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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 July 31, 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 from ___________________ to ______________
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
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 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 July 31, 1995: 9,282,709
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
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<CAPTION>
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OCTOBER 31, JULY 31,
ASSETS 1994 1995
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(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,368 $ 1,042
Accounts and other receivables, net 140,788 149,955
Inventories and supplies 17,420 19,579
Deferred income taxes 11,638 12,854
Prepaid expenses 12,228 15,558
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Total current assets 189,442 198,988
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INVESTMENTS AND LONG-TERM RECEIVABLES 6,841 6,601
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and buildings 6,063 5,555
Transportation and equipment 8,600 9,773
Machinery and other equipment 33,187 35,866
Leasehold improvements 9,052 9,260
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56,902 60,454
Less accumulated depreciation and amortization (37,083) (38,584)
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Property, plant and equipment, net 19,819 21,870
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INTANGIBLE ASSETS 61,373 68,965
DEFERRED INCOME TAXES 14,982 16,931
OTHER ASSETS 7,013 10,126
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$299,470 $323,481
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ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
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OCTOBER 31, JULY 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1995
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(Unaudited)
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CURRENT LIABILITIES:
Current portion of long-term debt $ 683 $ 679
Bank overdraft - -
Accounts payable, trade 26,187 23,042
Income taxes payable 1,961 2,077
Accrued Liabilities:
Compensation 19,807 19,941
Taxes - other than income 8,693 10,126
Insurance claims 27,185 29,718
Other 14,761 16,532
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Total current liabilities 99,277 102,115
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LONG-TERM DEBT (LESS CURRENT PORTION) 25,254 31,223
RETIREMENT PLANS 5,978 7,123
INSURANCE CLAIMS 38,230 40,735
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 9,283,000 shares
issued and outstanding at October 31, 1994
and July 31, 1995, respectively 90 93
Additional capital 35,334 39,074
Retained earnings 88,907 96,718
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Total stockholders' equity 124,331 135,885
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$299,470 $323,481
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ABM INDUSTRIES INCORPORATED
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
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THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
1994 1995 1994 1995
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<S> <C> <C> <C> <C>
REVENUES AND OTHER INCOME $ 224,965 $ 245,792 $ 651,676 $ 712,250
EXPENSES:
Operating Expenses and Cost of Goods Sold 194,403 212,467 560,517 613,379
Selling and Administrative 22,660 23,817 71,202 74,691
Interest 1,303 870 2,763 2,904
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Total Expenses 218,366 237,154 634,482 690,974
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INCOME BEFORE INCOME TAXES 6,599 8,638 17,194 21,276
INCOME TAXES 2,453 3,628 6,903 8,936
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NET INCOME $ 4,146 $ 5,010 $ 10,291 $ 12,340
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NET INCOME PER SHARE $ 0.45 $ 0.51 $ 1.12 $ 1.26
DIVIDENDS PER COMMON SHARE $ 0.125 $ 0.150 $ 0.375 $ 0.45
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 8,942 9,627 8,872 9,497
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ABM INDUSTRIES INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED JULY 31, 1994 AND 1995
(In Thousands)
<TABLE>
<CAPTION>
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JULY 31, JULY 31,
1994 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $638,764 $699,896
Other operating cash receipts 1,440 2,011
Interest received 286 384
Cash paid to suppliers and employees (617,892) (680,991)
Interest paid (3,120) (3,185)
Income taxes paid (9,792) (11,985)
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Net cash provided by (used) in operating activites 9,686 6,130
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (6,872) (7,254)
Proceeds from sale of assets 414 337
(Increase) decrease in investments and
long-term receivable 92 240
Intangibles resulting from acquisitions (6,468) (10,958)
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Net cash provided by (used) in investing activities (12,834) (17,635)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued 2,998 3,742
Dividends paid (3,814) (4,528)
Increase(decrease) in cash overdraft (4,231) 0
Increase(decrease) in notes payable 4,966 (4)
Long-term borrowings 22,000 57,000
Repayments of long-term borrowings (20,000) (51,031)
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Net cash provided by (used) financing actvities 1,919 5,179
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NET DECREASE IN CASH AND CASH EQUIVALENTS (1,229) (6,326)
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR 1,688 7,368
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CASH AND CASH EQUIVALENTS END OF PERIOD $ 459 $ 1,042
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RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Net Income $ 10,291 $ 12,340
Adjustments:
Depreciation and amortization 6,513 8,331
Provision for bad debts 1,349 1,117
Gain on sale of assets (113) (99)
(Increase) decrease in accounts and other
receivables (9,724) (10,284)
(Increase) decrease in inventories and supplies 683 (2,159)
(Increase) decrease in prepaid expenses (2,301) (3,330)
(Increase) decrease in other assets (236) (3,113)
Increase (decrease) in deferred income taxes (1,087) (3,165)
Increase (decrease) in income taxes payable (1,802) 116
Increase (decrease) in retirement plans accrual 1,055 1,145
Increase (decrease) in insurance claims liablilty 2,589 5,038
Increase (decrease) in accounts payable
and other accrued liabilities 2,469 193
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Total adjustments to net income (605) (6,210)
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NET CASH PROVIDED BY (USED) IN OPERATING ACTIVITIES $ 9,686 $ 6,130
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</TABLE>
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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 July 31, 1995 and the results of
operations and cash flows for the three months and nine 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
$384,000 during the nine months ended July 31, 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.
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
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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 July 31,
1995, the total amount considered utilized under this facility was approximately
$97.8 million which was comprised of loans in the amount of $29 million and
standby letters of credit of $68.8 million. The effective interest rate on bank
borrowings for the nine months ended July 31, 1995 was approximately 7.29%.
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 July 31, 1995, the balance remaining on this note was
$2,545,000.
At July 31, 1995, working capital was $96.9 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 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
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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. Management estimates that annual
revenues from this acquisition will be approximately $3.5 million.
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 and approximately $10 million in annual
revenues.
On July 1, 1995, the Company's Janitorial Services Division acquired the
janitorial operations of United Cleaning Specialists Corp. in Atlanta, Georgia.
United Cleaning provides janitorial services to major commercial buildings and
institutions in Alabama, Florida, Georgia, North Carolina, South Carolina,
Tennessee, and Virginia. At the time of acquisition by the Company, United
Cleaning reported annual revenues of approximately $10.6 million. In addition
to the amount paid at closing, annual contingent payments based upon gross
profit of acquired contracts will be made over the next five years.
On September 1, 1995, the Company acquired the janitorial maintenance
contracts of Allied Janitorial Services of Spokane, Washington, for a cash
downpayment made at the time of closing plus annual contingent payments based on
gross profits of acquired contacts over a five-year period. The expected annual
revenues from this acquisition will be approximately $4.7 million.
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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 third quarter which ended on October 31 and July 31,
respectively.
NINE MONTHS ENDED JULY 31, 1995 VS. NINE MONTHS ENDED JULY 31, 1994
Revenues and other income (hereafter called revenues) for the first nine
months of fiscal year 1995 were $712 million compared to $652 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 86.1% during the nine months of fiscal year 1995 compared to 86.0% for
the same period in 1994. Consequently, as a percentage of revenues, gross
profit (revenue minus operating expenses and cost of goods sold) was 13.9% for
the nine months ended July 31, 1995, as compared to 14.0% for the same period of
fiscal year 1994. The principal factors which contributed to the slight 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 nine months of fiscal year 1995
was $74.7 million compared to $71.2 million, up $3.5 million or 5%, for the
corresponding nine months of fiscal year 1994. As a percentage of revenues,
selling and administrative expense decreased from 10.9% for the nine months
ended July 31, 1994 to 10.5% for the same period in 1995. The increase in the
dollar amount of selling and administrative expense for the nine months ended
July 31, 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.
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Interest expense was $2,904,000 for the first nine months of fiscal year
1995 compared to $2,763,000 in 1994, an increase of $141,000 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 assessed on fully accrued state and federal income taxes.
The effective income tax rate for the first nine months of fiscal year 1994
was 40.1% compared to 42% for 1995. The effective income tax for the first nine
months of the fiscal year 1995 is higher than the same period of the prior year
primarily due to unavailability of certain tax credits in 1995 which were
available previously.
Net income for the first nine months of fiscal year 1995 was $12,340,000,
an increase of 20%, compared to the prior year's net income of $10,291,000.
However, due to the increase in average shares outstanding and the deduction of
a preferred stock dividend of $384,000 in the calculation of earnings per share,
per common share earnings increased 13% to $1.26 for the first nine months of
1995 compared to $1.12 for the same period in 1994.
The results of operations from the Company's three industry segments and
its eight operating divisions for the nine months ended July 31, 1995 as
compared to the nine months ended July 31, 1994 are more fully described below:
Revenues of the Janitorial Services segment for the first nine months
of fiscal year 1995 were $378 million, an increase of $21 million or
5.9%, over the first nine months of fiscal 1994, while its operating
profits increased by 2.3% over the comparable period of 1994. The
Janitorial Services segment accounted for approximately 53% of the
Company's consolidated revenues for the nine months of fiscal year
1995. The Janitorial Division's revenues increased by 5.6% during the
first nine months of fiscal year 1995 as compared to the same period
of 1994 primarily resulting from acquisitions as well as volume
increases recorded by all regions of this Division except for the
Southwest and Canadian Regions. This Division's operating profits
increased 2% when compared to the same period last year. Labor and
labor-related expenses and other direct expenses were slightly higher
during the first nine months of the fiscal year 1995 over the same
period of the prior year primarily due to start-up expenses associated
with new contracts. The Division's selling and
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administrative expenses also impacted the operating results negatively
because of increased marketing and acquisition expenses. The
Janitorial Supply Division's revenue for the first nine months
increased by approximately 13% compared to the same period in 1994
generally due to increased sales from new customers in Northern
California. An increase of 15% in operating profits was a result of a
larger sales volume as well as the Division's efforts to control its
selling and administrative expenses which was partially offset by
lower margins resulting from increased material costs.
Amtech Services reported revenues of $183 million, which represent
approximately 26% of the Company's consolidated revenues for the first
nine months of 1995, an increase of approximately 10% over the same
period of last year. Amtech Services' profit increased 47% compared
to the first nine months of fiscal year 1994 as all its divisions
posted higher operating profits for the nine months ended July 31,
1995. The Mechanical Division's revenues and operating profits for
the first nine months of 1995 increased by 6% and 33%, respectively.
Although the margins for some job categories decreased, this
Division's successful efforts in reducing its overhead expenses
enabled it to increase its operating profits. The Lighting Division's
revenues were up 28% 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
national customers. Operating profits increased by 13% during the
first nine months of fiscal year 1995. The increase in operating
profits did not parallel the increase in revenues because it was
somewhat negatively impacted by lower margin retrofit contracts and
other larger jobs. Revenues for the Elevator Division were down by 9%
for the first nine months of fiscal year 1995 over the same period of
1994 generally due to decreased construction business. The Division
is down-sizing this type of business since it remains highly
competitive and contributes lower margins. However, the Division
increased its operating profits by 135% for the nine 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
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administrative expenses were offset by currency translation losses
arising from its Mexican subsidiary. The Engineering Division's
revenues increased by 24% and reported a 50% increase in operating
profits in the first nine 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 nine months of
1995 were approximately $151 million, a 19% increase over the same
period of fiscal year 1995. Other Services accounted for
approximately 21% of the Company's consolidated revenues. The
operating profits of Other Services were up by 17% primarily due to
profit improvement by both its Parking and Security Divisions. The
Parking Division's revenues increased by 19% and its profits increased
by 27% during the first nine months of fiscal year 1995 compared to
1994. The increase in revenues is primarily due to the acquisition in
January 1995 of a parking business based in Northern California with
operations in California and Hawaii and from obtaining contracts to
manage parking operations at several major U.S. airports. Several
factors contributed to the increase in operating profits: the
acquisition of a parking business discussed above; improved business
conditions in its Southern California Region; and income derived from
its airport operations. The Security Division reported an increase in
revenues of 19% compared to 1994, and its profits increased by 6% in
the first nine 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 during the fiscal year
1995. However, the operating profit increase was below management's
expectations mainly due to lower margins necessitated by competitive
bidding in order to obtain larger contracts. Operating profits were
also impacted negatively by higher selling and administrative expenses
because of the increased level of business.
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THREE MONTHS ENDED JULY 31, 1995 VS. THREE MONTHS ENDED JULY 31, 1994
Revenues and other income for the third quarter of fiscal year 1995 were
$246 million compared to $225 million in 1994, a 9% increase over the same
quarter of the prior year. The growth in revenues for the third 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 remained constant at 86.4 %
for both 1995 and 1994. Consequently, as a percentage of revenues, the
Company's gross profit also remained at 13.6%.
Selling and administrative expense for the third quarter of fiscal year
1995 was $23.8 million compared to $22.7 million, an increase of approximately
$1.1 million or 5%, compared to the corresponding three months of fiscal year
1994. As a percentage of revenues, selling and administrative expense decreased
from 10.1% for the three months ended July 31, 1994, to 9.7% 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 July 31, 1995, compared to the same period in
1994,was in line with the Company's revenue growth.
Interest expense was $870,000 for the third quarter of fiscal year 1995
compared to $1,303,000 in 1994, a decrease of $433,000 over the same period of
the prior fiscal year. Interest expense decreased primarily due to interest
related to a foreign income tax assessment during 1994.
The effective income tax rate for the third quarter of fiscal year 1995 was
42% while the third quarter of the prior year was 37.2%. The effective income
tax for the third quarter of the fiscal year 1995 is higher than the prior year
quarter primarily due to unavailability of certain tax credits in 1995 which
were available previously.
Net income for the third quarter of 1995 was $5,010,000, an increase of
21%, compared to the net income of $4,146,000 for the third 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 13% to 51
cents for the third quarter of 1995 compared to 45 cents for the same period in
1994.
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The results of operations from the Company's three industry segments and
its eight operating divisions for the three months ended July 31, 1995, as
compared to the three months ended July 31, 1994, are more fully described
below:
Revenues of the Janitorial Services segment of the third quarter of fiscal
year 1995 were $129 million, an increase of approximately $5 million or 4%,
over the third quarter of fiscal 1994, while its operating profits
decreased by 4% over the comparable quarter of 1994. The Janitorial
Services segment accounted for approximately 53% of the Company's revenues
for the current quarter. The Janitorial Division's revenues increased by
4% during the third 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 Midwest Region.
However, the Division's operating profits decreased 4% when compared to the
same period last year. In comparison with the 4% revenue increase, the
lower than expected operating profit is principally due to higher selling
and administrative expenses associated with marketing efforts to increase
its revenues and costs associated with acquisitions. Easterday Janitorial
Supply Division's third quarter revenues increased by approximately 21%
compared to the same quarter in 1994 generally due to an increase in new
customers. The increase in operating profit was not in line with sales
volumes principally due to competitive bidding whereby several large sales
contracts were obtained at a lower than normal gross margin. Operating
profits were also partially offset by higher than expected selling and
administrative expenses and higher paper products and plastic liners
material expenses.
Amtech Divisions reported revenues of $63 million, which represent
approximately 26% of the Company's revenues for the third quarter of fiscal
year 1995, an increase of approximately 11% over the same quarter of last
year. Amtech Divisions' profit increased 32% for the third quarter of 1995
when compared to the third quarter of fiscal year 1994. CommAir Mechanical
Services Division's operating profits for the third quarter of 1995
increased by 36% on a revenue increase of 23%. Revenues from project
oriented type of contracts increased during the third quarter of 1995.
Increased revenues and a reduction in selling and administrative expenses
primarily accounted for the
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profit increase. Amtech Lighting Services Division reported a 26% revenue
increase benefiting from a continued expansion in the Southeast and an
expanded customer contract base from existing national customers, but its
operating profits decreased by 2%. A decline in gross profit as a
percentage of revenues was caused primarily by increases in material
expenses. Costs associated with market expansion in newer territories also
caused this Division's profit decline. Revenues for the Amtech Elevator
Services Division were down by 12% for the third 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 nearly doubled its operating profit for the third 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. This decision also helped to reduce
selling and administrative expenses significantly. ABM Engineering
Services Division's revenues increased by 25% and it reported a 32%
increase in operating profits for the third 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 third quarter of 1995 were
approximately $54 million, a 21% 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
37% due to improved operating profits reported by both its Ampco System
Parking Division and ASI Security Services. Ampco System Parking
Division's revenues increased by 17% while its profits increased 48% during
the third quarter of fiscal year 1995. The increase in revenues resulted
from an acquisition made in January 1995, as previously discussed, as well
as procuring parking management contracts of several major airports.
Operating profits were up primarily due to the recent acquisition,
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airport contracts, and improved economic conditions in the Division's
Southern California Region. ASI Security Services reported an increase in
revenues of 28% and its profits were up 24% in the third 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 all regions.
Revenue increases during the third quarter as compared to the prior year
contributed to the increase in operating profits; however, competitive
market conditions eroded the gross margins historically realized by this
Division.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings - not applicable.
Item 5. Other Information
Robert S. Dickerman retired from the Board of Directors on August 2, 1995.
Mr. Dickerman had been a director of the Company since 1967. The
Nominating Committee is in the process of recommending a nominee to fill
Mr. Dickerman's vacant seat. The person chosen by the Board will complete
Mr. Dickerman's unexpired term which ends in March 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27.1 - Financial Data Schedule.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
quarter ended July 31, 1995.
17
<PAGE>
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
SEPTEMBER 13, 1995 /s/ David H. Hebble
-------------------------------
Vice President and Principal
Financial Officer
18
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