ABM Industries Incorporated
Jun 4, 2009

ABM Industries Incorporated Announces Second Quarter Fiscal 2009 Financial Results

Company Reports Double Digit Increases in Net Income and Adjusted EBITDA, Despite Modest Revenue Decline
Well Positioned for U.S. Economic Recovery
Declares 173rd Consecutive Quarterly Dividend

NEW YORK, Jun 04, 2009 (BUSINESS WIRE) -- ABM Industries Incorporated (NYSE:ABM) today reported revenues for the second quarter of fiscal year 2009 of $855.7 million compared to second quarter fiscal year 2008 revenues of $906.3 million. Net income for the second quarter of fiscal year 2009 was $12.8 million, a 15.4% increase over $11.1 million in the year-ago quarter. Net income for the second quarter of fiscal year 2008 included a $7.2 million benefit ($4.4 million after-tax) from the reduction in self-insurance reserves related to prior years, partially offset by a $4.5 million ($4.0 million after-tax) goodwill impairment charge associated with the Company's former Lighting segment. Earnings per diluted share for the second quarter of fiscal year 2009 increased 13.6% to $0.25 compared to second quarter of fiscal year 2008 earnings per diluted share of $0.22.

Income from continuing operations for the second quarter of fiscal year 2009 was $13.0 million ($0.25 per diluted share) compared to $15.3 million ($0.30 per diluted share) in the second quarter of fiscal year 2008. As noted above, the year-over-year comparison reflects a $7.2 million benefit ($4.4 million after-tax) in the second quarter of fiscal year 2008 resulting from the reduction in self-insurance reserves relating to prior years. Adjusted income from continuing operations, which excludes items affecting comparability, increased to $16.3 million, or $0.32 per diluted share, for the second quarter of fiscal year 2009 compared to $14.0 million, or $0.27 per diluted share, in the second quarter of fiscal year 2008. (See accompanying financial tables for supplemental financial data and corresponding reconciliations to certain GAAP financial measures.)

The Company's adjusted EBITDA (earnings before interest, taxes, depreciation and amortization and excluding discontinued operations and items impacting comparability) for the second quarter of fiscal year 2009 was $36.1 million compared to $32.7 million in the year-ago quarter. (See accompanying financial tables for supplemental financial data and corresponding reconciliations to certain GAAP financial measures.)

"Our growth in net income and adjusted EBITDA reflects the focused actions we have taken to contain costs, preserve cash and maintain or increase operating margins," said Henrik Slipsager, president and chief executive officer of ABM Industries Incorporated. "We are proactively working with our clients to help them meet their cost pressures and, at the same time, aggressively managing our own bottom line and credit risk by scaling back or eliminating less profitable contracts. While these measures contributed to modestly lower revenues, we are improving our profit margins and serving a healthier, stronger client base. We also are generating strong operating cash flow and effectively managing our working capital across the business. These actions should continue to leave us well positioned when the U.S. economy rebounds."

The Company reported net income for the six months ended April 30, 2009 of $27.0 million, an increase of 54.8% compared to $17.4 million for the first six months of fiscal year 2008. Earnings per diluted share for the first six months of fiscal year 2009 increased 52.9% to $0.52 per diluted share compared to $0.34 per diluted share in the first half of fiscal year 2008. Income from continuing operations for the first six months of fiscal year 2009 increased to $27.8 million, or $0.54 per diluted share, compared to $21.6 million, or $0.42 per diluted share, for the first six months of fiscal year 2008. Adjusted income from continuing operations for the first half of fiscal year 2009 was $29.4 million, or $0.57 per diluted share, compared to $22.0 million, or $0.43 per diluted share, for the first six months of fiscal year 2008. (See accompanying financial tables for supplemental financial data and corresponding reconciliations to certain GAAP financial measures.)

Key financial information for the second quarter and first six months of fiscal years 2009 and 2008 is presented below.

                         
    Three Months Ended       Six Months Ended    
    April 30,   Increase   April 30,   Increase
(in millions)   2009   2008   (Decrease)   2009   2008  

(Decrease)

                         
Revenues   $ 855.7     $ 906.3     (5.6 )%   $ 1,743.2     $ 1,794.1     (2.8 )%
                         
Income from continuing operations     13.0       15.3     (14.7 )%     27.8       21.6     28.9 %
                         
Adjusted income from continuing operations     16.3       14.0     16.4 %     29.4       22.0     33.6 %
                         
Loss from discontinued operations     (0.3 )     (4.2 )   93.6 %     (0.8 )     (4.1 )   80.4 %
                         
Adjusted EBITDA     36.1       32.7     10.4 %     66.4       56.5     17.5 %
                         
Net Income     12.8       11.1     15.4 %     27.0       17.4     54.8 %
                         
Net cash provided by operating activities   $ 41.1     $ 46.1     (10.8 )%   $ 67.2     $ 21.1     217.9 %
                         
(See accompanying financial tables for supplemental financial data and corresponding reconciliations to certain GAAP financial measures.)
 

The Company also announced that the Board of Directors has declared a third quarter cash dividend of $0.13 per common share payable on August 3, 2009 to stockholders of record on July 2, 2009. This will be ABM's 173rd consecutive quarterly cash dividend.

Guidance

The Company is reaffirming its guidance for fiscal year 2009. The Company estimates that full fiscal year 2009 income from continuing operations per diluted share will be in the range of $1.10 to $1.20 and adjusted income from continuing operations per diluted share, for the same period, will be in the range of $1.25 to $1.35. (See accompanying financial tables for supplemental financial data and corresponding reconciliations to certain GAAP financial measures.)

Conference Call

On Friday, June 5, 2009 at 9:00 a.m. (EDT), ABM will host a live webcast of remarks by President and Chief Executive Officer Henrik C. Slipsager, and Executive Vice President and Chief Financial Officer James S. Lusk. The webcast will be accessible at: http://investor.abm.com/eventdetail.cfm?eventid=69087

Listeners are asked to be online at least 15 minutes early to register, as well as to download and install any complimentary audio software that might be required.

Following the call, the webcast will be available at this URL for a period of 90 days.

In addition to the webcast, a limited number of toll-free telephone lines will also be available for listeners who are among the first to call 877-852-6580 within 15 minutes before the event. Telephonic replays will be accessible during the period from two hours to seven days after the call by dialing 888-203-1112, and then entering ID #3741426.

Conference Call Presentation

In connection with the conference call to discuss earnings (see above), a slide presentation related to earnings and operations will be available at the Company's website at www.abm.com, and can be accessed through the Investor Relations portion of ABM's website by clicking on the "Presentations" tab.

About ABM Industries Incorporated

ABM Industries Incorporated (NYSE:ABM), which operates through its subsidiaries (collectively "ABM"), is among the leading providers of facility services in the United States. With fiscal 2008 revenues in excess of $3.6 billion and more than 105,000 employees, ABM provides janitorial, facility, engineering, parking and security services for thousands of commercial, industrial, institutional and retail facilities across the United States, Puerto Rico and British Columbia, Canada. ABM's business services include ABM Janitorial Services; ABM Facility Services; ABM Engineering Services; Ampco System Parking; and ABM Security Services.

Cautionary Statement under the Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements that set forth management's anticipated results based on management's current plans and assumptions. In addition, the financial results reported in this release continue to be subject to adjustment until filing of the Company's quarterly report on Form 10-Q for the quarter ended April 30, 2009.Any number of factors could cause the Company's actual results to differ materially from those anticipated. These factors include but are not limited to: (1) a slowdown in the Company's acquisition activity, diversion of management focus from operations as a result of acquisitions or failure to timely realize anticipated cost savings and synergies from acquisitions; (2) further declines in commercial office building occupancy and rental rates relating to a deepening of the current recession; (3) the inability to attract or grow revenues from new customers or loss of customers or financial difficulties or bankruptcy of a major customer or multiple customers; (4) the inability of customers to access the credit markets impacting the Company's ability to collect receivables; (5) intense competition that lowers revenue or reduces margins; (6) an increase in costs that the Company cannot pass on to customers; (7) functional delays and resource constraints related to the Company's transition to new information technology systems,the support of multiple concurrent projects relating to these systems and delays in completing such projects; (8) unanticipated costs or service disruptions associated with the transition of certain IT services from IBM to third-party vendors or associated with providing those services internally; (9) disruption in functions affected by the transition to Shared Services Centers; (10) the inability to collect accounts receivable retained by the Company in connection with the sale of its lighting business; (11)changes in estimated claims or in the frequency or severity of claims against the Company, deterioration in claims management,cancellation or non-renewal of the Company's primary insurance policies orchanges in the Company's customers' insurance needs; (12) increase in debt service requirements; (13) labor disputes leading to a loss of sales or expense variations; (14) natural disasters or acts of terrorism that disrupt the Company in providing services; (15) events or circumstances that may result in impairment of goodwill recognized on the OneSource or other acquisitions; (16) significant accounting and other control costs that reduce the Company's profitability; and (17) the unfavorable outcome in one or more of the several class and representative action lawsuits alleging various wage and hour claims or in other litigation. Additional information regarding these and other risks and uncertainties the Company faces is contained in the Company's Annual Report on Form 10-K/A for the year ended October 31, 2008 and in other reports it files from time to time with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Financial Information

To supplement ABM's consolidated financial information, the Company has presented income from continuing operations for the second quarter and first six months of fiscal years 2009 and 2008 and guidance for fiscal year 2009, as adjusted for items impacting comparability. These adjustments have been made with the intent of providing financial measures that give management and investors a better understanding of the underlying operational results and trends and ABM's marketplace performance. In addition, the Company has presented earnings before interest, taxes, depreciation and amortization and excluding discontinued operations and items impacting comparability (adjusted EBITDA) for the second quarter and first six months of fiscal years 2009 and 2008. Adjusted EBITDA is among the indicators management uses as a basis for planning and forecasting future periods. The presentation of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for financial statements prepared in accordance with generally accepted accounting principles in the United States. (See accompanying financial tables for supplemental financial data and corresponding reconciliations to certain GAAP financial measures.)

         
Financial Schedules
(In thousands, except per share data)
         
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION (UNAUDITED)
         
    April 30,   October 31,
    2009   2008
         
Assets        
Cash and cash equivalents   $ -   $ 710
Trade accounts receivable, net     467,636     473,263
Prepaid income taxes     15,858     7,097
Current assets of discontinued operations     16,363     34,508
Prepaid expenses and other     57,659     57,011
Deferred income taxes, net     49,608     57,463
Insurance recoverables     4,817     5,017
Total current assets     611,941     635,069
Non-current assets of discontinued operations     7,397     11,205
Insurance deposits     42,537     42,506
Other investments and long-term receivables     5,135     4,470
Deferred income taxes, net     81,681     88,704
Insurance recoverables     66,700     66,600
Other assets     31,496     23,310
Investments in auction rate securities     19,512     19,031
Property, plant and equipment, net     59,632     61,067
Other intangible assets, net     56,772     62,179
Goodwill     538,376     535,772
Total assets   $ 1,521,179   $ 1,549,913
Liabilities        
Trade accounts payable   $ 63,911   $ 70,034
Accrued liabilities        
Compensation     98,662     88,951
Taxes - other than income     25,856     20,270
Insurance claims     74,692     84,272
Other     74,029     85,455
Income taxes payable     2,165     2,025
Current liabilities of discontinued operations     12,334     10,082
Total current liabilities     351,649     361,089
Income taxes payable     16,488     15,793
Line of credit     182,000     230,000
Retirement plans and other     37,422     37,095
Insurance claims     269,901     261,885
Total liabilities     857,460     905,862
Stockholders' Equity     663,719     644,051
Total liabilities and stockholders' equity   $ 1,521,179   $ 1,549,913
         
 
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (UNAUDITED)
         
    Three Months Ended April 30,
    2009   2008
Net cash provided by continuing operating activities     30,881       40,642  
Net cash provided by discontinued operating activities     10,242       5,437  
Net cash provided by operating activities   $ 41,123     $ 46,079  
Net cash used in continuing investing activities     (2,465 )     (17,354 )
Net cash used in discontinued investing activities     -       (6 )
Net cash used in investing activities   $ (2,465 )   $ (17,360 )
Proceeds from exercises of stock options (including income tax benefit)     1,053       6,264  
Dividends paid     (6,673 )     (6,311 )
Borrowings from line of credit     170,000       136,000  
Repayment of borrowings from line of credit     (215,000 )     (150,500 )
Net cash used in financing activities   $ (50,620 )   $ (14,547 )
         
    Six Months Ended April 30,
    2009   2008
Net cash provided by continuing operating activities     44,341       17,581  
Net cash provided by discontinued operating activities     22,861       3,557  
Net cash provided by operating activities   $ 67,202     $ 21,138  
Net cash used in continuing investing activities     (8,114 )     (436,627 )
Net cash used in discontinued investing activities     -       (15 )
Net cash used in investing activities   $ (8,114 )   $ (436,642 )
Proceeds from exercises of stock options (including income tax benefit)     1,516       7,788  
Dividends paid     (13,314 )     (12,571 )
Borrowings from line of credit     343,000       522,500  
Repayment of borrowings from line of credit     (391,000 )     (221,000 )
Net cash (used in) provided by financing activities   $ (59,798 )   $ 296,717  
         
             
CONDENSED CONSOLIDATED INCOME STATEMENT INFORMATION (UNAUDITED)
             
    Three Months Ended April 30,   Increase
    2009   2008   (Decrease)
             
Revenues   $ 855,711     $ 906,349     (5.6 )%
Expenses            
Operating     766,148       806,150     (5.0 )%
Selling, general and administrative     64,265       68,936     (6.8 )%
Amortization of intangible assets     2,680       2,544     5.3 %
Total expenses     833,093       877,630     (5.1 )%
Operating profit     22,618       28,719     (21.2 )%
Interest expense     1,313       3,980     (67.0 )%

Income from continuing operations before income taxes

    21,305       24,739     (13.9 )%
Provision for income taxes     8,256       9,437     (12.5 )%
Income from continuing operations     13,049       15,302     (14.7 )%
Loss from discontinued operations     (272 )     (4,230 )   -  
Net Income   $ 12,777     $ 11,072     15.4 %
Net Income Per Common Share - Basic          
Income from continuing operations   $ 0.25     $ 0.30     (16.7 )%
Loss from discontinued operations     0.00       (0.08 )   -  
    $ 0.25     $ 0.22     13.6 %
Net Income Per Common Share - Diluted          
Income from continuing operations   $ 0.25     $ 0.30     (16.7 )%
Loss from discontinued operations     0.00       (0.08 )   -  
    $ 0.25     $ 0.22     13.6 %
             
Average Common And Common Equivalent Shares          
Basic     51,301       50,424      
Diluted     51,553       51,299      
             
Dividends Declared Per Common Share   $ 0.130     $ 0.125      
                     
   
CONDENSED CONSOLIDATED INCOME STATEMENT INFORMATION (UNAUDITED)
             
    Six Months Ended April 30,   Increase
    2009   2008   (Decrease)
             
Revenues   $ 1,743,183     $ 1,794,141     (2.8 )%
Expenses            
Operating     1,553,416       1,610,103     (3.5 )%
Selling, general and administrative     135,652       135,378     0.2 %
Amortization of intangible assets     5,503       4,925     11.7 %
Total expenses     1,694,571       1,750,406     (3.2 )%
Operating profit     48,612       43,735     11.2 %
Interest expense     2,981       8,590     (65.3 )%

Income from continuing operations before income taxes

    45,631       35,145     29.8 %
Provision for income taxes     17,827       13,576     31.3 %
Income from continuing operations     27,804       21,569     28.9 %
Loss from discontinued operations     (810 )     (4,133 )   -  
Net Income   $ 26,994     $ 17,436     54.8 %
Net Income Per Common Share - Basic          
Income from continuing operations   $ 0.54     $ 0.43     25.6 %
Loss from discontinued operations     (0.01 )     (0.08 )   -  
    $ 0.53     $ 0.35     51.4 %
Net Income Per Common Share - Diluted          
Income from continuing operations   $ 0.54     $ 0.42     28.6 %
Loss from discontinued operations     (0.02 )     (0.08 )   -  
    $ 0.52     $ 0.34     52.9 %
             
Average Common And Common Equivalent Shares          
Basic     51,206       50,268      
Diluted     51,511       51,105      
             
Dividends Declared Per Common Share   $ 0.260     $ 0.250      
             
       
REVENUES AND OPERATING PROFIT BY SEGMENT (UNAUDITED)
             
    Three Months Ended April 30,   Increase
    2009   2008   (Decrease)
Revenues            
Janitorial   $ 589,344     $ 625,542     (5.8 )%
Parking     113,347       118,522     (4.4 )%
Security     82,403       82,285     0.1 %
Engineering     70,194       79,346     (11.5 )%
Corporate     423       654     (35.3 )%
    $ 855,711     $ 906,349     (5.6 )%
Operating Profit            
Janitorial   $ 34,894     $ 29,844     16.9 %
Parking     4,859       4,364     11.3 %
Security     1,397       1,473     (5.2 )%
Engineering     4,038       4,286     (5.8 )%
Corporate     (22,570 )     (11,248 )   100.7 %
Operating profit     22,618       28,719     (21.2 )%
Interest expense     1,313       3,980     (67.0 )%

Income from continuing operations before income taxes

  $ 21,305     $ 24,739     (13.9 )%
             
    Six Months Ended April 30,   Increase
    2009   2008   (Decrease)
Revenues            
Janitorial   $ 1,197,764     $ 1,231,587     (2.7 )%
Parking     229,016       236,533     (3.2 )%
Security     167,986       163,226     2.9 %
Engineering     147,410       161,161     (8.5 )%
Corporate     1,007       1,634     (38.4 )%
    $ 1,743,183     $ 1,794,141     (2.8 )%
Operating Profit            
Janitorial   $ 67,205     $ 50,786     32.3 %
Parking     9,001       8,253     9.1 %
Security     3,191       2,865     11.4 %
Engineering     8,704       7,812     11.4 %
Corporate     (39,489 )     (25,981 )   52.0 %
Operating profit     48,612       43,735     11.2 %
Interest expense     2,981       8,590     (65.3 )%

Income from continuing operations before income taxes

  $ 45,631     $ 35,145     29.8 %
                       
                 
ABM Industries Incorporated
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
                 
(in millions, except per share data)
                 
    Three Months Ended April 30,   Six Months Ended April 30,
    2009   2008   2009   2008
                 
Reconciliation of Adjusted Income from Continuing  
Operations to Income from Continuing Operations  
                 
Adjusted Income from Continuing Operations   $ 16.3     $ 14.0     $ 29.4     $ 22.0  
                 
Items Impacting Comparability                
                 
Corporate Initiatives (a)     (5.5 )     (5.0 )     (12.2 )     (7.8 )
Third-Party Administrator Legal Settlement     -       -       9.6       -  
Insurance Adjustments     -       7.2       -       7.2  
Total Items Impacting Comparability     (5.5 )     2.2       (2.6 )     (0.6 )
Income Taxes (Expense) Benefit     2.2       (0.9 )     1.0       0.2  
Items Impacting Comparability, net of taxes     (3.3 )     1.3       (1.6 )     (0.4 )
                 
Income from Continuing Operations   $ 13.0     $ 15.3     $ 27.8     $ 21.6  
                 
Reconciliation of Adjusted EBITDA to Net Income  
                 
Adjusted EBITDA   $ 36.1     $ 32.7     $ 66.4     $ 56.5  
                 
Total Items Impacting Comparability     (5.5 )     2.2       (2.6 )     (0.6 )
Discontinued Operations     (0.3 )     (4.2 )     (0.8 )     (4.1 )
Income Tax     (8.3 )     (9.4 )     (17.8 )     (13.6 )
Interest Expense     (1.3 )     (4.0 )     (3.0 )     (8.6 )
Depreciation and Amortization     (7.9 )     (6.2 )     (15.2 )     (12.2 )
                 
Net Income   $ 12.8     $ 11.1     $ 27.0     $ 17.4  
                 
Reconciliation of Adjusted Income from Continuing Operations per Diluted  
Share to Income from Continuing Operations per Diluted Share  
                 

Adjusted Income from Continuing Operations per Diluted Share

  $ 0.32     $ 0.27     $ 0.57     $ 0.43  
                 
Items Impacting Comparability, net of taxes     (0.07 )     0.03       (0.03 )     (0.01 )

Income from Continuing Operations per Diluted Share

  $ 0.25     $ 0.30     $ 0.54     $ 0.42  
                 
Diluted Shares     51.6       51.3       51.5       51.1  
                 
(a) Corporate initiatives include: (i) costs associated with the implementation of a new payroll and human resources information system, (ii) the upgrade of the Company's accounting system, (iii) the completion of the corporate move from San Francisco, and (iv) the integration costs associated with OneSource.
   
         
ABM Industries Incorporated

Reconciliation of Estimated Adjusted Income from Continuing Operations per Diluted Share to Income from Continuing Operations per Diluted Share for the Year Ending October 31, 2009

         
         
    Year Ending October 31, 2009
    Low Estimate   High Estimate
    (per diluted share)
         
Adjusted Income from Continuing Operations per Diluted Share   $ 1.25     $ 1.35  
         
Adjustments to Income from Continuing Operations (a)     (0.15 )     (0.15 )
         
Income from Continuing Operations per Diluted Share   $ 1.10     $ 1.20  
         
(a) The adjustment to income from continuing operations includes: (i) costs associated with the implementation of a new payroll and human resources information system, the upgrade of the Company's accounting system, the completion of the corporate move from San Francisco and the integration costs associated with OneSource aggregating ($0.26) per share, offset by (ii) the positive settlement with a former third-party administrator of workers' compensation claims in the amount of $0.11 per share.

SOURCE: ABM Industries Incorporated

ABM Industries Incorporated
Investors & Analysts:
David Farwell, 415-733-4040, dfarwell@abm.com
or
Media:
Tony Mitchell, 212-297-9828, tony.mitchell@abm.com

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