1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1994
Commission File No. 1-8929
AMERICAN BUILDING MAINTENANCE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1369354
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
50 Fremont Street
San Francisco, CA 94105
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:
(415)597-4500
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 [ ]
Number of shares of Common Stock outstanding as of
January 31,1994: 8,842,000.
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
AMERCIAN BUILDING MAINTENANCE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands of dollars)
3
October 31, January 31
1993 1994
(Unaudited)
Current Assets:
Cash and time deposits $ 1,688 $ 1,051
Accounts and other receivables, net 127,908 130,404
Inventories and supplies 16,288 15,991
Deferred income taxes 10,960 10,542
Prepaid expenses 10,089 10,420
--------- ---------
Total current assets 166,933 168,408
--------- ---------
Investments and Long-Term Receivables 7,129 7,936
Property, Plant and Equipment, at Cost:
Land and buildings 5,364 5,640
Transportation and equipment 7,727 8,023
Machinery and other equipment 29,415 30,394
Leasehold improvements 8,332 8,733
--------- ---------
50,838 52,790
Less accumulated depreciation
and amortization (33,795) (34,703)
Property, plant and equipment, net 17,043 18,087
--------- ---------
Intangible Assets 57,785 57,532
Deferred Income Taxes 13,307 13,188
Other Assets 5,943 5,556
--------- ---------
$ 268,140 $ 270,707
======== ========
See accompanying Notes to Consolidated Financial Statements
4
October 31, January 31
1993 1994
(Unaudited)
Notes payable $ - $ 2,000
Current portion of long-term debt 682 669
Bank overdraft 4,231 -
Accounts payable, trade 17,863 15,192
Income taxes payable: 3,203 3,774
Accrued Liabilities:
Compensation 16,695 16,112
Taxes - other than income 8,474 10,425
Insurance claims 25,608 24,887
Other 13,564 14,792
--------- ---------
Total current liabilities 90,320 87,851
--------- ---------
Long-Term Debt (less current portion) 20,937 22,938
Retirement plans 4,574 4,894
Insurance claims 35,721 35,926
Series B 8% Senior redeemable cumulative
preferred stock 6,400 6,400
Stockholders' Equity:
Preferred stock, $0.1 par value, 500,000
shares authorized; none issued - -
Common stock, $.01 par value, 12,000,000
shares authorized; 8,514,000 and
8,842,000 shares issued and
outstanding at October 31, 1993
and January 31, 1994 respectively 88 88
Additional capital 31,244 32,160
Retained earnings 78,856 80,450
--------- ---------
Total stockholders' equity 110,188 112,698
--------- ---------
$ 268,140 $ 270,707
========= =========
See accompanying Notes to Consolidated Financial Statements
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AMERICAN BUILDING MAINTENANCE INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(In Thousands Except per Share Amounts )
January 31, January 31,
1993 1994
REVENUES AND OTHER INCOME $ 187,201 $ 210,839
EXPENSES:
Operating Expenses and Cost of Goods Sold 159,944 181,476
Selling and Administrative 22,813 23,772
Interest 376 717
-------- --------
Total Expenses 183,133 205,965
-------- --------
INCOME BEFORE INCOME TAXES 4,068 4,874
INCOME TAXES 1,709 2,047
-------- --------
NET INCOME $ 2,359 $ 2,827
======== ========
NET INCOME PER COMMON SHARE $ 0.28 $ 0.31
DIVIDENDS PER COMMON SHARE $ 0.125 $ 0.125
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 8,547 8,803
See accompanying Notes to Consolidated Financial Statements
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AMERICAN BUILDING MAINTENANCE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED JANUARY 31 1993 AND 1994
(In Thousands of Dollars)
7
January 31, January 31,
1993 1994
Cash Flows from Operating Activities:
Cash received from customers $ 190,042 $ 206,700
Other operating cash receipts 687 475
Interest received 143 109
Cash paid to suppliers and employees (182,032) (201,930)
Interest paid (475) (868)
Income taxes paid (64) (939)
--------- ---------
Net cash used in operating activities 8,301 3,547
--------- ---------
Cash Flows from Investing Activities:
Additions to property, plant and equipment (1,610) (2,667)
Proceeds from sale of assets 84 367
(Increase) decrease in investments
and long-term receivables (494) (807)
Intangibles resulting from acquisitions (2,697) (517)
--------- ---------
Net cash used in investing activities (4,717) (3,624)
--------- ---------
Cash Flows from Financing Activities:
Common stock issued 958 916
Dividends paid (1,073) (1,233)
Increase(decrease) in cash overdraft 0 (4,231)
Increase(decrease) in notes payable (18) 1,988
Long-term borrowings 14,000
Repayments of long-term borrowings (12,000)
--------- ---------
Net cash provided by financing actvities (133) (560)
--------- ---------
Net Increase (Decrease) in Cash
and Cash Equivalents 3,451 (637)
Cash and Cash Equivalents Beginning of Year 2,365 1,688
--------- ---------
Cash and Cash Equivalents End of Period $ 5,816 $ 1,051
========= =========
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Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net Income $ 2,359 $ 2,827
Adjustments:
Depreciation and amortization 1,640 2,080
Provision for bad debts 487 458
Gain on sale of assets (13) (54)
(Increase) decrease in accounts and
other receivables 3,420 (2,954)
(Increase) decrease in inventories and
supplies (846) 297
(Increase) decrease in prepaid expenses (197) (331)
(Increase) decrease in other assets 173 387
Increase (decrease) in deferred taxes (187) 537
Increase (decrease) in income taxes payable 1,832 571
Increase (decrease) in retirement
plans accrual 34 320
Increase (decrease) in insurance claims 342 (516)
Increase (decrease) in accounts payable
and other accrued liabilities (743) (75)
--------- ---------
Total Adjustments to net income 5,942 720
--------- ---------
Net Cash Used in Operating Activities $ 8,301 $ 3,547
========= =========
See accompanying Notes to Consolidated Financial Statements
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AMERICAN BUILDING MAINTENANCE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all material
adjustments which are necessary to present fairly the financial
position as of January 31, 1994 and the results of operations and
cash flows for the three months then ended.
It is suggested that these financial statements be read in
conjunction with the financial statements and the notes thereto
included in the Company's 1993 Form 10K filed with the Securities
and Exchange Commission.
2. Earnings per Share
Net Income per Common Share: Net income per common and
common equivalent share, after the reduction for preferred stock
dividends in the amount of $128,000 during the three months ended
January 31, 1994, 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.
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Item 2 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. The Company has short-term agreements with
several banks for lines of credit totaling $13 million, subject
to annual renewal, at a maximum of the prime interest rate. On
January 31, 1994, the Company had $2 million outstanding under
these arrangements. In addition, the Company has a long-term
line of credit of $20 million with a major U.S. bank and, at
January 31, 1994, the Company had borrowed $20 million under this
line. At the option of the Company, interest is at the com
mercial paper rate plus 1/2%, LIBOR plus 1/2% or at the prime
rate. The agreement requires the Company, among other things, to
meet certain objectives with respect to financial ratios and
places certain limitations on dividend payments and other outside
borrowing. The Company is prohibited from declaring or paying
cash dividends exceeding 50% of its net income for any fiscal
year. This agreement extends through June 30, 1995. The Company
has entered into an interest rate swap agreement to reduce the
impact of changes in interest rates on a portion of its floating
rate long-term debt. At January 31, 1994, the Company had
outstanding a swap agreement with a domestic commercial bank,
having a notional principal amount of $15 million. This
agreement effectively changes the Company's interest rate
exposure on $15 million of its $20 million floating rate debt due
in 1995 to a fixed 5.8%. The interest rate swap agreement
matures December 10, 1994. The Company is exposed to credit loss
in the event of nonperformance by the other parties to the
interest rate swap agreement. However, the Company does not
anticipate nonperformance by the counterparties. In connection
with an acquisition, the Company assumed a note payable in the
amount of $3,818,000 interest on this note of 9.35% is payable
monthly, with principal amounts of $636,000 due annually through
October 1, 1998. At January 31, 1994, the balance remaining on
this note was $3,181,000.
At January 31, 1994, working capital was $80.6 million, as
compared to $7,606 million at October 31, 1993.
Management does not expect its capital expenditures for
fiscal year 1994 to be significant as a percentage of revenues.
Capital expenditures during the first three months of fiscal year
1994 were approximately $2.7 million, as compared with $1.6
million during the same period of fiscal year 1993.
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Accounting Pronouncements Not Yet Adopted
In December 1990, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Post Retirement Benefits Other than
Pensions, which requires the Company to record all post
retirement benefits on an accrual basis. The Statement is
effective for fiscal years beginning after December 15, 1992.
The Company plans to implement this Statement in its fiscal year
beginning November 1, 1993. Management does not believe that the
adoption of this Statement will have any material effect on the
Company's financial statements.
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.
Acquisition
On March 1, 1994, the Company acquired the operations of
General Maintenance Company, Inc. in Washington D.C. General
Maintenance provides janitorial services to major commercial
buildings and institutions in Washington, D.C., Maryland, and
Virginia. At the time of acquisition by the Company, General
Maintenance reported revenues of $18.9 million. In addition to
the amount paid at closing, contingent payments based upon gross
profit of acquired contracts will be made over the next five
years.
Results of Operations
Three Months Ended January 31, 1994 vs. Three Months Ended
January 31, 1993
The following discussion should be read in conjunction with
the consolidated financial statements of the Company. All
information in the discussion and references to the years and
quarters are based on the Company's fiscal year and first quarter
which end on October 31 and January 31, respectively.
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Revenues and other income (hereafter called revenues) for the
first three months of fiscal year 1994 were $211 million compared
to $187 million in 1993, a 13% increase over the prior fiscal
year. As a percentage of revenues, operating expenses and cost
of goods sold were 86.1% during the three months of fiscal year
1994 compared to 85.4% for the same period in 1993.
Consequently, as a percentage of revenues, gross profit (revenue
minus operating expenses and cost of goods sold) was 13.9% for
the three months ended January 31, 1994, as compared to 14.6% for
the same period of fiscal year 1993. The erosion of gross profit
margin was primarily due to competitive market conditions
resulting in lower bids to retain existing customers and was
partially offset by a decrease of approximately $570,000 in self-
insurance expense.
Selling and administrative expense for the three months of
fiscal year 1994 was $24 million compared to $23 million for the
corresponding three months of fiscal year 1993. As a percentage
of revenues, selling and administrative expense decreased
slightly from 12.2% for the three months ended January 31, 1993
to 11.3% for the same period in 1994. The increase in the dollar
amount of selling and administrative expense for the three months
ended January 31, 1994, compared to the same period in 1993, is
primarily due to revenue growth and expense associated with
acquisitions.
Interest expense was $717,000 for the first three months of
fiscal year 1994 compared to $376,000 in 1993, an increase of
$341,000 over the same period of the prior fiscal year. Interest
expense increased due to higher bank borrowings related to recent
acquisitions, during the three months ended January 31, 1994
compared to 1993.
The effective income tax rate for the first three months of
both fiscal year 1994 and 1993 was 42%.
Net income for the first three months of fiscal year 1994 was
$2,827,000, an increase of 19.8%, compared to the prior year's
net income of $2,359,000. However, due to the increase in
average shares outstanding and a preferred stock dividend of
$128,000, earnings per common share increased 11% to 31 cents for
the first three months of 1994 compared to 28 cents for the same
period in 1993.
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The results of operations from the Company's three industry
segments and its operating divisions for the three months ended
January 31, 1994 as compared to the three months ended January
31, 1993 are more fully described below:
Revenues of the Janitorial Services segment for the first
quarter of fiscal year 1994 were $114 million, an increase
of $5 million, or 5% over the first quarter of fiscal
1993, while its operating profits increased by 2% over the
comparable quarter of 1993. Janitorial Services accounted
for approximately 54% of the Company's revenues for the
current quarter. The Janitorial Division's revenues
increased by 5% during the first quarter of fiscal year
1994 as compared to the same quarter of 1993 primarily as
a result of acquisitions made during the latter half of
fiscal year 1993 and to a lesser extent, increases
recorded by this Division's Northeast and Northwest
Regions. As a result of the revenue increase, this
Division's operating profits increased 3% when compared to
the same period last year. Decreases in labor-related and
insurance expenses contributed to a small improvement in
gross margin for this division during the first quarter of
the fiscal year 1994 over the same quarter of the prior
year. However, higher selling and administrative expenses
offset the gross margin improvement, and as a result, the
Division was not able to realize better operating profits.
The Janitorial Supply Division's first quarter revenue
increased by approximately 12% compared to the same
quarter in 1993 generally due to new customers in Northern
California. A decrease of 20% in operating profits was a
result of erosion of gross margins caused by very
competitive market conditions which more than offset the
benefit derived from the wholesale distributor program
discussed in previous periods.
14
Amtech Services reported revenues of $56 million, which
represent approximately 26% of the Company's revenues for
the first quarter of fiscal year 1994, an increase of
approximately 10% over the same quarter of last year.
Amtech Services profit increased 15% compared to the first
quarter of fiscal year 1993. The Mechanical Division's
operating profits for the first quarter of 1994 decreased
by 31% caused mainly by a 4% drop in revenues including
the loss of a large customer, as well as a decline in its
construction/installation business. Although this
Division has reduced its overhead, it was not sufficient
to offset the loss of gross margins from lower revenues.
The Lighting Division reported a 6% revenue increase by
the addition of new branches in the Southeast and an
expanded customer contract base. Operating profits
decreased by 22% during the first quarter of fiscal year
1994 due to startup costs associated with opening several
branches. Revenues for the Elevator Division were up by
15% for the first quarter of fiscal year 1994 over the
same quarter of 1993 largely due to increased business in
construction and modernization. The Division posted an
operating profit for the first quarter compared to a loss
for the corresponding quarter of fiscal year 1993. Major
cost reductions and closing of unprofitable locations, as
well as improved market conditions, enabled this Division
to return to profitability. The Engineering Division's
revenues increased by 15% and it reported a 44% increase
in operating profits in the first quarter of 1994 compared
to the same period in 1993. Revenues increased generally
from new business and price increases to its existing
customers. The increase in operating profits resulted
from increased revenues and reductions in insurance and
other payroll related costs.
15
Revenues of the Other Services segment for the first
quarter of 1994 were approximately $41 million, a 47%
increase over the same quarter of fiscal year 1993. Other
Services accounted for approximately 20% of the Company's
revenues. The operating profits of Other Services were up
by 70% primarily due to its Parking Division. The Parking
Division's revenues increased by 116% and its profits
increased by 141% during the first quarter of fiscal year
1994. The increase in revenues is primarily due to the
acquisitions of a parking business in Northern California
and of System Parking as discussed in previous periods.
The increase in operating profits was primarily due to
contributions made by these acquisitions. The Security
Division reported a slight decrease in revenues but its
profits increased by 30% in the first quarter of 1994
compared to the same period of 1993. The increase in
operating income during the first quarter as compared to
the first quarter of the prior year was due to a cost
reduction program implemented by management to help offset
anticipated decreases in gross profit margins and a
reduction in insurance expense. The Property Services
Division's revenues increased by 62% for the first quarter
of 1994 as compared to the same period of 1993 while its
profits more than doubled during the period. Increases in
revenues and operating profits are attributable to new
accounts and obtaining a multibranch bank consulting
contract on the East Coast during the Spring of 1993.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings - not applicable.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K: No reports on Form 8-K were filed
during the quarter ended January 31, 1994.
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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 on the 16th day of March, 1994.
AMERICAN BUILDING MAINTENANCE INDUSTRIES, INC.
(Registrant)
By /s/ David H. Hebble
David H. Hebble
Vice President, Principal Financial Officer
