ABM Industries Incorporated
Sep 2, 2009

ABM Industries Announces Third Quarter 2009 Financial Results and Declares Quarterly Dividend

Net Income Declines, Primarily Driven by Prior-Year Insurance Adjustments
Adjusted Income from Continuing Operations Increases 18%
Company Declares 174th Consecutive Quarterly Dividend

NEW YORK, Sep 02, 2009 (BUSINESS WIRE) -- ABM Industries Incorporated (NYSE:ABM):

Three Months EndedNine Months Ended
July 31,IncreaseJuly 31,Increase
(in millions) 20092008(Decrease)20092008(Decrease)
Revenues $ 870.6 $ 923.7 (5.7 )% $ 2,613.8 $ 2,717.8 (3.8 )%
Income from continuing operations 12.4 16.3 (24.1 )% 40.2 37.9 6.0 %
Net Income 12.3 16.4 (25.2 )% 39.3 33.9 16.0 %
Adjusted income from continuing operations 18.7 15.8 18.4 % 48.0 37.7 27.3 %
Net cash provided by operating activities $ 9.3 $ 15.7 (41.0 )% $ 76.5 $ 36.8 107.6 %
(See accompanying financial tables for supplemental financial data and corresponding reconciliations to certain GAAP financial measures.)

ABM Industries Incorporated (NYSE:ABM) today reported revenues for the third quarter of fiscal year 2009 of $870.6 million compared to third quarter of fiscal year 2008 revenues of $923.7 million. Net income for the third quarter of fiscal year 2009 was $12.3 million, a 25.2% decrease from $16.4 million in the year-ago quarter. Net income for the third quarter of fiscal year 2009 included a $2.2 million after-tax insurance expense related to prior years compared to a $4.6 million after-tax insurance benefit related to prior years in the year-ago quarter. Earnings per diluted share for the third quarter of fiscal year 2009 decreased 25.0% to $0.24 compared to third quarter of fiscal year 2008 earnings per diluted share of $0.32.

Income from continuing operations for the third quarter of fiscal year 2009 was $12.4 million ($0.24 per diluted share) compared to $16.3 million ($0.32 per diluted share) in the third quarter of fiscal year 2008. Adjusted income from continuing operations increased to $18.7 million, or $0.36 per diluted share, for the third quarter of fiscal year 2009, which excludes the $2.2 million after-tax insurance expense noted above and approximately $3 million after-tax costs related to the closing stages of the corporate initiatives which began in 2007. This compares to $15.8 million, or $0.31 per diluted share, in the third quarter of fiscal year 2008, which excludes a net $0.5 million benefit from items impacting comparability. (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 third quarter of fiscal year 2009 was $37.8 million compared to $35.0 million in the year-ago quarter. (See accompanying financial tables for supplemental financial data and corresponding reconciliations to certain GAAP financial measures.)

"We continue to deliver strong results from our operating divisions," said Henrik Slipsager, president and chief executive officer of ABM Industries Incorporated. "I am pleased that revenues in our third quarter increased slightly over the second quarter as we start to see signs of an improving economy. Combined, our operating divisions increased profits and margins, driven by aggressive cost controls. Adjusted income from continuing operations increased 18% for the quarter and adjusted EBITDA, a key measure of the strength of our operations, was up 8% year-over-year for the third quarter and nearly 14% for the first nine months of the fiscal year." (See accompanying financial tables for supplemental financial data and corresponding reconciliations to certain GAAP financial measures.)

Slipsager added: "We also continue to generate strong operating cash flow across the business. Net cash from operations increased to approximately $77 million through the first nine months of the year, which helped support our acquisition of facility services assets from Control Holding Group during the quarter. Additionally, we continue to reduce borrowings under our line of credit, net of acquisitions. These ongoing aggressive steps to improve profitability and generate cash from operations strongly position the Company for a rebound in the U.S. economy."

The Company reported net income for the nine months ended July 31, 2009 of $39.3 million, an increase of 16.0% compared to $33.9 million for the first nine months of fiscal year 2008. Earnings per diluted share for the first nine months of fiscal year 2009 increased 15.2% to $0.76 per diluted share compared to $0.66 per diluted share in the first nine months of fiscal year 2008. Income from continuing operations for the first nine months of fiscal year 2009 increased to $40.2 million ($0.78 per diluted share) compared to $37.9 million ($0.74 per diluted share) for the first nine months of fiscal year 2008. Adjusted income from continuing operations for the first nine months of fiscal year 2009 was $48.0 million, or $0.93 per diluted share, compared to $37.7 million, or $0.74 per diluted share, for the first nine months of fiscal year 2008. (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 fourth quarter cash dividend of $0.13 per common share payable on November 2, 2009 to stockholders of record on October 8, 2009. This will be ABM's 174th consecutive quarterly cash dividend.

Guidance

The Company now estimates that full fiscal year 2009 income from continuing operations per diluted share will be in the range of $1.05 to $1.15, which takes into consideration the unanticipated impact of the insurance expense related to prior years. The Company is reaffirming its guidance for fiscal year 2009 adjusted income from continuing operations per diluted share, which it expects 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 Thursday, September 3, 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=71925

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 877-627-6566 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 #7514121.

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 the leading provider of facility services in the United States. With fiscal 2008 revenues in excess of $3.6 billion and approximately 100,000 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 July 31, 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) further declines in commercial office building occupancy and rental rates relating to a deepening of the current recession; (2) 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; (3) the inability of customers to access the credit markets impacting the Company's ability to collect receivables; (4) 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; (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)future fluctuations in the fair value of the Company's investment in auction rate securities that are deemed other-than-temporarily impaired; (13)increase in debt service requirements; (14) labor disputes leading to a loss of sales or expense variations; (15) natural disasters or acts of terrorism that disrupt the Company in providing services; (16) events or circumstances that may result in impairment of goodwill recognized on the OneSource or other acquisitions; (17) significant accounting and other control costs that reduce the Company's profitability; and (18) 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 third quarter and first nine 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 third quarter and first nine 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)
July 31,October 31,
2009

2008 (a)

Assets
Cash and cash equivalents $ 23,573 $ 26,741
Trade accounts receivable, net 470,545 473,263
Prepaid income taxes 15,151 7,097
Current assets of discontinued operations 16,780 34,508
Prepaid expenses and other 58,981 57,011
Deferred income taxes, net 55,392 57,463
Insurance recoverables 4,817 5,017
Total current assets 645,239 661,100
Non-current assets of discontinued operations 5,846 11,205
Insurance deposits 42,506 42,506
Other investments and long-term receivables 5,524 4,470
Deferred income taxes, net 72,512 88,704
Insurance recoverables 67,300 66,600
Other assets 31,182 23,310
Investments in auction rate securities 19,655 19,031
Property, plant and equipment, net 59,438 61,067
Other intangible assets, net 63,084 62,179
Goodwill 548,978 535,772
Total assets $ 1,561,264 $ 1,575,944
Liabilities
Trade accounts payable $ 87,511 $ 104,930
Accrued liabilities
Compensation 93,032 88,951
Taxes - other than income 19,638 20,270
Insurance claims 84,500 84,272
Other 78,013 76,590
Income taxes payable 4,504 2,025
Current liabilities of discontinued operations 12,316 10,082
Total current liabilities 379,514 387,120
Income taxes payable 14,369 15,793
Line of credit 196,000 230,000
Retirement plans and other 37,754 37,095
Insurance claims 259,010 261,885
Total liabilities 886,647 931,893
Stockholders' Equity 674,617 644,051
Total liabilities and stockholders' equity $ 1,561,264 $ 1,575,944
(a) Amounts shown as of October 31, 2008 reflect the reclassification of certain net book credit cash balances which increased cash and cash equivalents and trade accounts payable. The reclassification resulted in an increase in cash and cash equivalents and trade accounts payable as of October 31, 2008 in the amount of $26.0 million. In addition, $8.9 million has been reclassed from other accrued liabilities to trade accounts payable as of October 31, 2008, related to certain net book credit cash balances that were previously reclassed.
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (UNAUDITED)
Three Months Ended July 31,
2009

2008 (a)

Net cash provided by continuing operating activities 8,295 13,369
Net cash provided by discontinued operating activities 968 2,326
Net cash provided by operating activities $ 9,263 $ 15,695
Net cash used in continuing investing activities (24,179 ) (10,363 )
Net cash provided by discontinued investing activities - 189
Net cash used in investing activities $ (24,179 ) $ (10,174 )
Proceeds from exercises of stock options (including income tax benefit) 1,690 5,197
Dividends paid (6,693 ) (6,330 )
Borrowings from line of credit 182,000 136,000
Repayment of borrowings from line of credit (168,000 ) (152,500 )
Book overdraft payable 9,427 7,079
Net cash provided by (used in) financing activities $ 18,424 $ (10,554 )
Nine Months Ended July 31,
2009

2008 (a)

Net cash provided by continuing operating activities 52,636 30,950
Net cash provided by discontinued operating activities 23,829 5,883
Net cash provided by operating activities $ 76,465 $ 36,833
Net cash used in continuing investing activities (32,293 ) (446,990 )
Net cash provided by discontinued investing activities - 174
Net cash used in investing activities $ (32,293 ) $ (446,816 )
Proceeds from exercises of stock options (including income tax benefit) 3,206 12,985
Dividends paid (20,007 ) (18,901 )
Borrowings from line of credit 525,000 658,500
Repayment of borrowings from line of credit (559,000 ) (373,500 )
Book overdraft payable 3,461 7,776
Net cash (used in) provided by financing activities $ (47,340 ) $ 286,860
(a) Amounts shown for the three months and nine months ended July 31, 2008 reflect the reclassification of certain net book credit cash balances which increased cash and cash equivalents and trade accounts payable. These reclassifications resulted in an increase in net cash provided by (used in) financing activities for the three and nine months ended July 31, 2008 in the amounts of $7.1 million and $7.8 million, respectively.
CONDENSED CONSOLIDATED INCOME STATEMENT INFORMATION (UNAUDITED)
Three Months Ended July 31,Increase
20092008(Decrease)
Revenues $ 870,635 $ 923,667 (5.7 )%
Expenses
Operating 782,449 818,887 (4.4 )%
Selling, general and administrative 64,736 72,317 (10.5 )%
Amortization of intangible assets 2,952 2,518 17.2 %
Total expenses 850,137 893,722 (4.9 )%
Operating profit 20,498 29,945 (31.5 )%

Other-than-temporary impairment losses on auction rate securities:

Gross impairment losses 3,575 - NM*

Impairments recognized in other comprehensive income

(2,009 ) - NM*
Interest expense 1,472 3,338 (55.9 )%

Income from continuing operations before income taxes

17,460 26,607 (34.4 )%
Provision for income taxes 5,060 10,263 (50.7 )%
Income from continuing operations 12,400 16,344 (24.1 )%
(Loss) income from discontinued operations (124 ) 68 NM*
Net Income $ 12,276 $ 16,412 (25.2 )%
Net Income Per Common Share - Basic
Income from continuing operations $ 0.24 $ 0.32 (25.0 )%
(Loss) income from discontinued operations - - NM*
$ 0.24 $ 0.32 (25.0 )%
Net Income Per Common Share - Diluted
Income from continuing operations $ 0.24 $ 0.32 (25.0 )%
(Loss) income from discontinued operations - - NM*
$ 0.24 $ 0.32 (25.0 )%
* Not Meaningful
Average Common And Common Equivalent Shares
Basic 51,471 50,653
Diluted 51,937 51,650
Dividends Declared Per Common Share $ 0.130 $ 0.125
CONDENSED CONSOLIDATED INCOME STATEMENT INFORMATION (UNAUDITED)
Nine Months Ended July 31,Increase
20092008(Decrease)
Revenues $ 2,613,818 $ 2,717,808 (3.8 )%
Expenses
Operating 2,335,865 2,428,989 (3.8 )%
Selling, general and administrative 200,388 207,694 (3.5 )%
Amortization of intangible assets 8,455 7,443 13.6 %
Total expenses 2,544,708 2,644,126 (3.8 )%
Operating profit 69,110 73,682 (6.2 )%

Other-than-temporary impairment losses on auction rate securities:

Gross impairment losses 3,575 - NM*

Impairments recognized in other comprehensive income

(2,009 ) - NM*
Interest expense 4,453 11,928 (62.7 )%

Income from continuing operations before income taxes

63,091 61,754 2.2 %
Provision for income taxes 22,887 23,839 (4.0 )%
Income from continuing operations 40,204 37,915 6.0 %
Loss from discontinued operations (934 ) (4,065 ) NM*
Net Income $ 39,270 $ 33,850 16.0 %
Net Income Per Common Share - Basic
Income from continuing operations $ 0.79 $ 0.75 5.3 %
Loss from discontinued operations (0.02 ) (0.08 ) NM*
$ 0.77 $ 0.67 14.9 %
Net Income Per Common Share - Diluted
Income from continuing operations $ 0.78 $ 0.74 5.4 %
Loss from discontinued operations (0.02 ) (0.08 ) NM*
$ 0.76 $ 0.66 15.2 %
* Not Meaningful
Average Common And Common Equivalent Shares
Basic 51,294 50,388
Diluted 51,653 51,278
Dividends Declared Per Common Share $ 0.390 $ 0.380
REVENUES AND OPERATING PROFIT BY SEGMENT (UNAUDITED)
Three Months Ended July 31,Increase
20092008(Decrease)
Revenues
Janitorial $ 595,115 $ 638,508 (6.8 )%
Parking 114,721 119,814 (4.3 )%
Security 84,501 85,347 (1.0 )%
Engineering 75,782 79,616 (4.8 )%
Corporate 516 382 35.1 %
$ 870,635 $ 923,667 (5.7 )%
Operating Profit
Janitorial $ 35,043 $ 31,678 10.6 %
Parking 4,968 5,464 (9.1 )%
Security 2,751 2,068 33.0 %
Engineering 4,857 5,523 (12.1 )%
Corporate (27,121 ) (14,788 ) 83.4 %
Operating profit 20,498 29,945 (31.5 )%

Other-than-temporary impairment losses on auction rate securities:

Gross impairment losses 3,575 - NM*

Impairments recognized in other comprehensive income

(2,009 ) - NM*
Interest expense 1,472 3,338 (55.9 )%

Income from continuing operations before income taxes

$ 17,460 $ 26,607 (34.4 )%
Nine Months Ended July 31,Increase
2009 2008(Decrease)
Revenues
Janitorial $ 1,792,879 $ 1,870,096 (4.1 )%
Parking 343,737 356,346 (3.5 )%
Security 252,487 248,573 1.6 %
Engineering 223,192 240,777 (7.3 )%
Corporate 1,523 2,016 (24.5 )%
$ 2,613,818 $ 2,717,808 (3.8 )%
Operating Profit
Janitorial $ 102,248 $ 82,464 24.0 %
Parking 13,969 13,717 1.8 %
Security 5,942 4,933 20.5 %
Engineering 13,561 13,335 1.7 %
Corporate (66,610 ) (40,767 ) 63.4 %
Operating profit 69,110 73,682 (6.2 )%

Other-than-temporary impairment losses on auction rate securities:

Gross impairment losses 3,575 - NM*

Impairments recognized in other comprehensive income

(2,009 ) - NM*
Interest expense 4,453 11,928 (62.7 )%
Income from continuing operations
before income taxes $ 63,091 $ 61,754 2.2 %
* Not Meaningful
ABM Industries Incorporated
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
(in millions, except per share data)
Three Months Ended July 31, Nine Months Ended July 31,
2009 2008 2009 2008

Reconciliation of Adjusted Income from Continuing Operations to Net Income

Adjusted Income from Continuing Operations $ 18.7 $ 15.8 $ 48.0 $ 37.7
Items Impacting Comparability, net of taxes (6.3 ) 0.5 (7.8 ) 0.2
Income from Continuing Operations 12.4 16.3 40.2 37.9
Loss (Income) from Discontinued Operations (0.1 ) 0.1 (0.9 ) (4.1 )
Net Income $ 12.3 $ 16.4 $ 39.3 $ 33.9 (a)

Reconciliation of Adjusted Income from Continuing Operations to Income from Continuing Operations

Adjusted Income from Continuing Operations $ 18.7 $ 15.8 $ 48.0 $ 37.7
Items Impacting Comparability
Corporate Initiatives (b) (5.1 ) (6.7 ) (17.3 ) (14.5 )
Third-Party Administrator Legal Settlement - - 9.6 -
Insurance Adjustments (3.5 ) 7.6 (3.5 ) 14.8
Credit Loss on Auction Rate Security (1.6 ) - (1.6 ) -
Total Items Impacting Comparability (10.2 ) 0.9 (12.8 ) 0.3
Income Taxes (Expense) Benefit 3.9 (0.4 ) 5.0 (0.1 )
Items Impacting Comparability, net of taxes (6.3 ) 0.5 (7.8 ) 0.2
Income from Continuing Operations $ 12.4 $ 16.3 $ 40.2 $ 37.9
Reconciliation of Adjusted EBITDA to Net Income
Adjusted EBITDA $ 37.8 $ 35.0 $ 104.2 $ 91.5
Total Items Impacting Comparability (10.2 ) 0.9 (12.8 ) 0.3
Discontinued Operations (0.1 ) 0.1 (0.9 ) (4.1 )
Income Tax (5.1 ) (10.3 ) (22.9 ) (23.8 )
Interest Expense (1.5 ) (3.3 ) (4.5 ) (11.9 )
Depreciation and Amortization (8.6 ) (5.9 ) (23.9 ) (18.1 )
Net Income $ 12.3 $ 16.4 (a) $ 39.3 (a) $ 33.9

Reconciliation of Adjusted Income from Continuing Operations per Diluted Share to Income from Continuing Operations per Diluted Share

Three Months Ended July 31, Nine Months Ended July 31,
2009 2008 2009 2008
Adjusted Income from Continuing
Operations per Diluted Share $ 0.36 $ 0.31 $ 0.93 $ 0.74
Items Impacting Comparability, net of taxes (0.12 ) 0.01 (0.15 ) -
Income from Continuing Operations
per Diluted Share $ 0.24 $ 0.32 $ 0.78 $ 0.74
Diluted Shares 51.9 51.7 51.7 51.3
(a) Does not foot due to rounding
(b) 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) (0.20 ) (0.20 )
Income from Continuing Operations per Diluted Share $ 1.05 $ 1.15

(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 ($0.25) per share, unanticipated impact of the insurance expense related to prior years ($0.04) per share and non-cash credit loss charge associated with an auction rate security ($0.02) 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, 212-297-9792
dfarwell@abm.com
or
Media:
Tony Mitchell, 212-297-9828
tony.mitchell@abm.com

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