form 8-K.
Item 8.01. Other Events.
On June 7, 2011, the Company announced that the Board of Directors of the Company declared a quarterly dividend of $0.14 per share, payable on August 1, 2011 to stockholders of record on July 7, 2011. A copy of the press release announcing the declaration of the dividend is attached as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits.
| (c) | Exhibits. |
| 99.1 | Press Release issued by ABM Industries Incorporated, dated June 7, 2011, announcing financial results related to the second quarter of fiscal year 2011 and the declaration of a dividend payable August 1, 2011 to stockholders of record on July 7, 2011. |
| 99.2 | Slides of ABM Industries Incorporated, dated June 8, 2011. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ABM INDUSTRIES INCORPORATED
Dated: June 7, 2011
By: /s/ Sarah H.
McConnell
Sarah H. McConnell
Senior Vice President and
General Counsel
EXHIBIT INDEX
| 99.1 | Press Release issued by ABM Industries Incorporated, dated June 7, 2011, announcing financial results related to the second quarter of fiscal year 2011 and the declaration of a dividend. |
| 99.2 | Slides of ABM Industries Incorporated, dated June 8, 2011. |
Exhibit 99.1
|
551 Fifth Avenue Suite 300 New York, NY 10176 |
PRESS RELEASE
Contact: |
||||||
Investors & Analysts:
|
David Farwell | Media: | Tony Mitchell | |||
| (212) 297-9792 | (212) 297-9828 | |||||
| dfarwell@abm.com | tony.mitchell@abm.com |
ABM INDUSTRIES ANNOUNCES SECOND QUARTER 2011 FINANCIAL RESULTS, DECLARES QUARTERLY
DIVIDEND AND REAFFIRMS GUIDANCE
DIVIDEND AND REAFFIRMS GUIDANCE
Revenues Increase 24% to $1.06 Billion
EPS from Continuing Operations Rises to $0.26; Adjusted EPS Increases to $0.28
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| (in millions, | April 30, | Increase | April 30, | Increase | ||||||||||||||||||||
| except per share data) | 2011 | 2010 | (Decrease) | 2011 | 2010 | (Decrease) | ||||||||||||||||||
Revenues |
$ | 1,060.1 | $ | 855.5 | 23.9 | % | $ | 2,089.3 | $ | 1,725.3 | 21.1 | % | ||||||||||||
Net cash provided by continuing operating activities |
$ | 31.3 | $ | 50.0 | (37.4 | )% | $ | 31.5 | $ | 37.7 | (16.5 | )% | ||||||||||||
Income from continuing operations |
$ | 14.2 | $ | 8.6 | 64.7 | % | $ | 22.6 | $ | 21.5 | 5.3 | % | ||||||||||||
Income from continuing operations per diluted share |
$ | 0.26 | $ | 0.16 | 63.9 | % | $ | 0.42 | $ | 0.41 | 2.1 | % | ||||||||||||
Net income |
$ | 14.2 | $ | 8.6 | 65.5 | % | $ | 22.6 | $ | 21.4 | 5.8 | % | ||||||||||||
Net income per diluted share |
$ | 0.26 | $ | 0.16 | 63.9 | % | $ | 0.42 | $ | 0.41 | 2.1 | % | ||||||||||||
Adjusted income from continuing operations |
$ | 15.0 | $ | 11.9 | 25.5 | % | $ | 26.7 | $ | 26.0 | 2.9 | % | ||||||||||||
Adjusted income from continuing operations per diluted share |
$ | 0.28 | $ | 0.23 | 20.0 | % | $ | 0.50 | $ | 0.49 | 2.0 | % | ||||||||||||
Adjusted EBITDA |
$ | 42.0 | $ | 29.4 | 43.1 | % | $ | 77.7 | $ | 62.0 | 25.3 | % | ||||||||||||
(This release refers to non-GAAP financial measures described as “Adjusted EBITDA”, “Adjusted
Income from Continuing Operations”, and “Adjusted Income from Continuing Operations per Diluted
Share” (or “Adjusted EPS”). Refer to the accompanying financial tables for supplemental financial
data and corresponding reconciliation of these non-GAAP financial measures to certain GAAP
financial measures.)
- 1 -
NEW YORK, NY — June 7, 2011 — ABM Industries Incorporated (NYSE:ABM) today announced
revenues for the second quarter of fiscal year 2011 of $1.06 billion, a 23.9% increase compared to
second quarter of fiscal year 2010 revenues of $855.5 million. Income from continuing operations
for the second quarter of fiscal year 2011 was $14.2 million, a 64.7% increase from $8.6 million in
the second quarter of fiscal year 2010. Income from continuing operations per diluted share for
the second quarter of fiscal year 2011 increased 63.9% to $0.26 compared to income from continuing
operations per diluted share of $0.16 in the second quarter of fiscal year 2010. Income from
continuing operations increased primarily as a result of a $4.7 million after-tax increase in
Divisional operating profit in the second quarter of fiscal year 2011, driven by the companies
acquired in 2010, and including a $2.3 million after-tax benefit from lower labor expense as a
result of one less work day, partially offset by higher state unemployment insurance tax expense
and fuel costs. In addition, the second quarter of fiscal year 2010 included a $2.7 million
after-tax expense for a specific legal contingency. This combined benefit to the year-over-year
increase in income from continuing operations in the second quarter of fiscal year 2011 was
partially offset by a $1.9 million after-tax increase in interest expense compared to the year-ago
quarter, primarily as a result of financing the Linc acquisition.
“The strength of our acquired businesses, combined with our continued focus on job profitability,
drove second quarter results, which came in as expected,” said Henrik Slipsager, president and
chief executive officer, ABM Industries Incorporated. “The quarter generated top and bottom line
growth for the Company as we delivered our second consecutive quarter exceeding $1 billion in
revenues and both income from continuing operations and adjusted income from continuing operations
increased by double digits year-over-year. Revenue growth in the quarter was driven by the
companies we acquired in 2010, which together contributed nearly $200 million. We also achieved
slight organic growth, both year-over-year and sequentially. Adjusted income from continuing
operations increased 26% to $15 million while adjusted income from continuing operations per
diluted share increased 20% year-over-year to $0.28. The quarter also generated 43% growth in
Adjusted EBITDA, which increased to $42 million compared to $29 million in the year-ago quarter.”
“As with last quarter, all four Divisions produced revenue increases year-over-year. The
acquisitions of The Linc Group, L&R Parking companies and Diversco continue to increase the
Company’s revenues and profitability while expanding our reach in key vertical markets.
Engineering revenues increased by more than $135 million driven by The Linc Group, which also
helped increase the Division’s operating profit by more than 36%. Linc Government Services,
however, was impacted by the delay in passing a federal budget that postponed the start of existing
projects and delayed bidding and awarding of new contracts.”
“Janitorial revenues grew through the combination of Diversco sales and strong revenue growth in
the Northeast. Janitorial increased operating profit by more than 21% as a result of lower labor
expense from one less work day in the quarter, which added $2.3 million after-tax, as well as the
savings generated by the Division’s regional consolidation. Parking revenues increased about 37%
on the strength of $43 million in sales from the L&R companies. Parking’s operating profit was
down slightly as a result of a contract settlement and higher state unemployment insurance expenses
in the quarter. Security revenues increased slightly with Diversco generating nearly $3 million.
Security’s operating profit was essentially flat year-over-year.”
Slipsager concluded: “With the addition and successful integration of The Linc Group, Engineering
continued to expand the number and scope of facility solutions we offer to reduce energy
consumption and costs for clients ranging from colleges and universities to biotechnology centers
and governments. Across all Divisions, we continued to win new business and expand existing
businesses in key vertical markets, including financial services, health care, education,
telecommunications, transportation and commercial real estate. We will continue to focus on and
generate growth from the integrated facility services we deliver to our target vertical markets,
leveraging our experience and expertise in meeting the distinct needs of these client sectors.”
- 2 -
Excluding items impacting comparability, adjusted income from continuing operations was $15.0
million, or $0.28 per diluted share, for the second quarter of fiscal year 2011. This compares to
adjusted income from continuing operations of $11.9 million, or $0.23 per diluted share, in the
second quarter of fiscal year 2010.
The Company’s adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, and
excluding discontinued operations and items impacting comparability) for the second quarter of
fiscal year 2011 was $42.0 million, a 43.1% increase compared to $29.4 million in the second
quarter of fiscal year 2010.
Net cash from continuing operations was $31.3 million in the second quarter of fiscal year 2011
compared to $50.0 million in the second quarter of fiscal year 2010. The decrease in net cash
provided by operating activities was primarily related to the timing of both collections received
from clients and payments made on vendor invoices as well as an increase in cash taxes paid as a
result of the runoff in the utilization of tax assets acquired in the 2007 OneSource acquisition.
The Company reported revenues for the six months ended April 30, 2011 of $2.09 billion, a 21.1%
increase compared to year-ago revenues of $1.73 billion. Income from continuing operations for the
first six months of fiscal year 2011 was $22.6 million, or $0.42 per diluted share, compared to
$21.5 million, or $0.41 per diluted share, for the first six months of fiscal year 2010. Adjusted
income from continuing operations for the first half of fiscal year 2011 was $26.7 million, or
$0.50 per diluted share, compared to $26.0 million, or $0.49 per diluted share, for the first six
months of fiscal year 2010. Adjusted EBITDA for the first six months of fiscal year 2011 was $77.7
million, a 25.3% increase compared to $62.0 million for the first six months of fiscal year 2010.
The Company also announced that the Board of Directors has declared a third quarter cash dividend
of $0.14 per common share payable on August 1, 2011 to stockholders of record on July 7, 2011.
This will be ABM’s 181st consecutive quarterly cash dividend.
Guidance
The Company reaffirmed its guidance and continues to estimate that income from continuing
operations per diluted share for the full 2011 fiscal year will be in the range of $1.23 to $1.33
and adjusted income from continuing operations per diluted share, for the same period, of $1.43 to
$1.53.
Earnings Webcast
On Wednesday, June 8, 2011, at 9:00 a.m. (EDT), ABM will host a live webcast of remarks by
President and Chief Executive Officer Henrik Slipsager and Executive Vice President and Chief
Financial Officer James Lusk.
The webcast will be accessible at: http://investor.abm.com/eventdetail.cfm?eventid=97653
Listeners are asked to be online at least 15 minutes early to register, as well as to download and
install any complimentary audio software that might be required. Following the call, the webcast
will be available at this URL for a period of 90 days.
In addition to the webcast, a limited number of toll-free telephone lines will also be available
for listeners who are among the first to call 877-664-7395 within 15 minutes before the event.
Telephonic replays will be accessible during the period from two hours to seven days after the call
by dialing 800-642-1687 and then entering ID #70483113.
- 3 -
Earnings Webcast Presentation
In connection with the webcast to discuss earnings (see above), a slide presentation related to
earnings and operations will be available at the Company’s website at www.abm.com and can be
accessed through the Investor Relations portion of ABM’s website by clicking on the “Presentations”
tab.
About ABM Industries Incorporated
ABM Industries Incorporated (NYSE:ABM), which operates through its subsidiaries (collectively
“ABM”), is a leading provider of integrated facility services. With fiscal 2010 revenues of
approximately $3.5 billion and nearly 100,000 employees, ABM provides commercial cleaning and
maintenance, facility engineering, energy efficiency, parking and security services for thousands
of commercial, industrial, government and retail clients across the United States and various
international locations. ABM’s business services include ABM Janitorial Services, ABM Facility
Services, ABM Engineering Services, Ampco System Parking and ABM Security Services. For more
information, visit www.abm.com.
Cautionary Statement under the Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements that set forth management’s anticipated
results based on management’s current plans and assumptions. Any number of factors could cause the
Company’s actual results to differ materially from those anticipated. These factors include but are
not limited to the following: (1) risks relating to our acquisition of Linc, including risks
relating to reductions in government spending on outsourced services as well as payment delays, may
adversely affect a significant portion of revenues generated by government contracts, and political
and compliance risks, both domestically and abroad, may adversely impact our operations; (2) our
acquisition strategy may adversely impact our results of operations; (3) intense competition can
constrain our ability to gain business, as well as our profitability; (4) we are subject to
volatility associated with high deductibles for certain insurable risks; (5) an increase in costs
that we cannot pass on to clients could affect our profitability; (6) we provide our services
pursuant to agreements which are generally cancelable by either party upon 30 to 90 days’ notice;
(7) our success depends on our ability to preserve our long-term relationships with clients; (8) we
incur significant accounting and other control costs that reduce profitability; (9 ) a decline in
commercial office building occupancy and rental rates could affect our revenues and profitability;
(10) deterioration in economic conditions in general could further reduce the demand for facility
services and, as a result, reduce our earnings and adversely affect our financial condition; (11)
financial difficulties or bankruptcy of one or more of our major clients could adversely affect
results; (12) we are subject to risks relating to foreign currency fluctuations and foreign
exchange exposure; (13) our ability to operate and pay our debt obligations depends upon our access
to cash; (14) because we conduct our business through operating subsidiaries, we depend on those
entities to generate the funds necessary to meet financial obligations; (15) that portion of our
revenues which are generated from international operations are subject to political risks and
changes in socio-economic conditions, laws and regulations, including labor, monetary and fiscal
policies, which could negatively impact our ability to operate and grow our business in the
international arena; (17) future declines or fluctuations in the fair value of our investments in
auction rate securities that are deemed other-than-temporarily impaired could negatively impact our
earnings; (18) uncertainty in the credit markets may negatively impact our costs of borrowings, our
ability to collect receivables on a timely basis, and our cash flow; (19) any future increase in
the level of debt or in interest rates can affect our results of operations; (20) an impairment
charge could have a material adverse effect on our financial condition and results of operations;
(21) we are defendants in several class and representative actions or other lawsuits alleging
various claims that could cause us to incur substantial liabilities; (22) since we are an
attractive employer for recent émigrés to this country and many of our jobs are filled by such,
changes in immigration laws or enforcement actions or investigations under such laws could
significantly adversely affect our labor force, operations and financial results as well as our
reputation; (23) labor disputes could lead to loss of revenues or expense variations; (24) federal
health care reform legislation may adversely affect our business and results of operations; (25) we
participate in multi-employer defined benefit plans that could result
in substantial liabilities being incurred; and (26) natural disasters or acts of terrorism could
disrupt our services.
- 4 -
Additional information regarding these and other risks and uncertainties the Company faces is
contained in the Company’s Annual Report on Form 10-K for the year ended October 31, 2010 and in
other reports we file from time to time with the Securities and Exchange Commission.
Use of Non-GAAP Financial Information
To supplement ABM’s consolidated financial information, the Company has presented income from
continuing operations, as adjusted for items impacting comparability, for the second quarter of
fiscal years 2011 and 2010. The Company also presents guidance for fiscal year 2011, as adjusted.
These adjustments have been made with the intent of providing financial measures that give
management and investors a better understanding of the underlying operational results and trends
and ABM’s marketplace performance. In addition, the Company has presented earnings before interest,
taxes, depreciation and amortization and excluding discontinued operations and items impacting
comparability (adjusted EBITDA) for the second quarter of fiscal years 2011 and 2010. Adjusted
EBITDA is among the indicators management uses as a basis for planning and forecasting future
periods. The presentation of these non-GAAP financial measures is not meant to be considered in
isolation or as a substitute for financial statements prepared in accordance with generally
accepted accounting principles in the United States. (See accompanying financial tables for
supplemental financial data and corresponding reconciliations to certain GAAP financial measures.)
###
- 5 -
Financial Schedules
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENT INFORMATION
(UNAUDITED)
| Three Months Ended April 30, | Increase | |||||||||||
| (In thousands, except per share data) | 2011 | 2010 | (Decrease) | |||||||||
Revenues |
$ | 1,060,083 | $ | 855,461 | 23.9 | % | ||||||
Expenses |
||||||||||||
Operating |
949,594 | 771,974 | 23.0 | % | ||||||||
Selling, general and administrative |
78,324 | 65,244 | 20.0 | % | ||||||||
Amortization of intangible assets |
5,666 | 2,694 | 110.3 | % | ||||||||
Total expenses |
1,033,584 | 839,912 | 23.1 | % | ||||||||
Operating profit |
26,499 | 15,549 | 70.4 | % | ||||||||
Other-than-temporary impairment losses
on auction rate security: |
||||||||||||
Gross impairment losses |
— | (101 | ) | NM | * | |||||||
Impairments recognized in
other comprehensive income |
— | (26 | ) | NM | * | |||||||
Income from unconsolidated affiliates, net |
832 | — | NM | * | ||||||||
Interest expense |
(4,317 | ) | (1,177 | ) | 266.8 | % | ||||||
Income from continuing operations
before income taxes |
23,014 | 14,245 | 61.6 | % | ||||||||
Provision for income taxes |
(8,814 | ) | (5,622 | ) | 56.8 | % | ||||||
Income from continuing operations |
14,200 | 8,623 | 64.7 | % | ||||||||
Loss from discontinued operations, net of taxes |
(8 | ) | (46 | ) | NM | * | ||||||
Net Income |
$ | 14,192 | $ | 8,577 | 65.5 | % | ||||||
Net Income Per Common Share — Basic |
||||||||||||
Income from continuing operations |
$ | 0.27 | $ | 0.16 | 67.1 | % | ||||||
Loss from discontinued operations |
— | — | NM | * | ||||||||
Net Income |
$ | 0.27 | $ | 0.16 | 67.1 | % | ||||||
Net Income Per Common Share — Diluted |
||||||||||||
Income from continuing operations |
$ | 0.26 | $ | 0.16 | 63.9 | % | ||||||
Loss from discontinued operations |
— | — | NM | * | ||||||||
Net Income |
$ | 0.26 | $ | 0.16 | 63.9 | % | ||||||
* Not Meaningful |
||||||||||||
Average Common And Common Equivalent Shares |
||||||||||||
Basic |
53,106 | 52,007 | ||||||||||
Diluted |
54,159 | 52,719 | ||||||||||
Dividends Declared Per Common Share |
$ | 0.140 | $ | 0.135 | ||||||||
- 6 -
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENT INFORMATION (UNAUDITED)
| Six Months Ended April 30, | Increase | |||||||||||
| (In thousands, except per share data) | 2011 | 2010 | (Decrease) | |||||||||
Revenues |
$ | 2,089,252 | $ | 1,725,345 | 21.1 | % | ||||||
Expenses |
||||||||||||
Operating |
1,877,354 | 1,554,075 | 20.8 | % | ||||||||
Selling, general and administrative |
157,524 | 128,046 | 23.0 | % | ||||||||
Amortization of intangible assets |
10,959 | 5,469 | 100.4 | % | ||||||||
Total expenses |
2,045,837 | 1,687,590 | 21.2 | % | ||||||||
Operating profit |
43,415 | 37,755 | 15.0 | % | ||||||||
Other-than-temporary impairment losses
on auction rate security: |
||||||||||||
Gross impairment losses |
— | (36 | ) | NM | * | |||||||
Impairments recognized in
other comprehensive income |
— | (91 | ) | NM | * | |||||||
Income from unconsolidated affiliates, net |
1,619 | — | NM | * | ||||||||
Interest expense |
(8,363 | ) | (2,392 | ) | 249.6 | % | ||||||
Income from continuing operations
before income taxes |
36,671 | 35,236 | 4.1 | % | ||||||||
Provision for income taxes |
(14,066 | ) | (13,777 | ) | 2.1 | % | ||||||
Income from continuing operations |
22,605 | 21,459 | 5.3 | % | ||||||||
Loss from discontinued operations, net of taxes |
(24 | ) | (107 | ) | NM | * | ||||||
Net Income |
$ | 22,581 | $ | 21,352 | 5.8 | % | ||||||
Net Income Per Common Share — Basic |
||||||||||||
Income from continuing operations |
$ | 0.43 | $ | 0.41 | 4.1 | % | ||||||
Loss from discontinued operations |
— | — | NM | * | ||||||||
Net Income |
$ | 0.43 | $ | 0.41 | 4.1 | % | ||||||
Net Income Per Common Share — Diluted |
||||||||||||
Income from continuing operations |
$ | 0.42 | $ | 0.41 | 2.1 | % | ||||||
Loss from discontinued operations |
— | — | NM | * | ||||||||
Net Income |
$ | 0.42 | $ | 0.41 | 2.1 | % | ||||||
* Not Meaningful |
||||||||||||
Average Common And Common Equivalent Shares |
||||||||||||
Basic |
52,972 | 51,914 | ||||||||||
Diluted |
54,026 | 52,633 | ||||||||||
Dividends Declared Per Common Share |
$ | 0.280 | $ | 0.270 | ||||||||
- 7 -
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW INFORMATION
(UNAUDITED)
| Three Months Ended April 30, | ||||||||
| (In thousands) | 2011 | 2010 | ||||||
Net cash provided by continuing operating activities |
31,266 | 49,960 | ||||||
Net cash provided by discontinued operating activities |
614 | 3,276 | ||||||
Net cash provided by operating activities |
$ | 31,880 | $ | 53,236 | ||||
Net cash provided by (used in) investing activities |
$ | 262 | $ | (4,815 | ) | |||
Proceeds from exercises of stock options (including income tax benefit) |
2,000 | 1,794 | ||||||
Dividends paid |
(7,436 | ) | (7,022 | ) | ||||
Borrowings from line of credit |
131,000 | 98,000 | ||||||
Repayment of borrowings from line of credit |
(165,000 | ) | (125,000 | ) | ||||
Changes in book cash overdrafts |
(781 | ) | (16,427 | ) | ||||
Net cash used in financing activities |
$ | (40,217 | ) | $ | (48,655 | ) | ||
| Six Months Ended April 30, | ||||||||
| (In thousands) | 2011 | 2010 | ||||||
Net cash provided by continuing operating activities |
31,524 | 37,740 | ||||||
Net cash provided by discontinued operating activities |
1,653 | 6,583 | ||||||
Net cash provided by operating activities |
$ | 33,177 | $ | 44,323 | ||||
Acquisition of Linc (net of cash acquired) |
(292,178 | ) | — | |||||
Other investing |
(5,547 | ) | (11,739 | ) | ||||
Net cash used in investing activities |
$ | (297,725 | ) | $ | (11,739 | ) | ||
Proceeds from exercises of stock options |
||||||||
(including income tax benefit) |
7,731 | 3,045 | ||||||
Dividends paid |
(14,834 | ) | (14,014 | ) | ||||
Deferred financing costs paid |
(4,991 | ) | — | |||||
Borrowings from line of credit |
561,500 | 229,000 | ||||||
Repayment of borrowings from line of credit |
(306,000 | ) | (256,500 | ) | ||||
Changes in book cash overdrafts |
4,986 | (7,325 | ) | |||||
Net cash provided by (used in) financing activities |
$ | 248,392 | $ | (45,794 | ) | |||
- 8 -
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
(UNAUDITED)
| April 30, | October 31, | |||||||
| (In thousands) | 2011 | 2010 | ||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 23,290 | $ | 39,446 | ||||
Trade accounts receivable, net |
555,940 | 450,513 | ||||||
Prepaid income taxes |
2,211 | 1,498 | ||||||
Current assets of discontinued operations |
3,445 | 4,260 | ||||||
Prepaid expenses |
47,038 | 41,306 | ||||||
Notes receivable and other |
33,686 | 20,402 | ||||||
Deferred income taxes, net |
45,217 | 46,193 | ||||||
Insurance recoverables |
5,138 | 5,138 | ||||||
Total current assets |
715,965 | 608,756 | ||||||
Non-current assets of discontinued operations |
464 | 1,392 | ||||||
Insurance deposits |
35,903 | 36,164 | ||||||
Other investments and long-term receivables |
3,736 | 4,445 | ||||||
Deferred income taxes, net |
45,209 | 51,068 | ||||||
Insurance recoverables |
72,006 | 70,960 | ||||||
Other assets |
67,051 | 37,869 | ||||||
Investments in auction rate securities |
15,503 | 20,171 | ||||||
Investments in unconsolidated affiliates, net |
15,705 | — | ||||||
Property, plant and equipment, net |
62,346 | 58,088 | ||||||
Other intangible assets, net |
140,924 | 65,774 | ||||||
Goodwill |
742,179 | 593,983 | ||||||
Total assets |
$ | 1,916,991 | $ | 1,548,670 | ||||
Liabilities |
||||||||
Trade accounts payable |
$ | 127,197 | $ | 78,928 | ||||
Accrued liabilities |
||||||||
Compensation |
94,974 | 89,063 | ||||||
Taxes — other than income |
22,530 | 17,663 | ||||||
Insurance claims |
76,438 | 77,101 | ||||||
Other |
80,504 | 70,119 | ||||||
Income taxes payable |
716 | 977 | ||||||
Total current liabilities |
402,359 | 333,851 | ||||||
Income taxes payable |
32,961 | 29,455 | ||||||
Line of credit |
396,000 | 140,500 | ||||||
Retirement plans and other |
53,517 | 34,626 | ||||||
Insurance claims |
271,897 | 271,213 | ||||||
Total liabilities |
1,156,734 | 809,645 | ||||||
Stockholders’ Equity |
760,257 | 739,025 | ||||||
Total liabilities and stockholders’ equity |
$ | 1,916,991 | $ | 1,548,670 | ||||
- 9 -
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
REVENUES AND OPERATING PROFIT BY SEGMENT (UNAUDITED)
| Three Months Ended April 30, | Increase | |||||||||||
| (In thousands) | 2011 | 2010 | (Decrease) | |||||||||
Revenues |
||||||||||||
Janitorial |
$ | 590,254 | $ | 566,275 | 4.2 | % | ||||||
Engineering |
229,197 | 93,961 | 143.9 | % | ||||||||
Parking |
156,127 | 114,003 | 36.9 | % | ||||||||
Security |
84,138 | 80,712 | 4.2 | % | ||||||||
Corporate |
367 | 510 | (28.0 | )% | ||||||||
| $ | 1,060,083 | $ | 855,461 | 23.9 | % | |||||||
Operating Profit |
||||||||||||
Janitorial |
$ | 34,934 | $ | 28,859 | 21.1 | % | ||||||
Engineering |
6,842 | 5,022 | 36.2 | % | ||||||||
Parking |
4,894 | 5,184 | (5.6 | )% | ||||||||
Security |
897 | 941 | (4.7 | )% | ||||||||
Corporate |
(21,068 | ) | (24,457 | ) | 13.9 | % | ||||||
Operating profit |
26,499 | 15,549 | 70.4 | % | ||||||||
Other-than-temporary impairment losses
on auction rate security: |
||||||||||||
Gross impairment losses |
— | (101 | ) | NM | * | |||||||
Impairments recognized in
other comprehensive income |
— | (26 | ) | NM | * | |||||||
Income from unconsolidated affiliates, net |
832 | — | NM | * | ||||||||
Interest expense |
(4,317 | ) | (1,177 | ) | 266.8 | % | ||||||
Income from continuing operations
before income taxes |
$ | 23,014 | $ | 14,245 | 61.6 | % | ||||||
REVENUES AND OPERATING PROFIT BY SEGMENT (UNAUDITED)
| Six Months Ended April 30, | Increase | |||||||||||
| (In thousands) | 2011 | 2010 | (Decrease) | |||||||||
Revenues |
||||||||||||
Janitorial |
$ | 1,184,860 | $ | 1,142,333 | 3.7 | % | ||||||
Engineering |
421,845 | 191,333 | 120.5 | % | ||||||||
Parking |
308,993 | 226,591 | 36.4 | % | ||||||||
Security |
172,894 | 164,309 | 5.2 | % | ||||||||
Corporate |
660 | 779 | (15.3 | )% | ||||||||
| $ | 2,089,252 | $ | 1,725,345 | 21.1 | % | |||||||
Operating Profit |
||||||||||||
Janitorial |
$ | 64,798 | $ | 62,660 | 3.4 | % | ||||||
Engineering |
14,292 | 10,297 | 38.8 | % | ||||||||
Parking |
9,628 | 10,210 | (5.7 | )% | ||||||||
Security |
2,198 | 2,287 | (3.9 | )% | ||||||||
Corporate |
(47,501 | ) | (47,699 | ) | 0.4 | % | ||||||
Operating profit |
43,415 | 37,755 | 15.0 | % | ||||||||
Other-than-temporary impairment losses
on auction rate security: |
||||||||||||
Gross impairment losses |
— | (36 | ) | NM | * | |||||||
Impairments recognized in
other comprehensive income |
— | (91 | ) | NM | * | |||||||
Income from unconsolidated affiliates, net |
1,619 | — | NM | * | ||||||||
Interest expense |
(8,363 | ) | (2,392 | ) | 249.6 | % | ||||||
Income from continuing operations
before income taxes |
$ | 36,671 | $ | 35,236 | 4.1 | % | ||||||
| * | Not Meaningful |
- 10 -
ABM Industries Incorporated and Subsidiaries
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
(in thousands, except per share data)
| Three Months Ended April 30, | Six Months Ended April 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Reconciliation of Adjusted Income
from Continuing
Operations to Net Income |
||||||||||||||||
Adjusted Income from Continuing Operations |
$ | 14,967 | $ | 11,925 | $ | 26,715 | $ | 25,965 | ||||||||
Items Impacting Comparability, net of taxes |
(767 | ) | (3,302 | ) | (4,110 | ) | (4,506 | ) | ||||||||
Income from Continuing Operations |
14,200 | 8,623 | 22,605 | 21,459 | ||||||||||||
Loss from Discontinued Operations |
(8 | ) | (46 | ) | (24 | ) | (107 | ) | ||||||||
Net Income |
$ | 14,192 | $ | 8,577 | $ | 22,581 | $ | 21,352 | ||||||||
Reconciliation of Adjusted Income from Continuing
Operations to Income from
Continuing Operations |
||||||||||||||||
Adjusted Income from Continuing Operations |
$ | 14,967 | $ | 11,925 | $ | 26,715 | $ | 25,965 | ||||||||
Items Impacting Comparability: |
||||||||||||||||
Corporate Initiatives (a) |
— | (1,005 | ) | — | (2,975 | ) | ||||||||||
Acquistion Costs |
(803 | ) | — | (4,927 | ) | — | ||||||||||
Linc Purchase Accounting Adjustment |
(418 | ) | — | (698 | ) | — | ||||||||||
Litigation Contingency |
— | (4,400 | ) | (920 | ) | (4,400 | ) | |||||||||
Total Items Impacting Comparability |
(1,221 | ) | (5,405 | ) | (6,545 | ) | (7,375 | ) | ||||||||
Income Taxes Benefit |
454 | 2,103 | 2,435 | 2,869 | ||||||||||||
Items Impacting Comparability, net of taxes |
(767 | ) | (3,302 | ) | (4,110 | ) | (4,506 | ) | ||||||||
Income from Continuing Operations |
$ | 14,200 | $ | 8,623 | $ | 22,605 | $ | 21,459 | ||||||||
Reconciliation of Adjusted
EBITDA to Net Income |
||||||||||||||||
Adjusted EBITDA |
$ | 42,046 | $ | 29,378 | $ | 77,747 | $ | 62,047 | ||||||||
Items Impacting Comparability |
(1,221 | ) | (5,405 | ) | (6,545 | ) | (7,375 | ) | ||||||||
Discontinued Operations |
(8 | ) | (46 | ) | (24 | ) | (107 | ) | ||||||||
Income Tax |
(8,814 | ) | (5,622 | ) | (14,066 | ) | (13,777 | ) | ||||||||
Interest Expense |
(4,317 | ) | (1,177 | ) | (8,363 | ) | (2,392 | ) | ||||||||
Depreciation and Amortization |
(13,494 | ) | (8,551 | ) | (26,168 | ) | (17,044 | ) | ||||||||
Net Income |
$ | 14,192 | $ | 8,577 | $ | 22,581 | $ | 21,352 | ||||||||
| (a) | Corporate initiatives includes: (i) costs associated with the implementation of a new
payroll and human resources information system, (ii) the upgrade of the Company’s accounting
system, (iii) the completion of the corporate move from San Francisco, and (iv) the
integration costs associated with OneSource. |
- 11 -
(Continued)
Reconciliation of Adjusted Income from Continuing Operations per Diluted
Share to Income from Continuing Operations per Diluted Share
Share to Income from Continuing Operations per Diluted Share
| Three Months Ended April 30, | Six Months Ended April 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Adjusted Income from Continuing
Operations per Diluted Share |
$ | 0.28 | $ | 0.23 | $ | 0.50 | $ | 0.49 | ||||||||
Items Impacting Comparability, net of taxes |
(0.02 | ) | (0.07 | ) | (0.08 | ) | (0.08 | ) | ||||||||
Income from Continuing Operations
per Diluted Share |
$ | 0.26 | $ | 0.16 | $ | 0.42 | $ | 0.41 | ||||||||
Diluted Shares |
54,159 | 52,719 | 54,026 | 52,633 | ||||||||||||
- 12 -
ABM Industries Incorporated and Subsidiaries
Reconciliation of Estimated Adjusted Income from Continuing Operations per Diluted Share to
Income from Continuing Operations per Diluted Share for the Year Ending October 31, 2011
Reconciliation of Estimated Adjusted Income from Continuing Operations per Diluted Share to
Income from Continuing Operations per Diluted Share for the Year Ending October 31, 2011
| Year Ending October 31, 2011 | ||||||||
| Low Estimate | High Estimate | |||||||
| (per diluted share) | ||||||||
Adjusted Income from Continuing Operations per Diluted Share |
$ | 1.43 | $ | 1.53 | ||||
Adjustments to Income from Continuing Operations (a) |
(0.20 | ) | (0.20 | ) | ||||
Income from Continuing Operations per Diluted Share |
$ | 1.23 | $ | 1.33 | ||||
| (a) | Adjustments to income from continuing operations are expected to include transaction and
integration costs associated with the acquisition of The Linc Group (TLG) and other unique
items impacting comparability. |
- 13 -
Exhibit 99.2
| Second Quarter 2011 Investor Conference Call June 8, 2011 |
| Agenda 1 Introduction & Overview | Henrik Slipsager, Chief Executive Officer 2 Second Quarter 2011 Financial Review | Jim Lusk, Chief Financial Officer 3 Second Quarter 2011 Review & Outlook | Henrik Slipsager, Chief Executive Officer 4 Questions and Answers Forward-Looking Statements and Non-GAAP Financial Information: Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. The factors that could cause actual results to differ are discussed in the Company's 2010 Annual Report on Form 10-K and in our 2011 reports on Form 10-Q and Form 8-K. These reports are available on our website at http://investor.abm.com/ under "SEC Filings". A description of factors that could cause actual results to differ is also set forth at the end of this presentation. Also, the discussion during this conference call will include certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). Reconciliations of those non- GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found on the Investor Relations portion of our website at http://investor.abm.com and at the end of this presentation. |
| Second Quarter 2011 Financial Highlights Revenue from recent acquisitions contributed to 24% year-over-year top-line growth. Second consecutive quarter of organic revenue growth Achieved double digit growth in Revenue, Net Income and Adjusted Income from Continuing Operations 43% increase in Adjusted EBITDA Cash flow from continuing operations of $31 million Acquisitions slightly accretive, excluding transaction costs; Linc synergies on schedule and integration moving forward as planned Paid 180th consecutive dividend |
| Results Synthesis - Key Financial Metrics Net Income Net Income of $14.2 million, up 65.5% or $5.6 million . Net income increased primarily as a result of a $4.7 million increase in divisional operating profit driven by the companies acquired in 2010, and including a $2.3 million benefit from lower labor expense in the Janitorial segment as a result of one less work day. In addition, the second quarter of fiscal 2010 included a $2.7 million expense for a specific legal contingency. Partially offsetting these items was a $1.9 million increase in interest expense as a result of financing the Linc acquisition Adjusted EBITDA1 Adjusted EBITDA of $42.0 million was $12.6 million, or 43.1% higher. The year-over-year growth in Adjusted EBITDA for the second quarter of 2011 is the result of an increase of $7.6 million in pre-tax operating profit , which includes a pre-tax benefit of $3.8 million from one less work day combined with lower corporate expenses of $3.4 million. Cash Flow The decrease was primarily related to the timing of both collections received from clients and payments to vendors 1 Reconciliation of Adjusted Income from Continuing Operations and Adjusted EBITDA in the appendix of this presentation |
| Cash Flow & Select Balance Sheet Information Insurance comparison Comparison of working capital and net trade receivables (In thousands) (In thousands) (In thousands) Cash Flow from Operating Activities (in millions) Days sales outstanding (DSO) for second quarter were 48 days DSO up 1 day year-over-year and down 3 days sequentially |
| Engineering Services & Energy Solutions Q2 2011 Results Synthesis - Revenue1 Revenue up 4.2% Tag revenue consistent with prior quarters Organic revenue of approximately $7 million Revenue up 24%. Second consecutive quarter of revenue surpassing $1 billion Janitorial Services Parking & Shuttle Services Security Services Revenue up 143.9%. Linc acquisition contributed $134.0 million Revenue up 36.9%. L&R acquisition contributed $43.0 million Seasonality still impacted revenues Revenue up 4.2%. Diversco acquisition contributed approximately $3 million 1Excludes Corporate |
| Q2 2011 Results Synthesis - Operating Profits1 Janitorial operating profit increased 21% as the segment benefited from one less work day, which reduced labor expenses by $3.8 million, partially offset by higher fuel expense of $0.8 million and higher state unemployment insurance costs of $0.7 million Engineering operating profit up $1.8 million or 36.2% resulting from operating profits associated with the Linc acquisition The 5.6% decrease in Parking's operating profit was primarily the result of higher state unemployment insurance costs and a contract settlement, which accounted for $0.4 million of additional expense. Security operating profit was essentially flat as higher state unemployment insurance expense was partially offset by operating profit associated with the Diversco acquisition 1Excludes Corporate |
| Operating Segment Highlights ABM continued to win new business and expand existing businesses in key vertical markets Engineering helps Government client with sustainability and also won an Integrated Facility Services (IFS) contract for a national landmark Continued to gain traction with ABM Green CareTM, which now services over 285 million square feet of space Recently ABM was awarded an IFS contract for a client in the industrial vertical market. |
| Fiscal 2011 Outlook Summary - Q2 Update Reaffirming Guidance for Fiscal Year 2011 Net Income of $1.23 to $1.33 per diluted share Adjusted Income from Continuing Operations of $1.43 to $1.53 per diluted share Continue to anticipate gradual improvement in organic revenue but lower contribution from Government projects due to the delayed Federal budget approval Higher leverage ratio and borrowing rates will continue to generate significant year- over-year increase in interest expense Continue to expect increase of $10 million to $12 million for the fiscal year Continue to expect the acquisition of The Linc Group to be slightly accretive, excluding transaction and integration expenses One additional work day for FY2011; impact of $3.5 million to $4.5 million pre-tax One more day in Q1; One less day in Q2; and one more day in Q4 Expect operating cash flow to remain strong but lower year-over-year OneSource NOL's diminishing. Cash taxes estimated to be approximately $20 million Continue to anticipate year-over-year increase in state unemployment insurance pre- tax expense of $6 million to $7 million Effective tax rate of 38% to 39% |
| Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Reform Act of 1995, which are subject to risks and uncertainties. The forward-looking statements, which address the company's expected business and financial performance, among other matters, contain words such as "believe", "expect", "anticipate," "intend," "plan," "should", "could" and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date that they are made. The Company undertakes no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements, include, but are not limited to, the following: risks relating to our acquisition of The Linc Group LLC ("Linc"), including risks relating to reductions in government spending on outsourced services as well as payment delays may adversely affect a significant portion of revenues generated by government contracts, and political and compliance risks, both domestically and abroad, may adversely affect our operations; our acquisition strategy may adversely impact our results of operations; intense competition can constrain our ability to gain business, as well as our profitability; we are subject to volatility associated with high deductibles for certain insurable risks; an increase in costs that we cannot pass on to clients could affect our profitability; we provide our services pursuant to agreements which are cancelable by either party upon 30 to 90 days' notice; our success depends on our ability to preserve our long-term relationships with clients; we incur significant accounting and other control costs that reduce profitability; a decline in commercial office building occupancy and rental rates could affect our revenues and profitability; deterioration in economic conditions in general could further reduce the demand for facility services and, as a result, reduce our earnings and adversely affect our financial condition; financial difficulties or bankruptcy of one or more of our major clients could adversely affect results; we are subject to risks relating to foreign currency fluctuations and foreign exchange exposure; our ability to operate and pay our debt obligations depends upon our access to cash; because we conduct our business through operating subsidiaries, we depend on those entities to generate the funds necessary to meet financial obligations; that portion of our revenues which are generated from international operations are subject to political risks and changes in socio-economic conditions, laws and regulations, including labor, monetary and fiscal policies, which could negatively impact our ability to operate and grow our business in the international arena; future declines or fluctuations in the fair value of our investments in auction rate securities that are deemed other-than-temporarily impaired could negatively impact our earnings; uncertainty in the credit markets and the financial services industry may impact our ability to collect receivables on a timely basis and may negatively impact our cash flow; any future increase in the level of debt or in interest rates can affect our results of operations; an impairment charge could have a material adverse effect on our financial condition and results of operations; we are defendants in several class and representative actions or other lawsuits alleging various claims that could cause us to incur substantial liabilities; since we are an attractive employer for recent emigres to this country and many of our jobs are filled by such, changes in immigration laws or enforcement actions or investigations under such laws could significantly and adversely affect our labor force, operations, financial results and our reputation; labor disputes could lead to loss of revenues or expense variations; federal health care reform legislation may adversely affect our business and results of operations; we participate in multi-employer defined benefit plans which could result in substantial liabilities being incurred; and natural disasters or acts of terrorism could disrupt our services. Additional information regarding these and other risks and uncertainties the Company faces is contained in the Company's Annual Report on Form 10-K for the year ended October 31, 2010 and in other reports we file from time to time with the Securities and Exchange Commission. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. |
| Appendix Unaudited Reconciliation of non-GAAP Financial Measures |
| Unaudited Reconciliation of non-GAAP Financial Measures (in thousands) |
| Unaudited Reconciliation of non-GAAP Financial Measures (in thousands, except per share data) |
| Unaudited Reconciliation of non-GAAP Financial Measures |