UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 6, 2018
ABM Industries Incorporated
(Exact name of registrant as specified in its charter)
| Delaware | 1-8929 | 94-1369354 | ||
| (State or other jurisdiction | (Commission File | (IRS Employer | ||
| of incorporation) | Number) | dentification No.) |
| One Liberty Plaza, 7th Floor | ||
| New York, New York | 10006 | |
| (Address of principal executive offices) | (Zip Code) |
| Registrant’s telephone number, including area code | (212) 297-0200 |
N/A
(Former name or former address if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| ¨ | Emerging growth company |
| ¨ | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
| Item 2.02. | Results of Operations and Financial Condition. |
On March 6, 2018, ABM Industries Incorporated (the “Company”) issued a press release announcing financial results related to the first quarter of fiscal year 2018. A copy of the press release is attached as Exhibit 99.1, which is incorporated into this item by reference.
| Item 7.01. | Regulation FD. |
As disclosed in the press release attached as Exhibit 99.1, the Company will hold a live web cast on March 7, 2018 relating to the Company’s financial results for the first quarter of fiscal year 2018. A copy of the slides to be presented at the Company’s web cast and discussed in the conference call relating to such financial results is being furnished as Exhibit 99.2 to this Form 8-K.
| Item 8.01. | Other Events. |
On March 6, 2018, the Company announced that the Board of Directors of the Company declared a quarterly dividend of $0.175 per share, payable on May 7, 2018 to stockholders of record on April 5, 2018. A copy of the press release announcing the declaration of the dividend is attached as Exhibit 99.1, which is incorporated into this item by reference.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| 99.2 | Slides of ABM Industries Incorporated, dated March 7, 2018. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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ABM INDUSTRIES INCORPORATED
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| Dated: March 6, 2018 | By: | /s/ Barbara L. Smithers | |
| Barbara L. Smithers | |||
| Vice President, Deputy General Counsel and Assistant Secretary |
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Exhibit 99.1
ABM INDUSTRIES ANNOUNCES RESULTS FOR
FIRST QUARTER FISCAL 2018
Reports Record First Quarter Revenues of $1.6 billion
GAAP Continuing EPS of $0.42; Adjusted Continuing EPS of $0.26
Increases Fiscal 2018 GAAP Guidance Outlook to $1.88 - $1.98 and
Non-GAAP Guidance to $2.00 - $2.10
Declaration of 208th Consecutive Quarterly Dividend
New York, NY - March 6, 2018 - ABM (NYSE: ABM), a leading provider of facility solutions, today announced financial results for the first quarter of fiscal 2018.
Scott Salmirs, President and Chief Executive Officer of ABM Industries, commented, "We are pleased with our start to the new fiscal year as results met our expectations. Our performance reflects our 2020 Vision and the execution of our strategic priorities, which include organic revenue acceleration with a focus on cross-selling, margin expansion, and earnings growth. Our integration of GCA also continues to proceed as planned."
| Three Months Ended January 31, | Increase/ (Decrease) | ||||||||
| (in millions, except per share amounts) (unaudited) |
2018 | 2017 | |||||||
| Revenues | $ | 1,588.3 | $ | 1,326.7 | 19.7% | ||||
| Operating profit | $ | 19.5 | $ | 23.8 | (18.2)% | ||||
| Income from continuing operations | $ | 28.0 | $ | 16.1 | 74.1% | ||||
| Income from continuing operations per diluted share | $ | 0.42 | $ | 0.28 | 50.0% | ||||
| Adjusted income from continuing operations | $ | 17.4 | $ | 21.5 | (19.1)% | ||||
| Adjusted income from continuing operations per diluted share | $ | 0.26 | $ | 0.38 | (31.6)% | ||||
| Net income (loss) | $ | 27.8 | $ | (56.8 | ) | NM* | |||
| Net income (loss) per diluted share | $ | 0.42 | $ | (1.00 | ) | NM* | |||
| Net cash provided by (used in) operating activities of continuing operations | $ | 33.8 | $ | (9.7 | ) | NM* | |||
| Adjusted EBITDA | $ | 65.1 | $ | 48.1 | 35.2% | ||||
| Adjusted EBITDA margin | 4.1 | % | 3.6 | % | 50 bps | ||||
| * Not meaningful (due to variance greater than or equal to +/-100%) |
This release refers to certain non-GAAP financial measures described as “Adjusted EBITDA” defined as earnings before income from discontinued operations, net of interest, taxes, depreciation and amortization and excluding items impacting comparability, "Adjusted EBITDA margin", “Adjusted income from continuing operations,” and “Adjusted income from continuing operations per diluted share”. These adjustments have been made with the intent of providing financial measures that give management and investors a more representative understanding of underlying operational results and trends as well as the Company’s operational performance. Management also uses Adjusted EBITDA as a basis for planning and forecasting future periods. Please refer to the accompanying financial schedules for supplemental financial data and corresponding reconciliation of these non-GAAP financial measures to certain GAAP financial measures. We round amounts in these schedules to millions and calculate all percentages and per-share data from the underlying whole-dollar amounts. As a result, certain amounts may not foot, crossfoot, or recalculate based on reported numbers due to rounding. Unless otherwise noted, all references to years are to our fiscal year, which ends on October 31.
1
First Quarter Summary
| • | Broad-based total revenue growth of 19.7% driven predominantly by acquisitive revenue within the Education and Technology & Manufacturing segments. |
| • | Organic revenue growth of 3.0% led by new wins and business expansions in the Business & Industry and Aviation segments. |
| • | Lower Technical Solutions revenue due to the timing of backlog. |
| • | The booking of a Technical Solutions cross-sell in a Georgia school district, exemplifying the Company’s focus on cross-selling into its Education customers. |
| • | Growth of 50.0% in income from continuing operations per diluted share driven primarily by a one-time tax benefit associated with the U.S. Tax Cuts and Jobs Act and a reduction of the Company's overall corporate tax rate, partially offset by higher restructuring costs related to the 2017 acquisition of GCA Services Group ("GCA"). |
| • | Lower adjusted income from continuing operations per diluted share reflecting increased interest expense, amortization and higher share count related to the GCA acquisition, which offset higher operating segment contribution and a lower overall corporate tax rate. |
| • | Net income growth to $27.8 million compared to a loss of $56.8 million in the year ago period, which includes discontinued operations. |
| • | Higher adjusted EBITDA of $65.1 million, or a margin rate of 4.1%, compared to $48.1 million, or a margin rate of 3.6% last year. |
First Quarter Results
For the first quarter of fiscal 2018, the Company reported revenues of approximately $1.6 billion driven by the acquisition of GCA, and organic growth stemming from new domestic and international janitorial wins, janitorial and parking-related business expansions, and higher Work Order (tag) revenue within the Business & Industry segment. The Aviation segment also experienced strong organic growth stemming from parking, cabin cleaning, and expansion of catering logistics. Organic revenue growth was partially offset by lower revenue within the Technical Solutions segment. Acquisitions provided $253.9 million of incremental revenues during the quarter primarily related to GCA, which is predominantly reflected in the Education and Technology & Manufacturing segments in the amounts of $140.5 million and $58.6 million, respectively.
On a GAAP basis, income from continuing operations was $28.0 million, or $0.42 per diluted share, compared to income from continuing operations of $16.1 million, or $0.28 per diluted share last year. Income from continuing operations versus last year reflects a significant benefit stemming from The Tax Cuts and Jobs Act, which was enacted in December 2017. Due to this new legislation, the Company recorded a one-time net tax benefit of $21.7 million related to the remeasurement of deferred tax assets and liabilities which was partially offset by a tax expense associated with the repatriation of foreign earnings. Income from continuing operations for the quarter on both a GAAP and adjusted basis reflects higher amortization expense as a result of the GCA acquisition, which is embedded in each of the Company's reportable segments. Additionally, the Company ended the first quarter of fiscal 2018 with higher interest expense and 66.3 million weighted average shares outstanding on a diluted basis due to the GCA transaction.
2
Income from continuing operations was primarily impacted by incremental revenue contribution in the Education and Technology & Manufacturing segments associated with the Company's GCA acquisition. These results were partially offset by higher corporate-related expenses primarily related to restructuring charges associated with GCA and investments in IT.
Adjusted income from continuing operations for the first quarter of 2018 was $17.4 million, or $0.26 per diluted share, compared to $21.5 million, or $0.38 per diluted share for the first quarter of fiscal 2017. The positive impact from a reduction in the Company's corporate tax rate and increased revenue contribution from GCA were offset by the aforementioned expenses and share count dilution attributable to the GCA acquisition. These results exclude items impacting comparability. A full description of items impacting comparability can be found in the "Reconciliation of Non-GAAP Financial Measures" table.
Net income for the first quarter of 2018 was $27.8 million, or $0.42 per diluted share, compared to a net loss of $56.8 million, or $1.00 per diluted share last year.
Adjusted EBITDA for the quarter was $65.1 million compared to $48.1 million in the first quarter of fiscal 2017. Adjusted EBITDA margin for the quarter was 4.1% versus 3.6% last year.
Mr. Salmirs continued, "Our new reportable segments reflect an integrated ABM. With leadership in place and business plans taking shape, we are excited about the long-term potential for our Industry Groups. We are seeing early signs of cross-selling and continue to invest in our business development platform for greater efficiency and expansion."
Liquidity & Capital Structure
The Company ended the quarter with total debt, including standby letters of credit, of $1.3 billion.
Total debt to proforma adjusted EBITDA was approximately 4.0x.
In addition, the Company paid a quarterly cash dividend of $0.175 per common share for a total distribution of $11.5 million.
Declaration of Quarterly Cash Dividend
The Company also announced that the Board of Directors has declared a cash dividend of $0.175 per common share payable on May 7, 2018 to shareholders of record on April 5, 2018. This will be the Company's 208th consecutive quarterly cash dividend.
3
Guidance
The Company now expects GAAP income from continuing operations of $1.88 to $1.98 per diluted share compared to its previously issued guidance of $1.33 to $1.43. Excluding items impacting comparability, adjusted income from continuing operations is expected to be in the range of $2.00 to $2.10 per diluted share for the 2018 fiscal year compared to its previously issued guidance range of $1.70 to $1.80. The Company's revised guidance outlook is primarily a result of the impact related to the U.S Tax Cuts and Jobs Act. With the exception of the 2018 Work Opportunity Tax Credits and anticipated excess tax benefits on stock-based awards, this guidance does not include any potential benefits associated with certain other discrete tax items and other unrecognized tax benefits. Due to the complexity of reflecting the impacts of the U.S. Tax Cuts and Jobs Act, the company intends to continue reviewing the required analyses and accounting surrounding this tax impact throughout fiscal 2018. As such, the Company may further refine these estimates.
Mr. Salmirs concluded, "Given the benefit we will see from tax reform this year, we are pleased to have increased our guidance outlook. As previously discussed, we plan to use these tax proceeds to primarily deleverage, which aligns with our capital allocation priorities."
Conference Call Information
ABM will host its quarterly conference call for all interested parties on Wednesday, March 7, 2018 at 8:30 AM (ET). The live conference call can be accessed via audio webcast under the "Events & Presentations" section of the Company's Investor Relations website, located at investor.abm.com, or by dialing (877) 451-6152 approximately 15 minutes prior to the scheduled time.
A supplemental presentation will accompany the webcast on the Company's website.
A replay will be available approximately two hours after the recording through March 14, 2018 and can be accessed by dialing (844) 512-2921 and then entering ID #13676965. An archive will also be available on the ABM website for 90 days.
ABOUT ABM
ABM (NYSE: ABM) is a leading provider of facility solutions with revenues of approximately $5.5 billion and more than 130,000 employees in 350+ offices throughout the United States and various international locations. ABM’s comprehensive capabilities include janitorial, electrical & lighting, energy solutions, facilities engineering, HVAC & mechanical, landscape & turf, mission critical solutions and parking, provided through stand-alone or integrated solutions. ABM provides custom facility solutions in urban, suburban and rural areas to properties of all sizes - from schools and commercial buildings to hospitals, data centers, manufacturing plants and airports. ABM Industries Incorporated, which operates through its subsidiaries, was founded in 1909. For more information, visit www.abm.com.
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Cautionary Statement under the Private Securities Litigation Reform Act of 1995
This press release contains both historical and forward-looking statements regarding ABM Industries Incorporated (“ABM”) and its subsidiaries (collectively referred to as “ABM,” “we,” “us,” “our,” or the “Company”). We make forward-looking statements related to future expectations, estimates, and projections that are uncertain and often contain words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “outlook,” “plan,” “predict,” “should,” “target,” or other similar words or phrases. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and assumptions that are difficult to predict. Particular risks and uncertainties that could cause our actual results to be materially different from those expressed in our forward-looking statements include: (1) we may not realize the growth opportunities and cost synergies that are anticipated from the acquisition of GCA Services Group (“GCA”); (2) we have incurred a substantial amount of debt to complete the acquisition of GCA. To service our debt we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control. We also depend on the profitability of our subsidiaries to satisfy our cash needs. If we cannot generate the required cash, we may not be able to make the necessary payments required to service our indebtedness or we may be required to suspend certain discretionary payments, including our dividend; (3) changes to our businesses, operating structure, financial reporting structure, or personnel relating to the implementation of our 2020 Vision strategic transformation initiative, including our move to our Enterprise Services Center, may not have the desired effects on our financial condition and results of operations; (4) our success depends on our ability to gain profitable business despite competitive pressures and to preserve long-term client relationships; (5) our business success depends on our ability to attract and retain qualified personnel and senior management; (6) our use of subcontractors or joint venture partners to perform work under customer contracts exposes us to liability and financial risk; (7) our international business involves risks different from those we face in the United States that could have an effect on our results of operations and financial condition; (8) unfavorable developments in our class and representative actions and other lawsuits alleging various claims could cause us to incur substantial liabilities; (9) we insure our insurable risks through a combination of insurance and self-insurance and we retain a substantial portion of the risk associated with expected losses under these programs, which exposes us to volatility associated with those risks, including the possibility that changes in estimates of ultimate insurance losses could result in a material charge against our earnings; (10) our risk management and safety programs may not have the intended effect of reducing our liability for personal injury or property loss; (11) impairment of goodwill and long-lived assets could have a material adverse effect on our financial condition and results of operations; (12) changes in general economic conditions, including changes in energy prices, government regulations, or changing consumer preferences, could reduce the demand for facility services and, as a result, reduce our earnings and adversely affect our financial condition; (13) our income tax provision and income tax liabilities could be adversely affected by the jurisdictional mix of earnings, changes in valuations of deferred tax assets and liabilities, and changes in tax treaties, laws, and regulations, including the U.S. Tax Cuts and Jobs Act of 2017, which effected significant changes to the U.S. corporate income tax system; (14) we could be subject to cyber-security risks, information technology interruptions, and business continuity risks; (15) a significant number of our employees are covered by collective bargaining agreements that could expose us to potential liabilities in relationship to our participation in multiemployer pension plans, requirements to make contributions to other benefit plans, and the potential for strikes, work slowdowns or similar activities, and union-organizing drives; (16) if we fail to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be negatively impacted, which could harm our operating results and investors’ perceptions of our company and, as a result, the value of our common stock; (17) our business may be negatively impacted by adverse weather conditions; (18) catastrophic events, disasters, and terrorist attacks could disrupt our services; and (19) actions of activist investors could disrupt our business. The list of factors above is illustrative and by no means exhaustive. Additional information regarding these and other risks and uncertainties we face is contained in our Annual Report on Form 10-K for the year ended October 31, 2017 and in other reports we file from time to time with the Securities and Exchange Commission (including all amendments to those reports). We urge readers to consider these risks and uncertainties in evaluating our forward-looking statements. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
5
Use of Non-GAAP Financial Information
To supplement ABM’s consolidated financial information, the Company has presented income from continuing operations and income from continuing operations per diluted share as adjusted for items impacting comparability, for the first quarter of fiscal years 2018 and 2017. These adjustments have been made with the intent of providing financial measures that give management and investors a better understanding of the underlying operational results and trends as well as ABM’s operational performance. In addition, the Company has presented earnings before income from discontinued operations, net of taxes, interest, taxes, depreciation and amortization and excluding items impacting comparability (adjusted EBITDA) for the first quarter of fiscal years 2018 and 2017. Adjusted EBITDA is among the indicators management uses as a basis for planning and forecasting future periods. The presentation of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for financial statements prepared in accordance with accounting principles generally accepted in the United States of America. (See accompanying financial tables for supplemental financial data and corresponding reconciliations to certain GAAP financial measures.)
| Contact: | |
| Investor & Media Relations: | Susie A. Choi |
| (212) 297-9721 | |
| susie.choi@abm.com |
6
Financial Schedules
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT INFORMATION (UNAUDITED)
| Three Months Ended January 31, | ||||||||||||
| (in millions, except per share amounts) | 2018 | 2017 | Increase / (Decrease) | |||||||||
| Revenues | $ | 1,588.3 | $ | 1,326.7 | 19.7 | % | ||||||
| Operating expenses | 1,429.3 | 1,195.1 | 19.6 | % | ||||||||
| Selling, general and administrative expenses | 109.0 | 97.3 | 12.1 | % | ||||||||
| Restructuring and related expenses | 14.3 | 5.0 | NM* | |||||||||
| Amortization of intangible assets | 16.2 | 5.5 | NM* | |||||||||
| Operating profit | 19.5 | 23.8 | (18.2 | )% | ||||||||
| Income from unconsolidated affiliates, net | 0.5 | 1.4 | (61.0 | )% | ||||||||
| Interest expense | (14.3 | ) | (3.2 | ) | NM* | |||||||
| Income from continuing operations before income taxes | 5.8 | 22.0 | (73.8 | )% | ||||||||
| Income tax benefit (provision) | 22.2 | (5.9 | ) | NM* | ||||||||
| Income from continuing operations | 28.0 | 16.1 | 74.1 | % | ||||||||
| Loss from discontinued operations, net of taxes | (0.1 | ) | (72.9 | ) | (99.8 | )% | ||||||
| Net income (loss) | $ | 27.8 | $ | (56.8 | ) | NM* | ||||||
| Net income (loss) per common share — basic | ||||||||||||
| Income from continuing operations | $ | 0.42 | $ | 0.29 | 44.8 | % | ||||||
| Loss from discontinued operations | — | (1.30 | ) | NM* | ||||||||
| Net income (loss) | $ | 0.42 | $ | (1.01 | ) | NM* | ||||||
| Net income (loss) per common share — diluted | ||||||||||||
| Income from continuing operations | $ | 0.42 | $ | 0.28 | 50.0 | % | ||||||
| Loss from discontinued operations | — | (1.28 | ) | NM* | ||||||||
| Net income (loss) | $ | 0.42 | $ | (1.00 | ) | NM* | ||||||
| Weighted-average common and common equivalent shares outstanding | ||||||||||||
| Basic | 65.9 | 56.0 | ||||||||||
| Diluted | 66.3 | 56.6 | ||||||||||
| Dividends declared per common share | $ | 0.175 | $ | 0.170 | ||||||||
| * Not meaningful (due to variance greater than or equal to +/-100%) |
7
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW INFORMATION (UNAUDITED)
| Three Months Ended January 31, | ||||||||
| (in millions) | 2018 | 2017 | ||||||
| Net cash provided by (used in) operating activities of continuing operations | $ | 33.8 | $ | (9.7 | ) | |||
| Net cash used in operating activities of discontinued operations | (0.1 | ) | (1.4 | ) | ||||
| Net cash provided by (used in) operating activities | 33.7 | (11.1 | ) | |||||
| Purchases of businesses, net of cash acquired | (2.4 | ) | (18.6 | ) | ||||
| Other | (12.8 | ) | (10.5 | ) | ||||
| Net cash used in investing activities | (15.3 | ) | (29.1 | ) | ||||
| Taxes withheld from issuance of share-based compensation awards, net | (2.0 | ) | (1.0 | ) | ||||
| Repurchases of common stock | — | (7.9 | ) | |||||
| Dividends paid | (11.5 | ) | (9.4 | ) | ||||
| Deferred financing costs paid | (0.1 | ) | — | |||||
| Borrowings from credit facility | 304.3 | 207.4 | ||||||
| Repayment of borrowings from credit facility | (303.0 | ) | (169.7 | ) | ||||
| Changes in book cash overdrafts | (1.2 | ) | 5.1 | |||||
| Financing of energy savings performance contracts | — | 2.6 | ||||||
| Repayment of capital lease obligations | (0.8 | ) | (0.1 | ) | ||||
| Net cash (used in) provided by financing activities | $ | (14.3 | ) | $ | 27.0 | |||
| Effect of exchange rate changes on cash and cash equivalents | 1.7 | 0.5 | ||||||
8
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION (UNAUDITED)
| (in millions) | January 31, 2018 | October 31, 2017 | ||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 68.6 | $ | 62.8 | ||||
| Trade accounts receivable, net of allowances | 1,020.0 | 1,038.1 | ||||||
| Prepaid expenses | 97.4 | 101.8 | ||||||
| Other current assets | 32.1 | 32.8 | ||||||
| Total current assets | 1,218.1 | 1,235.5 | ||||||
| Other investments | 18.8 | 17.6 | ||||||
| Property, plant and equipment, net of accumulated depreciation | 141.6 | 143.1 | ||||||
| Other intangible assets, net of accumulated amortization | 404.3 | 430.1 | ||||||
| Goodwill | 1,871.2 | 1,864.2 | ||||||
| Other noncurrent assets | 143.1 | 122.1 | ||||||
| Total assets | $ | 3,797.0 | $ | 3,812.6 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities | ||||||||
| Current portion of long-term debt, net | $ | 7.0 | $ | 16.9 | ||||
| Trade accounts payable | 203.5 | 230.8 | ||||||
| Accrued compensation | 143.1 | 159.9 | ||||||
| Accrued taxes—other than income | 62.5 | 52.5 | ||||||
| Insurance claims | 114.1 | 112.5 | ||||||
| Income taxes payable | 5.0 | 13.4 | ||||||
| Other accrued liabilities | 164.4 | 171.8 | ||||||
| Total current liabilities | 699.6 | 757.8 | ||||||
| Long-term debt, net | 1,173.4 | 1,161.3 | ||||||
| Deferred income tax liability, net | 32.8 | 57.3 | ||||||
| Noncurrent insurance claims | 387.3 | 382.9 | ||||||
| Other noncurrent liabilities | 63.5 | 61.3 | ||||||
| Noncurrent income taxes payable | 23.7 | 16.3 | ||||||
| Total liabilities | 2,380.2 | 2,436.9 | ||||||
| Total stockholders' equity | 1,416.8 | 1,375.7 | ||||||
| Total liabilities and stockholders’ equity | $ | 3,797.0 | $ | 3,812.6 | ||||
9
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
REVENUES AND OPERATING PROFIT BY SEGMENT (UNAUDITED)
| Three Months Ended January 31, | Increase/ (Decrease) | |||||||||||
| (in millions) | 2018 | 2017 | ||||||||||
| Revenues | ||||||||||||
| Business & Industry | $ | 722.1 | $ | 655.6 | 10.1 | % | ||||||
| Aviation | 256.2 | 231.9 | 10.5 | % | ||||||||
| Technology & Manufacturing | 232.0 | 171.5 | 35.3 | % | ||||||||
| Education | 206.3 | 67.0 | NM* | |||||||||
| Technical Solutions | 104.0 | 107.7 | (3.4 | )% | ||||||||
| Healthcare | 67.7 | 61.7 | 9.8 | % | ||||||||
| Government Services | — | 31.4 | NM* | |||||||||
| Total revenues | $ | 1,588.3 | $ | 1,326.7 | 19.7 | % | ||||||
| Operating profit (loss) | ||||||||||||
| Business & Industry | $ | 28.5 | $ | 27.1 | 5.1 | % | ||||||
| Aviation | 5.8 | 4.6 | 25.5 | % | ||||||||
| Technology & Manufacturing | 16.9 | 12.6 | 33.6 | % | ||||||||
| Education | 9.2 | 3.6 | NM* | |||||||||
| Technical Solutions | 5.5 | 7.9 | (30.5 | )% | ||||||||
| Healthcare | 2.7 | 2.5 | 10.1 | % | ||||||||
| Government Services | (0.7 | ) | 1.9 | NM* | ||||||||
| Corporate | (47.4 | ) | (34.6 | ) | 36.9 | % | ||||||
| Adjustment for income from unconsolidated affiliates, net, included in Aviation and Government Services | (0.6 | ) | (1.3 | ) | (53.3 | )% | ||||||
| Adjustment for tax deductions for energy efficient government buildings, included in Technical Solutions | (0.3 | ) | (0.5 | ) | (39.4 | )% | ||||||
| Total operating profit | 19.5 | 23.8 | (18.2 | )% | ||||||||
| Income from unconsolidated affiliates, net | 0.5 | 1.4 | (61.0 | )% | ||||||||
| Interest expense | (14.3 | ) | (3.2 | ) | NM* | |||||||
| Income from continuing operations before income taxes | 5.8 | 22.0 | (73.8 | )% | ||||||||
| Income tax benefit (provision) | 22.2 | (5.9 | ) | NM* | ||||||||
| Income from continuing operations | 28.0 | 16.1 | 74.1 | % | ||||||||
| Loss from discontinued operations, net of taxes | (0.1 | ) | (72.9 | ) | (99.8 | )% | ||||||
| Net income (loss) | $ | 27.8 | $ | (56.8 | ) | NM* | ||||||
* Not meaningful (due to variance greater than or equal to +/-100%)
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ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
| (in millions, except per share amounts) | Three Months Ended January 31, | |||||||
| 2018 | 2017 | |||||||
| Reconciliation of Income from Continuing Operations to Adjusted Income from Continuing Operations | ||||||||
| Income from continuing operations | $ | 28.0 | $ | 16.1 | ||||
| Items impacting comparability(a) | ||||||||
| Prior year self-insurance adjustment(b) | 2.0 | 5.0 | ||||||
| U.S. Foreign Corrupt Practices Act investigation(c) | — | (3.2 | ) | |||||
| Restructuring and related(d) | 14.3 | 5.0 | ||||||
| Acquisition costs | 1.3 | 0.5 | ||||||
| Litigation and other settlements | (2.3 | ) | 1.9 | |||||
| Impairment recovery and loss on sale | 0.7 | — | ||||||
| Total items impacting comparability | 16.0 | 9.2 | ||||||
| Income tax benefit(e) (f) | (26.6 | ) | (3.8 | ) | ||||
| Items impacting comparability, net of taxes | (10.6 | ) | 5.4 | |||||
| Adjusted income from continuing operations | $ | 17.4 | $ | 21.5 | ||||
| Three Months Ended January 31, | ||||||||
| 2018 | 2017 | |||||||
| Reconciliation of Net Income (loss) to Adjusted EBITDA | ||||||||
| Net income (loss) | $ | 27.8 | $ | (56.8 | ) | |||
| Items impacting comparability | 16.0 | 9.2 | ||||||
| Net loss from discontinued operations | 0.1 | 72.9 | ||||||
| Income tax (benefit) provision | (22.2 | ) | 5.9 | |||||
| Interest income from energy efficient government buildings(g) | — | (0.3 | ) | |||||
| Interest expense | 14.3 | 3.2 | ||||||
| Depreciation and amortization | 29.0 | 14.0 | ||||||
| Adjusted EBITDA | $ | 65.1 | $ | 48.1 | ||||
| Three Months Ended January 31, | ||||||||
| 2018 | 2017 | |||||||
| Reconciliation of Income from Continuing Operations per Diluted Share to Adjusted Income from Continuing Operations per Diluted Share | ||||||||
| Income from continuing operations per diluted share | $ | 0.42 | $ | 0.28 | ||||
| Items impacting comparability, net of taxes | (0.16 | ) | 0.10 | |||||
| Adjusted income from continuing operations per diluted share | $ | 0.26 | $ | 0.38 | ||||
| Diluted shares | 66.3 | 56.6 | ||||||
(a) The Company adjusts income from continuing operations to exclude the impact of certain items that are unusual, non-recurring, or otherwise do not reflect management's views of the underlying operational results and trends of the Company.
(b) Represents adjustments to our self-insurance reserve for general liability, workers’ compensation and automobile claims related to prior period accident years. Management believes these prior period reserve changes do not illustrate the performance of the Company’s normal ongoing operations given the current year's insurance expense is estimated by management in conjunction with the Company's outside actuary to take into consideration past history and current costs and regulatory trends. Once the Company develops its best estimate of insurance expense premiums for the year, the Company fully allocates such costs out to the business leaders to hold them accountable for the current year costs within operations. However, since these prior period reserve changes relate to claims that could date back many years, current management has limited ability to influence the ultimate development of the prior year changes. Accordingly, including the prior period reserve changes in the Company's current operational results would not depict how the business is run as the Company holds its management accountable for the current year’s operational performance. The Company believes the exclusion of the self-insurance adjustment from income from continuing operations is useful to investors by enabling them to better assess our operating performance in the context of current year profitability.
(c) FY17 represents reimbursement of previously expensed legal and other costs incurred in connection with an internal investigation into a foreign entity affiliated with a former joint venture partner.
(d) The QTD FY18 period represents restructuring costs related to the GCA acquisition in September 2017; The QTD FY17 amount presents costs for the Company's 2020 Vision Transformation Initiative, net of the reversal of certain share-based compensation costs.
(e) The Company's tax impact is calculated using the federal and state statutory rate of 29.8% for QTD FY18, and 41.5% for QTD FY17, respectively. The tax impact of the impairment recovery and loss on sale related to the Company’s Government Services business was calculated using a 39.0% tax rate for all periods presented. We calculate tax from the underlying whole-dollar amounts, as a result, certain amounts may not recalculate based on reported numbers due to rounding.
(f) FY18 QTD includes a tax benefit of $21.7M related to the enactment of the Tax Act.
(g) Adjusted EBITDA does not include interest income for certain long term energy contracts, in which case a gross up of both interest income and interest expense is being recorded.
11
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
2018 GUIDANCE
| Year Ending October 31, 2018 | ||||||||
| Reconciliation of Estimated Income from Continuing Operations per Diluted Share to Estimated Adjusted Income from Continuing Operations per Diluted Share | Low Estimate | High Estimate | ||||||
| Previously announced Income from continuing operations per diluted share (a) | $ | 1.33 | $ | 1.43 | ||||
| Impact from 2017 Tax Reform Act change in federal tax rate and one-time related items | 0.55 | 0.55 | ||||||
| Revised Income from continuing operations per diluted share | 1.88 | 1.98 | ||||||
| Adjustments (b) | 0.45 | 0.45 | ||||||
| Deduct impact from 2017 Tax Reform Act one-time items | (0.33 | ) | (0.33 | ) | ||||
| Adjusted Income from continuing operations per diluted share (a) | $ | 2.00 | $ | 2.10 | ||||
(a) With the exception of the 2018 Work Opportunity Tax Credits and anticipated excess tax benefits on stock-based awards, this guidance does not include any potential benefits associated with certain other discrete tax items and other unrecognized tax benefits.
(b) Adjustments include costs associated with the strategic review and realignment, acquisition - related integration and transaction costs, legal settlements, adjustments to self-insurance reserves pertaining to prior year's claims and other unique items impacting comparability.
12
Exhibit 99.2
FIRST QUARTER 2018 MARCH 7, 2018
1 2 3 4 5 2 Business Overview First Quarter 2018 Review Fiscal 2018 Outlook Forward - Looking Statements and Non - GAAP Financial Information: Our discussions during this conference call and in this presentation will include forward - looking statements. Actual results could differ materially from those projected in the forward - looking statements. Some of the factors that could cause actual results to differ are discussed in the Company’s 2017 Annual Report on Form 10 - K and in our 2018 reports on Form 10 - Q and Form 8 - K. These reports are available on our website at http:// investor.abm.com under “Company Information”. A description of other factors that could cause actual results to differ is also set forth at the end of this presentation. Also, the discussion during this conference call and in this presentation will include certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Please see the Appendix for reconciliations of those historical non - GAAP financial measures and for information relating to the use of certain other non - GAAP financial measures. Reconciliations of certain non - GAAP financial measures can also be found on the Investor Relations portion of our website at http:// investor.abm.com.
MARCH 7, 2018 Business Overview
PURPOSE To take care of the people, spaces and places that are important to you VISION To be the clear choice in the industries we serve through engaged people MISSION To make a difference, every person, every day ABM
5 Services We Perform HVAC, Central Plants, Lighting and Controls EV Charging Stations 24/7/365 Facility Operation Energy Audits & Optimization Infrastructure Upgrades Energy Solutions Building Cleaning & Maintenance Green Cleaning and Recycling Services Hard Surface Floor & Carpet Care Clean Room and GMP Cleaning Staffing and Specialty Services Janitorial On and Off - Street Parking Management Shuttle and Transportation Services Valet Parking and Special Event Services Parking & Transportation Repairs, Replacements and Upgrades Predictive and Preventative Maintenance Low to High - Voltage Testing Electrical Engineering and Commissioning Chiller Services Mechanical Systems Operations Electrical & Mechanical Aviation Services Aircraft Interior & Exterior Cleaning Cargo Services Terminal Cleaning Wheelchair Assistance Ambassador Services Queue/Lobby Management Landscape and Grounds Maintenance Golf Course Maintenance and Renovations Athletic and Sports Field Maintenance Irrigation Maintenance & Management Exterior Pest & Fertility Management Landscape & Turf Mail, Logistics & Print Room Furniture Movement Supplier Management Reception & Switchboard/Help Desk Audio Visual Building Technical Administration
6 Strategically Focused on Industries Where We Can Win Business & Industry Aviation Education Healthcare Technology & Manufacturing Business & Industry Technical Solutions Shared Services, Support Functions
Fiscal 2018 – New Segment Structure SEGMENT DESCRIPTIONS B&I B&I, our largest segment, encompasses janitorial, facilities engineering, and parking services for commercial real estate properties, and sports and entertainment venues. Aviation Aviation includes services supporting airlines and airports ranging from parking and janitorial to passenger assistance, catering, air cabin maintenance, and transportation. Education Education provides custodial, landscaping and grounds, facilities engineering, and parking services for public school districts, private schools, colleges, and universities. T&M T&M combines our Industrial & Manufacturing (“I&M”) business, which was previously included in our B&I segment, with our High Tech industry group. Services include janitorial, facilities engineering, and parking services for clients in these industries. Technical Solutions Technical Solutions provides specialized mechanical and electrical services. These services can also be leveraged for cross - selling across all of our industry groups, both domestically and internationally. Healthcare Services in the healthcare industry group include janitorial, environmental services, facilities management, clinical engineering, food & nutrition, laundry & linen, parking & guest services, and patient transportation at traditional hospitals and non - acute facilities. 71
MARCH 7, 2018 Recent Results
$1,326.7 $1,588.3 2017 2018 Q1 FY18Revenue First Quarter 2018 Review 9 • Q1 FY18 revenue increase of 19.7% • Q1 FY18 organic growth of 3.0%
$16.1 $28.0 2017 2018 Q1 FY18 Income from Continuing Operations $21.5 $17.4 2017 2018 Q1 FY18 Adj. Income from Continuing Operations First Quarter 2018 Review 10 $0.42 per share $0.26 per share $0.38 per share $0.28 per share 1 Results reflect increased amortization and share dilution related to the Company’s GCA acquisition o n September 1, 2017 1 1
($56.8) $27.8 2017 2018 Q1 FY18 Net Income $48.1 $65.1 2017 2018 Q1 FY18 Adj. EBITDA Q1 FY18 Net (Loss) Q1 FY18 Net Income (Loss) First Quarter 2018 Review 11 4.1% margin 3.6% margin 1 Results reflect increased amortization related to the Company’s GCA acquisition o n September 1, 2017 ($1.00) per share $0.42 per share 1
First Quarter 2018 Segment Results 12 Business & Industry • Revenues of $722.1m, increase of 10.1% y - o - y • Operating profit of $28.5m, operating margin of 3.9% Aviation • Revenues of $256.2m, increase of 10.5% y - o - y • Operating profit of $5. 8 m, operating margin of 2 .3 % Technology & Manufacturing • Revenues of $232.0m, increase of 35.3% y - o - y • Operating profit of $ 16.9 m, operating margin of 7.3 % Education • Revenues of $206.3m, reflecting predominance of GCA business • Operating profit of $9 .2 m, operating margin of 4.4% Healthcare • Revenues of $67.7m, increase of 9.8% y - o - y • Operating profit of $2 .7 m, operating margin of 4.0% Technical Solutions • Revenues of $104.0m, decrease of 3.4% • Operating profit of $5 .5 m, operating margin of 5.3%
Guidance Outlook
Fiscal 2018 Outlook 14 Metric Amount Income from continuing operations per diluted share $1.88 - $1.98 Adjusted Income from continuing operations per diluted share $2.00 - $2.10 Depreciation $50m - $60m Amortization ¹ $60m - $70m Interest Expense $50m - $53m Capital Expenditures $55m - $65m Adjusted EBITDA Margin 5.3% to 5.5% Tax Rate (excluding WOTC & other discrete tax items) ² 28% - 30% Synergies $10m - $15m 1 Amortization increasing significantly in FY18 due to the acquisition of GCA Services Group with an anticipated EPS impact of approximately $0 .40 . ² With the exception of the 2018 Work Opportunity Tax Credits and ASU 2016 - 09, this guidance does not include any potential benefits as sociated with certain other discrete tax items and other unrecognized tax benefits . 2018 Working Days Quarter Q1 Q2 Q3 Q4 Days 66 63 66 66 Δ y - o - y 0 0 0 0
Fiscal 2018 Outlook 15 Segment FY18 Operating Profit Margin % Business & Industry low 5% Aviation mid 3% Education low 5% Healthcare low 5% Technology & Manufacturing low 8% Technical Solutions high 8% ($ in millions) 1 Operating profit includes acquisition - related amortization stemming from GCA . ¹
Forward - Looking Statements This presentation contains both historical and forward - looking statements regarding ABM Industries Incorporated (“ABM”) and its subsidiaries (collectively referred to as “ABM,” “we,” “us,” “our,” or the “Company”) . We make forward - looking statements related to future expectations, estimates, and projections that are uncertain and often contain words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “outlook,” “plan,” “predict,” “should,” “target,” or other similar words or phrases . These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and assumptions that are difficult to predict . Particular risks and uncertainties that could cause our actual results to be materially different from those expressed in our forward - looking statements include : ( 1 ) we may not realize the growth opportunities and cost synergies that are anticipated from the acquisition of GCA Services Group (“GCA”) ; ( 2 ) we have incurred a substantial amount of debt to complete the acquisition of GCA . To service our debt we will require a significant amount of cash . Our ability to generate cash depends on many factors beyond our control . We also depend on the profitability of our subsidiaries to satisfy our cash needs . If we cannot generate the required cash, we may not be able to make the necessary payments required to service our indebtedness or we may be required to suspend certain discretionary payments, including our dividend ; ( 3 ) changes to our businesses, operating structure, financial reporting structure, or personnel relating to the implementation of our 2020 Vision strategic transformation initiative, including our move to our Enterprise Services Center, may not have the desired effects on our financial condition and results of operations ; ( 4 ) our success depends on our ability to gain profitable business despite competitive pressures and to preserve long - term client relationships ; ( 5 ) our business success depends on our ability to attract and retain qualified personnel and senior management ; ( 6 ) our use of subcontractors or joint venture partners to perform work under customer contracts exposes us to liability and financial risk ; ( 7 ) our international business involves risks different from those we face in the United States that could have an effect on our results of operations and financial condition ; ( 8 ) unfavorable developments in our class and representative actions and other lawsuits alleging various claims could cause us to incur substantial liabilities ; ( 9 ) we insure our insurable risks through a combination of insurance and self - insurance and we retain a substantial portion of the risk associated with expected losses under these programs, which exposes us to volatility associated with those risks, including the possibility that changes in estimates of ultimate insurance losses could result in a material charge against our earnings ; ( 10 ) our risk management and safety programs may not have the intended effect of reducing our liability for personal injury or property loss ; ( 11 ) impairment of goodwill and long - lived assets could have a material adverse effect on our financial condition and results of operations ; ( 12 ) changes in general economic conditions, including changes in energy prices, government regulations, or changing consumer preferences, could reduce the demand for facility services and, as a result, reduce our earnings and adversely affect our financial condition ; ( 13 ) our income tax provision and income tax liabilities could be adversely affected by the jurisdictional mix of earnings, changes in valuations of deferred tax assets and liabilities, and changes in tax treaties, laws, and regulations, including the U . S . Tax Cuts and Jobs Act of 2017 , which effected significant changes to the U . S . corporate income tax system ; ( 14 ) we could be subject to cyber - security risks, information technology interruptions, and business continuity risks ; ( 15 ) a significant number of our employees are covered by collective bargaining agreements that could expose us to potential liabilities in relationship to our participation in multiemployer pension plans, requirements to make contributions to other benefit plans, and the potential for strikes, work slowdowns or similar activities, and union - organizing drives ; ( 16 ) if we fail to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be negatively impacted, which could harm our operating results and investors’ perceptions of our company and, as a result, the value of our common stock ; ( 17 ) our business may be negatively impacted by adverse weather conditions ; ( 18 ) catastrophic events, disasters, and terrorist attacks could disrupt our services ; and ( 19 ) actions of activist investors could disrupt our business . The list of factors above is illustrative and by no means exhaustive . Additional information regarding these and other risks and uncertainties we face is contained in our Annual Report on Form 10 - K for the year ended October 31 , 2017 and in other reports we file from time to time with the Securities and Exchange Commission (including all amendments to those reports) . We urge readers to consider these risks and uncertainties in evaluating our forward - looking statements . We caution readers not to place undue reliance upon any such forward - looking statements, which speak only as of the date made . We undertake no obligation to publicly update any forward - looking statements, whether as a result of new information, future events, or otherwise, except as required by law . 16
MARCH 7, 2018 Appendix
Use of Non - GAAP Financial Information To supplement ABM’s consolidated financial information, the Company has presented income from continuing operations and income from continuing operations per diluted share as adjusted for items impacting comparability, for the first quarter of fiscal years 2018 and 2017 . These adjustments have been made with the intent of providing financial measures that give management and investors a better understanding of the underlying operational results and trends as well as ABM’s operational performance . In addition, the Company has presented earnings before income from discontinued operations, net of taxes, interest, taxes, depreciation and amortization and excluding items impacting comparability (adjusted EBITDA) for the first quarter of fiscal years 2018 and 2017 . Adjusted EBITDA is among the indicators management uses as a basis for planning and forecasting future periods . The presentation of these non - GAAP financial measures is not meant to be considered in isolation or as a substitute for financial statements prepared in accordance with accounting principles generally accepted in the United States of America . (See accompanying financial tables for supplemental financial data and corresponding reconciliations to certain GAAP financial measures . ) 18
Unaudited Reconciliation of Non - GAAP Financial Measures 19 (a) The Company adjusts income from continuing operations to exclude the impact of certain items that are unusual, non - recurring, or otherwise do not reflect management's views of the underlying operational results and trends of the Company . (b) ( b) Represents adjustments to our self - insurance reserve for general liability, workers’ compensation and automobile claims related to prior period accident years . Management believes these prior period reserve changes do not illustrate the performance of the Company’s normal ongoing operations given the current year's insurance expense is estimated by management in conjunction with the Company's outside actuary to take into consideration past history and current costs and regulatory trends . Once the Company develops its best estimate of insurance expense premiums for the year, the Company fully allocates such costs out to the business leaders to hold them accountable for the current year costs within operations . However, since these prior period reserve changes relate to claims that could date back many years, current management has limited ability to influence the ultimate development of the prior year changes . Accordingly, including the prior period reserve changes in the Company's current operational results would not depict how the business is run as the Company holds its management accountable for the current year’s operational performance . The Company believes the exclusion of the self - insurance adjustment from income from continuing operations is useful to investors by enabling them to better assess our operating performance in the context of current year profitability . (c) FY 17 represents reimbursement of previously expensed legal and other costs incurred in connection with an internal investigation into a foreign entity affiliated with a former joint venture partner . (d) The QTD FY 18 period represents restructuring costs related to the GCA acquisition in September 2017 ; The QTD FY 17 amount presents costs for the Company's 2020 Vision Transformation Initiative , net of the reversal of certain share - based compensation costs . (e) The Company's tax impact is calculated using the federal and state statutory rate of 29 . 8 % for QTD FY 18 , and 41 . 5 % for QTD FY 17 , respectively . The tax impact of the impairment recovery and loss on sale related to the Company’s Government Services business was calculated using a 39 . 0 % tax rate for all periods presented . We calculate tax from the underlying whole - dollar amounts, as a result, certain amounts may not recalculate based on reported numbers due to rounding . (f) Y 18 QTD includes a tax benefit of $ 21 . 7 M related to the enactment of the Tax Act . (in millions)
(in millions, except per share amounts) Unaudited Reconciliation of Non - GAAP Financial Measures 20 (g) Adjusted EBITDA does not include interest income for certain long term energy contracts, in which case a gross up of both interest income and interest expense is being recorded .
2018 Guidance 21
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