SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10 Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period to
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Commission file Number 1-8929
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ABM INDUSTRIES INCORPORATED
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(Exact name of registrant as specified in its charter)
DELAWARE 94-1369354
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
50 FREMONT STREET, 26TH FLOOR, SAN FRANCISCO, CALIFORNIA 94105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 597-4500
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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 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
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Number of shares of Common Stock outstanding as of April 30, 1995: 9,215,604
-1-
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
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OCTOBER 31, APRIL 30,
ASSETS 1994 1995
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(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 7,368 $ 2,019
Accounts and other receivables, net 140,788 151,577
Inventories and supplies 17,420 19,113
Deferred income taxes 11,638 12,020
Prepaid expenses 12,228 15,413
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Total current assets 189,442 200,142
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INVESTMENTS AND LONG-TERM RECEIVABLES 6,841 6,861
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and buildings 6,063 5,566
Transportation and equipment 8,600 9,414
Machinery and other equipment 33,187 34,510
Leasehold improvements 9,052 9,269
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56,902 58,759
Less accumulated depreciation and amortization (37,083) (37,793)
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Property, plant and equipment, net 19,819 20,966
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INTANGIBLE ASSETS 61,373 65,584
DEFERRED INCOME TAXES 14,982 16,076
OTHER ASSETS 7,013 9,519
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$ 299,470 $ 319,148
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-2-
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
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OCTOBER 31, APRIL 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1995
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(Unaudited)
CURRENT LIABILITIES:
Current portion of long-term debt $ 683 $ 679
Bank overdraft -- 9,800
Accounts payable, trade 26,187 22,929
Income taxes payable 1,961 841
Accrued Liabilities:
Compensation 19,807 17,757
Taxes - other than income 8,693 9,758
Insurance claims 27,185 28,537
Other 14,761 17,100
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Total current liabilities 99,277 107,401
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LONG-TERM DEBT (LESS CURRENT PORTION) 25,254 27,235
RETIREMENT PLANS 5,978 6,790
INSURANCE CLAIMS 38,230 40,107
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, $.01 par value, 12,000,000 shares
authorized; 9,049,000 and 9,216,000 shares
issued and outstanding at October 31, 1994
and April 30, 1995, respectively 90 92
Additional capital 35,334 37,894
Retained earnings 88,907 93,229
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Total stockholders' equity 124,331 131,215
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$ 299,470 $ 319,148
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-3-
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In Thousands Except Per Share Amounts)
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THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
1994 1995 1994 1995
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REVENUES AND OTHER INCOME $ 215,872 $ 234,396 $ 426,711 $ 466,458
EXPENSES:
Operating Expenses and Cost of Goods Sold 184,638 200,989 366,114 400,912
Selling and Administrative 24,770 25,316 48,542 50,874
Interest 743 1,293 1,460 2,034
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Total Expenses 210,151 227,598 416,116 453,820
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INCOME BEFORE INCOME TAXES 5,721 6,798 10,595 12,638
INCOME TAXES 2,403 2,855 4,450 5,308
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NET INCOME $ 3,318 $ 3,943 $ 6,145 $ 7,330
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NET INCOME PER SHARE $ 0.36 $ 0.40 $ 0.67 $ 0.75
DIVIDENDS PER COMMON SHARE $ 0.13 $ 0.15 $ 0.255 $ 0.30
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 8,872 9,520 8,838 9,461
-4-
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1994 AND 1995
(In Thousands)
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APRIL 30, APRIL 30,
1994 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 416,475 $ 454,074
Other operating cash receipts 933 1,210
Interest received 201 240
Cash paid to suppliers and employees (408,097) (451,260)
Interest paid (1,684) (2,231)
Income taxes paid (6,648) (7,904)
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Net cash provided by (used in) operating activities 1,180 (5,871)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (5,087) (4,573)
Proceeds from sale of assets 318 200
(Increase) decrease in investments and long-term receivables 213 (20)
Intangibles resulting from acquisitions (5,918) (6,416)
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Net cash used in investing activities (10,474) (10,809)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued 1,882 2,562
Dividends paid (2,519) (3,008)
Increase(decrease) in cash overdraft 2,948 9,800
Increase(decrease) in notes payable 4,977 --
Long-term borrowings 22,000 32,000
Repayments of long-term borrowings (20,000) (30,023)
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Net cash provided by financing actvities 9,288 11,331
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NET DECREASE IN CASH AND CASH EQUIVALENTS (6) (5,349)
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR 1,688 7,368
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CASH AND CASH EQUIVALENTS END OF PERIOD $ 1,682 $ 2,019
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RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net Income $ 6,145 $ 7,330
Adjustments:
Depreciation and amortization 4,338 5,487
Provision for bad debts 808 809
Gain on sale of assets (80) (56)
(Increase) decrease in accounts and other receivables (7,616) (11,598)
(Increase) decrease in inventories and supplies 362 (1,693)
(Increase) decrease in prepaid expenses (2,452) (3,185)
(Increase) decrease in other assets (499) (2,506)
(Increase) decrease in deferred income taxes (124) (1,476)
Increase (decrease) in income taxes payable (2,074) (1,120)
Increase (decrease) in retirement plans accrual 745 812
Increase (decrease) in insurance claims liablilty 38 3,229
Increase (decrease) in accounts payable and other accrued liabilities 1,589 (1,904)
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Total adjustments to net income (4,965) (13,201)
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 1,180 $ (5,871)
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-5-
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
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 April 30, 1995 and the results of
operations and cash flows for the three months and six 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 1994
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
$256,000 during the six months ended April 30, 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.
6
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. On September 22, 1994, the Company signed a $100
million unsecured revolving credit agreement with a syndicate of U.S. banks, and
on May 1, 1995, this credit line was increased to $125 million. This agreement
expires September 22, 1998, and 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 April 30, 1995, the total amount outstanding
under this facility, before the increase to $125 million discussed above, was
approximately $90.2 million which was comprised of loans in the amount of $25
million and standby letters of credit of $65.2 million. The effective interest
rate on bank borrowings for the six months ended April 30, 1995 was
approximately 7.44%. 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, 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 April 30, 1995, the balance remaining on this note was
$2,545,000.
At April 30, 1995, working capital was $92.7 million, as compared to $90.2
million at October 31, 1994.
EFFECT OF INFLATION
The low rates of inflation experienced in recent years 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.
ENVIRONMENTAL MATTERS
The Company's operations are subject to various
7
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
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 for a cash downpayment made at the time of
closing plus annual contingent payments based upon gross profit of acquired
contracts to be made over a four-year period.
As of January 1, 1995, the Company's Ampco System Parking Division acquired
the parking operations of Pansini Corporation for a cash downpayment made at the
time of the closing plus annual contingent payments based upon gross profit of
acquired contracts to be made over a five-year period. The parking contracts
obtained as a result of this acquisition are expected to add approximately 100
facilities in California and Hawaii.
RESULTS OF OPERATIONS
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 second quarter which ended on October 31 and April 30,
respectively.
8
SIX MONTHS ENDED APRIL 30, 1995 VS. SIX MONTHS ENDED APRIL 30, 1994
Revenues and other income (hereafter called revenues) for the first six
months of fiscal year 1995 were $466 million compared to $427 million in 1994, a
9% increase over the same period of the prior year. The 9% increase in revenues
was attributed to volume and price increases as well as revenues generated from
acquisitions. As a percentage of revenues, operating expenses and cost of goods
sold were 85.9% during the six months of fiscal year 1995 compared to 85.8% for
the same period in 1994. Consequently, as a percentage of revenues, gross
profit (revenue minus operating expenses and cost of goods sold) was 14.1% for
the six months ended April 30, 1995, as compared to 14.2% for the same period of
fiscal year 1994. The principal factors which contributed to the decline of
gross profit margin were competitive market conditions 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 expects this competitive
environment to continue throughout 1995.
Selling and administrative expense for the six months of fiscal year 1995
was $50.9 million compared to $48.5 million, up $2.4 million or 5%, for the
corresponding six months of fiscal year 1994. As a percentage of revenues,
selling and administrative expense decreased from 11.4% for the six months ended
April 30, 1994 to 10.9% for the same period in 1995. The increase in the dollar
amount of selling and administrative expense for the six months ended April 30,
1995, compared to the same period in 1994, is due to revenue growth, expenses
associated with acquisitions, and an increase in the profit sharing expense.
Interest expense was $2,034,000 for the first six months of fiscal year
1995 compared to $1,460,000 in 1994, an increase of $574,000 over the same
period of the prior fiscal year. The increase in interest expense was due to
higher bank borrowings in 1995 primarily necessitated by acquisitions and
interest paid to state and federal tax authorities on fully accrued income
taxes.
The effective income tax rate for the first six months of both fiscal year
1994 and 1995 was 42%.
9
Net income for the first six months of fiscal year 1995 was $7,330,000, an
increase of 19%, compared to the prior year's net income of $6,145,000. However,
due to the increase in average shares outstanding and the deduction of a
preferred stock dividend of $256,000 in the calculation of earnings per share,
per common share earnings increased 12% to 75 cents for the first six months of
1995 compared to 67 cents for the same period in 1994.
The results of operations from the Company's three industry segments and
its eight operating divisions for the six months ended April 30, 1995 as
compared to the six months ended April 30, 1994 are more fully described below:
Revenues of the Janitorial Services segment for the first six months
of fiscal year 1995 were $249 million, an increase of $16 million or
6.7%, over the first six months of fiscal 1994, while its operating
profits increased by 6.5% over the comparable period of 1994.
Janitorial Services accounted for approximately 53% of the Company's
consolidated revenues for the six months of fiscal year 1995. The
Janitorial Division's revenues increased by 6.7% during the first six
months of fiscal year 1995 as compared to the same period of 1994
primarily as a result of acquisitions and volume increases recorded by
this Division's Northeast, Northwest, and Southeast Regions partially
offset by revenue losses in its Midwest and Canadian Regions. As a
result of an overall increase in revenues, this Division's operating
profits increased 6% when compared to the same period last year.
Labor and labor-related expenses and other direct expenses remained
fairly constant whereby this Division was able to maintain its gross
margin during the first six months of the fiscal year 1995 over the
same period of the prior year. The Division's selling and
administrative expenses were in line with its revenue growth. The
Janitorial Supply Division's revenue for the first six months
increased by approximately 8.3% compared to the same period in 1994
generally due to increased sales from new customers in Northern
California. An increase of 25% in operating profits was a result of a
larger sales volume as well as its efforts to control its selling and
administrative expenses.
Amtech Services reported revenues of $120 million, which represent
approximately 26% of the Company's consolidated revenues for the first
six months of 1995, an increase of approximately 9% over the same
period of last year. Amtech Services' profit
10
increased 58% compared to the first six months of fiscal year 1994 as
all its divisions posted higher operating profits for the six months
ended April 30, 1995. The Mechanical Division's operating profits for
the first six months of 1995 increased by 29% even with a 3% drop in
revenues caused generally by the poor weather conditions in California
during the Winter and Spring months. This Division's successful
efforts in reducing its overhead expenses enabled it to increase its
operating profits. The Lighting Division's revenues were up 29%
largely due to increased sales volume posted by the majority of its
branches by obtaining additional time and material contracts and
supplemented by increased business from existing customers. As a
result of this revenue growth, operating profits increased by 23%
during the first six months of fiscal year 1995. Operating profits
were somewhat negatively impacted by lower margin retrofit contracts.
Revenues for the Elevator Division were down by 8% for the first six
months of fiscal year 1995 over the same period of 1994 generally due
to decreased construction business as the Division is down-sizing this
line of business since it remains highly competitive and contributes
lower margins. However, the Division increased its operating profits
by 169% for the six months of 1995. 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 has
enabled the Division to improve its gross profits. In addition, this
Division's reduction of its selling and administrative expenses were
offset by currency translation losses arising from its Mexican
subsidiary. The Engineering Division's revenues increased by 23% and
reported a 61% increase in operating profits in the first six months
of 1995 compared to the same period in 1994. Revenues increased
generally from the start-up of the Midwest and Northeast Regions,
obtaining several new contracts, and price increases to its existing
customers. The increase in operating profit resulted from increased
business and reductions in insurance and other direct expenses, as
well as containing its selling and administrative expenses.
Revenues of the Other Services segment for the first six months of
1995 were approximately $97 million, a 17% increase over the same
period of fiscal year 1995. Other Services accounted for
approximately 21%
11
of the Company's consolidated revenues. The operating profits of
Other Services were up by 5% primarily due to profit improvement by
its Parking Division. The Parking Division's revenues increased by
19% and its profits increased by 13% during the first six months of
fiscal year 1995 compared to 1994. The increase in revenues is
primarily due to the acquisition of a parking business in Northern
California and from obtaining contracts to manage parking operations
at several major airports in the U.S. The increase in operating
profits was primarily due to improved business conditions in its
Southern California Region and income derived from its airport
operations, offset partially by the loss of some contracts in the
Midwest. The Security Division reported an increase in revenues of
14% compared to 1994, but its profits decreased by 4% in the first six
months of 1995 compared to the same period of 1994. The increase in
revenues resulted from obtaining several new contracts during the
latter part of fiscal year 1994 and earlier in the fiscal year 1995.
The decrease in operating income during the first six months as
compared to the prior year was primarily due to lower margins
necessitated by competitive bidding in order to obtain certain larger
contracts.
THREE MONTHS ENDED APRIL 30, 1995 VS. THREE MONTHS ENDED APRIL 30, 1994
Revenues and other income for the second quarter of fiscal year 1995 were
$234 million compared to $216 million in 1994, a 9% increase over the same
quarter of the prior year. The growth in revenues for the second quarter of
1995 over the same quarter of the prior year was attributable to volume and
price increases as well as revenues generated from acquisitions. As a
percentage of revenues, operating expenses and cost of goods sold increased
slightly from 85.7% for the second quarter of 1995 compared to 85.5% in 1994.
Consequently, as a percentage of revenues, the Company's gross profit decreased
to 14.3% from the prior year's second quarter at 14.5% due to strong competition
and continued pricing pressures faced by several of its divisions in the market
place.
Selling and administrative expense for the second quarter of fiscal year
1995 was $25.3 million compared to $24.8 million, an increase of approximately
$500,000 or 2%, compared to the corresponding three months of fiscal year 1994.
As a percentage of revenues, selling and
12
administrative expense decreased from 11.5% for the three months ended April 30,
1994, to 10.8% for the same period in 1995 primarily as a result of management's
continued efforts to contain expenses. The increase in the dollar amount of
selling and administrative expense for the three months ended April 30, 1995,
compared to the same period in 1994, was in line with the Company's revenue
growth.
Interest expense was $1,293,000 for the second three months of fiscal year
1995 compared to $743,000 in 1994, an increase of $550,000 over the same period
of the prior fiscal year. Interest expense increased primarily due to tax
payments made to federal and state tax authorities on fully accrued income taxes
as well as interest expenses associated with higher bank borrowings during the
three months ended April 30, 1995, as compared to 1994.
The effective income tax rate for the second three months of both fiscal
year 1995 and 1994 was 42%.
Net income for the second quarter of 1995 was $3,943,000, an increase of
19%, compared to the net income of $3,318,000 for the second quarter of 1994.
Cost controls, coupled with the revenue growth, enabled the Company to realize
improved earnings. However, due to the increase in the average number of common
and common equivalent shares outstanding, earnings per share rose 11% to 40
cents for the second quarter of 1995 compared to 36 cents for the same period in
1994.
The results of operations from the Company's three industry segments and
its eight operating divisions for the three months ended April 30, 1995, as
compared to the three months ended April 30, 1994, are more fully described
below:
Revenues of the Janitorial Divisions of the second quarter of fiscal year
1995 were $124 million, an increase of approximately $15 million or 14%,
over the second quarter of fiscal 1994, while its operating
profitsincreased by 8% over the comparable quarter of 1994. Janitorial
Divisions accounted for approximately53% of the Company's revenues for the
current quarter. ABM Janitorial Services' revenues increased by 14% during
the second quarter of fiscal year 1995 as compared to the same quarter of
1994 as a result of acquisitions made during the latter part of fiscal year
1994 and earlier in fiscal year 1995 as well as revenue growth throughout
the majority of its regions except for its Canadian and Midwest Regions.
The Division's operating profits only increased 8% when compared to the
same period last year. In comparison with the 14%
13
revenue increase, a lower than expected 8% increase in operating profits is
principally due to higher selling and administrative expenses associated
with marketing efforts to increase its revenues. Easterday Janitorial
Supply Division's second quarter revenues increased by approximately 15%
compared to the same quarter in 1994 generally due to an increase in new
customers. An increase of 7% in operating profits results from a higher
sales volume, containment of selling and administrative expenses, and
partially offset by higher paper products and plastic liners material
expenses.
Amtech Divisions reported revenues of $60 million, which represent
approximately 26% of the Company's revenues for the second quarter of
fiscal year 1995, an increase of approximately 17% over the same quarter of
last year. Amtech Divisions' profit increased 48% for the second quarter
of 1995 when compared to the second quarter of fiscal year 1994 as all its
divisions recorded profit increases. CommAir Mechanical Services
Division's operating profits for the second quarter of 1995 increased by
25% on a revenue increased by 8%. Revenues from project oriented type of
contracts increased during the second quarter of 1995. As a result of
depressed market conditions in Southern California one-time service and
repair jobs are still sluggish. Improved gross profit margins and a
reduction in selling and administrative expenses accounted for the profit
increase. Amtech Lighting Services Division reported a 34% revenue
increase benefiting from a continued expansion in the Southeast and an
expanded customer contract base from existing customers and its operating
profits increased by 23%. While the selling and administrative expenses
were in line with the level of revenue increase, a decline in gross profit
as a percentage of revenues partially offset its operating profits. This
erosion of gross margins was caused by increases in material expenses.
Revenues for the Amtech Elevator Services Division were down by 4% for the
second quarter of fiscal year 1995 over the same quarter of 1994 largely
due to management's decision to allocate the Division's resources to its
repair and service maintenance business rather than obtaining lower margin
construction contracts. The Division more than doubled its operating
profit for the second quarter compared to the corresponding quarter of
fiscal year 1994 primarily due to higher gross margins from its maintenance
and repair jobs and, as discussed above, from management's decision to de-
emphasize the construction business where margins are historically lower.
ABM Engineering
14
Services Division's revenues increased by 37% and it reported a 54%
increase in operating profits the second quarter of 1995 compared to the
same period in 1994. Revenue increases generally were recorded by all its
regions primarily reflecting increased penetration into new markets as well
as from price increases to existing customers. The increase in operating
profits resulted from increased revenues, reductions in payroll related
costs including insurance expenses, and containment of selling and
administrative expenses.
Revenues of the Other Divisions for the second quarter of 1995 were
approximately $50 million, a 76% increase over the same quarter of fiscal
year 1994. Other Divisions accounted for approximately 21% of the
Company's revenues. The operating profits of Other Divisions were up by
17% primarily due to improved operating profits by its Ampco System Parking
Division and ASI Security Services. Ampco System Parking Division's
revenues increased by 146% while its profits increased 25% during the
second quarter of fiscal year 1995. The increase in revenues resulted from
a recent acquisition in Northern California as well as procuring parking
management contracts of several major airports. Operating profits were up
primarily due to the recent acquisition, airport contracts, and improved
economic conditions in the Division's Southern California Region. ASI
Security Services reported an increase in revenues of 17% but its profits
were up only 8% in the second quarter of 1995 compared to the same period
of 1994. The revenue growth was largely due to obtaining several large
customers and increases posted by its South Central Region. Revenue
increases during the second quarter as compared to the second quarter of
the prior year contributed to the increase in operating profits; however,
competitive market conditions eroded the gross margins historically
realized by this Division.
15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - not applicable.
Item 4. Submission of Matters to a Vote of Stockholders
a) The Annual Meeting of Stockholders was held on
March 21, 1995.
b)The following directors nominated by management were
approved by a vote of stockholders: Henry L. Kotkins,
Jr., Robert S. Dickerman, Esq., William E. Walsh.
The following directors remained in office: Maryellen B. Cattani,Esq., John
F. Egan, Charles T. Horngren, Martinn H. Mandles. Sydney J. Rosenberg, Theodore
Rosenberg, William W. Steele and Boniface A. Zaino.
c) Proposal 1 - Election of Directors
Against
or Broker
Nominee: For Withheld Abstentions Nonvotes
Henry L Kotkins, Jr. 7,697,978 51,567 0 0
Robert S. Dickerman 7,697,842 51,703 0 0
William E. Walsh 7,630,920 118,625 0 0
d) Proposal 2 - Amendment to the Company's 1984
Executive Stock Option Plan.
For: 6,972,996 Against: 340,002 Abstain: 436,541
Broker Nonvotes:0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 4.2 - First Amendment to Credit Agreement
Exhibit 4.3 - Second Amendment to Credit Agreement
Exhibit 27.1 - Financial Data Schedule.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
quarter ended April 30, 1995.
16
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 thereunto duly authorized.
ABM Industries Incorporated
June 13, 1995 /s/ David H. Hebble
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Vice President and Principal
Financial Officer
17
EXHIBIT 4.2
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT ("AMENDMENT"), dated as of March
3, 1995, is entered into by and among ABM INDUSTRIES INCORPORATED (the
"COMPANY"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for
the Banks (the "AGENT"), and the several financial institutions from time to
time party to the Credit Agreement (collectively, the "BANKS"; individually, a
"BANK").
RECITALS
A. The Company, the Banks, and the Agent are parties to a Credit
Agreement dated as of September 22, 1994 (the "CREDIT AGREEMENT") pursuant to
which the Agent and the Banks have extended to the Company a revolving credit
facility including letters of credit.
B. The Company has requested the Banks to increase the amount of credit
they have committed to extend under the revolving credit facility and to agree
to amend the Credit Agreement accordingly.
C. The Banks are willing to amend the Credit Agreement in order to
increase the amount of each Bank's Commitment, subject to the terms and
conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT. The respective amounts set forth
opposite the Banks' names on the signature pages of the Credit Agreement under
the caption "Commitment" are hereby increased to the following amounts:
Bank Amount of Commitment
---- --------------------
Bank of America National Trust
and Savings Association $43,200,000
NationsBank of Texas, N.A. $27,000,000
United States National Bank of Oregon $16,200,000
Seattle-First National Bank $21,600,000
3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Agent and the Banks as follows:
(a) No Default or Event of Default has occurred and is
1
continuing.
(b) The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary corporate and other action
and do not and will not require any registration with, consent or approval of,
notice to or action by, any Person (including any Governmental Authority) in
order to be effective and enforceable. The Credit Agreement as amended by this
Amendment constitutes the legal, valid and binding obligations of the Company,
enforceable against it in accordance with its respective terms, without defense,
counterclaim or offset.
(c) All representations and warranties of the Company contained in
the Credit Agreement are true and correct.
(d) The Company is entering into this Amendment on the basis of its
own investigation and for its own reasons, without reliance upon the Agent and
the Banks or any other Person.
4. EFFECTIVE DATE. This Amendment will become effective as of March 3,
1995 (the "EFFECTIVE DATE"), PROVIDED that each of the following conditions is
satisfied:
(a) By no later than March 7, 1995, the Agent has received from the
Company and the Banks a duly executed original (or, if elected by the Agent, an
executed facsimile copy) of this Amendment.
(b) By no later than March 13, 1995, the Agent has received from the
Company a copy of a resolution passed by the board of directors of such
corporation, certified by the Secretary or an Assistant Secretary of such
corporation as being in full force and effect on the date hereof, authorizing
the execution, delivery and performance of this Amendment.
(c) All representations and warranties contained herein are true and
correct as of the Effective Date.
5. MISCELLANEOUS.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein to such Credit Agreement shall henceforth refer to
the Credit Agreement as amended by this Amendment. This Amendment shall be
deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and thereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance
with the law of the State of California.
2
(d) This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts together
shall constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an executed
original or an executed original sent by facsimile transmission to be followed
promptly by mailing of a hard copy original, and that receipt by the Agent of a
facsimile transmitted document purportedly bearing the signature of a Bank or
the Company shall bind such Bank or the Company, respectively, with the same
force and effect as the delivery of a hard copy original. Any failure by the
Agent to receive the hard copy executed original of such document shall not
diminish the binding effect of receipt of the facsimile transmitted executed
original of such document of the party whose hard copy page was not received by
the Agent.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto. This Amendment may not be
amended except in accordance with the provisions of Section 11.1 of the Credit
Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or
the Credit Agreement, respectively.
(g) The Company covenants to pay to or reimburse the Agent and the
Banks, upon demand, for all costs and expenses (including allocated costs of in-
house counsel) incurred in connection with the development, preparation,
negotiation, execution and delivery of this Amendment, including without
limitation appraisal, audit, search and filing fees incurred in connection
therewith.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Waiver and Amendment as of the date first above written.
COMPANY: ABM INDUSTRIES INCORPORATED
By: /s/ David H. Hebble
----------------------------
Title: Vice President & CFO
-------------------------
By: /s/ Douglas B. Bowlus
----------------------------
Title: Treasurer
-------------------------
3
AGENT: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Agent
By: /s/ Shannon Collins
-----------------------------
Title: Vice President
--------------------------
ISSUING BANK: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Issuing Bank
By: /s/ Jack K. Telian
------------------------------
Title: Vice President
---------------------------
BANKS: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Bank
By: /s/ Jack K. Telian
------------------------------
Title: Vice President
---------------------------
NATIONSBANK OF TEXAS, N.A.,
as a Bank
By: /s/ Keith Ferris
------------------------------
Title: Officer
---------------------------
UNITED STATES NATIONAL BANK
OF OREGON, as a Bank
By: /s/ Jonathan A. Horton
------------------------------
Title: Assistant Vice President
---------------------------
SEATTLE-FIRST NATIONAL BANK,
as a Bank
By: /s/ Michael J. Collum
------------------------
Title: Vice President
---------------------
4
ABM INDUSTRIES INCORPORATED
SECRETARY'S CERTIFICATE
The undersigned, Harry H. Kahn hereby certifies that he is the Secretary of
ABM Industries Incorporated, a Delaware corporation (the "Company") and
that as such he is authorized to execute this certificate on behalf of the
Company, and further certifies that the attached copy of the resolutions
adopted by the Board of Directors of said Company on August 30, 1994,
continue to be in full force and effect as of March 3, 1995, and authorize
the execution, delivery and performance of the First Amendment to Credit
agreement dated as of March 3, 1995.
Dated: 3/6/95 /s/ HARRY H. KAHN
-------------------------- ------------------------------
Harry H. Kahn, Secretary
(SEAL)
ABM INDUSTRIES INCORPORATED
SECRETARY'S CERTIFICATE
The undersigned, Harry H. Kahn hereby certifies that he is Secretary of ABM
Industries Incorporated, a Delaware corporation (the "Company") and that as such
he is authorized to execute this certificate on behalf of the Company, and
further certifies, represents and warrants on behalf of the Company that the
following resolutions were adopted by the Executive Committee of the Board of
Directors of said Company on August 30, 1994:
RESOLVED, that this Company (a) borrow and (b) obtain for the account of
this corporation commercial and standby letters of credit issued by one or
more of such banks, from various domestic banks, from time to time, such
sums of money, all as, in the judgment of the authorized persons
hereinafter, this Company may require for its general corporate purposes.
RESOLVED FURTHER, that any one of the following authorized persons, the
Chairman of the Executive Committee of the Board of Directors, or the
Chairman of the Board of Directors; or any two of the following authorized
persons, the President, a Vice President, the Treasurer and the Secretary
(such persons being hereinafter referred to as the "authorized persons"),
are hereby authorized, directed and empowered, in the name of this Company,
to execute and deliver to such banks, and the banks are requested to
accept, financing agreements, the note or notes, security agreements and
documents, advance account agreements, acceptance agreements or other
instruments evidencing the indebtedness of this Company for the monies
borrowed, or to be borrowed, with interest thereon, said authorized
officers being also hereby authorized to execute renewals or extensions of
said notes, security agreements, advance account agreements, acceptance
agreements or other instruments;
RESOLVED FURTHER, that any authorized person as delineated above may borrow
upon telephoned request, and any bank to which such request is telephoned
is authorized to make advances of the amounts so requested to be borrowed
to this Company; provided, however, that such advances shall be made only
by making deposit in one or more of the Company's commercial accounts with
such bank or with another bank with which it maintains a commercial
account. Such bank shall not be responsible for acting in accordance with
such telephonic requests and directions as to which account the advances
are to be deposited, provided it reasonably believes the person making the
request to be so authorized. Any such advances shall be conclusively
presumed to have been made to or for the benefit of the Company when
deposited by such bank in good faith in accordance with such requests and
directions. Each such request shall be followed by a confirming letter
signed by one of the authorized persons to be delivered or mailed to the
bank as soon as reasonably possible. All borrowings shall be approved upon
like telephonic instructions confirmed by such confirming letter.
-1-
RESOLVED FURTHER, that the Secretary or Assistant Secretary of this Company
shall file with each such bank a certified copy of these resolutions and
shall certify to the banks, from time to time, the names of the authorized
officers and the persons designated by the authorized persons to act with
respect to the accounts of this Company, together with specimen signatures
of such authorized persons and other individuals; and,
RESOLVED FURTHER, that effective upon the filing with the banks of the
certificates of the Secretary or Assistant Secretary of this Company as
provided hereinabove, the foregoing resolutions shall supersede and replace
all prior resolutions of the Board of Directors filed with such banks, and
the foregoing resolutions shall remain in full force and effect until
written notice of their amendment or recision shall have been received by
each bank and the receipt of such notice shall not affect any action taken
by a bank prior thereto.
Dated: 8/30/94 /s/ HARRY H. KAHN
------------------- --------------------------------------
Harry H. Kahn
Secretary
(SEAL)
-2-
EXHIBIT 4.3
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT ("AMENDMENT"), dated as of May 1,
1995, is entered into by and among ABM INDUSTRIES INCORPORATED (the "COMPANY"),
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the Banks
(the "AGENT"), and the several financial institutions from time to time party to
the Credit Agreement (collectively, the "BANKS"; individually, a "BANK").
RECITALS
A. The Company, the Banks, and the Agent are parties to a Credit
Agreement dated as of September 22, 1994 (as previously amended, the "CREDIT
AGREEMENT") pursuant to which the Agent and the Banks have extended to the
Company a revolving credit facility including letters of credit.
B. The Company has requested the Banks to increase the amount of credit
they have committed to extend under the revolving credit facility and to agree
to amend the Credit Agreement accordingly.
C. The Banks are willing to amend the Credit Agreement in order to
increase the amount of each Bank's Commitment, subject to the terms and
conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT. The respective amounts set forth
opposite the Banks' names on the signature pages of the Credit Agreement under
the caption "Commitment" are hereby increased to the following amounts:
Bank Amount of Commitment
---- --------------------
Bank of America National Trust
and Savings Associations $50,000,000
NationsBank of Texas, N.A. $31,250,000
United States National Bank of Oregon $18,750,000
Seattle-First National Bank $25,000,000
3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Agent and the Banks as follows:
(a) No Default or Event of Default has occurred and is
-1-
continuing.
(b) The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary corporate and other action
and do not and will not require any registration with, consent or approval of,
notice to or action by, any Person (including any Governmental Authority) in
order to be effective and enforceable. The Credit Agreement as amended by this
Amendment constitutes the legal, valid and binding obligations of the Company,
enforceable against it in accordance with its respective terms, without defense,
counterclaim or offset.
(c) All representations and warranties of the Company contained in
the Credit Agreement are true and correct.
(d) The Company is entering into this Amendment on the basis of its
own investigation and for its own reasons, without reliance upon the Agent and
the Banks or any other Person.
4. EFFECTIVE DATE. This Amendment will become effective as of May 1,
1995 (the "EFFECTIVE DATE"), PROVIDED that each of the following conditions is
satisfied:
(a) By no later than May 1, 1995, the Agent has received from the
Company and the Banks a duly executed original (or, if elected by the Agent, an
executed facsimile copy) of this Amendment.
(b) By no later than May 1, 1995, the Agent has received from the
Company a copy of a resolution passed by the board of directors of such
corporation, certified by the Secretary or an Assistant Secretary of such
corporation as being in full force and effect on the date hereof, authorizing
the execution, delivery and performance of this Amendment.
(c) All representations and warranties contained herein are true and
correct as of the Effective Date.
(d) The Company pays a fee of $15,000, to be shared pro rata by the
Banks.
5. MISCELLANEOUS.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein to such Credit Agreement shall henceforth refer to
the Credit Agreement as amended by this Amendment. This Amendment shall be
deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and thereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
-2-
(c) This Amendment shall be governed by and construed in accordance
with the law of the State of California.
(d) This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts together
shall constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an executed
original or an executed original sent by facsimile transmission to be followed
promptly by mailing of a hard copy original, and that receipt by the Agent of a
facsimile transmitted document purportedly bearing the signature of a Bank or
the Company shall bind such Bank or the Company, respectively, with the same
force and effect as the delivery of a hard copy original. Any failure by the
Agent to receive the hard copy executed original of such document shall not
diminish the binding effect of receipt of the facsimile transmitted executed
original of such document of the party whose hard copy page was not received by
the Agent.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto. This Amendment may not be
amended except in accordance with the provisions of Section 11.1 of the Credit
Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Company covenants to pay to or reimburse the Agent and the
Banks, upon demand, for all costs and expenses (including allocated costs of in-
house counsel) incurred in connection with the development, preparation,
negotiation, execution and delivery of this Amendment, including without
limitation appraisal, audit, search and filing fees incurred in connection
therewith.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Waiver and Amendment as of the date first above written.
COMPANY: ABM INDUSTRIES INCORPORATED
By: /s/ DAVID H. HEBBLE
-----------------------------
Title: Vice President & CFO
--------------------------
By: /s/ DOUGLAS B. BOWLUS
-----------------------------
Title: Treasurer
--------------------------
-3-
AGENT: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Agent
By: /s/ CHRISTINE CORTI
-----------------------------
Title: Vice President
--------------------------
ISSUING BANK: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Issuing Bank
By: /s/ HAGOP BOULDIKIAN
-----------------------------
Title: Vice President
--------------------------
BANKS: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Bank
By: /s/ HAGOP BOULDIKIAN
-----------------------------
Title: Vice President
--------------------------
NATIONSBANK OF TEXAS, N.A.,
as a Bank
By: /s/ SCOTT LARUE
-----------------------------
Title: Senior Vice President
--------------------------
UNITED STATES NATIONAL BANK
OF OREGON, as a Bank
By: /s/ JONATHAN A. HORTON
-----------------------------
Title: Assistant Vice President
--------------------------
SEATTLE-FIRST NATIONAL BANK,
as a Bank
By: /s/ THOMAS W. ESSIG
-----------------------------
Title: Assistant Vice President
--------------------------
-4-
5
1,000
6-MOS
OCT-31-1995
APR-30-1995
2,019
0
151,577
0
19,113
200,142
58,759
37,793
319,148
0
0
92
0
6,400
131,123
319,148
466,458
466,458
400,912
400,912
50,874
0
2,034
12,638
5,308
7,330
0
0
0
7,330
.75
.75
