UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the Transition Period from _________ to _________
Commission File Number 1-8929
ABM INDUSTRIES INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 94-1369354
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
50 FREMONT STREET, 26TH FLOOR, SAN FRANCISCO, CALIFORNIA 94105
(Address and zip code of principal executive offices)
TELEPHONE: (415) 597-4500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of Each Exchange on Which
Title of Each Class Registered
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE AND
PACIFIC STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE AND
PACIFIC STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
As of December 31, 1995, nonaffiliates of the registrant beneficially owned
shares of the registrant's common stock with an aggregate market value of
$197,113,717.
As of December 31, 1995, there were 9,412,719 shares of the registrant's common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement to be used by the Company in connection with its 1996 Annual
Meeting of Stockholders is incorporated by reference into Part III of this Form
10-K.
PART I
ITEM 1. BUSINESS.
ABM Industries Incorporated ("ABM") is the largest American-owned facility
services contractor listed on the New York Stock Exchange. With annual revenues
approaching $1 billion and more than 45,000 employees, ABM and its subsidiaries
(the "Company") provide air conditioning, elevator, engineering, janitorial,
lighting, parking and security services to thousands of commercial, industrial
and institutional facilities in hundreds of cities across North America.
ABM was reincorporated in Delaware on March 19, 1985, as the successor to a
business founded in California in 1909. By vote of the stockholders on March 16,
1994, the Company's name was changed from American Building Maintenance
Industries, Inc. to ABM Industries Incorporated. The corporate headquarters of
the Company is located at 50 Fremont Street, 26th Floor, San Francisco,
California 94105, and its telephone number is (415) 597-4500.
BUSINESS SEGMENT INFORMATION
The Company's divisions (consisting of one or more subsidiaries of the
Company), listed below, operate in three functionally oriented segments of the
building services industry -- Janitorial Divisions, Public Service Divisions and
Technical Divisions.
JANITORIAL PUBLIC SERVICE TECHNICAL
DIVISIONS DIVISIONS DIVISIONS
- --------------------------------------------------------------------------------
ABM Janitorial Services ABM Security Services Amtech Elevator
Easterday Janitorial Supply Ampco System Parking Services
Amtech Engineering
Services
Amtech Lighting
Services
CommAir Mechanical
Services
Additional information relating to the Company's three industry segments
appears in Note 15 of Item 8, Financial Statements and Supplementary Data of
this Form 10-K. The business activities of the Company's three industry segments
and eight operating divisions, as they existed at October 31, 1995, are more
fully described below.
JANITORIAL DIVISIONS
The Janitorial Divisions provide janitorial cleaning services as well as
janitorial supplies and equipment to their customers. Operating from 86 offices
throughout the United States and Canada, this segment accounted for
approximately 57%, 54% and 53% of the Company's revenues in the fiscal years
ended October 31, 1993, 1994 and 1995, respectively.
/ / ABM JANITORIAL SERVICES provides a wide range of basic janitorial
services for a variety of structures and organizations, including office
buildings, industrial plants, banks, department stores, theaters,
warehouses, educational and health institutions and airport terminals.
Services provided by ABM Janitorial Services include floor cleaning and
finishing, wall and window washing, furniture polishing, rug cleaning,
dusting, and other building cleaning services. This Division maintains 80
offices in 33 states, the District of Columbia and two Canadian provinces
and operates under thousands of individually negotiated building maintenance
contracts, the majority of which are obtained by competitive bidding.
Generally, profit margins on maintenance contracts tend to be inversely
proportional to the size of the contract. Although many of the Division's
maintenance contracts are fixed price agreements, others contain clauses
under which the customer agrees to reimburse the Division for the full
amount of wages, payroll taxes, insurance premiums and other expenses plus a
profit percentage. The majority of the Division's contracts are for one-year
periods, contain automatic renewal clauses and are subject to termination by
either party upon 30 to 90 days written notice.
/ / EASTERDAY JANITORIAL SUPPLY markets janitorial supplies and
equipment through six sales offices located in San Francisco, Los Angeles
and Sacramento, California; Portland, Oregon; Reno, Nevada; and Houston,
Texas. Aside from sales to ABM Janitorial Services, which, in 1995,
accounted for approximately 32% of Easterday Janitorial Supply's total
revenues (before intercompany eliminations), the principal customers for
this division are industrial plants, schools, commercial buildings,
industrial organizations, transportation terminals, theaters, hotels, retail
stores, restaurants, military establishments and janitorial service
companies. Among the products sold are paper products, disinfectants, floor
cleaners, polishes, glass cleaners, waxes and cleaning equipment. The
products sold include a number of nationally advertised brands and, in large
part, are manufactured by others. This Division manufactures certain
cleaning agents and waxes which it sells, but its manufacturing operations
are not significant in relation to Easterday Janitorial Supply as a whole.
2
PUBLIC SERVICE DIVISIONS
At October 31, 1995, operations of the Company's Public Service Divisions
segment provided parking facility management services and commercial security
and investigative services to their customers.
The Public Service Divisions operated from 44 offices which were located
throughout the United States. For the fiscal years ended October 31, 1993, 1994
and 1995, this segment accounted for approximately 16%, 20% and 21%,
respectively, of the Company's revenues.
The two Public Service Divisions are described below:
/ / ABM SECURITY SERVICES provides security guards and special
investigative and security consulting services to a wide range of businesses
in the major metropolitan areas of San Francisco, San Diego and Los Angeles,
California; Houston, Dallas/Fort Worth, Austin and San Antonio, Texas;
Chicago, Illinois; Phoenix, Arizona; Seattle, Washington; Portland, Oregon;
New Orleans, Louisiana; Minneapolis, Minnesota; Kansas City, Missouri; and
the District of Columbia. Much like ABM Janitorial Services, the majority of
this Division's contracts are for one-year periods, contain automatic
renewal clauses and are subject to termination by either party upon 30 to 90
days written notice.
/ / AMPCO SYSTEM PARKING operates approximately 1,425 parking lots and
garages which are either leased from or managed for third parties. Ampco
System Parking currently has parking facilities in 23 states: Arizona,
California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Indiana,
Iowa, Kansas, Michigan, Missouri, Nebraska, New Jersey, New York, Ohio,
Oklahoma, Pennsylvania, Texas, Utah, Washington and Wisconsin.
TECHNICAL DIVISIONS
The Technical Divisions segment provides its customers with a wide range of
elevator, engineering, lighting and mechanical services through its four
divisions. The Company believes that the offering of such a wide range of
services by an affiliated group provides its customers with an attractive
alternative to obtaining the services of a larger number of unrelated individual
contractors and/or subcontractors. A number of the Divisions' service contracts
are for one to three years and are generally renewed after expiration.
Installation contracts are either individually negotiated or obtained through
competitive bidding. This segment's primary market consists of retail and
commercial businesses with multiple locations scattered over wide geographic
areas. Examples of such customers include high-rise office buildings, bank and
savings and loan branch systems, shopping centers, restaurant chains, service
stations, supermarkets and drug, convenience and discount store chains.
The Technical Divisions operate from 47 offices located in Arizona,
California, Colorado, Florida, Georgia, Illinois, Kentucky, Louisiana, Maryland,
Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Pennsylvania,
Texas, Washington, Washington, D.C., Wisconsin and Mexico. For the fiscal years
ended October 31, 1993, 1994 and 1995, this segment accounted for approximately
27%, 26% and 26%, respectively, of the Company's revenues.
Operations of the four Technical Divisions during fiscal year 1995 are
described below:
/ / AMTECH ELEVATOR SERVICES installs, maintains and repairs elevators
and escalators in major metropolitan areas of California; Houston, Texas;
Detroit, Michigan; Upper Marlboro, Maryland; Las Vegas, Nevada; Pennsauken,
New Jersey; Atlanta, Georgia; Philadelphia, Pennsylvania; Denver, Colorado;
Chicago, Illinois; Cincinnati, Ohio; and Washington, D.C. Amtech Elevator
Services builds elevator units in Rosarito, Mexico, maintains fourteen
offices and several parts warehouses and operates a fleet of radio-equipped
service vehicles.
/ / AMTECH ENGINEERING SERVICES provides building owners and managers
with staffs of on-site operating engineers to operate, maintain and repair
electrical, mechanical, and plumbing systems within a facility. This service
is primarily for high-rise office buildings, but customers also include
schools, warehouses and factories. Amtech Engineering Services maintains
five offices, two of which are in California and one each in Chicago,
Illinois; Philadelphia, Pennsylvania; and Phoenix, Arizona.
/ / AMTECH LIGHTING SERVICES provides relamping, fixture cleaning and
periodic maintenance service to its customers. Amtech Lighting Services also
repairs, services, designs and installs outdoor signage. This division
maintains sixteen offices, six of which are located in California; and one
office in each of Austin, Dallas, Houston and San Antonio, Texas; Phoenix,
Arizona; Albuquerque, New Mexico; New Orleans, Louisiana; Atlanta, Georgia;
and Tampa and Ft. Lauderdale, Florida.
/ / COMMAIR MECHANICAL SERVICES installs and services air conditioning,
ventilation and heating equipment and provides energy management
3
services to commercial, industrial and institutional facilities. CommAir
Mechanical Services maintains eleven offices, ten of which are located in
California, and one in Phoenix, Arizona.
TRADEMARKS
The Company believes that it owns or is licensed to use all corporate names,
trade names, trademarks, service marks, copyrights, patents and trade secrets
which are material to the Company's operations.
COMPETITION
The Company believes that each aspect of its business is highly competitive,
and that such competition is based primarily on price and quality of service.
The Company's competitors include a large number of regional and local companies
located in major cities throughout the United States and Canada. While the
majority of the Company's competitors in the janitorial and building maintenance
business operate in a limited geographic area, the operating divisions of a few
large, diversified companies compete with the Company on a national basis. In
addition, a number of the Company's competitors do not operate under collective
bargaining agreements. Generally, these nonunion competitors are able to operate
with lower labor and employee benefit costs, thus permitting them to more
aggressively compete on the basis of price in geographic areas where the Company
has union operations.
MARKETING AND SALES
The Company's marketing and sales efforts are conducted by its various
divisions and regional offices. Sales, marketing and operations executives in
each of the regional and some of the major branch offices participate directly
in obtaining new customers and also service the existing ones. The broad
geographic base of the Company's division, regional and branch offices enables
the Company to provide a full range of facility services, which are available
individually or as a part of the Company's multi-service marketing program.
The Company has a broad customer base including airports, apartment
complexes, city centers, colleges and universities, financial institutions,
industrial plants, office buildings, retail stores, shopping centers and theme
parks. The Company estimates that no customer accounted for more than 5% of its
revenues during the fiscal year ended October 31, 1995.
EMPLOYEES
The Company employs approximately 45,000 persons, of whom about 3,100 are in
executive, managerial, administrative, professional, sales and clerical
positions. The remaining employees perform air conditioning, elevator,
engineering, janitorial, lighting, parking and security services. Approximately
18,400 employees are covered under collective bargaining agreements.
4
PRINCIPAL OFFICERS OF THE COMPANY
The principal officers of the Company are as follows:
PRINCIPAL OCCUPATIONS AND BUSINESS EXPERIENCE
NAME AGE DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------
Sydney J. Rosenberg 81 Chairman of the Board; Chief Executive Officer from November 1991
to November 1994
William W. Steele 59 Chief Executive Officer since November 1994; President since
November 1991; Executive Vice President from April 1988 to October
1991
Martinn H. Mandles 55 Executive Vice President since November 1991; Vice President from
October 1972 to November 1991
J. E. Benton, III 55 Senior Vice President, Office of the President, since July 1994;
Vice President of the Company from November 1977 to July 1994
Sherrill F. Sipes, Jr. 60 Senior Vice President, Office of the President, since July 1994;
Vice President from May 1968 to July 1994
William C. Banner 61 Vice President of the Company, and President of the Security
Services Division
Donna M. Dell 47 Vice President and Director of Human Resources since July 1994;
Vice President and Counsel, Wells Fargo Bank, from February 1990
to June 1994
John F. Egan 59 Vice President of the Company, and President of the Janitorial
Services Division
David H. Hebble 60 Vice President and Chief Financial Officer
Harry H. Kahn 52 Vice President, General Counsel and Secretary
Douglas B. Bowlus 51 Treasurer
Hussain A. Khan 59 Controller and Chief Accounting Officer since March 1993;
Controller from March 1983 to March 1993
5
ITEM 2. PROPERTIES.
The Company has sales, operations, warehouse and administrative facilities
in over 200 locations throughout the United States, Canada and Mexico. Fifteen
of these facilities are owned by the Company and the remainder are leased. At
October 31, 1995, the real estate owned by the Company had an aggregate net book
value of $4,619,000 and was located in: Phoenix, Arizona; San Francisco,
Los Angeles and Fresno, California; Jacksonville and Tampa, Florida; Portland,
Oregon; Houston and Austin, Texas; Seattle, Spokane and Tacoma, Washington;
Winnipeg, Manitoba, Canada; and Rosarito Beach, Baja, Mexico.
Rental payments under long and short-term lease agreements amounted to
$87,349,000 for the fiscal year ended October 31, 1995. Of this amount,
$50,922,000 in rental expense was attributable to Ampco System Parking Division
for the public parking lots and garages that it manages and operates. The
remaining rent expense was for equipment, vehicles, office and warehouse space.
ITEM 3. LEGAL PROCEEDINGS.
Effective June 30, 1995 and July 20, 1995, respectively, the Company and all
current and former officers and directors of the Company who participated in the
proposed management led buyout of the Company and who were named defendants in
the action entitled ACS FINANCIAL INC. ET AL V AMERICAN BUILDING MAINTENANCE
INDUSTRIES, INC. ET AL and/or related cross actions (all of which action and
cross-actions had been fully and finally settled as among the various parties on
or about October 18, 1994) completed settlements with the Company and its
Directors and Officers Liability Insurance carrier, respectively, for all claims
for indemnification and expense reimbursement under the Company's existing
by-laws, indemnification agreements and insurance policies. These settlements
finally conclude all issues arising out of the above-referenced matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
MARKET INFORMATION AND DIVIDENDS
The Company's common stock is listed on the New York Stock Exchange and
Pacific Stock Exchange. The Company's credit agreement places certain
limitations on dividend payments based on net income (see note 5 to the
consolidated financial statements in item 8). The following table sets forth the
high and low prices of the Company's common stock and quarterly cash dividends
on common shares for the periods indicated:
FISCAL QUARTER
--------------------------------------
FIRST SECOND THIRD FOURTH YEAR
- ------------------------------------------------------------------------------------------------------------
1994
Price range of common stock:
High $19 1/4 $19 $23 5/8 $23
Low $16 1/8 $17 1/8 $17 3/4 $19 7/8
Dividends per share $ 0.125 $ 0.13 $ 0.13 $ 0.13 $ 0.515
1995
Price range of common stock:
High $24 1/4 $24 1/8 $25 $27 5/8
Low $20 1/4 $21 1/2 $22 $25 1/8
Dividends per share $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.60
- ------------------------------------------------------------------------------------------------------------
At December 31, 1995, there were approximately 4,100 holders of the Company's
common stock.
6
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below is derived from the
Company's consolidated financial statements for each of the years in the
five-year period ended October 31, 1995:
- ------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts and ratios) 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------
OPERATIONS
Revenues and other income $ 745,721 $ 760,097 $ 773,312 $ 884,633 $ 965,381
- ------------------------------------------------------------------------------------------------------------
Expenses
Operating expenses and cost of goods sold 632,792 643,346 658,503 760,056 830,749
Selling, general and administrative 91,230 94,273 92,403 96,059 99,521
Interest 3,121 2,061 2,164 3,459 3,699
- ------------------------------------------------------------------------------------------------------------
727,143 739,680 753,070 859,574 933,969
- ------------------------------------------------------------------------------------------------------------
Income before income taxes 18,578 20,417 20,242 25,059 31,412
Income taxes 7,478 8,425 7,596 9,890 13,193
- ------------------------------------------------------------------------------------------------------------
Net income $ 11,100 $ 11,992 $ 12,646 $ 15,169 $ 18,219
- ------------------------------------------------------------------------------------------------------------
Net income per common share $ 1.36 $ 1.43 $ 1.45 $ 1.65 $ 1.85
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Common and common equivalent shares 8,146 8,397 8,646 8,908 9,590
FINANCIAL STATISTICS
Dividends per common share $ 0.473 $ 0.49 $ 0.50 $ 0.515 $ 0.60
Stockholders' equity per common share $ 10.53 $ 11.54 $ 12.55 $ 13.74 $ 15.14
Working capital $ 62,905 $ 76,484 $ 76,613 $ 90,165 $ 95,627
Current ratio 1.79 2.00 1.85 1.91 1.84
Long-term debt $ 9,477 $ 15,435 $ 20,937 $ 25,254 $ 22,575
Redeemable cumulative preferred stock $ -- $ -- $ 6,400 $ 6,400 $ 6,400
Stockholders' equity $ 86,938 $ 98,209 $ 110,188 $ 124,331 $ 141,786
Total assets $ 209,036 $ 223,724 $ 268,140 $ 299,470 $ 334,973
Property, plant and equipment -- net $ 15,595 $ 15,009 $ 17,043 $ 19,819 $ 22,647
Capital expenditures $ 5,647 $ 5,225 $ 6,187 $ 8,539 $ 10,225
Depreciation and amortization $ 6,970 $ 6,634 $ 7,158 $ 9,300 $ 11,527
Accounts receivable -- net $ 110,472 $ 120,885 $ 127,908 $ 140,788 $ 158,075
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
All share and per share amounts have been restated to retroactively reflect
the two-for-one stock split in 1992.
7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FINANCIAL CONDITION
Funds provided from operations and bank borrowings have historically been
the sources for meeting working capital requirements, financing capital
expenditures, acquisitions and paying cash dividends. Management believes that
funds from these sources will remain available and adequately serve the
Company's liquidity needs. Prior to September 22, 1994, the Company had
short-term and long-term lines of credit totaling $33,000,000. These lines were
canceled as of September 22, 1994, in conjunction with the signing of a new
unsecured revolving credit agreement with a syndicate of U.S. banks. This
agreement has a $125 million line of credit expiring September 22, 1998, which
at the Company's option, may be extended one year. The credit facility provides,
at the Company's option, interest at the prime rate or IBOR+.45%. As of October
31, 1995, the total amount outstanding was approximately $93 million which was
comprised of loans in the amount of $21 million and standby letters of credit of
$72 million. The interest rate at October 31, 1995 was 7.8 %. This agreement
requires the Company to meet certain financial ratios and places some
limitations on dividend payments and outside borrowing. The Company is
prohibited from declaring or paying cash dividends exceeding 50% of its net
income for any fiscal year.
In connection with the acquisition of System Parking on September 1, 1993,
the Company assumed a note payable in the amount of $3,818,000. Interest on this
note is payable at an annual rate of 9.35%, with principal amounts of $636,000
due annually through October 1, 1998. At October 31, 1995, the balance remaining
on this note was $1,909,000.
Operating activities in 1994 generated a cash flow of $21.9 million compared
to $13.8 million in 1995. At October 31, 1994, working capital was $90.2
million, as compared to $95.6 million at October 31, 1995.
Cost of acquisitions during the fiscal years ended October 31, 1993, 1994
and 1995 (hereinafter referred to as 1993, 1994 and 1995, respectively),
including payments pursuant to contractual arrangements involved in prior
acquisitions, were approximately $24.1 million, $7.1 million and $12.5 million,
respectively. Capital expenditures, including assets acquired for cash through
acquisitions, during 1993, 1994, and 1995 were $6.2 million, $8.5 million, and
$10.2 million, respectively. Cash dividends paid to stockholders of common and
redeemable preferred stock were approximately $4.4 million in 1993, $5.1 million
in 1994 and $6.1 million in 1995.
ACCOUNTING PRONOUNCEMENT NOT YET ADOPTED
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. This statement establishes financial accounting and reporting
standards for stock-based employee compensation plans. It also applies to
transactions in which a company issues equity to acquire goods or services from
non-employees. The statement defines a fair value based method of accounting for
an employee stock option plan and encourages all entities to adopt this method.
The statement also, however, allows an entity the option to continue to measure
compensation cost for those plans using the intrinsic value based method in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25), but then requires the entity to adopt the positions of SFAS 123
through pro forma disclosures.
Under the fair value based method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period. Fair value is determined using an option pricing model that takes into
account the stock price at the grant date, the exercise price, the expected life
of the option, the volatility of the underlying stock, expected dividends, and
the risk-free interest rate over the expected life of the option. Under the
intrinsic value based method, compensation cost is the excess, if any, of the
quoted market price of the stock at the grant date over the amount the employee
must pay to acquire the stock. As ABM's stock option plans have historically
issued options at the market value of the stock on the date of the grant, no
compensation cost has been recognized in accordance with APB 25. The Company
will continue to account for its stock option issuances under the provisions of
APB 25 and will make the required pro forma disclosures as prescribed by SFAS
123. The Company plans to implement this statement as required in its fiscal
year beginning November 1, 1996.
EFFECT OF INFLATION
The low rates of inflation experienced in recent years have had no material
impact on the financial statements of the Company. The Company attempts to
recover inflationary costs by increasing sales prices to the extent permitted by
contracts and competition.
8
ENVIRONMENTAL MATTERS
The Company's operations are subject to various federal, state and/or local
laws regulating the discharge of materials into the environment or otherwise
relating to the protection of the environment, such as discharge into soil,
water and air, and the generation, handling, storage, transportation and
disposal of waste and hazardous substances.
These laws have the effect of increasing costs and potential liabilities
associated with the conduct of the Company's operations, although historically
they have not had a material adverse effect on the Company's financial position
or its results of operations.
The Company is currently involved in various stages of environmental
investigation and/or remediation relating to certain current and former Company
facilities. While it is difficult to predict the ultimate outcome of these
investigations, or to assess the likelihood and scope of further investigation
and remediation activities, based on information currently available, management
believes that the costs of these matters are not reasonably likely to have a
material adverse affect on the Company's financial position or its results of
operations.
ACQUISITIONS
The operating results of businesses acquired have been included in the
accompanying consolidated financial statements from their respective dates of
acquisition. The following acquisitions made during the fiscal year 1995
accounted for approximately $17.1 million in revenues and had an impact of
approximately $0.08 on earnings per share:
Effective November 1, 1994, the Company's ABM Janitorial Services Division
acquired substantially all of the maintenance services contracts from Quality
Building Maintenance, Inc. of Seattle. This acquisition added approximately $3.4
million in annual revenues during the fiscal year 1995 to the Division's
Northwest Region in Seattle.
The South Central Region of ABM Janitorial Services Division acquired the
janitorial business of Consolidated Chemical of Tyler, Texas on January 1, 1995,
and this acquisition added approximately $800,000 in revenues during the fiscal
year 1995.
As of January 1, 1995, the Company's Ampco System Parking Division acquired
the parking operations of Pansini Corporation. The parking contracts obtained as
a result of this acquisition added approximately 100 facilities in California
and Hawaii and approximately $8.5 million in revenues during the fiscal year
1995.
On July 1, 1995, the Company's ABM Janitorial Services Division acquired the
janitorial operations of United Cleaning Specialists Corp. in Atlanta, Georgia.
For the fiscal year 1995, this acquisition contributed approximately $3.7
million in revenues to the Division's Southeast Region. United Cleaning
Specialists operated in Alabama, Florida, Georgia, North and South Carolina,
Tennessee and Virginia.
On September 1, 1995, the Company's ABM Janitorial Services Division
acquired the janitorial operations of Allied Janitorial Service Company of
Spokane, Washington that operated in Eastern Washington and Idaho. This
acquisition added approximately $700,000 to the revenues of this Division's
Northwest Region for the two months ended October 31, 1995.
RESULTS OF OPERATIONS
COMPARISON OF 1995 TO 1994
The following discussion should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto. All information in
the discussion and references to the years are based on the Company's fiscal
year which ends on October 31.
The Company reported record revenues and earnings for 1995. Revenues and
other income (hereinafter called "revenues") were $965 million in 1995, up $80
million or 9%, from the prior year revenues of $885 million. The 9% increase in
revenues in 1995 over 1994 was attributable to volume and price increases as
well as revenues generated from acquisitions. All eight divisions of the Company
reported revenue growth in 1995 except the Amtech Elevator Services Division,
and all divisions posted increased operating profits (revenues minus total
expenses) for 1995. Net income for 1995 was $18.2 million, a 20% increase,
compared to $15.2 million in 1994. As a percentage of revenues, operating
expenses and cost of goods sold were 85.9% in 1994 and 86.1% in 1995.
Consequently, as a percentage of revenues, gross profit (revenues minus
operating expenses and cost of goods sold) was 13.9% in 1995 as compared to
14.1% in 1994. The principal factors that contributed to the slight decline of
gross profit percentage were competitive market conditions and pricing pressures
experienced by several of the Company's divisions, as well as the impact from
certain larger Ampco System Parking Division contracts which had lower gross
profit percentages. However, the dollar amount of the Company's gross profit
increased resulting from higher revenues more than offset the impact of a lower
gross profit percentage in 1995. The total insurance expense included in
9
operating expenses and cost of goods sold increased 2% to $46 million in 1995
from $45 million in 1994. The increase in insurance expense was proportionately
less than the 9% increase in revenue growth in 1995 over 1994. With the
Company's continued emphasis on safety programs, management expects the
insurance costs to increase at a modest rate in relation to the revenue growth.
Selling, general and administrative expenses were $99.5 million in 1995, up
$3.4 million, or 4% from $96.1 million in 1994. As a percentage of revenues,
these expenses were down to 10% in 1995 from 11% in 1994. The selling, general
and administrative expenses decline as a percentage of revenues reflects the
Company's continued efforts to contain costs in this area. This percentage
decline in selling, general and administrative expenses was partially offset by
an increase in profit sharing expense.
Higher debt levels during 1995 caused the interest expense in 1995 to be
$3.7 million as compared with $3.5 million in 1994, an increase of $200,000, or
6%. The increase in interest expense was due to higher average bank borrowings
in 1995 primarily necessitated by acquisitions and interest assessed on fully
accrued state and federal income taxes.
The income tax provisions for the fiscal years 1995 and 1994 were based on
annual effective rates of 42.0% and 39.5%, respectively. The annual effective
rate for 1995 is higher than 1994 primarily due to the unavailability of certain
tax credits in 1995 that were previously available and also due to the increase
in nondeductible expenses.
Net income for 1995 was $18.2 million, an increase of 20%, compared to the
prior years net income of $15.2 million. As a result of the exercise of stock
options and purchases made by employees under the Company's Employee Stock
Purchase Plan, the number of common and common equivalent shares increased from
8,908,000 shares in 1994 to 9,590,000 shares in 1995, an increase of
approximately 8%. The resultant earnings per share increased 12% to $1.85 for
1995 compared to $1.65 in 1994. Earnings per share calculations include the
effects of a preferred stock dividend deduction of $512,000 for 1994 and 1995.
The results of operations from the Company's three industry segments and its
operating divisions for 1995 as compared to 1994 are more fully described below:
Revenues for the Janitorial Divisions segment in 1995 were $512 million, an
increase of $30 million, or 6% over 1994, while its operating profits increased
by 10% over 1994. The Janitorial Divisions segment, which includes ABM
Janitorial Services and Easterday Janitorial Supply, accounted for approximately
53% of the Company's consolidated revenues for 1995. Revenues of ABM Janitorial
Services increased by 6% in 1995 as compared to 1994 as a result of acquisitions
and internal growth by all of its regions except its Southwest and Canadian
Regions. As a result of the revenue increase, ABM Janitorial Services' operating
profits increased 10% in 1995 compared to 1994. Labor and labor related expenses
and other direct costs were slightly higher for the fiscal year 1995 over the
prior year primarily due to start-up expenses associated with new contracts as
well as acquisitions. This Division's operating expenses (indirect, selling and
administrative expenses excluding costs of goods sold) were in line with its
revenue growth. Easterday Janitorial Supply's revenues for 1995 were up
approximately 9% compared to 1994 generally due to revenue increases in Northern
California from obtaining several large customers. An increase of 11% in
operating profits was a result of a larger sales volume as well as the Supply
Division's efforts to control its selling, general and administrative expenses,
which were partially offset by lower margins resulting from increased material
costs.
Revenues from the Public Service Divisions segment for 1995 were $206
million, an increase of 18% over 1994. Public Service Divisions accounted for
approximately 21% of the Company's consolidated revenues in 1995. The operating
profits of this segment were up by 30% per the discussion that follows of its
ABM Security Services ("Security") and Ampco System Parking ("Parking")
Divisions. Security reported an increase in revenues of 22% in 1995 compared to
1994 and its profits increased by 10%, primarily due to obtaining new customers.
This Division was also successful in securing several large contracts,
especially in the San Francisco Bay Area. The gross profit amount increased as a
result of higher revenues; however, the gross profit percentage declined as the
Security Division had to bid for contracts at lower margins in order to be
competitive. The Company's Parking Division revenues increased by 17% while its
profits increased by 50% in 1995 over 1994. The increase in revenues is
primarily due to the January 1995 acquisition of a parking business based in
Northern California with operations in California and Hawaii, and also from
obtaining contracts to manage parking operations at several major U.S. airports.
Several factors contributed to the increase in operating profits: the
acquisitions of the parking business discussed above; improved business
condition in its Southern California region which was partially offset by
10
loss of a few large contracts in its Northeast Region; and income derived from
its expanded airport operations.
The Technical Divisions segment through its four divisions reported revenues
of $248 million, which represent approximately 26% of the Company's consolidated
revenues for 1995, and an increase of approximately 8% over last year. Profits
of the Technical Divisions were up 36% compared to 1994. The Amtech Engineering
Services Division's revenues increased by 22% and reported a 45% increase in
operating profits for 1995 compared to 1994. Revenues increased generally from
the start-up of the Midwest and Northeast Regions and obtaining several new
contracts. Operating profits increased from new business and the reduction in
insurance and other direct expenses, as well as containing its selling, general
and administrative expenses. Revenues for Amtech Elevator Services Division were
down by 10% for 1995 from 1994, principally due to phasing out its new
construction market and a slow-down caused by the Mexican economy. However, this
Division increased its operating profits by 55% in 1995 over the prior year. The
improved operating results are due to a fundamental change in management's
strategy to emphasize services related to maintenance and repair business; this
change enabled Amtech Elevator Services to improve its gross profits.
Additionally, this Division's reduction of its selling, general and
administrative expenses was partially offset by currency translation losses
arising from its Mexican subsidiary. Amtech Lighting Services Division's
revenues were up 23% largely due to increased sales volume posted by the
majority of its branches through obtaining additional time and material
contracts, supplemented by increased business from its nationwide customers.
Operating profits increased by 18% during 1995, primarily due to increased sales
volume and efficiencies realized in the selling, general and administrative
areas, particularly in payroll, travel and other office expenses. The CommAir
Mechanical Services Division's revenues and operating profits for 1995 increased
by 9% and 37%, respectively. The revenue increase was primarily due to increased
level of construction and installation contracts. Although the margins on some
job categories decreased, this Division's successful efforts in increasing its
revenues, coupled with management's efforts to reduce overhead expenses, more
than offset the decrease in margins.
COMPARISON OF 1994 TO 1993
Revenues and other income rose to $885 million in 1994, up $112 million, or
14%, from $773 million in 1993. The 14% increase in revenues in 1994 over 1993
was attributable to volume and price increases as well as revenues generated
from acquisitions. Net income for 1994 was $15.2 million, a 21% increase
compared to $12.6 million in 1993. Earnings per share increased 14% to $1.65 in
1994 from $1.45 in 1993. Operating expenses and cost of goods sold expressed as
a percentage of revenues were 85.2% in 1993 and 85.9% in 1994. The increase in
operating expenses and cost of goods sold from $659 million in 1993 to $760
million in 1994 was $101 million, or 15%. As a result of this increase, the
Company's gross profit percentage declined although the gross profit amount for
1994 exceeded 1993's gross profit by approximately $9.8 million. The gross
profit amount increase resulting from higher revenues more than offset the
impact of a lower gross profit percentage in 1994. The gross profit percentage
was unfavorably impacted by intense competition and pricing pressures
experienced by some of the operating divisions of the Company, as well as the
impact from certain larger Ampco System Parking Division contracts whose gross
profit percentage is much lower. The Company's total insurance expense increased
7% to $45 million in 1994 from $42.1 million in 1993. The increase in insurance
expense was lower than the 14% revenue growth in 1994 over 1993. The Company's
safety program impacted the frequency and severity of workers' compensation
claims which led to a reduction in claims expense. This expense decrease was
more than offset by an escalating dollar value of liability claims, leading to
the overall increase in insurance expense.
Selling, general and administrative expenses were $96.1 million in 1994, up
$3.7 million, or 4% from $92.4 million in 1993. As a percentage of revenues,
these expenses were down to 11% in 1994 from 12% in 1993. Management was
successful in attaining its cost containment goals as revenues grew 14% while
selling, general and administrative expense growth was only 4%.
Higher debt levels during 1994 caused the interest expense in 1994 to be
$3.5 million as compared with $2.2 million in 1993, an increase of $1.3 million,
or 59%. The increase in bank borrowing was necessitated primarily by
acquisitions.
The effective income tax rates for 1994 and 1993 were 39.5% and 37.5%,
respectively. The effective income tax rate for 1994 would be comparable to 1993
after taking into account the decrease in income tax expenses for 1993 of
$540,000 arising from the effect of the Omnibus Budget Reconciliation Act of
1993's federal income tax rate change on the Company's deferred taxes as
calculated under Statement of Financial Accounting Standards No. 109.
11
The Company's pre-tax income in 1994 was $25.1 million, an increase of 24%,
compared to $20.2 million in 1993. The growth in pre-tax income outpaced the
revenue growth in 1994 due primarily to benefits arising from the realization of
certain operating consolidation economies from recent acquisitions and, in part,
due to lower selling, general and administrative expenses resulting from cost
containment programs.
The results of operations from the Company's three industry segments and its
operating divisions for 1994 as compared to 1993 are more fully described below:
Revenues for the Janitorial Divisions segment in 1994 were $482 million, an
increase of $39 million, or 9% over 1993, while its operating profits increased
by 13% over 1993. The Janitorial Divisions segment accounted for approximately
54% of the Company's consolidated revenues for 1994. Revenue of ABM Janitorial
Services increased by 9% in 1994 as compared to 1993 primarily as a result of
acquisitions and, to a lesser extent, revenue increases from internal growth by
this Division's Northeast, Northwest and Southeast Regions. As a result of the
revenue increase, ABM Janitorial Services' operating profits increased 13% in
1994 compared to 1993. Continued decreases in labor and labor-related expenses
contributed to an improvement in gross profit for this Division in 1994 over the
prior year. The Division's selling, general and administrative expenses were in
line with its revenue growth. Easterday Janitorial Supply's revenues for 1994
were up approximately 9% compared to 1993 generally due to revenue increases in
Northern California from obtaining several large customers. In 1994, compared to
1993, an increase of 12% in operating profits was attained even with a lower
than expected gross profit percentage as a result of higher sales volume and a
reduction in selling, general and administrative expenses.
Revenues from the Public Service Divisions segment for 1994 were $174
million, a 44% increase over 1993. The Company's Public Service Divisions
accounted for approximately 20% of the Company's consolidated revenues. The
operating profits of these Divisions were up by 35% principally due to
acquisitions and new contracts obtained by Ampco System Parking. ABM Security
Services reported a slight decrease in revenues from loss of certain large
accounts and its profits increased by 8% in 1994 compared to 1993. The increase
in operating income in 1994 as compared to 1993 was due to a decrease in direct
labor and related expenses and a decrease in selling, general and administrative
expenses which resulted from this Division's cost cutting measures. Ampco System
Parking's revenues increased by 93% and its profits increased by 78% in 1994
over 1993. The increases in revenues and operating profits were primarily due to
the acquisition of System Parking and from obtaining contracts to manage parking
operations at several major airports in the U.S., including Los Angeles,
California; Honolulu, Hawaii; Cedar Rapids, Iowa; Newark, New Jersey and
Buffalo, New York, among others.
The Technical Divisions segment reported revenues of $229 million, which
represent approximately 26% of the Company's consolidated revenues for 1994, an
increase of approximately 9% over last year. Profit of the Technical Divisions
increased 19% compared to 1993. Amtech Engineering Services reported increased
revenues of 12% and a 45% increase in operating profits for 1994 compared to
1993. Revenue increases generally were recorded by all its regions due to
geographic expansion and penetration into new markets. The increase in operating
profits continues to result from increased volume, reductions in payroll related
costs including insurance expense and containment of selling, general and
administrative expenses. Revenues for Amtech Elevator Services were up by 8% for
1994 over 1993 principally due to increases in its service, repair and
installation lines of business, as well as an improved performance by its
Mexican subsidiary. Amtech Elevator's operating profits for 1994 compared to
1993 were up by 45% due to a combination of increased revenues, improved gross
profits and containment of selling, general and administrative expenses. Amtech
Lighting Services' revenues were up 10% largely due to an expanded contract base
from existing customers, as well as obtaining a large one-time energy saving
retrofit contract. Operating profits decreased by 3% during 1994 primarily due
to start-up administrative expenses and lower than expected gross margins
associated with the opening of three new branches. CommAir Mechanical Services'
revenues for 1994 were 5% above 1993, primarily due to construction revenues
which more than offset the decline in service maintenance revenues. Operating
profits of this Division were up 15% largely due to the start and completion of
a large installation contract during the fourth quarter of 1994 and a reduction
in selling, general and administrative expenses.
12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
ABM Industries Incorporated:
We have audited the accompanying consolidated balance sheets of ABM
Industries Incorporated and subsidiaries as of October 31, 1994 and 1995, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the years in the three-year period ended October 31, 1995. In
connection with our audits of the consolidated financial statements, we also
have audited financial statement schedule II. These consolidated financial
statements and the financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit of financial statements includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ABM
Industries Incorporated and subsidiaries as of October 31, 1994 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended October 31, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule II, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
San Francisco, California
December 15, 1995
13
ABM Industries Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------------------------------------
OCTOBER 31 1994 1995
(in thousands of dollars except share amounts)
- -----------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 7,368 $ 1,840
Accounts receivable (less allowances of $3,067 and $3,755) 140,788 158,075
Inventories 17,420 19,389
Deferred income taxes 11,638 11,429
Prepaid expenses and other current assets 12,228 19,134
- -----------------------------------------------------------------------------------------------------------
Total current assets 189,442 209,867
Investments and long-term receivables 6,841 5,988
Property, plant and equipment -- at cost 56,902 61,648
Less accumulated depreciation and amortization (37,083) (39,001)
- -----------------------------------------------------------------------------------------------------------
Property, plant and equipment -- net 19,819 22,647
Intangible assets (less accumulated amortization of $15,095 and $19,688) 61,373 69,279
Deferred income taxes 14,982 18,745
Other assets 7,013 8,447
- -----------------------------------------------------------------------------------------------------------
$ 299,470 $ 334,973
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
Current portion of long-term debt $ 683 $ 679
Bank overdraft -- 5,361
Trade accounts payable 26,187 25,453
Income taxes payable 1,961 2,270
Accrued liabilities:
Compensation 19,807 25,595
Taxes -- other than income 8,693 10,725
Insurance claims 27,185 27,532
Other 14,761 16,625
- -----------------------------------------------------------------------------------------------------------
Total current liabilities 99,277 114,240
Long-term debt 25,254 22,575
Retirement plans 5,978 7,627
Insurance claims 38,230 42,345
Commitments and contingencies
Series B 8% Senior redeemable cumulative preferred stock 6,400 6,400
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 500,000 shares authorized; none issued -- --
Common stock, $.01 par value; 12,000,000 shares authorized: 9,049,000 and
9,366,000 shares issued and outstanding in 1994 and 1995, respectively 90 94
Additional capital 35,334 40,627
Retained earnings 88,907 101,065
- -----------------------------------------------------------------------------------------------------------
Total stockholders' equity 124,331 141,786
- -----------------------------------------------------------------------------------------------------------
$ 299,470 $ 334,973
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
14
ABM Industries Incorporated and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
- -----------------------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31 1993 1994 1995
(in thousands, except per share amounts)
- -----------------------------------------------------------------------------------------------------------
REVENUES AND OTHER INCOME $ 773,312 $ 884,633 $ 965,381
- -----------------------------------------------------------------------------------------------------------
EXPENSES
Operating expenses and cost of goods sold 658,503 760,056 830,749
Selling, general and administrative 92,403 96,059 99,521
Interest 2,164 3,459 3,699
- -----------------------------------------------------------------------------------------------------------
753,070 859,574 933,969
- -----------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 20,242 25,059 31,412
Income taxes 7,596 9,890 13,193
- -----------------------------------------------------------------------------------------------------------
NET INCOME $ 12,646 $ 15,169 $ 18,219
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE $ 1.45 $ 1.65 $ 1.85
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
COMMON AND COMMON EQUIVALENT SHARES 8,646 8,908 9,590
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCK
YEARS ENDED OCTOBER 31, 1993, 1994 AND 1995 -------------------------- ADDITIONAL RETAINED
(in thousands, except per share amounts) SHARES AMOUNT CAPITAL EARNINGS
- ---------------------------------------------------------------------------------------------------------------------
BALANCE OCTOBER 31, 1992 8,514 $ 85 $ 27,488 $ 70,636
Net income 12,646
Dividends:
Common stock at $0.50 per share (4,339)
Preferred stock at $13.56 per share (87)
Stock issued under employees' stock purchase and option plans 264 3 3,756
- ---------------------------------------------------------------------------------------------------------------------
BALANCE OCTOBER 31, 1993 8,778 88 31,244 78,856
Net income 15,169
Dividends:
Common stock at $0.515 per share (4,606)
Preferred stock at $80.00 per share (512)
Stock issued under employees' stock purchase and option plans 271 2 4,090
- ---------------------------------------------------------------------------------------------------------------------
BALANCE OCTOBER 31, 1994 9,049 90 35,334 88,907
Net income 18,219
Dividends:
Common stock at $0.60 per share (5,549)
Preferred stock at $80.00 per share (512)
Stock issued under employees' stock purchase and option plans 317 4 5,293
- ---------------------------------------------------------------------------------------------------------------------
BALANCE OCTOBER 31, 1995 9,366 $ 94 $ 40,627 $ 101,065
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
15
ABM Industries Incorporated and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31 1993 1994 1995
(in thousands of dollars)
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 766,610 $ 868,041 $ 944,570
Other operating cash receipts 2,334 1,638 1,931
Interest received 634 505 489
Cash paid to suppliers and employees (739,819) (830,861) (912,617)
Interest paid (2,689) (3,982) (4,096)
Income taxes paid (9,825) (13,485) (16,438)
- ----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 17,245 21,856 13,839
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (6,187) (8,539) (10,225)
Proceeds from sale of assets 320 162 590
Decrease in investments and long-term receivables 1,071 288 853
Intangible assets acquired (17,694) (7,148) (12,499)
- ----------------------------------------------------------------------------------------------------------
Net cash used in investing activities (22,490) (15,237) (21,281)
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued 3,759 4,092 5,297
Dividends paid (4,426) (5,118) (6,061)
Increase (decrease) in bank overdraft 4,231 (4,231) 5,361
Decrease in notes payable (1,301) -- (4)
Long-term borrowings 15,000 50,000 89,000
Repayments of long-term borrowings (12,695) (45,682) (91,679)
- ----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 4,568 (939) 1,914
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (677) 5,680 (5,528)
Cash and cash equivalents beginning of year 2,365 1,688 7,368
- ----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS END OF YEAR $ 1,688 $ 7,368 $ 1,840
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net income $ 12,646 $ 15,169 $ 18,219
ADJUSTMENTS:
Depreciation and amortization 7,158 9,300 11,527
Provision for bad debts 2,187 1,915 1,536
Gain on sale of assets (147) (141) (127)
Deferred income taxes (4,256) (2,353) (3,554)
Increase in accounts receivable (3,767) (14,793) (18,823)
Increase in inventories (2,486) (1,132) (1,969)
Increase in prepaid expenses and other current assets (2,707) (2,139) (6,906)
Increase in other assets (1,055) (1,070) (1,434)
Increase (decrease) in income taxes payable 2,027 (1,242) 309
Increase in retirement plans accrual 926 1,404 1,649
Increase in insurance claims liability 4,948 4,086 4,462
Increase in trade accounts payable and other accrued liabilities 1,771 12,852 8,950
- ----------------------------------------------------------------------------------------------------------
Total adjustments to net income 4,599 6,687 (4,380)
- ----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 17,245 $ 21,856 $ 13,839
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
16
ABM Industries Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of ABM Industries Incorporated and all its subsidiaries (the
"Company"). All material intercompany transactions and balances have been
eliminated. Certain reclassifications of prior year amounts have been made to
conform with the current year presentation.
ACCOUNTS RECEIVABLE: The Company's accounts receivable are principally
trade receivables arising from services provided to its customers and are
generally due and payable on terms varying from the receipt of invoice to net
thirty days. The Company does not believe that it has any material exposure due
to either industry or regional concentrations of credit risk.
INVENTORIES: Inventories are valued at amounts approximating the lower of
cost (first-in, first-out basis) or market.
PROPERTY, PLANT AND EQUIPMENT: Major renewals, replacements and betterments
are capitalized at cost. At the time property, plant and equipment is retired or
otherwise disposed of, the cost and accumulated depreciation are removed from
the accounts and any resulting gain or loss is reflected in income. Maintenance
and repairs are charged against income.
Depreciation is calculated principally on the straight-line method. Lives
used in computing depreciation for transportation equipment average 3 to 5 years
and 2 to 20 years for machinery and other equipment. Buildings are depreciated
over periods of 20 to 40 years. Leasehold improvements are amortized over the
terms of the respective leases.
AMORTIZATION OF INTANGIBLE ASSETS: Intangible assets consist of goodwill,
customer lists and noncompete agreements. Goodwill, which represents the excess
of cost over fair value of assets of businesses acquired, is amortized on a
straight-line basis over periods not exceeding 40 years. It is the Company's
policy to carry goodwill applicable to acquisitions prior to 1971 of $1,094,000
at cost until such time as there may be evidence of diminution in value.
Customer lists and noncompete agreements are amortized over the estimated period
to be benefited, generally from 5 to 15 years. The Company annually evaluates
the existence of goodwill impairment on the basis of whether the goodwill is
fully recoverable from projected, undiscounted net cash flows of the related
business unit. Impairment would be recognized in operating results if a
permanent diminution in value were to occur.
INCOME TAXES: Income tax expense is based on reported results of operations
before income taxes. In accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes, deferred income taxes reflect
the impact of temporary differences between the amount of assets and liabilities
recognized for financial reporting purposes and such amounts recognized for tax
purposes. These deferred taxes are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
REVENUE RECOGNITION: Revenues are recorded at the time services are
performed or when products are shipped except for long-term contracts that are
recorded on the percentage-of-completion method. The percentage-of-completion
method is used by both the Amtech Elevator Services and CommAir Mechanical
Services Divisions of the Technical Divisions segment for their long-term
contracts. Revenues and gross profit are recognized as work is performed based
on the relationship between actual costs incurred and total estimated costs at
completion. Revenues and gross profit are adjusted prospectively for revisions
in estimated total contract costs and contract values. Estimated losses are
recorded when identified.
NET INCOME PER COMMON SHARE: Net income per common share and common
equivalent share (principally outstanding stock options), after the reduction
for preferred stock dividends in the amount of $87,000 in 1993 and $512,000 in
1994 and 1995, is based on the weighted average number of shares outstanding
during the year and the common stock equivalents that have a dilutive effect.
Net income per common share assuming full dilution is not significantly
different than net income per share as shown.
STATEMENTS OF CASH FLOWS: For purposes of the comparative statements of
cash flows, the Company considers all highly liquid instruments with original
maturities of three months or less to be cash and cash equivalents.
2. INSURANCE
Certain insurable risks such as general liability, property damage and
workers' compensation are self-insured by the Company. However, the Company has
umbrella insurance coverage for certain risk exposures subject to specified
limits. Accruals for claims under
17
the Company's self-insurance program are recorded on a claim-incurred basis.
Under this program, the estimated liability for claims incurred but unpaid at
October 31, 1994 and 1995 was $65,415,000 and $69,877,000, respectively. In
connection with certain self-insurance agreements, the Company has standby
letters of credit at October 31, 1995 supporting the estimated unpaid liability
in the amounts of $71,895,000.
3. INVENTORIES
The inventories at October 31, consisted of the following:
- -------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1994 1995
- -------------------------------------------------------------------------------------------------------
Janitorial supplies and equipment held for sale $ 3,278 $ 3,301
Parts and materials 12,683 14,444
Work in process 1,459 1,644
- -------------------------------------------------------------------------------------------------------
$17,420 $19,389
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at October 31, consisted of the following:
- -------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1994 1995
- -------------------------------------------------------------------------------------------------------
Land $ 1,901 $ 1,718
Buildings 4,162 4,647
Transportation equipment 8,599 9,825
Machinery and other equipment 33,187 37,076
Leasehold improvements 9,053 8,382
- -------------------------------------------------------------------------------------------------------
$56,902 $61,648
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
5. LONG-TERM DEBT AND CREDIT AGREEMENT
Prior to September 22, 1994, the Company had a $20,000,000 credit agreement
with a major U.S. bank. In conjunction with the negotiation of the new credit
facility described below, this line was terminated. On September 22, 1994, the
Company signed a new $100,000,000 credit agreement with a syndicate of U.S.
banks. This agreement expires September 22, 1998, and at the Company's option,
may be extended one year. This agreement was amended effective May 1, 1995 to
increase the amount available to $125,000,000. The unsecured revolving credit
facility provides, at the Company's option, interest at the prime rate or
IBOR+.45%. The facility calls for a commitment fee payable quarterly, in
arrears, of .15% based on the average daily unused portion. For purposes of this
calculation, irrevocable standby letters of credit issued in conjunction with
the Company's self-insurance program plus cash borrowings are considered to be
outstanding amounts. As of October 31, 1995, the total outstanding amount under
this facility was $93,255,000 comprised of $21 million in loans and $72,255,000
in standby letters of credit. The interest rate at October 31, 1995 was 7.8%.
The Company is required, under this agreement, to maintain financial ratios and
places certain limitations on dividend payments. The Company is prohibited from
paying cash dividends exceeding 50% of its net income for any fiscal year.
In connection with the Company's acquisition of System Parking, $3,818,000
of 9.35% fixed rate fully amortizing debt with a major insurance company was
assumed. Terms call for monthly interest payments and equal annual principal
payments. The loan matures October 1, 1998.
The long-term debt of $22,575,000 matures in the years ending October 31 as
follows: $679,000 in 1997; $21,679,000 in 1998; $43,000 in 1999; $43,000 in
2000; and $131,000 in subsequent years.
Long-term debt at October 31, is summarized as follows:
- -------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1994 1995
- -------------------------------------------------------------------------------------------------------
Note payable to bank $23,000 $21,000
Note payable to insurance company 2,545 1,909
Notes payable, contracts and annuities payable with interest rates from 8% to 8.75%
payable through 2001 392 345
- -------------------------------------------------------------------------------------------------------
25,937 23,254
Less current portion 683 679
- -------------------------------------------------------------------------------------------------------
$25,254 $22,575
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
6. EMPLOYEE BENEFIT PLANS
(A) RETIREMENT AGREEMENTS
The Company has unfunded retirement agreements for 27 current and former
senior executives, all of which are fully vested. The agreements provide for
annual benefits for ten years commencing with the respective retirement dates of
those executives. The benefits are being accrued over the period the senior
executives are expected to be employed by the Company. During 1993, 1994 and
1995, amounts accrued under these agreements were $301,000, $178,000 and
$307,000, respectively. Payments were made in 1993, 1994 and 1995 in the amounts
of $150,000, $112,000 and $112,000, respectively.
(B) PROFIT SHARING AND EMPLOYEE SAVINGS PLAN
The Company has a discretionary noncontributory profit sharing and employee
savings plan covering all nonmanual employees (except highly compensated
individuals) not covered under collective bargaining agreements, which includes
employer participation in accordance with the provisions of Section 401(k) of
the Internal Revenue Code. The plan allows participants to make pretax
contributions and the Company matches certain percentages of employee
contributions depending on the participant's length of service. All amounts
contributed to the plan are deposited in a trust fund
18
with a national bank and administered by independent trustees.
The Company provided for profit sharing contributions of $417,000, $385,000
and $920,000 for 1993, 1994 and 1995, respectively. The Company's matching
contributions required by the employee savings plan for 1993, 1994 and 1995 were
approximately $567,000, $500,000 and $602,000, respectively.
(C) SERVICE AWARD BENEFIT PLAN
The Company established an unfunded service award benefit plan effective
November 1, 1989, with a retroactive vesting period of five years. This plan is
a "severance pay plan" as defined by the Employee Retirement Income Security Act
(ERISA) and covers all highly compensated nonmanual employees excluded from the
Profit Sharing and Employee Savings Plan discussed above. The plan provides
participants, upon termination, with a guaranteed seven days pay for each year
of employment subsequent to November 1, 1989. The Company, at its discretion,
may also award additional days each year.
Net cost of the plan is comprised of:
- ----------------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1993 1994 1995
- ----------------------------------------------------------------------------------------------------------------
Service cost $ 380 $ 324 $ 352
Interest 91 108 139
- ----------------------------------------------------------------------------------------------------------------
Net cost $ 471 $ 432 $ 491
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Actuarial present value of:
Vested benefit obligation $ 1,053 $ 1,436 $ 1,863
Accumulated benefit obligation $ 1,164 $ 1,523 $ 1,949
Projected benefit obligation $ 1,833 $ 1,970 $ 2,470
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Assumptions used in accounting for the plan as of October 31, were:
- ----------------------------------------------------------------------------------------------------------------
1993 1994 1995
- ----------------------------------------------------------------------------------------------------------------
Weighted average discount rate 7% 7% 7%
Rates of increase in compensation level 6% 5% 5%
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
(D) PENSION PLAN UNDER COLLECTIVE BARGAINING
Certain employees of the Company are covered under union-sponsored
collectively bargained multi-employer defined benefit plans. Contributions for
these plans were approximately $8,600,000, $10,800,000 and $10,100,000 in 1993,
1994 and 1995, respectively. These plans are not administered by the Company and
contributions are determined in accordance with provisions of negotiated labor
contracts.
7. LEASE COMMITMENTS AND RENTAL EXPENSE
The Company is obligated under noncancelable operating leases for various
facilities and equipment. Assets held under these leases consist of offices,
warehouses, vehicles and parking facilities.
As of October 31, 1995, future minimum lease commitments under noncancelable
operating leases are as follows:
- ---------------------------------------------------------------
Years ending (in thousands of dollars)
- ---------------------------------------------------------------
1996 $ 58,367
1997 52,353
1998 29,150
1999 13,740
2000 6,525
Thereafter 8,498
- ---------------------------------------------------------------
Total minimum lease commitments $ 168,633
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Rental expense for the years ended October 31, is summarized as follows:
- ------------------------------------------------------------------
(in thousands of dollars) 1993 1994 1995
- ------------------------------------------------------------------
Minimum rentals under
noncancelable leases $ 26,565 $ 36,724 $ 47,114
Contingent rentals 9,648 17,398 16,400
Short-term rental agreements 5,792 20,855 23,835
- ------------------------------------------------------------------
$ 42,005 $ 74,977 $ 87,349
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Contingent rentals are applicable to leases of parking lots and garages and
are based on percentages of the gross receipts attributable to the related
facilities.
8. COMMITMENTS AND CONTINGENCIES
The Company and some of its subsidiaries have been named defendants in
certain litigation arising in the ordinary course of business. In the opinion of
management, based on advice of legal counsel, such matters should have no
material effect on the Company's financial position.
9. REDEEMABLE CUMULATIVE PREFERRED STOCK
On June 23, 1993, the Company authorized 6,400 shares of preferred stock
having a par value of $0.01 per share. These shares designated as Series B 8%
Senior Redeemable Cumulative Preferred Stock (Series B Preferred Stock) shall be
entitled to one vote per share on all matters upon which common stockholders are
entitled to vote and have a redemption price of $1,000 per share, together with
accrued and unpaid dividends thereon. Redemption of the Series B Preferred Stock
is at the option of the holders for any or all of the outstanding shares after
September 1, 1998 or at the option of the Company after September 1, 2002. The
total redemption value of the shares outstanding at October 31 in an amount of
$6,400,000 is classified on the Company's balance sheet as redeemable cumulative
preferred stock. In the event of any liquidation, dissolution or winding up of
the affairs of the Company, holders of the Series B Preferred
19
Stock shall be paid the redemption price plus all accrued dividends to the date
of liquidation, dissolution or winding up of affairs before any payment to other
stockholders.
On September 1, 1993, the Company issued 6,400 shares of its Series B
Preferred Stock in conjunction with the acquisition of System Parking. The
acquisition agreement provided that one-half, or 3,200 shares, of the Series B
Preferred Stock be placed in escrow and will be released upon certain annual
earnout requirements.
Dividends of $128,000 are due and payable each quarter and are deducted from
net income in determining net income per common share.
10. CAPITAL STOCK
In 1984, the Company adopted an executive stock option plan whereby 340,000
shares were reserved for grant. As amended December 20, 1994, options which have
been granted at fair market value are 50% exercisable when the option holders
reach their 61st birthday and the remaining 50% will vest on their 64th
birthday. To the extent vested, the options may be exercised at any time prior
to one year after termination of employment. Options which terminate without
being exercised may be reissued. At October 31, 1995, 19,500 options were
exercisable and 500 options remained available for grant.
Transactions under this plan are summarized as follows:
- ---------------------------------------------------------------
Number of
Shares under Option Price
Option per Share
- ---------------------------------------------------------------
Balance October 31, 1992 238,000 $11.44 - $17.44
Options exercised (6,000) $11.44
- ---------------------------------------------------------------
Balance October 31, 1993 232,000 $11.44 - $17.44
Options terminated (3,000) $11.44
- ---------------------------------------------------------------
Balance October 31, 1994 229,000 $11.44 - $17.44
Granted 104,500 $22.50 - $26.56
Options exercised (6,000) $11.44
- ---------------------------------------------------------------
Balance October 31, 1995 327,500 $11.44 - $26.56
- ---------------------------------------------------------------
- ---------------------------------------------------------------
In 1987, the Company adopted a stock option plan under which 600,000 shares
were reserved for grant until December 31, 1996. In March 1994, this plan was
amended to reserve an additional 500,000 shares. During 1994, 454,500 options
were granted at a fair market price of $17.81 and $19.59. During 1995, 18,000
options were granted at a fair market price of $20.63 to $26.56. Options which
terminate without being exercised may be reissued.
Transactions under this plan are summarized as follows:
- ---------------------------------------------------------------
Number of
Shares under Option Price
Option per Share
- ---------------------------------------------------------------
Balance October 31, 1992 516,990 $ 9.57 - $16.97
Options exercised (26,485) $11.56 - $16.97
Options terminated (6,640) $12.13 - $16.97
- ---------------------------------------------------------------
Balance October 31, 1993 483,865 $ 9.57 - $16.97
Granted 454,500 $17.81 - $19.59
Options exercised (15,600) $12.13 - $16.97
Options terminated (26,400) $12.13 - $16.97
- ---------------------------------------------------------------
Balance October 31, 1994 896,365 $ 9.57 - $19.59
Granted 18,000 $20.63 - $26.56
Options exercised (27,305) $11.44 - $17.81
Options terminated (22,200) $12.13 - $20.63
- ---------------------------------------------------------------
Balance October 31, 1995 864,860 $ 9.57 - $26.56
- ---------------------------------------------------------------
- ---------------------------------------------------------------
At October 31, 1995, there were 451,260 options exercisable and 82,140
options remained available for grant.
The Company has an employee stock purchase plan under which sale of 2.5
million shares of its common stock has been authorized. The purchase price of
the shares under the plan is the lesser of 85% of the fair market value at the
commencement of each plan year or 85% of the fair market value on the date of
purchase. Employees may designate up to 10% of their compensation for the
purchase of stock. During 1993, 1994 and 1995, 232,000, 255,000 and 283,000
shares of stock were issued under the plan for an aggregate purchase price of
$3,362,000, $3,849,000 and $4,805,000, respectively. At October 31, 1995,
368,992 shares remained unissued under the plan.
The Company is authorized to issue 500,000 shares of preferred stock, of
which 50,000 shares have been designated as Series A Junior Participating
Preferred Stock of $.01 par value. None of these preferred shares have been
issued.
On April 22, 1988, the Company distributed a dividend of one half of one
right for each outstanding share of common stock. The rights are attached to all
outstanding shares of common stock. Each right entitles the holder to purchase
1/100 of a share of the Series A Junior Participating Preferred Stock for $80,
subject to adjustment. The rights are exercisable only after a third party
(other than Sydney and Theodore Rosenberg, individually or as members of a
group, or their permitted transferees) acquires 20% or more or commences a
tender offer which would result in such party's acquiring 30% or more of the
Company's common stock. The rights expire on April 22, 1998,
20
and may be redeemed at a price of $.01 under certain circumstances.
After the rights become exercisable, if the Company is acquired and is not
the surviving corporation or 50% or more of its assets or its earnings power is
transferred, each right will entitle its holder to purchase shares of the
acquiring company at a 50% discount. If the Company is acquired and is the
surviving corporation, or a 20% or greater holder engages in "self-dealing"
transactions or increases its beneficial ownership of the Company by more than
1% in a transaction involving the Company, each right will entitle its holder,
other than the acquirer, to purchase common stock of the Company at a similar
50% discount.
11. INCOME TAXES
The provision for income taxes is made up of the following components for each
of the years ended October 31:
- -------------------------------------------------------------------
(in thousands of dollars) 1993 1994 1995
- -------------------------------------------------------------------
Current
Federal $ 9,693 $ 9,621 $ 14,630
State 2,325 1,992 2,016
Foreign 224 630 100
Deferred
Federal (3,947) (2,111) (3,237)
State (699) (242) (316)
- -------------------------------------------------------------------
$ 7,596 $ 9,890 $ 13,193
- -------------------------------------------------------------------
- -------------------------------------------------------------------
The 1993 deferred federal income tax benefit includes a $540,000 benefit
associated with the Omnibus Budget Reconciliation Act of 1993 enacted on August
10, 1993.
Income tax expense attributable to income from operations differs from the
amounts computed by applying the U.S. statutory rates to pretax income from
operations as a result of the following for the years ended October 31:
- --------------------------------------------------------------------------
1993 1994 1995
- --------------------------------------------------------------------------
Statutory rate 35.0% 35.0% 35.0%
State and local taxes on income, net
of federal tax benefit 5.2% 4.5% 3.4%
Tax rate change on deferred tax assets
and liabilities (2.7)% -- --
Targeted job tax credits (2.0 )% (2.6 )% (1.5 )%
Nondeductible expenses and other --
net 2.0 % 2.6 % 5.1 %
- --------------------------------------------------------------------------
37.5 % 39.5 % 42.0 %
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at October 31,
are presented below:
- -----------------------------------------------------------------
(in thousands of dollars) 1994 1995
- -----------------------------------------------------------------
Deferred tax assets:
Self-insurance claims $ 23,930 $ 25,396
Bad debt allowance 1,480 1,737
Deferred and other compensation 2,847 3,719
State taxes 508 827
Other 419 1,060
- -----------------------------------------------------------------
Total deferred tax assets 29,184 32,739
- -----------------------------------------------------------------
Deferred tax liabilities:
Union pension contributions (2,179) (2,426)
Customer lists (118) (21)
Depreciation (267) (118)
- -----------------------------------------------------------------
Total deferred tax liabilities (2,564) (2,565)
- -----------------------------------------------------------------
Net deferred tax assets $ 26,620 $ 30,174
- -----------------------------------------------------------------
- -----------------------------------------------------------------
The Company believes that a valuation reserve is not needed to reduce
deferred tax assets because it is expected that all deferred assets will
ultimately be realized.
12. ACQUISITIONS AND DIVESTITURES
All acquisitions have been accounted for as purchases; operations of the
companies and businesses acquired have been included in the accompanying
consolidated financial statements from their respective dates of acquisition.
The excess of the purchase price over fair value of the net assets acquired is
generally included in goodwill. Most purchase agreements provide for contingent
payments based on the annual pretax income for subsequent periods ranging
generally from three to five years. Any such future payments are generally
capitalized as goodwill or customer lists when paid. Cost of acquisitions,
including amounts based on subsequent earnings, were approximately $24.1 million
in 1993, $7.1 million in 1994 and $12.5 million in 1995. Included in the 1993
amount is the redemption value of redeemable preferred stock of the Company of
$6,400,000 issued in conjunction with the acquisition of System Parking (see
Note 9).
On November 1, 1994, the Company acquired the janitorial operations of
Quality Building Maintenance, Inc. of Seattle, Washington. In addition to the
amount paid in cash at closing of this transaction, annual contingent payments
based on gross profit of acquired contracts will be made over a four-year
period. On January 1, 1995, the janitorial operations of Consolidated Chemical
of Tyler, Texas were acquired for a cash down payment plus contingent payments
to be made over a period of four years based on gross profit from the contracts
acquired.
21
On January 1, 1995, the Company's subsidiary, Ampco Auto Parks, Inc.,
acquired in a cash transaction, substantially all of the parking operations of
Pansini Corporation, a San Francisco based company that had approximately 100
facilities in California and Hawaii. In addition to amounts paid at closing, the
acquisition agreement provides for additional payments over the subsequent five
years based upon the gross profit of contracts acquired.
On July 1, 1995, the Company acquired the janitorial operations of United
Cleaning Specialists Corp. of Atlanta, Georgia. United Cleaning Specialists
provided janitorial services in Alabama, Florida, Georgia, North and South
Carolina, Tennessee and Virginia. In addition to the amount paid at closing,
annual contingent payments based upon gross profit of acquired contracts will be
made over the next five years. On September 1, 1995, the Company acquired the
janitorial business of Allied Janitorial Service Company of Spokane, Washington,
for a cash down payment plus contingent payments to be made over a five-year
period based on gross profits derived from the contracts acquired.
13. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash and cash
equivalents approximate fair value due to the short-maturity of these
instruments.
Financial instruments included in investments and long-term receivables have
no quoted market prices and, accordingly, a reasonable estimate of fair market
value could not be made without incurring excessive costs. However, the Company
believes by reference to stated interest rates and security held, the fair value
of the assets would not differ significantly from the carrying value.
The fair value of the Company's long-term debt approximates carrying value
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining maturities.
The Company believes that it is not practical to estimate a fair market
value different from the redeemable preferred stock's carrying value of $6.4
million, as this security was issued in conjunction with an acquisition and has
numerous features unique to this security as described in Note 9.
14. QUARTERLY INFORMATION (UNAUDITED)
(in thousands, except earnings per share)
- -----------------------------------------------------------------------------------------------------------------------------
FISCAL QUARTER
--------------------------------------
OPERATIONS FIRST SECOND THIRD FOURTH YEAR
- -----------------------------------------------------------------------------------------------------------------------------
1994
Revenues and other income $210,839 $215,872 $224,965 $232,957 $884,633
Gross profit 29,363 31,234 30,562 33,418 124,577
Net income 2,827 3,318 4,146 4,878 15,169
Net income per common share 0.31 0.36 0.45 0.53 1.65
1995
Revenues and other income $232,062 $234,396 $245,792 $253,131 $965,381
Gross profit 32,139 33,407 33,325 35,761 134,632
Net income 3,387 3,943 5,010 5,879 18,219
Net income per common share 0.35 0.40 0.51 0.59 1.85
- -----------------------------------------------------------------------------------------------------------------------------
22
15. SEGMENT INFORMATION
(in thousands of dollars)
- ------------------------------------------------------------------------------------------------------------------------------------
PUBLIC
JANITORIAL SERVICE TECHNICAL CONSOLIDATED
FOR THE YEAR ENDED OCTOBER 31, 1993 DIVISIONS DIVISIONS DIVISIONS CORPORATE ELIMINATIONS TOTALS
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues and other income $442,241 $121,053 $209,520 $ 498 $ $773,312
Intersegment revenues 9,609 60 293 (9,962) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenues $451,850 $121,113 $209,813 $ 498 $ (9,962) $773,312
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Operating profit $ 19,545 $ 4,797 $ 9,111 $(11,047) $ $ 22,406
Interest, expense (45) (5) (47) (2,067) (2,164)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 19,500 $ 4,792 $ 9,064 $(13,114) $ $ 20,242
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $ 99,128 $ 64,545 $ 75,628 $ 28,839 $ $268,140
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Depreciation expense $ 2,059 $ 963 $ 1,615 $ 368 $ $ 5,005
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Amortization expense $ 763 $ 754 $ 636 $ $ $ 2,153
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 2,764 $ 1,008 $ 2,020 $ 395 $ $ 6,187
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues and other income $481,604 $173,707 $228,962 $ 360 $ $884,633
Intersegment revenues 9,944 61 175 (10,180) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenues $491,548 $173,768 $229,137 $ 360 $(10,180) $884,633
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Operating profit $ 22,045 $ 6,480 $ 10,817 $(10,824) $ $ 28,518
Interest, expense (36) (10) (632) (2,781) (3,459)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 22,009 $ 6,470 $ 10,185 $(13,605) $ $ 25,059
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $111,869 $ 71,418 $ 81,913 $ 34,270 $ $299,470
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Depreciation expense $ 2,283 $ 1,328 $ 1,723 $ 409 $ $ 5,743
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Amortization expense $ 1,298 $ 1,619 $ 640 $ $ $ 3,557
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 2,946 $ 2,092 $ 1,987 $ 1,514 $ $ 8,539
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues and other income $511,801 $205,578 $247,748 $ 254 $ $965,381
Intersegment revenues 11,135 75 239 (11,449) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenues $522,936 $205,653 $247,987 $ 254 $(11,449) $965,381
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Operating profit $ 24,211 $ 8,449 $ 14,665 $(12,214) $ $ 35,111
Interest, expense (34) (11) (93) (3,561) (3,699)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 24,177 $ 8,438 $ 14,572 $(15,775) $ $ 31,412
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $130,657 $ 82,580 $ 90,403 $ 31,333 $ $334,973
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Depreciation expense $ 2,706 $ 1,701 $ 1,964 $ 563 $ $ 6,934
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Amortization expense $ 1,832 $ 2,085 $ 676 $ $ $ 4,593
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 3,871 $ 3,405 $ 2,248 $ 701 $ $ 10,225
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Intersegment revenues are recorded at prices negotiated between the entities.
23
SCHEDULE II
ABM Industries Incorporated and Subsidiaries
CONSOLIDATED VALUATION ACCOUNTS
For the Three Years Ended October 31, 1993, 1994 and 1995
(in thousands of dollars)
- --------------------------------------------------------------------------------
BALANCE CHARGES TO DEDUCTIONS
BEGINNING COSTS AND NET OF OTHER ADDITIONS BALANCE
OF YEAR EXPENSES RECOVERIES (REDUCTIONS) END OF YEAR
- ---------------------------------------------------------------------------------------------------------------------------
Allowance for Doubtful Accounts
Years ended October 31:
1993 $ 2,806 $ 1,187 $ (892) $ 3,101
1994 3,101 1,915 (1,949) 3,067
1995 3,067 1,536 (848) 3,755
- ---------------------------------------------------------------------------------------------------------------------------
24
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item is incorporated by reference to the
information set forth under the caption "Election of Directors" contained in the
Proxy Statement to be used by the Company in connection with its 1996 Annual
Meeting of Stockholders. See also the cover page of this Form 10-K and item 1.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference to the
information set forth under the caption "Executive Compensation" contained in
the Proxy Statement to be used by the Company in connection with its 1996 Annual
Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference to the
information set forth under the caption "Principal Stockholders" contained in
the Proxy Statement to be used by the Company in connection with its 1996 Annual
Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference to the
information set forth under the captions "Executive Compensation" and "Certain
Relationships and Related Transactions" contained in the Proxy Statement to be
used by the Company in connection with the 1996 Annual Meeting of Stockholders.
25
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS FORM 10-K:
1. and 2. Consolidated Financial Statements and Consolidated
Financial Statement Schedule.
The following consolidated financial statements of ABM Industries
Incorporated and subsidiaries are included in Item 8:
Independent Auditors' Report
Consolidated balance sheets -- October 31, 1994 and 1995
Consolidated statements of income -- Years ended October 31, 1993,
1994 and 1995
Consolidated statements of stockholders' equity -- Years ended
October 31, 1993, 1994 and 1995
Consolidated statements of cash flows -- Years ended October 31,
1993, 1994 and 1995
Notes to consolidated financial statements -- October 31, 1995.
The following consolidated financial statement schedule of ABM Industries
Incorporated and subsidiaries is included in Item 8.
Schedule II -- Consolidated Valuation Accounts for the Three Years Ended
October 31, 1993, 1994 and 1995.
All other schedules are omitted because they are not applicable or because
the required information is included in the consolidated financial statements or
the notes thereto.
The individual financial statements of the registrant's subsidiaries have
been omitted since the registrant is primarily an operating company and all
subsidiaries included in the consolidated financial statements are wholly-owned
subsidiaries.
--------------------------------------------------
Exhibit
Number Description
---------------------------------------------------------------
3.1 [j] Certificate of Incorporation, as amended.
3.2 Restated Bylaws, as amended effective September 19, 1995.
4.1 [l] Credit Agreement, dated September 22, 1994, between Bank of America
National Trust and Savings Association and the Company.
4.2 [k] First Amendment to Credit Agreement dated September 22, 1994.
4.3 [k] Second Amendment to Credit Agreement dated September 22, 1994.
10.2 [a]* 1985 Employee Stock Purchase Plan.
10.3 [b]* Supplemental Medical and Dental Plan.
10.4 [m]* 1984 Executive Stock Option Plan.
10.6 [f]* Consulting Agreement with R. David Anacker.
10.7 [f]* Executive Employment Agreement with Sydney J. Rosenberg.
10.9 [f]* Short Form Deed of Trust and Assignment of Rents (dated December 17, 1991)
between the Company and John F. Egan, together with the related Promissory
Note (dated January 1, 1992).
10.13 [c]* 1987 Stock Option Plan.
10.16 [d] Rights Agreement, dated as of April 11, 1988, between the Company and Bank
of America National Trust and Savings Association, as Rights Agent with
Chemical Trust Company of California as successor-in-interest to Bank of
America as Rights Agent.
10.19 [e]* Service Award Plan.
10.20 [f]* Executive Employment Agreement with William W. Steele.
10.21 [f]* Amended and Restated Retirement Plan for Outside Directors.
10.22 [f]* Amendment No. 1 to Service Award Plan.
10.23 [g]* Form of Outside Director Retirement Agreement (dated June 16, 1992).
10.24 [g]* Executive Employment Agreement with John F. Egan.
10.25 [g]* Executive Employment Agreement with Jess. E. Benton, III.
10.27 [h] Guaranty of American Building Maintenance Industries, Inc.
10.28 [i]* Deferred Compensation Plan.
10.29 [i]* Form of Existing Executive Employment Agreement Other Than Those Named
Above.
10.30 [l]* Executive Employment Agreement with Martinn H. Mandles, as amended by
Amendments One and Two.
10.31 [l]* Amendment of Corporate Executive Employment Agreement with William W.
Steele.
10.32 [l]* First and Second Amendments of Corporate Executive Employment Agreement
with John F. Egan.
10.33 [l]* Amendment of Corporate Executive Employment Agreement with Sydney J.
Rosenberg.
10.34 [l]* First and Second Amendments of Corporate Executive Employment Agreement
with Jess E. Benton, III.
10.35 [l]* Form of Amendments of Corporate Executive Employment Agreements with Other
Than Those Named Above.
10.36 [n] Form of Indemnification for Directors
22.1 Subsidiaries of the Registrant.
24.1 Consent of Independent Certified Public Accountants.
27.1 Financial Data Schedule.
- ------------------------------
[a] Incorporated by reference to exhibit 4.1 of the Company's Registration
Statement on Form S-8 filed March 30, 1994.
[b] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1984.
[c] Incorporated by reference to exhibit 4.1 of the Company's Registration
Statement on Form S-8 filed March 31, 1994.
26
[d] Incorporated by reference to exhibit 1 to the Company's report on Form 8-K
dated April 11, 1988.
[e] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1990.
[f] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1991.
[g] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's quarterly report
on Form 10-Q for the fiscal quarter ended July 31, 1992.
[h] Incorporated by reference to the exhibit bearing the same numeric reference
which was filed as an exhibit to the Company's quarterly report on Form 10-Q
for the fiscal quarter ended July 31, 1993.
[i] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1993.
[j] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's quarterly report
on Form 10-Q for the fiscal quarter ended April 30, 1994.
[k] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's quarterly report
on Form 10-Q for the fiscal quarter ended April 30, 1995.
[l] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1994.
[m] Incorporated by reference to Appendix A of the Company's Proxy Statement for
the 1995 Annual Meeting.
[n] Incorporated by reference to exhibit 10.20 which was filed as an exhibit to
the Company's quarterly report on Form 10-Q for the fiscal quarter ended
April 30, 1991.
* Management contract, compensatory plan or arrangement.
(B) REPORTS ON FORM 8-K:
No reports on Form 8-K have been filed during the last quarter of the period
covered by this report.
27
SIGNATURES
Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this
report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ABM INDUSTRIES INCORPORATED
By: /s/ Sydney J. Rosenberg
--------------------------------------
Sydney J. Rosenberg
Chairman of the Board and Director
January 26, 1996
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been
signed below by the following persons on behalf
of the registrant and in the capacities and on
the dates indicated.
/s/ Sydney J. Rosenberg /s/ David H. Hebble
- -------------------------------------- --------------------------------------
Sydney J. Rosenberg David H. Hebble
Chairman of the Board and Director Corporate Vice President and
January 26, 1996 Chief Financial Officer
(Principal Financial Officer)
January 26, 1996
/s/ William W. Steele /s/ Hussain A. Khan
- -------------------------------------- --------------------------------------
William W. Steele, President, Hussain A. Khan, Corporate Controller
Chief Executive Officer and Director (Principal Accounting Officer)
January 26, 1996 January 26, 1996
/s/ Maryellen B. Cattani /s/ John F. Egan
- -------------------------------------- --------------------------------------
Maryellen B. Cattani, Director John F. Egan
January 26, 1996 Corporate Vice President and Director
January 26, 1996
/s/ Luke S. Helms /s/ Charles T. Horngren
- -------------------------------------- --------------------------------------
Luke S. Helms, Director Charles T. Horngren, Director
January 26, 1996 January 26, 1996
/s/ Henry L. Kotkins, Jr. /s/ Martinn H. Mandles
- -------------------------------------- --------------------------------------
Henry L. Kotkins, Jr., Director Martinn H. Mandles
January 26, 1996 Executive Vice President and Director
January 26, 1996
/s/ Theodore Rosenberg /s/ William E. Walsh
- -------------------------------------- --------------------------------------
Theodore Rosenberg, Chairman of the William E. Walsh, Director
Executive Committee and Director January 26, 1996
January 26, 1996
/s/ Boniface A. Zaino
- --------------------------------------
Boniface A. Zaino, Director
January 26, 1996
28
BOARD OF DIRECTORS
SYDNEY J. ROSENBERG (a,b)
Chairman of the Board of the Company
Los Angeles, California
THEODORE ROSENBERG (a,c)
Chairman of the Executive Committee of the Company
Daly City, California
MARYELLEN B. CATTANI (c,d)
Executive Vice President, General
Counsel and Secretary
American President Companies, Ltd.
Oakland, California
JOHN F. EGAN
Vice President of the Company,
and President of the Janitorial
Services Division
San Francisco, California
LUKE HELMS (b)
Vice Chairman
BankAmerica Corporation
San Francisco, California
CHARLES T. HORNGREN (d)
Edmund W. Littlefield Professor of
Accounting, Stanford University
Graduate School of Business
Stanford, California
HENRY L. KOTKINS, JR. (b)
President and Chief Executive Officer
Skyway Luggage Company
Seattle, Washington
MARTINN H. MANDLES, (a)
Executive Vice President and Chief
Administrative Officer of the Company
San Francisco, California
WILLIAM W. STEELE (a)
President and Chief Executive Officer
of the Company
San Francisco, California
WILLIAM E. WALSH (c)
Management Consultant and Author
Menlo Park, California
BONIFACE A. ZAINO (b,e)
Managing Director of
The Trust Company of the West
New York, New York
PRINCIPAL OFFICERS
SYDNEY ROSENBERG (a,b)
Chairman of the Board
WILLIAM W. STEELE (a)
President and Chief Executive Officer
MARTINN H. MANDLES (a)
Executive Vice President
J.E. BENTON, III
Senior Vice President, Office of the President
SHERRILL F. SIPES, JR.
Senior Vice President, Office of the President
WILLIAM C. BANNER
Vice President of the Company, and President of the Security Services Division
DONNA M. DELL
Vice President and Director of Human Resources
JOHN F. EGAN
Vice President of the Company, and President of the Janitorial Services Division
DAVID H. HEBBLE
Vice President and Chief Financial Officer
HARRY H. KAHN
Vice President, General Counsel and Secretary
DOUGLAS B. BOWLUS
Treasurer
HUSSAIN A. KHAN
Controller and Chief Accounting Officer
(a) Executive Committee
(b) Nominating Committee
(c) Officer Compensation & Stock Option Committee
(d) Audit Committee
(e) Effective February 1, 1996
SPECIAL NOTES
LISTINGS
New York Stock Exchange
Pacific Stock Exchange
TICKER SYMBOL
ABM
REGISTRARS AND TRANSFER AGENTS
Chemical Mellon Shareholder
Services, L.L.C.
50 California Street, 10th Floor
San Francisco, CA 94111
AUDITORS
KPMG Peat Marwick LLP
Three Embarcadero Center
San Francisco, CA 94111
10-K REPORT
Additional copies available to stockholders at no charge upon request to:
ABM Corporation
Communications
Post Office Box 193224
San Francisco, CA 94119
STOCKHOLDERS
As of December 31, 1995, there were approximately 4,100 holders of record of the
Company's Common Stock.
ANNUAL MEETING
The Annual Meeting of Stockholders of ABM Industries Incorporated will be held
on Tuesday, March 19, 1996 at 10:00 a.m. at 50 Fremont Street,
San Francisco, California
DIVIDENDS
The Company has paid quarterly cash dividends on its Common Stock without
interruption since 1965. The Board of Directors considers the payment of cash
dividends on a quarterly basis, subject to the Company's earnings, financial
condition and other factors.
EXHIBIT 3.2
ABM INDUSTRIES INCORPORATED
BY-LAWS
AS AMENDED EFFECTIVE 9/19/95
ARTICLE I
OFFICES
SECTION 1.1. REGISTERED OFFICE. The registered office shall be
located in the City of Wilmington, County of New Castle, State of Delaware.
SECTION 1.2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1. PLACE OF MEETING. All meetings of stockholders shall be
held at the principal executive office of the Corporation or at any other place,
either within or without the State of Delaware, as may be designated by the
Board of Directors.
SECTION 2.2. ANNUAL MEETING. The annual meeting of stockholders
shall be held on such date and at such time as the Board of Directors may
designate.
At each annual meeting the stockholders shall elect directors to
succeed those whose terms expire in that year and to
2
serve until their successors are elected, and shall transact such other
business as may properly be brought before the meeting.
SECTION 2.3. NOTICE OF ANNUAL MEETING. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Such notice shall be given either
personally or by mail or other means of written communication, addressed or
delivered to each stockholder entitled to vote at such meeting at the address of
such stockholder appearing on the books of the Corporation or given by him to
the Corporation for the purpose of such notice. If no such address appears or
is given, notice shall be given either personally or by mail or other means of
written communication addressed to the stockholder at the place where the
principal executive office of the Corporation is located. The notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by other means of written communication.
SECTION 2.4. LIST OF STOCKHOLDERS. The officer who has charge of
the stock ledger of the Corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of the stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior
3
to the meeting, either at a place within the city where the meeting is to be
held, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 2.5. SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose or purposes, may be called at any time by the Board of
Directors, or by a committee of the Board of Directors which has been duly
designated by the Board of Directors and whose power and authority, as provided
in a resolution of the Board of Directors, include the power to call such
meetings, but such special meetings may not be called by any other person or
persons.
SECTION 2.6. NOTICE OF SPECIAL MEETINGS. Written notice of a special
meeting of stockholders stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called shall be given not less than
ten nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting.
SECTION 2.7. BUSINESS AT SPECIAL MEETINGS. The business transacted
at any special meeting of stockholders shall be limited to the purposes stated
in the notice.
SECTION 2.8. ADJOURNED MEETINGS AND NOTICE THEREOF. Any
stockholders' meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the vote of a majority of the shares
represented either in person or by
4
proxy, but in the absence of a quorum, no other business may be transacted at
such meeting, except as provided in Section 2.10 of these by-laws.
When a stockholders' meeting is adjourned to another time or place,
notice of the adjourned meeting need not be given if the time and place thereof
are announced at the meeting at which the adjournment is taken; except that if
the adjournment is for more than thirty days or if after the adjournment a new
record date is fixed for the adjourned meeting, notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote thereat.
At the adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting.
SECTION 2.9. QUORUM. The holders of a majority of the shares issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation.
SECTION 2.10. MAJORITY VOTE. If a quorum is present at any meeting,
the vote of the holders of a majority of the shares having voting power, present
in person or represented by proxy, shall decide any question brought before such
meeting, unless a different vote is required on that question by express
provision of statute or of the certificate of incorporation, in which case such
express provision shall govern and control.
5
The stockholders present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum, in any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum, unless a different vote is required as set
forth above.
SECTION 2.11. VOTING. Except as otherwise provided in the
certificate of incorporation and subject to Section 8.4 of these by-laws, each
stockholder shall be entitled to one vote, in person or by proxy, for each share
of capital stock having voting power held by such stockholder, but no proxy
shall be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. Vote may be viva voce or by ballot; provided,
however, that elections for directors must be by ballot.
Any holder of shares entitled to vote on any matter may vote part of
the shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, other than elections to office but, if the
stockholder fails to specify the number of shares such stockholder is voting
affirmatively, it shall be conclusively presumed that the stockholder's
approving vote is with respect to all shares said stockholder is entitled to
vote.
SECTION 2.12. STOCKHOLDER ACTION. Any action required or permitted
to be taken by the stockholders must be effected at
6
a duly called annual or special meeting of such holders and may not be
effected by any consent in writing by such holders.
Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when a person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened; provided, that attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law or these by-
laws to be included in the notice but not so included if such objection is
expressly made at the meeting.
SECTION 2.13. PRESIDING OFFICER. The chairman of the Board of
Directors, if there be such officer, shall, if present, call the meetings of the
stockholders to order and shall act as the presiding officer thereof.
SECTION 2.14. SECRETARY. The secretary of the Corporation, if
present, shall act as secretary of all meetings of the stockholders. In the
absence of the secretary, an assistant secretary if present shall act as
secretary of the meetings of the stockholders. In the absence of the secretary
or any assistant secretary, the presiding officer may appoint a person to act as
secretary of such meeting.
ARTICLE III
DIRECTORS
SECTION 3.1. NUMBER OF DIRECTORS, ELECTION AND TERM OF OFFICE. The
number of directors which shall constitute the whole board shall be eleven.
The Board of Directors shall be
7
classified, with respect to the time for which they severally hold office,
into three classes, as nearly equal in number as possible, as determined by
the Board of Directors, one class to hold office initially for a term
expiring at the annual meeting of stockholders to be held in 1986, another
class to hold office initially for a term expiring at the annual meeting of
stockholders to be held in 1987, and another class to hold office initially
for a term expiring at the annual meeting of stockholders to be held in 1988,
with the members of each class to hold office until their successors are
elected and qualified. At each annual meeting of stockholders, the
successors of the class of directors whose term expires at that meeting shall
be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election.
The term "entire board" as used in these by-laws means the total
number of directors which the Corporation would have if there were no vacancies.
SECTION 3.2. VACANCIES. A vacancy in the Board of Directors shall be
deemed to exist in case of the death, resignation, or removal of any director,
or if the authorized number of directors be increased, or if the stockholders
fail at any annual or special meeting of stockholders to elect the full
authorized number of directors to be voted for at that meeting.
Unless otherwise provided in the certificate of incorporation,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors
8
may be filled by a majority of the directors then in office, although less
than a quorum, or by a sole remaining director, and any director so chosen
shall hold office until the next election of the class for which he was
chosen and until his successor is fully elected and qualified, unless sooner
displaced. If at any time the Corporation should have no directors in
office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the entire board (as constituted immediately prior to any such increase), the
Court of the Chancery may upon application of any stockholder or stockholders
holding at least ten percent (10%) of the total number of the shares at the
time outstanding having the right to vote for such directors, summarily order
an election to be held to fill any such vacancies or newly created
directorships or to replace the directors chosen by the directors then in
office.
SECTION 3.3. POWERS. The business and affairs of the Corporation
shall be managed by its Board of Directors which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
SECTION 3.4. COMPENSATION OF DIRECTORS. The Board of Directors shall
have the authority to fix the compensation of directors. No such compensation
shall preclude any director from
9
serving the Corporation in any other capacity and receiving compensation
therefor.
SECTION 3.5. RESIGNATION. Any director may resign effective upon
giving written notice to the chief executive officer, the secretary, or the
Board of Directors of the Corporation, unless the notice specifies a later time
for the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to take office when the resignation
becomes effective.
SECTION 3.6. NOMINATION OF DIRECTORS. Nominations for the election
of directors may be made by the Board of Directors or a committee appointed by
the Board of Directors authorized to make such nominations or by any stockholder
entitled to vote in the election of directors generally. However, stockholders
may nominate one or more persons for election as directors at a meeting only if
written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the secretary of the Corporation not later than (i)
with respect to an election to be held at an annual meeting of stockholders, 60
days in advance of such meeting, and (ii) with respect to an election to be held
at a special meeting of stockholders for the election of directors, the close of
business on the tenth day following the date on which notice of such meeting is
first given to stockholders. Each such notice shall set forth: (a) the name
and address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) a
10
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (d) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated, or intended to be nominated, by
the Board of Directors; and (e) the consent of each nominee to serve as a
director of the Corporation if so elected. The presiding officer of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 4.1. PLACE OF MEETING. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
SECTION 4.2. ORGANIZATION MEETING. Immediately after each annual
meeting of stockholders, the Board of Directors shall hold a regular meeting for
the purpose of organization, electing officers and transacting other business.
No notice of such
11
meeting need be given. In the event such meeting is not so held, the meeting
may be held at such time and place as shall be specified in a notice given as
hereafter provided for special meetings of the Board of Directors, or as
shall be specified in a written waiver signed by all of the directors.
SECTION 4.3. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such time and at such place as shall from time to time
be determined by the Board of Directors; provided, however, that if the date so
designated falls upon a legal holiday, then the meeting shall be held at the
same time and place on the next succeeding day which is not a legal holiday.
Such regular meetings may be held without notice.
SECTION 4.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the chairman of the board of directors, chairman of
the executive committee of the Board of Directors, the chief executive officer
or the president or on the written request of the directors constituting a
majority of the entire board.
SECTION 4.5. NOTICE OF SPECIAL MEETINGS. Notice of the time and
place of special meetings of the Board of Director shall be delivered personally
to each director, or sent to each director by mail, telephone, or telegraph. In
case such notice is sent by mail or telegraphed it shall be deposited in the
United States mail or delivered to the telegraph company in the place in which
the principal office of the Corporation is located at least 48 hours prior to
the time of the holding of the meeting. In case such notice is delivered
personally or by
12
telephone, it shall be so delivered at least 24 hours prior to the time of
the holding of the meeting. Such notice shall not be necessary if
appropriate waivers, consents and/or approvals are filed in accordance with
Section 4.6 of these by-laws.
SECTION 4.6. WAIVER OF NOTICE. Notice of a meeting need not be given
to any director who signs a waiver of notice, whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director.
The transactions of any meeting of the Board of Directors, however
called and noticed or wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice if a quorum is present and if,
either before or after the meeting, each of the directors not present signs a
written waiver of notice, a consent to holding the meeting or an approval of the
minutes thereof. All such waivers, consents and approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
SECTION 4.7. QUORUM. At all meetings of the board, the presence of
one-third of the entire board shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any meetings at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting without notice
other than
13
announcement at the meeting, until a quorum shall be present. A meeting at
which a quorum is initially present may continue to transact business,
notwithstanding the withdrawal of directors, if any action taken is approved
by at least a majority of the required quorum for such meeting.
SECTION 4.8. ADJOURNMENT. Any meeting of the Board of Directors,
whether or not a quorum is present, may be adjourned to another time and place
by the vote of a majority of the directors present. Notice of the time and
place of the adjourned meeting need not be given to absent directors if said
time and place are fixed at the meeting adjourned.
SECTION 4.9. ACTION WITHOUT MEETING. Unless otherwise restricted by
the certificate of incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
SECTION 4.10. CONFERENCE COMMUNICATION. Unless otherwise restricted
by the certificate of incorporation or these by-laws, members of the Board of
Directors or any committee designated by the board may participate in a meeting
of the Board of Directors or committee by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear one another. Participation
14
in a meeting pursuant to this action shall constitute presence in person at
such meeting.
ARTICLE V
COMMITTEES OF DIRECTORS
SECTION 5.1. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the entire board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolutions of the Board of Directors,
shall have and may exercise all the power and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
substantially all of the Corporation's
15
property and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the by-laws of the
Corporation and, unless the resolution or the certificate of incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors.
SECTION 5.2. COMMITTEE MINUTES. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.
ARTICLE VI
OFFICERS
SECTION 6.1 OFFICERS The officers of the Corporation shall be a
chairman of the Board, a president, one or more executive vice presidents, one
or more senior vice presi-dents, one or more vice presidents, a secretary, a
controller, and a treasurer, each of whom shall be a principal officer of the
Corporation appointed by the Board of Directors. The Corporation may also have
one or more assistant vice presidents, one or more assistant secretaries, one or
more assistant controllers, and one or more assistant treasurers, each of whom
shall be an assistant officer of the Corporation appointed by the Executive
Committee of the Board of Directors. Any number of offices may be held by
16
the same person, unless the certificate of incorporation or these bylaws
otherwise provide".
SECTION 6.2 ELECTION. The Board of Directors at its first meeting
after each annual meeting of stockholders shall elect all principal officers for
the ensuing year and shall designate a chief executive officer and a chief
financial officer. At its first meeting after each annual meeting of
stockholders, the Executive Committee shall elect all assistant officers.
SECTION 6.3 OTHER OFFICERS. The Board of Directors may appoint such
other officers and agents as it shall deem necessary and they shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION 6.4 TERM. Subject to an applicable written employment agreement,
if any, between the Corporation and any principal officer elected or appointed
by the Board of Directors or any assistant officer appointed by the Executive
Committee of the Board of Directors, said officer may be removed at any time,
either with or without cause, by the affirmative vote of a majority of the Board
of Directors or of the Executive Committee of the Board of Directors,
respectively. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors or by the Executive Committee of the Board of
Directors pursuant to the requirements of Section 6.1 of this Article VI.
17
Compensation and other terms and conditions of employment of any principal
officer shall be subject to approval of the Officer Compensation and Stock
Option Committee and the Board of Directors. Compensation and other terms and
conditions of employment of assistant officers shall be subject to approval of
the Executive Committee of the Board of Directors.
SECTION 6.5 THE CHAIRMAN OF THE BOARD OF DIRECTORS. The chairman of
the Board of Directors shall, if present, preside at all meetings of the Board
of Directors and of the stockholders and shall exercise and perform such other
powers and duties as may be, from time to time, prescribed by the by-laws or
assigned by the Board of Directors.
SECTION 6.6 THE PRESIDENT. The president shall have general and
active management over the business and affairs of the corporation, subject,
however, to the powers and authority of the chief executive officer and to the
control of the Board of Directors. In the absence or disability of the chief
executive officer, the president shall perform the duties of the chief executive
officer, and when so acting, shall have all the powers of, and be subject to all
the restrictions upon, the chief executive officer.
SECTION 6.7 THE EXECUTIVE VICE PRESIDENT. In the absence or
disability of the chief executive officer and the president, the executive vice
president or any other officer of
18
the corporation designated by the Board of Directors, shall perform the
duties of the chief executive officer, and when so acting shall have all the
powers of, and be subject to all the restrictions upon the chief executive
officer. The executive vice president shall have such other powers and
perform such other duties as from time to time may be prescribed by the chief
executive officer.
SECTION 6.8 THE SENIOR VICE PRESIDENTS. In the absence of the
chairman of the board or any executive vice presidents, the senior vice
presidents, in order of their rank as fixed by the board of directors, or, if
not ranked, the senior vice president designated by the Board of Directors shall
perform the duties of the president, and when so acting shall have all the
powers of, and be subject to all the restrictions upon the president. The senior
vice presidents shall have such other powers and perform such other duties as
from time to time may be prescribed for them respectively by the Executive
Committee of the Board of Directors.
SECTION 6.9 THE VICE PRESIDENTS . The vice presidents shall have
such powers and perform such duties as may from time to time be prescribed by
the Executive Committee of the Board of Directors.
SECTION 6.10 THE SECRETARY. The secretary shall keep, or cause to be
kept, a book of minutes in written form of the
19
proceedings of the Board of Directors, committees of the board, and
stockholders. Such minutes shall include all waivers of notice, consents to
the holding of meeting, or approvals of the minutes of meetings executed
pursuant to these by-laws or statute. The secretary shall keep, or cause to
be kept, at the principal executive office or at the office of the
Corporation's transfer agent or registrar, a record of its stockholders,
giving the names and addresses of all stockholders, and the number and class
of shares held by each.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by these by-laws or
by law to be given, and shall keep the seal of the Corporation in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or these by-laws.
SECTION 6.11 THE ASSISTANT SECRETARY. The assistant secretary shall
have all the powers, and perform all the duties of, the secretary in the absence
or inability of the secretary to act.
SECTION 6.12 THE CONTROLLER. The Controller of the Corporation shall
be the general manager of the accounting, tax and internal audit functions of
the Corporation and its subsidiaries, subject to the control of the chief
financial officer. The controller shall have such other powers and perform such
other duties as from time to time may be prescribed by the chief financial
officer.
20
SECTION 6.13 THE TREASURER. The treasurer shall have the custody
of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Company and
shall deposit all monies and other valuables in the name and to the credit of
the Company. The treasurer shall also have such other powers and perform such
other duties as may be prescribed by the Executive Committee of the Board of
Directors.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
SECTION 7.1. ACTIONS, SUITS OR PROCEEDINGS OTHER THAN BY OR IN THE
RIGHT OF THE CORPORATION. The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges, expenses (including attorneys'
fees) judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on
21
his behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful; PROVIDED HOWEVER, that the foregoing
indemnity shall not be applicable as to any person who is or was or agreed to
become an employee or agent of the Corporation (other than employees or
agents who are or were also officers or directors of the Corporation), or is
or was serving or agreed to serve at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise (other than employees or agents who are or were also
officers or directors of any such other corporation, partnership, joint
venture, trust or enterprise), unless and until such indemnity is
specifically approved by the Board of Directors. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 7.3. INDEMNIFICATION FOR COSTS, CHARGES AND EXPENSES OF SUCCESSFUL
PARTY. Notwithstanding the other provisions of this Article, to the extent that
a director,
22
officer, employee or agent of the Corporation has been successful on the
merits or otherwise, including, without limitation, the dismissal of an
action without prejudice, in defense of any action, suit or proceeding
referred to in Sections 7.1 and 7.2 of this Article, or in defense of any
claim, issue or matter therein, he shall be indemnified against all costs,
charges and expenses (including attorneys' fees) actually and reasonably
incurred by him or on his behalf in connection therewith.
SECTION 7.4. DETERMINATION OF RIGHT TO INDEMNIFICATION. Any
indemnification under Sections 7.1 and 7.2 of this Article (unless ordered by a
court) shall be paid by the Corporation unless a determination is made (1) by
the Board of Directors by a majority vote of the quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders, that indemnification of the director, officer, employee or agent
is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Sections 7.1 and 7.2 of this Article.
SECTION 7.5. ADVANCE OF COSTS, CHARGES AND EXPENSES. Costs, charges
and expenses (including attorneys' fees incurred by a person referred to in
Sections 7.1 and 7.2 of this Article in defending a civil or criminal action,
suit or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding; PROVIDING, HOWEVER, that the
23
payment of such costs, charges and expenses incurred by a director or officer in
his capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer) in
advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by or on behalf of the director or
officer to repay all amounts so advanced in the event that it shall ultimately
be determined that such director or officer is not entitled to be indemnified by
the Corporation as authorized in this Article. Such costs, charges and expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate. The Board of
Directors may, in the manner set forth above, and upon approval of such
director, officer, employee or agent of the Corporation, authorize the
Corporation's counsel to represent such person, in any action, suit or
proceeding, whether or not the Corporation is a party to such action suit or
proceeding.
SECTION 7.7. OTHER RIGHTS; CONTINUATION OF RIGHT TO INDEMNIFICATION.
The indemnification provided by this Article shall not be deemed exclusive of
any other rights to which a person seeking indemnification may be entitled under
any law (common or statutory), agreement, vote of stockholders or disinterested
director or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office or while employed by or acting
as agent for the Corporation, and shall continue as to a person who has ceased
to be a director, officer, employee or agent, and shall inure to the
24
benefit of the estate, heirs, executors and administrators of such person.
All rights to indemnification under this Article shall be deemed to be a
contract between the Corporation and each director, officer, employee or
agent of the Corporation who serves or served in such capacity at any time
while this Article is in effect. Any repeal or modification of this Article
or any repeal or modification of relevant provisions of the Delaware General
Corporation Law or any other applicable laws shall not in any way diminish
any rights to indemnification of such director, officer, employee or agent or
the obligations of the Corporation arising hereunder.
SECTION 7.8. INSURANCE. The Corporation shall purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him or on his behalf
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article, PROVIDED that such insurance is available on
acceptable terms, which determination shall be made by a vote of a majority of
the entire Board of Directors.
SECTION 7.9. SAVINGS CLAUSE. If this Article or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless
25
indemnify each director, officer, employee and agent of the Corporation as to
costs, charges and expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including an action
by or in the right of the Corporation, to the full extent permitted by any
applicable portion of this Article that shall not have been invalidated and
to the full extent permitted by applicable law.
26
ARTICLE VIII
STOCKHOLDERS
SECTION 8.1. CERTIFICATES OF STOCK. Every holder of shares in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the chairman, the president or a vice president and the
secretary or an assistant secretary of the Corporation, or the treasurer or an
assistant treasurer, certifying the number of shares owned by him in the
Corporation. Any or all the signatures on the certificate may be a facsimile.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
SECTION 8.2. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates of stock to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates,
27
the Corporation may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond (or
other adequate security) in such sum as it may direct as indemnity against any
claim that may be made against the Corporation on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
SECTION 8.3. TRANSFER OF STOCK. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION 8.4. STOCKHOLDERS OF RECORD. In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of the stockholders or any adjournment thereof, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion, or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days
28
prior to any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting, unless the Board of Directors fixes a new
record date for the adjourned meeting, but the board shall fix a new record
date if the meeting is adjourned for more than forty-five days from the date
set for the original meeting.
SECTION 8.5. NO RECORD DATE. If no record date is fixed, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business at the day next preceding the
day on which notice is given, or, if notice is waived, at the end of business of
the day next preceding the day on which the meeting is held. The record date
for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
SECTION 8.6. REGISTERED STOCKHOLDERS. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
29
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. FISCAL YEAR. The fiscal year of the Corporation shall
be fixed by resolution of the Board of Directors.
SECTION 9.2. SEAL. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization, and the name of the
state of its incorporation. The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE X
AMENDMENTS
SECTION 10.1. AMENDMENTS. Subject to the provisions of the
Certificate of Incorporation, these by-laws may be altered, amended or repealed
at any regular meeting of the stockholders (or at any special meeting thereof
duly called for that purpose) by a vote of not less than 70% of the outstanding
stock entitled to vote at such meeting; provided that in the notice of such
special meeting notice of such purpose shall be given. Subject to the laws of
the State of Delaware, the certificate of incorporation and these by-laws, the
Board of Directors may by majority vote of those present at any meeting at which
a quorum is present amend these by-laws, or enact such other by-laws as in their
judgment may be advisable for the regulation of the conduct of the affairs of
the Corporation.
Exhibit 22.1
SUBSIDIARIES OF REGISTRANT
as of 12/31/95
Percentage
of Voting
Securities
Owned by
State of Immediate
NAME Incorporation Parent
- ---- ------------- ----------
ABM Industries Incorporated Delaware Registrant
(*) ABM Janitorial Services - Northern California California 100%
ABM Janitorial Services - Southern California + California 100%
ABM Janitorial Services Co. Ltd. British Columbia 100%
Supreme Building Maintenance Ltd. British Columbia 100%
American Building Maintenance Co. of Canada Ltd. + Canada 100%
American Building Maintenance Co. of Georgia California 100%
American Building Maintenance Co. of Illinois California 100%
American Building Maintenance Co. of Nebraska + California 100%
American Building Maintenance Co. of New York California 100%
American Building Service Company + California 100%
American Building Maintenance Co. of Utah + California 100%
American Building Maintenance Co. - West California 100%
California Janitorial and Supply Co. + California 100%
Commercial Property Services, Inc. California 100%
Bonded Maintenance Company Texas 100%
Servall Services Inc. Texas 100%
American Plant Protection, Inc. California 100%
American Public Services + California 100%
Easterday Janitorial Supply Company California 100%
ABMI Security Services of Texas, Inc. + Texas 100%
American Security and Investigative Services, Inc. California 100%
ABMI Investigative Services + California 100%
ABMI Security Services, Inc. California 100%
American Commercial Security Services, Inc. California 100%
Amtech Services Inc. California 100%
ABM Facility Services Company California 100%
Amtech Energy Services California 100%
Amtech Lighting Services California 100%
CommAir Mechanical Services California 100%
Amtech Elevator Services California 100%
Amtech Reliable Elevator Company of Texas + Texas 100%
ABM Engineering Services Company California 100%
Bradford Building Services, Inc. California 100%
Commercial Air Conditioning of Northern California, Inc. + California 100%
Southern California Building Services + California 100%
Accurate Janitor Service, Inc. + California 100%
Ampco System Parking California 100%
Beehive Parking, Inc. Utah 100%
System Parking, Inc. California 100%
Towel and Linen Service, Inc. + California 100%
Internacional de Elevadores, S.A. de C.V. Mexico 100%
(*) Subsidiary relationship to registrant or to subsidiary parents shown by
progressive indentation.
+ Inactive companies.
Exhibit 24.1
Consent of Independent Auditors
-------------------------------
The Board of Directors
ABM Industries Incorporated:
We consent to incorporation by reference in the following registration
statements on Form S-8 of ABM Industries Incorporated of our report dated
December 15, 1995, relating to the consolidated balance sheets of ABM
Industries Incorporated and subsidiaries as of October 31, 1995 and 1994, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the years in the three-year period ended October 31, 1995,
and the related schedule, which report appears in the October 31, 1995, annual
report on Form 10-K of ABM Industries Incorporated.
Registration No. Form Plan
---------------- ---- ----
2-86666 S-8 Executive Stock Option Plan
2-96416 S-8 1985 Employee Stock Purchase Plan
33-14269 S-8 1987 Stock Option Plan
KPMG Peat Marwick LLP
San Francisco, California
January 26, 1996
5
1,000
YEAR
OCT-31-1995
OCT-31-1995
1,840
0
158,075
3,755
19,389
209,867
61,648
39,001
334,973
114,240
0
0
6,400
94
141,786
334,973
965,381
965,381
830,749
830,749
99,521
0
3,699
31,412
13,193
18,219
0
0
0
18,219
1.85
1.85
