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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(Mark One)
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X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999
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OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
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For the Transition Period from __________ to __________ .
Commission File Number 1-8929
ABM INDUSTRIES INCORPORATED
(Exact name of registrant as specified in its charter)
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DELAWARE 94-1369354
(State or other jurisdiction of incorporation or (IRS Employer Identification Number)
organization)
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160 PACIFIC AVENUE, SUITE 222, SAN FRANCISCO, CALIFORNIA 94111
(Address and zip code of principal executive offices)
TELEPHONE: 415/733-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Title of Each Class Name of Each Exchange on Which Registered
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COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act: None
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 for 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 _
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes X No _
As of December 31, 1999, nonaffiliates of the registrant beneficially owned
16,859,393 shares of the registrant's common stock with an aggregate market
value of $343,510,132.
As of December 31, 1999, there were 22,148,348 shares of the registrant's common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be used by the Company in connection with its
2000 Annual Meeting of Stockholders are incorporated by reference into Part III
of this Form 10-K.
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ABM INDUSTRIES INCORPORATED
FORM 10-K
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999
TABLE OF CONTENTS
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PAGE
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PART I
Item 1 Business.................................................... 3
Executive Officers of the Company........................... 6
Item 2 Properties.................................................. 7
Item 3 Legal Proceedings........................................... 7
Item 4 Submission of Matters to a Vote of Security Holders......... 7
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 7
Item 6 Selected Consolidated Financial Data........................ 8
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
Item 7A Qualitative and Quantitative Disclosures About Market
Risk........................................................ 13
Item 8 Financial Statements and Financial Statement Schedule....... 14
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 30
PART
III
Item 10 Directors and Executive Officers of the Registrant.......... 30
Item 11 Executive Compensation...................................... 30
Item 12 Security Ownership of Certain Beneficial Owners and
Management.................................................. 30
Item 13 Certain Relationships and Related Transactions.............. 30
PART IV
Item 14 Exhibits, Consolidated Financial Statement Schedules and
Reports on Form 8-K......................................... 30
Signatures.................................................. 32
Exhibit Index............................................... 33
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PART I
ITEM 1. BUSINESS.
ABM Industries Incorporated ("ABM") is the largest facility services
contractor listed on the New York Stock Exchange. With annual revenues exceeding
$1.6 billion and more than 57,000 employees, ABM and its subsidiaries (the
"Company") provide air conditioning, elevator, engineering, janitorial,
lighting, parking and security services to thousands of commercial, industrial
and institutional customers who outsource these services in hundreds of cities
across North America.
ABM was reincorporated in Delaware on March 19, 1985, as the successor to a
business founded in California in 1909. The Corporate Headquarters of the
Company are located at 160 Pacific Avenue, Suite 222, San Francisco, California
94111, and its telephone number is 415/733-4000.
INDUSTRY SEGMENT INFORMATION
The Company's operations are grouped into nine industry segments or
divisions (comprised of one or more subsidiaries of the Company). Referred to as
"ABM Industries Incorporated Family of Services", they are listed below by their
respective division name:
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- - ABM Engineering Services - Amtech Elevator Services
- - ABM Facility Services - Amtech Lighting Services
- - ABM Janitorial Services - CommAir Mechanical
- - American Commercial Services
Security - Easterday Janitorial
- - Ampco System Parking Supply Company
</TABLE>
Additional information relating to the Company's industry segments appears
in Note 14 of Notes to Consolidated Financial Statements contained in Item 8,
Financial Statements and Financial Statement Schedule. The business activities
of the Company's industry segments, as they existed at October 31, 1999, are
more fully described below.
M ABM ENGINEERING SERVICES provides building owners and managers with
on-site engineers to operate, maintain and repair electrical, energy
management, mechanical, and plumbing systems utilizing computerized
maintenance management systems (CMMS). This service is primarily for
high-rise office buildings, but customers also include schools, warehouses,
factories, shopping malls and universities. ABM Engineering Services
operates in 25 states through seven regional offices, two of which are in
California and one each in Chicago, Illinois; Denver, Colorado;
Philadelphia, Pennsylvania; New York, New York; and Phoenix, Arizona. In
1999, this Division earned ISO 9002 Certification, the first national
engineering services provider of on-site operating engineers to earn this
exclusive designation. ISO is a quality standard comprised of a rigorous
set of guidelines and good business practices against which companies are
rated through a comprehensive independent audit process that can take
several years.
M ABM FACILITY SERVICES provides customers with streamlined,
centralized control and coordination of multiple facility service needs.
This process is consistent with the greater competitive demands on
corporate organizations to become more efficient in the business market
today. By leveraging the core competencies of the Company's other
affiliated divisions, this Division attempts to reduce overhead, such as
redundant personnel, for its customers by providing multiple services under
a single contract, with one contact and one invoice. Its National Service
Center provides centralized dispatching, emergency services, accounting and
related reports to financial institutions, high-tech companies, and other
customers regardless of industry or size. ABM Facility Services is
headquartered in San Francisco, where it also maintains its National
Service Center.
M ABM JANITORIAL SERVICES (also known as "American Building
Maintenance") provides a wide range of basic janitorial services for a
variety of structures and organizations, including office buildings,
industrial plants, banks, department stores, theaters, warehouses,
educational and health institutions and airport terminals. Services
provided include floor cleaning and finishing, wall and window washing,
furniture polishing, rug cleaning, dusting, as well as other building
cleaning services. ABM Janitorial Services maintains 106 offices in 35
states, the District of Columbia and one Canadian province, and operates
under thousands of individually negotiated building maintenance contracts,
the majority of which are obtained by competitive bidding. Generally,
profit margins on maintenance contracts tend to be inversely proportional
to the size of the contract. Although many of this Division's maintenance
contracts are fixed-price agreements, others contain clauses under which
the customer agrees to reimburse the full amount of wages, payroll taxes,
insurance charges and
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other expenses plus a profit percentage. The majority of ABM Janitorial
Services contracts are for one-year periods, contain automatic renewal
clauses and are subject to termination by either party upon 30 to 90 days
written notice.
M AMERICAN COMMERCIAL SECURITY (also known as "ACS" and "ABM Security
Services") provides security guards, electric monitoring of fire, life,
safety, and access control devices, and security consulting services to a
wide range of businesses in the major metropolitan areas of Phoenix,
Arizona; San Francisco, San Diego and Los Angeles, California; Chicago,
Illinois; New Orleans, Louisiana; Minneapolis, Minnesota; Portland, Oregon;
Houston, Dallas, Fort Worth, Austin and San Antonio, Texas; Seattle,
Washington; and Salt Lake City, Utah. Much like ABM Janitorial Services,
the majority of this Division's contracts are for one-year periods, contain
automatic renewal clauses and are subject to termination by either party
upon 30 to 90 days written notice.
M AMPCO SYSTEM PARKING (also known as "Ampco System Airport Parking"
and "Ampco Express Airport Parking") operates approximately 1,500 parking
lots and garages, which are either leased from or operated for third
parties. The lease terms generally range from 5 to 20 years and usually
contain provisions for renewal options. Leases which expire may continue on
a month-to-month basis or are replaced by similar leases. Many leases
contain provisions for contingent rentals based on revenues. Ampco System
Parking currently operates in 24 states, including five of the 20 busiest
international airports in the U.S.: Denver, Honolulu, Newark, Phoenix, and
San Francisco. In conjunction with its on-airport parking services, this
Division also operates off-airport parking facilities in Philadelphia,
Houston, and Los Angeles, and parking shuttle bus service at thirteen
locations.
M AMTECH ELEVATOR SERVICES maintains, modernizes and repairs elevators
and escalators in major metropolitan areas of California; Houston, Texas;
Cincinnati, Ohio; Detroit, Michigan; Upper Marlboro, Maryland; Las Vegas,
Nevada; Pennsauken, New Jersey; Atlanta, Georgia; Philadelphia,
Pennsylvania; Phoenix, Arizona; Denver, Colorado; Chicago, Illinois; and
Washington, D.C. Amtech Elevator Services maintains 17 offices and several
parts warehouses, and operates a fleet of radio-equipped service vehicles.
M AMTECH LIGHTING SERVICES (also known as "Sica Lighting & Electrical
Services") provides relamping, fixture cleaning and periodic maintenance
service to its customers. Amtech Lighting Services also repairs, services,
designs and installs outdoor signage. This Division maintains 24 offices,
eight of which are located in California; four of which are in Texas; and
one office in each of the following states: Arizona, Florida, Georgia,
Illinois, Maryland, Minnesota, Nevada, New Jersey, New Mexico, New York,
Louisiana, and Oklahoma.
M COMMAIR MECHANICAL SERVICES (also known as "CommAir Preferred
Mechanical Services") installs, maintains, and repairs heating, ventilation
and air conditioning equipment, performs chemical water treatment, and
provides energy conservation services for commercial, industrial and
institutional facilities. CommAir Mechanical Services maintains ten
offices, nine of which are located in California, and one in Phoenix,
Arizona.
M EASTERDAY JANITORIAL SUPPLY markets janitorial supplies and
equipment through six sales offices located in San Francisco, Los Angeles
and Sacramento, California; Portland, Oregon; Reno, Nevada; and Houston,
Texas. Easterday has also approved over 30 sub-distributors to serve ABM
Janitorial Services and any customer in 26 other states and the District of
Columbia. Aside from sales to ABM Janitorial Services, which, in 1999,
accounted for approximately 29% of Easterday Janitorial Supply's total
revenues, the principal customers for this Division are industrial plants,
schools, commercial buildings, industrial organizations, transportation
terminals, theaters, hotels, retail stores, restaurants, military
establishments and janitorial service companies. Among the products sold
are cleaning equipment, disinfectants, floor cleaners, floor finishes,
glass cleaners, paper products and polishes. The products sold include many
nationally advertised brands, which, in large part, are manufactured by
others. This Division blends certain cleaning agents and floor finishes,
which it sells under the Easterday trade name, and provides sanitation
services to the food industry.
TRADEMARKS
The Company believes that it owns or is licensed to use all corporate
names, trade names, trademarks, service marks, copyrights, patents and trade
secrets which are material to the Company's operations.
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COMPETITION
The Company believes that each aspect of its business is highly
competitive, and that such competition is based primarily on price and quality
of service. Many contracts are obtained through competitive bidding. The
Company's competitors include a large number of regional and local companies
located in major cities throughout the United States and Canada. While the
majority of the Company's competitors operate in a limited geographic area, the
operating divisions of a few large, diversified facility service companies
compete with the Company on a national basis.
SALES AND MARKETING
The Company's sales and marketing efforts are conducted by its corporate,
division, region, branch and district offices. Sales, marketing, management and
operations personnel in each of these offices participate directly in selling
and servicing customers. The broad geographic scope of these offices enables the
Company to provide a full range of facility services through intercompany sales
referrals, multi-service "bundled" sales and national account sales. The Company
also has designated a nationwide group of "ABM Family of Services" executives to
market all of the Company's facility services capabilities.
The Company has a broad customer base including airports, apartment
complexes, city centers, colleges and universities, financial institutions,
industrial plants, office buildings, retail stores, shopping centers and theme
parks. No customer accounted for more than 5% of its revenues during the fiscal
year ended October 31, 1999.
EMPLOYEES
The Company employs over 57,000 persons, of whom the vast majority are
service employees who perform air conditioning, elevator, engineering,
janitorial, lighting, parking and security services. Approximately 24,400 of
these employees are covered under collective bargaining agreements. There are
about 3,300 employees with executive, managerial, supervisory, administrative,
professional, sales, marketing, clerical and other office assignments.
ENVIRONMENTAL MATTERS
The discussion of the Company's environmental matters can be found in Item
7, Management's Discussion and Analysis of Financial Condition and Results of
Operations.
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EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company as of December 31, 1999 are as
follows:
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PRINCIPAL OCCUPATIONS AND BUSINESS EXPERIENCE
NAME AGE DURING PAST FIVE YEARS
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William W. Steele 63 President & Chief Executive Officer since November 1994
Martinn H. Mandles 59 Chairman of the Board since December 1997; Chief
Administrative Officer since November 1991; Executive Vice
President from November 1991 to December 1997
Jess E. Benton, III 59 Executive Vice President of the Company since November 1999;
Senior Vice President of the Company from July 1994 through
October 1999
Henrik C. Slipsager 44 Executive Vice President of the Company, and President of
ABM Janitorial Services Division, since November 1999;
Senior Vice President of the Company from March 1998 through
October 1999; Executive Vice President of the ABM Janitorial
Services Division from January 1997 through October 1999;
President & Chief Executive Officer, ISS International
Service System, Inc. prior to January 1997
Donna M. Dell 51 Senior Vice President since November 1999; Vice President &
Chief Employment Counsel since April 1997; Vice President &
Director of Human Resources from July 1994 through October
1999
David H. Hebble 64 Senior Vice President since November 1999; Chief Financial
Officer since November 1979; Vice President from November
1979 through October 1999
Harry H. Kahn 56 Senior Vice President since November 1999; General Counsel &
Corporate Secretary since November 1991; Vice President from
November 1991 through October 1999
Sherrill F. Sipes, Jr. 64 Senior Vice President since July 1994
John F. Egan 63 Vice President since March 1984; Special Assistant to the
President since November 1999; President of the Company's
ABM Janitorial Services Division from 1984 through October
1999
Douglas B. Bowlus 55 Vice President since November 1999; Corporate Treasurer
since March 1996; Treasurer from February 1984 through
February 1996.
Anthony D. Lackey 36 Vice President since November 1999; Director of Electronic
Services & Chief Technology Officer since 1996; Assistant
Vice President from July 1996 through October 1999; various
positions of increasing responsibility in the Company's
Electronic Services Department from November 1987 through
June 1996
Terry D. McNeil 52 Vice President since November 1999; Director of Insurance
Services since October 1988; Assistant Vice President from
July 1996 through October 1999
Vernon E. Skelton 55 Vice President since November 1999; Controller & Chief
Accounting Officer since April 1997; Assistant Vice
President from July 1996 through October 1999; Director of
Accounting from November 1991 through March 1997
Eleonora C. Walsh 59 Vice President since November 1999; Director of
Administrative Services since November 1991; Assistant Vice
President from July 1996 through October 1999
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ITEM 2. PROPERTIES.
The Company has corporate, division, regional, branch, or district offices
in over 250 locations throughout the United States, and Canada. Twelve of these
facilities are owned by the Company and the remainder are leased. At October 31,
1999, the real estate owned by the Company had an aggregate net book value of
$3.2 million and was located in: Phoenix, Arizona; Fresno, California;
Jacksonville and Tampa, Florida; Elko, Nevada; Portland, Oregon; Houston and San
Antonio, Texas; and Kennewick, Seattle, Spokane and Tacoma, Washington.
Rental payments under long and short-term lease agreements amounted to
$96.4 million for the fiscal year ended October 31, 1999. Of this amount, $72.0
million in rental expense was attributable to public parking lots and garages
that Ampco System Parking leases and operates. The remaining expense was for the
rental or lease of office space, computers, operating equipment and motor
vehicles.
ITEM 3. LEGAL PROCEEDINGS.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
MARKET INFORMATION AND DIVIDENDS
The Company's common stock is listed on the New York Stock Exchange. The
Company's credit agreement places certain limitations on dividend payments based
on net income (see Note 5 of Notes to Consolidated Financial Statements
contained in Item 8). The following table sets forth the high and low prices of
the Company's common stock and quarterly cash dividends on common shares for the
periods indicated:
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FISCAL QUARTER
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FIRST SECOND THIRD FOURTH YEAR
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1998
Price range of common stock:
High $31.50 $37.00 $32.06 $31.25 $37.00
Low $25.94 $28.13 $25.31 $25.00 $25.00
Dividends per share $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.48
1999
Price range of common stock:
High $35.06 $33.13 $30.75 $28.75 $35.06
Low $27.88 $25.75 $25.19 $21.88 $21.88
Dividends per share $ 0.14 $ 0.14 $ 0.14 $ 0.14 $ 0.56
- ---------------------------------------------------------------------------------------------------------
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At December 31, 1999, there were approximately 7,292 registered holders of
the Company's common stock, in addition to stockholders in street name.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The selected consolidated financial data presented below is derived from
the Company's consolidated financial statements for each of the years in the
five-year period ended October 31, 1999:
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(in thousands, except per share amounts and
ratios) 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------------------------------------
OPERATIONS
Revenues and other income $965,381 $1,086,925 $1,252,472 $1,501,827 $1,629,716
- -------------------------------------------------------------------------------------------------------------
Expenses
Operating expenses and cost of goods sold 830,749 940,296 1,076,078 1,298,423 1,413,541
Selling, general and administrative 100,481 105,943 126,755 142,431 146,984
Interest 2,739 2,581 2,675 3,465 1,959
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933,969 1,048,820 1,205,508 1,444,319 1,562,484
- -------------------------------------------------------------------------------------------------------------
Income before income taxes 31,412 38,105 46,964 57,508 67,232
Income taxes 13,193 16,385 19,725 23,578 27,565
- -------------------------------------------------------------------------------------------------------------
Net income $ 18,219 $ 21,720 $ 27,239 $ 33,930 $ 39,667
=============================================================================================================
Net income per common share
Basic $ 0.96 $ 1.11 $ 1.33 $ 1.58 $ 1.77
Diluted $ 0.92 $ 1.05 $ 1.22 $ 1.44 $ 1.65
=============================================================================================================
Common and common equivalent shares
Basic 18,415 19,123 20,143 21,110 22,067
Diluted 19,179 20,241 21,872 23,161 23,748
=============================================================================================================
FINANCIAL STATISTICS
Dividends per common share $ 0.30 $ 0.35 $ 0.40 $ 0.48 $ 0.56
Stockholders' equity per common share $ 7.55 $ 8.41 $ 9.64 $ 10.96 $ 12.36
Working capital $ 95,209 $ 119,579 $ 137,223 $ 165,788 $ 184,279
Current ratio 1.83 2.05 1.89 2.05 2.01
Long-term debt $ 22,575 $ 33,664 $ 38,402 $ 33,720 $ 28,903
Redeemable cumulative preferred stock $ 6,400 $ 6,400 $ 6,400 $ 6,400 $ 6,400
Stockholders' equity $141,368 $ 163,915 $ 197,278 $ 236,838 $ 276,951
Total assets $334,973 $ 379,770 $ 464,251 $ 501,363 $ 563,384
Property, plant and equipment -- net $ 22,647 $ 22,570 $ 26,584 $ 27,307 $ 35,181
Capital expenditures $ 10,225 $ 10,751 $ 13,272 $ 11,715 $ 19,451
Depreciation and amortization $ 11,527 $ 13,651 $ 16,118 $ 19,593 $ 20,698
Accounts receivable -- net $158,075 $ 183,716 $ 234,464 $ 260,549 $ 297,596
=============================================================================================================
</TABLE>
All share and per share amounts have been restated to retroactively reflect
a two-for-one common stock split in 1996. Certain prior year amounts have been
reclassified to conform to the current year's presentation.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
OF OPERATIONS.
FINANCIAL CONDITION
The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto contained
in Item 8. All information in the discussion and references to the years are
based on the Company's fiscal year that ends on October 31.
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. The Company has an unsecured revolving credit
agreement with a syndicate of U.S. banks that provides a $150 million line of
credit expiring July 1, 2002. At the Company's option, the credit facility
provides interest at the prime rate or IBOR+.35%. As of October 31, 1999, the
total amount outstanding was approximately $90 million, which was comprised of
loans in the amount of $26 million and standby letters of credit of $64 million.
This agreement requires the Company to meet certain financial ratios, places
some limitations on outside borrowing and prohibits declaring or paying cash
dividends exceeding 50% of the Company's net income for any fiscal year. In
addition, the Company has a loan agreement with a major U.S. bank with a balance
of $3,386,000 at October 31, 1999. This loan bears interest at a fixed rate of
6.78% with annual payments of principal, in varying amounts, and interest due
each February 15 through 2003. The Company's effective interest rate for all
long-term debt bank borrowings for the year ended October 31, 1999 was 6.8%.
Operating activities generated cash flows in 1997, 1998 and 1999 of $27.7
million, $32.1 million and $35.3 million, respectively. Cash paid for
acquisitions during the fiscal years ended October 31, 1997, 1998 and 1999,
including payments pursuant to contractual arrangements involved in prior
acquisitions, were approximately $28.6 million, $10.0 million and $11.0 million,
respectively. Capital expenditures during fiscal years 1997, 1998 and 1999 were
$13.3 million, $11.7 million and $19.5 million, respectively. Cash dividends
paid to stockholders of common and redeemable preferred stock and amounts used
to repurchase common stock were approximately $8.6 million in 1997, $10.7
million in 1998 and $18.5 million in 1999. At October 31, 1998, working capital
was $165.8 million as compared to $184.3 million at October 31, 1999.
EFFECT OF INFLATION
The low rates of inflation experienced in recent years have 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 nature of the Company's operations, primarily services, would not
ordinarily involve it in environmental contamination. However, 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 generally 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, cash flows or its results of operations.
The Company is currently involved in four proceedings relating to
environmental matters: one involving alleged potential soil and groundwater
contamination at a Company facility in Florida; one involving alleged potential
soil contamination at a former Company facility in Arizona; one involving
alleged potential soil and groundwater contamination of a parking garage
previously operated by the Company in Washington; and, one involving alleged
potential soil and groundwater contamination at a former dry-cleaning facility
leased by the Company in Nevada. While it is difficult to predict the ultimate
outcome of these matters, based on information currently available, management
believes that none of these matters, individually or in the aggregate, are
reasonably likely to have a material adverse effect on the Company's financial
position, cash flows, or its results of operations.
YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written and
embedded chips being designed that used two digits rather than four digits to
define the applicable year. As a result, there
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existed a potential that existing computer programs and hardware would be unable
to accurately process dates beyond the year 1999. In mid-1997, the Company
established a dedicated project team that developed a detailed plan for making
the Company Year 2000 compliant. The plan encompassed both information
technology-related systems, such as the Company's accounting software and non-IT
related systems, as well as the impact to the Company due to the non-compliance
of major vendors or customers. The Company completed its plan with respect to
hardware and software prior to the end of 1999. It also surveyed significant
vendors with respect to their Year 2000 compliance and where deemed appropriate
identified alternate suppliers. The Company also established contingency plans.
The aggregate expense of these efforts was approximately $3.0 million. As of
January 26, 2000, the Company has not experienced any significant Y2K failures.
Several minor issues were reported to the Y2K project team, but did not affect
business and have been corrected. There can be no certainty that failures or
problems related to Year 2000 might not develop in the future, but management
believes no such failure or problem is reasonably likely to materially disrupt
the Company's business.
ACQUISITIONS
The operating results of businesses acquired have been included in the
accompanying consolidated financial statements from their respective dates of
acquisition and are fully discussed in Note 12 to the Consolidated Financial
Statements. Acquisitions made during the three fiscal years ended October 31,
1999, contributed approximately $235 million to fiscal 1999 revenues, including
the August 1997 acquisition in New York which contributed $153 million of these
revenues.
INTERNAL INVESTIGATION
During fiscal year 1999, the Audit Committee of the Board of Directors
conducted an investigation of alleged questionable payments and related
accounting practices in connection with janitorial service contracts
representing less than 5% of the Company's consolidated revenues. The Company
does not believe that the matter investigated will have any material impact on
its financial condition, cash flow or results of operations. However, in an
abundance of caution, the Company has referred the matter to appropriate
government authorities.
RESULTS OF OPERATIONS
COMPARISON OF 1999 TO 1998
The Company reported record revenues and earnings for 1999. Revenues and
other income (hereinafter called "revenues") were $1.6 billion in 1999, up $128
million or 9%, from $1.5 billion reported in 1998. The increase in revenues in
1999 over 1998 was attributable to new business and price increases as well as
acquisitions made during the prior years. Acquisitions during 1999 accounted for
approximately $11 million, or approximately 9% of the total revenue increase of
$128 million for 1999.
As a percentage of revenues, operating expenses and cost of goods sold was
86.7% for 1999, compared to 86.5% in 1998. Consequently, as a percentage of
revenues, the Company's gross profit (revenues minus operating expenses and cost
of goods sold) of 13.3% in 1999 was slightly lower than the gross profit of
13.5% in 1998. The decrease in gross profit as a percentage of revenues was
mostly due to higher labor and related costs, particularly workers' compensation
insurance and continued competitive pressure to maintain or lower prices. The
Company anticipates such increased costs may be gradually recovered through
future price increases. For the next fiscal year, management has committed to
negotiating with its customers appropriate price increases.
Selling, general and administrative expenses increased 3.2% for 1999
compared to 1998. However, as a percentage of revenues, selling, general and
administrative expenses decreased from 9.5% for 1998, to 9.0% for 1999,
primarily due to certain costs (such as health insurance and legal fees) that do
not increase at the same rate as sales. The dollar increase in selling, general
and administrative expenses is primarily due to salaries and expenses associated
with acquisitions including the amortization of goodwill.
Interest expense was $2.0 million in 1999 compared to $3.5 million for
1998, a decrease of $1.5 million. This decrease was primarily due to lower
weighted average borrowings.
The income before income taxes (pre-tax income) for 1999 was $67.2 million
compared to $57.5 million, an increase of 17% over 1998. The growth in pre-tax
income outpaced the revenue growth for 1999 primarily due to the reduction (as a
percentage of revenues) of selling, general and administrative expenses.
10
<PAGE> 11
The estimated effective income tax rate for 1999 and 1998 was 41.0%.
Net income for 1999 was $39.7 million, an increase of 17%, compared to net
income of $33.9 million in 1998. Diluted net income per common share rose 15% to
$1.65 for 1999 compared to $1.44 for the same period in 1998. The percentage
increase in diluted net income per share was less than the increase in net
income due to the 3% increase in number of diluted shares outstanding that
primarily resulted from stock purchased by employees under the Company's
Employee Stock Purchase Plan as well as stock options exercised. On September
22, 1999 the Company announced a stock repurchase program for up to one million
outstanding shares. As of October 31, 1999, 220,000 shares had been reacquired.
Earnings per share calculations also include the effect of a preferred stock
dividend deduction of $512,000 in both 1999 and 1998.
The Company is organized into nine separate operating divisions as defined
under Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures
about Segments of an Enterprise and Related Information". However, only the ABM
Janitorial, Amtech Elevator, ABM Engineering, Amtech Lighting, and Ampco System
Parking Divisions are reportable using the criteria under SFAS 131. The results
of operations from these five reportable operating divisions for 1999 as
compared to 1998 are more fully described below:
The ABM Janitorial Services Division reported revenues for 1999 of $933.7
million, an increase of approximately $74.2 million, or 9%, over 1998. This is
the Company's largest Division and accounted for approximately 57% of the
Company's consolidated revenues in 1999. ABM Janitorial Services revenues
increased as a result of new business, particularly in the Gulf Central,
Mid-Atlantic and Southwest regions. Revenues generated from acquisitions during
the prior year contributed about $8.7 million of the 1999 increase while the
current year acquisitions added $9.1 million. ABM Janitorial Services' operating
profits increased 11% in 1999 to $49.5 million when compared to 1998. This
profit increase was due primarily to the increase in revenues, reduced legal
fees and slightly lower labor and labor related costs.
Revenues for Amtech Elevator Services were $96.6 million, up by 8% for 1999
over 1998, largely due to an increased customer base in the maintenance and
repair sector. The Amtech Elevator Division reported a 3% increase in operating
profits in 1999 to $6.7 million compared to 1998. The smaller increase in
operating profits can be attributed primarily to the inability of the Division
to pass on increased labor and insurance costs.
The ABM Engineering Services Division increased revenues by 13% to $153.9
million and its operating profits increased 4% to $8.4 million for 1999 compared
to 1998. The large revenue increase was due primarily to new business in the
Midwest, Arizona, and Southern California regions. The smaller percentage
increase in operating profits is due to lower margins on contracts particularly
in the New York and Philadelphia regions and pressure from competition to reduce
fees.
Amtech Lighting Services reported a 9% revenue increase to $95.8 million
due to increased business in the Atlanta, Chicago, New Orleans, New York, and
Oakland markets. Operating profits increased by 8% to $7.5 million during 1999
compared to the prior year primarily due to the increased sales.
Ampco System Parking increased revenues to $162.4 million or 5% over 1999,
while its operating profits increased 22% to $8.5 million during 1999 compared
to 1998. The increase in revenues was mostly due to growth in its California
region. The operating profit increase was due for the most part to the
conversion from leased lots to management contracts, which have higher margins,
as well as improved profits related to off-airport parking operations.
COMPARISON OF 1998 TO 1997
Revenues were $1.5 billion in 1998, up $249 million or 20%, from $1.3
billion reported in 1997. The 20% increase in revenues in 1998 over 1997 was
attributable to 1997 acquisitions, particularly large acquisitions in New York
of janitorial, engineering and lighting businesses, as well as sales and price
increases. Acquisitions made during 1998 accounted for approximately $6 million,
or approximately 2.4% of the total revenue increase of $249 million for 1998.
As a percentage of revenues, operating expenses and cost of goods sold was
86.5% for 1998, compared to 85.9% in 1997. Consequently, the Company's gross
profit as a percentage of revenues of 13.5% in 1998 was lower than the gross
profit of 14.1% in 1997. The gross profit percentage declined mostly due to
higher labor and related costs and continued competitive pressure to lower
prices.
Selling, general and administrative expenses for 1998 were $142.4 million
compared to $126.8 million in 1997. As a percentage of revenues, selling,
general and administrative expenses decreased from 10.1% for 1997, to 9.5% for
1998, primarily as a result of
11
<PAGE> 12
certain costs not increasing at the same rate as sales. The dollar increase in
selling, general and administrative expenses of $15.6 million is primarily due
to expenses related to growth and to a lesser extent expenses associated with
acquisitions including the amortization of goodwill.
Interest expense was $3.5 million in 1998 compared to $2.7 million for
1997, an increase of $790,000. This increase was primarily due to higher
weighted average borrowings during 1998, which were needed to fund acquisitions
and working capital.
The income before income taxes (pre-tax income) for 1998 was $57.5 million
compared to $47.0 million, an increase of 22% over 1997. The growth in pre-tax
income outpaced the revenue growth for 1998 primarily due to lower insurance
costs as a percent of revenues.
The estimated effective income tax rate for 1998 was 41.0%, compared to
42.0% in 1997. The lower tax rate was due for the most part to an increase in
various federal and state tax credits.
Net income for 1998 was $33.9 million, an increase of 25%, compared to net
income of $27.2 million in 1997. Diluted net income per common share rose 18% to
$1.44 for 1998 compared to $1.22 for the same period in 1997. The increase in
diluted net income per share was not proportional to the increase in net income
due to the 6% increase in number of diluted shares outstanding primarily a
result of purchases made by employees under the Company's Employee Stock
Purchase Plan. Earnings per share calculations also include the effect of a
preferred stock dividend deduction of $512,000 in both 1998 and 1997.
The results of operations from the Company's five reportable operating
divisions for 1998 as compared to 1997 are more fully described below:
Revenues of the ABM Janitorial Services Division increased by 25% during
1998 to $859.4 million, as compared to 1997, as a result of several acquisitions
made during 1997, particularly in the Northeast and the Southwest regions.
Revenues generated from those acquisitions during 1997 contributed $142 million
of the 1998 increase. Operating profits increased to $44.6 million in 1998, or
36%, when compared to 1997. This profit increase was due primarily to the
increase in revenues and lower labor and labor related costs.
Revenues for the Amtech Elevator Services Division were $89.3 million, up
by 8% for 1998 over 1997, largely due to an increased customer base in the
maintenance and repair sector. The Amtech Elevator Division reported operating
profits of $6.5 million in 1998, a 39% increase compared to 1997. This increase
in operating profits can be attributed primarily to a higher profit margin on
service contracts and a substantial reduction of insurance costs.
The ABM Engineering Services Division's revenues increased by 45% to $136.8
million and its operating profits increased 9% to $8.0 million for 1998 compared
to 1997. The revenue increase was due primarily to an acquisition in New York in
August 1997 and new business in the Midwest and West Central regions. The
smaller percentage increase in operating profits is due to lower margins
particularly on contracts purchased through the New York acquisition, increased
insurance costs and pressure from competition to reduce fees.
Amtech Lighting Services reported a 10% revenue increase to $88.2 million
due to increased revenues in the Northeast and Dallas markets as well as from a
small acquisition in the Midwest. Operating profits increased by 11% to $6.9
million during 1998 compared to the prior year primarily due to the increased
sales.
The Ampco System Parking Division's revenues increased by 7% to $154.1
million, while its profits increased 10% to $7.0 million during 1998 compared to
1997. The increase in revenues was mostly due to growth in its national airport
business and its Texas region. The operating profit increase was due for the
most part to lower payroll tax expense and the increased sales.
SAFE HARBOR STATEMENT
Cautionary Safe Harbor Disclosure for Forward Looking Statements under the
Private Securities Litigation Reform Act of 1995: Because of the factors set
forth below, as well as other variables affecting the Company's operating
results, past financial performance, should not be considered a reliable
indicator of future performance, and investors should not use historical trends
to anticipate results or trends in future periods. The statements contained
herein which are not historical facts are forward-looking statements that are
subject to meaningful risks and uncertainties, including but not limited to: (1)
significant decreases in commercial real estate occupancy, resulting in reduced
demand and prices for building maintenance and other facility services in the
Company's major markets, (2) loss or bankruptcy of one or more of the Company's
major customers, which could adversely affect the Company's ability to collect
its accounts receivable or recover its deferred costs,
12
<PAGE> 13
(3) major collective bargaining issues that may cause loss of revenues or cost
increases that non-union companies can use to their advantage in gaining market
share, (4) significant shortfalls in adding additional customers in existing and
new territories and markets, (5) a protracted slowdown in the Company's
acquisition program, (6) legislation or other governmental action that severely
impacts one or more of the Company's lines of business, such as price controls
that could restrict price increases, or the unrecovered cost of any universal
employer-paid health insurance, as well as government investigations that
adversely affect the Company, (7) reduction or revocation of the Company's line
of credit, which would increase interest expense or the cost of capital, (8)
cancellation or nonrenewal of the Company's primary insurance policies, as many
customers contract out services based on the contractor's ability to provide
adequate insurance coverage and limits, (9) catastrophic uninsured or
underinsured claims against the Company, the inability of the Company's
insurance carriers to pay otherwise insured claims, or inadequacy in the
Company's reserve for self-insured claims, (10) resignation, termination, death
or disability of one or more of the Company's key executives, which could
adversely affect customer retention and day-to-day management of the Company,
(11) inability to employ entry level personnel due to labor shortages, and (12)
other material factors that are disclosed from time to time in the Company's
public filings with the United States Securities and Exchange Commission, such
as reports on Forms 8-K, 10-K and 10-Q.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company does not issue or invest in financial instruments or their
derivatives for trading or speculative purposes. The operations of the Company
are conducted primarily in the United States, and, as such, are not subject to
material foreign currency exchange rate risk. Although the Company has
outstanding debt and related interest expense, market risk in interest rate
exposure in the United States is currently not material.
ITEM 8. FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE.
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
ABM Industries Incorporated:
We have audited the accompanying consolidated balance sheets of ABM
Industries Incorporated and subsidiaries as of October 31, 1998 and 1999, and
the related consolidated statements of income, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended October 31, 1999. In connection with our audits of the consolidated
financial statements, we also have audited the related financial statement
schedule II. These consolidated financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ABM
Industries Incorporated and subsidiaries as of October 31, 1998 and 1999, and
the results of their operations and their cash flows for each of the years in
the three-year period ended October 31, 1999, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule II, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ KPMG LLP
- --------------------------
KPMG LLP
San Francisco, California
December 13, 1999
13
<PAGE> 14
ABM Industries Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
October 31 1998 1999
(in thousands of dollars except share amounts)
<S> <C> <C>
- ----------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 1,844 $ 2,139
Accounts receivable (less allowances of $6,761 and $7,490) 260,549 297,596
Inventories 22,965 23,296
Deferred income taxes 10,505 14,163
Prepaid expenses and other current assets 28,445 30,395
- ----------------------------------------------------------------------------------
Total current assets 324,308 367,589
Investments and long-term receivables 12,405 14,290
Property, plant and equipment -- net 27,307 35,181
Intangible assets (less accumulated amortization of $39,420
and $49,297) 102,776 105,583
Deferred income taxes 27,509 30,388
Other assets 7,058 10,353
- ----------------------------------------------------------------------------------
$501,363 $563,384
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
LIABILITIES
Current portion of long-term debt $ 865 $ 898
Bank overdraft 2,475 4,967
Trade accounts payable 34,992 45,596
Income taxes payable 5,527 7,318
Accrued liabilities:
Compensation 40,914 45,170
Taxes -- other than income 15,887 16,505
Insurance claims 29,254 35,139
Other 28,606 27,717
- ----------------------------------------------------------------------------------
Total current liabilities 158,520 183,310
Long-term debt 33,720 28,903
Retirement plans 15,974 19,294
Insurance claims 49,911 48,526
- ----------------------------------------------------------------------------------
Total liabilities 258,125 280,033
SERIES B 8% SENIOR REDEEMABLE CUMULATIVE PREFERRED STOCK,
6,400 shares authorized, issued and outstanding, stated at
redemption value, $1,000 per share 6,400 6,400
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 500,000 shares authorized;
none issued -- --
Common stock, $.01 par value; 28,000,000 and 100,000,000
shares authorized; 21,601,000 and 22,407,000 shares issued
and outstanding at October 31, 1998 and 1999, respectively 216 224
Additional capital 79,904 93,336
Accumulated other comprehensive income (696) (635)
Retained earnings 157,414 184,026
- ----------------------------------------------------------------------------------
Total stockholders' equity 236,838 276,951
- ----------------------------------------------------------------------------------
$501,363 $563,384
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
14
<PAGE> 15
ABM Industries Incorporated and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years ended October 31 1997 1998 1999
(in thousands, except per share amounts)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES AND OTHER INCOME $1,252,472 $1,501,827 $1,629,716
- --------------------------------------------------------------------------------------------------
EXPENSES
Operating expenses and cost of goods sold 1,076,078 1,298,423 1,413,541
Selling, general and administrative 126,755 142,431 146,984
Interest 2,675 3,465 1,959
- --------------------------------------------------------------------------------------------------
1,205,508 1,444,319 1,562,484
- --------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 46,964 57,508 67,232
Income taxes 19,725 23,578 27,565
- --------------------------------------------------------------------------------------------------
Net income $ 27,239 $ 33,930 $ 39,667
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE
Basic $ 1.33 $ 1.58 $ 1.77
Diluted $ 1.22 $ 1.44 $ 1.65
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
COMMON AND COMMON EQUIVALENT SHARES
Basic 20,143 21,110 22,067
Diluted 21,872 23,161 23,748
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
YEARS ENDED OCTOBER 31, 1997, 1998 AND 1999 --------------- PAID-IN COMPREHENSIVE RETAINED
(IN THOUSANDS) SHARES AMOUNT CAPITAL INCOME EARNINGS TOTAL
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE OCTOBER 31, 1996 19,489 $195 $48,548 $(378) $115,550 $163,915
Comprehensive income:
Net income 27,239 27,239
Other comprehensive income:
Foreign currency translation (157) (157)
--------
Total Comprehensive income 27,082
Dividends:
Common stock (8,085) (8,085)
Preferred stock (512) (512)
Stock issued under employees' stock purchase and option
plans 975 10 14,868 14,878
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE OCTOBER 31, 1997 20,464 205 63,416 (535) 134,192 197,278
Comprehensive income:
Net income 33,930 33,930
Other comprehensive income:
Foreign currency translation (161) (161)
--------
Total Comprehensive income 33,769
Dividends:
Common stock (10,196) (10,196)
Preferred stock (512) (512)
Tax benefit from exercise of stock options 718 718
Stock issued under employees' stock purchase and option
plans and for acquisition 1,137 11 15,770 15,781
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE OCTOBER 31, 1998 21,601 216 79,904 (696) 157,414 236,838
Comprehensive income:
Net income 39,667 39,667
Other comprehensive income:
Foreign currency translation 61 61
--------
Total Comprehensive income 39,728
Dividends:
Common stock (12,543) (12,543)
Preferred stock (512) (512)
Tax benefit from exercise of stock options 387 387
Stock repurchased (220) (2) (5,446) (5,448)
Stock issued under employees' stock purchase and option
plans and for acquisition 1,026 10 18,491 18,501
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE OCTOBER 31, 1999 22,407 $224 $93,336 $(635) $184,026 $276,951
================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
15
<PAGE> 16
ABM Industries Incorporated and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years ended October 31 1997 1998
(in thousands) 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 1,203,314 $ 1,463,918 $ 1,589,775
Other operating cash receipts 1,126 1,331 1,491
Interest received 552 682 870
Cash paid to suppliers and employees (1,154,572) (1,406,600) (1,522,495)
Interest paid (2,685) (3,334) (2,025)
Income taxes paid (19,988) (23,936) (32,311)
- -------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 27,747 32,061 35,305
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (13,272) (11,715) (19,451)
Proceeds from sale of assets 660 497 922
Decrease (increase) in investments and long-term receivables 3,041 495 (1,885)
Intangible assets acquired (28,606) (10,010) (10,980)
- -------------------------------------------------------------------------------------------------------
Net cash used in investing activities (38,177) (20,733) (31,394)
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued, including tax benefit 8,778 15,151 17,178
Common stock repurchased -- -- (5,448)
Dividends paid (8,597) (10,708) (13,055)
Increase (decrease) in bank overdraft 8,035 (10,500) 2,492
Long-term borrowings 116,145 93,204 57,064
Repayments of long-term borrowings (113,715) (98,414) (61,847)
- -------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 10,646 (11,267) (3,616)
- -------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 216 61 295
Cash and cash equivalents beginning of year 1,567 1,783 1,844
- -------------------------------------------------------------------------------------------------------
Cash and cash equivalents end of year $ 1,783 $ 1,844 $ 2,139
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net income $ 27,239 $ 33,930 $ 39,667
ADJUSTMENTS:
Depreciation and amortization 16,118 19,593 20,698
Impairment of long-lived assets 2,700 -- --
Provision for bad debts 2,988 2,821 2,257
Gain on sale of assets (257) (202) (160)
Increase in deferred income taxes (1,777) (4,521) (6,537)
Increase in accounts receivable (50,312) (28,907) (39,304)
Increase in inventories (4,069) (1,768) (331)
Increase in prepaid expenses and other current assets (5,628) (2,440) (1,950)
Decrease (increase) in other assets 1,580 454 (3,295)
Increase in income taxes payable 1,514 4,163 1,791
Increase in retirement plans accrual 3,273 2,561 3,320
Increase (decrease) in insurance claims liability 5,212 (778) 4,500
Increase in trade accounts payable and other accrued
liabilities 29,166 7,155 14,649
- -------------------------------------------------------------------------------------------------------
Total adjustments to net income 508 (1,869) (4,362)
- -------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 27,747 $ 32,061 $ 35,305
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Non-cash investing activities:
Common stock issued for net assets of business acquired $ 6,100 $ 1,348 $ 1,710
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16
<PAGE> 17
ABM Industries Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of ABM Industries Incorporated and its subsidiaries ("the
Company"). All material intercompany transactions and balances have been
eliminated. Certain reclassifications of prior year amounts have been made to
conform with the current year presentation.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and related notes to financial statements. Changes in such
estimates may affect amounts reported in future periods.
ACCOUNTS RECEIVABLE: The Company's accounts receivable are principally
trade receivables arising from services provided to its customers and are
generally due and payable on terms varying from the receipt of invoice to net
thirty days. The Company does not believe that it has any material exposure due
to either industry or regional concentrations of credit risk.
INVENTORIES: Inventories are valued at amounts approximating the lower of
cost (first-in, first-out basis) or market.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost less accumulated depreciation and amortization. At the time property, plant
and equipment is retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is
reflected in income. Maintenance and repairs are charged against income.
Depreciation and amortization are calculated principally on the
straight-line method. Lives used in computing depreciation for transportation
equipment average 3 to 5 years and 2 to 20 years for machinery and other
equipment. Buildings are depreciated over periods of 20 to 40 years. Leasehold
improvements are amortized over the shorter of the terms of the respective
leases, or the assets' useful lives.
The Company is implementing an enterprise-wide information system. External
direct costs of materials and services and payroll-related costs of employees
working solely on the development of the system are capitalized. In addition, in
1999 related interest costs of approximately $135,000 were capitalized.
Capitalized costs of the project will be amortized over a period of five years
beginning when the system is placed in service. Training costs are expensed as
incurred.
INTANGIBLE ASSETS: Intangible assets consist of goodwill in the amount of
$152,477,000 and other intangible assets in the amount of $2,403,000, net of
accumulated amortization of $49,297,000. Goodwill, which represents the excess
of cost over fair value of tangible assets of businesses acquired, is amortized
on a straight-line basis over periods not exceeding 40 years. It is the
Company's policy to carry goodwill applicable to acquisitions prior to 1971 of
$1,450,000 at cost until such time as there may be evidence of diminution in
value.
IMPAIRMENT OF LONG-LIVED ASSETS: The Company annually reviews its
long-lived assets, including goodwill. Impairment is evaluated on the basis of
whether the asset is fully recoverable from projected, undiscounted net cash
flows of the related business unit, in accordance with Statement of Financial
Accounting Standards No. 121. Impairment is recognized in operating results when
a permanent diminution in value is believed to have occurred. The Company
measures impairment as the excess of any unamortized goodwill over the estimated
future discounted cash flows over the remaining life of the asset. During the
year ended October 31, 1997, the Company's ABM Janitorial Division wrote off
$2,700,000 of goodwill that was deemed to be permanently impaired.
INCOME TAXES: Income tax expense is based on reported results of operations
before income taxes. In accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", deferred income taxes reflect
the impact of temporary differences between the amount of assets and liabilities
recognized for financial reporting purposes and such amounts recognized for tax
purposes. These deferred taxes are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
REVENUE RECOGNITION: Revenues are generally recorded at the time services
are performed or when products are shipped.
17
<PAGE> 18
NET INCOME PER COMMON SHARE: The company has reported its earnings in
accordance with Statement of Financial Accounting Standards No. 128, "Earnings
per Share". Basic net income per common share, after the reduction for preferred
stock dividends, is based on the weighted average number of shares actually
outstanding during the period. Diluted net income per common share, after the
reduction for preferred stock dividends, is based on the weighted average number
of shares outstanding during the period, including common stock equivalents.
Diluted net income per common share is consistent with the Company's former
presentation of primary net income per common share. The calculation of these
amounts is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
1997 1998 1999
- -----------------------------------------------------------------
<S> <C> <C> <C>
Net Income $27,239,000 $33,930,000 $39,667,000
Preferred Stock
Dividends (512,000) (512,000) (512,000)
- -----------------------------------------------------------------
$26,727,000 $33,418,000 $39,155,000
=================================================================
Common shares
outstanding -- basic: 20,143,000 21,110,000 22,067,000
Effect of dilutive
securities:
Stock options 1,381,000 1,852,000 1,544,000
Other 348,000 199,000 137,000
- -----------------------------------------------------------------
Common shares
outstanding --
diluted 21,872,000 23,161,000 23,748,000
=================================================================
</TABLE>
For the purposes of computing diluted net income per common share, weighted
average common share equivalents do not include stock options with an exercise
price that exceeds the average fair market value of the Company's common stock
for the period. On October 31, 1999, options to purchase approximately 1,268,000
shares of common stock at a weighted average exercise price of $31.09 were
outstanding, but were excluded from the computation because the options'
exercise price was greater than the average market price of the common shares.
At October 31, 1998, 938,000 shares of common stock at a weighted average
exercise price of $31.78 were outstanding, but were excluded from the
computation because the options' exercise price was greater than the average
market price of the common shares.
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid
instruments with original maturities of three months or less to be cash and cash
equivalents.
STOCK-BASED COMPENSATION: The Company accounts for its stock-based awards
using the intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees".
COMPREHENSIVE INCOME: In 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income". The Company adopted SFAS 130 during fiscal 1999. The new
rules established standards for the reporting of comprehensive income and its
components in financial statements. Comprehensive income consists of net income
and other related gains and losses affecting shareholder's equity that, under
generally accepted accounting principles, are excluded from net income. For the
Company, such comprehensive income items consist of foreign currency gains and
losses, the tax effect of such was insignificant. The adoption of SFAS 130
affected the presentation in the accompanying consolidated balance sheets and
consolidated statements of stockholders' equity and comprehensive income. Prior
year financial statements have been reclassified to conform to the new
requirements.
2. INSURANCE
Certain insurable risks such as general liability, property damage and
workers' compensation are self-insured by the Company. However, the Company has
umbrella insurance coverage for certain risk exposures subject to specified
limits. Accruals for claims under the Company's self-insurance program are
recorded on a claim-incurred basis. Under this program, the estimated liability
for claims incurred but unpaid at October 31, 1998 and 1999 was $79,165,000 and
$83,665,000, respectively. In connection with certain self-insurance agreements,
the Company has standby letters of credit at October 31, 1999 supporting the
estimated unpaid liability in the amounts of $62,557,000.
3. INVENTORIES
The inventories at October 31, consisted of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(in thousands of dollars) 1998 1999
- ---------------------------------------------------------------
<S> <C> <C>
Janitorial supplies and equipment held for
sale $ 4,839 $ 4,176
Parts and materials 14,510 14,766
Work in process 3,616 4,354
- ---------------------------------------------------------------
$22,965 $23,296
===============================================================
</TABLE>
18
<PAGE> 19
4. PROPERTY, PLANT AND EQUIPMENT -- NET
Property, plant and equipment at October 31, consisted of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(in thousands of dollars) 1998 1999
- ---------------------------------------------------------------
<S> <C> <C>
Land $ 834 $ 800
Buildings 3,968 3,726
Transportation equipment 11,633 13,104
Machinery and other equipment 51,528 61,390
Leasehold improvements 13,096 14,425
- ---------------------------------------------------------------
81,059 93,445
Less accumulated depreciation and
amortization (53,752) (58,264)
- ---------------------------------------------------------------
$ 27,307 $ 35,181
===============================================================
</TABLE>
5. LONG-TERM DEBT AND CREDIT AGREEMENT
The Company has a $150 million syndicated line of credit expiring July 1,
2002. The unsecured revolving credit facility provides, at the Company's option,
interest at the prime rate or IBOR+.35%. The facility calls for a commitment fee
payable quarterly, in arrears, of .12% based on the average, daily, unused
portion. For purposes of this calculation, irrevocable standby letters of credit
issued in conjunction with the Company's self-insurance program plus cash
borrowings are considered to be outstanding amounts. As of October 31, 1999, the
total outstanding amount under this facility was $90 million comprised of $26
million in loans and $64 million in standby letters of credit. The interest
rates at October 31, 1999 on loans outstanding under this agreement ranged from
5.79% to 8.25%. The Company is required, under this agreement to maintain
financial ratios and places certain limitations on dividend payments. The
Company is prohibited from paying cash dividends exceeding 50% of its net income
for any fiscal year.
The Company has a loan agreement with a major U.S. bank with a balance of
$3,386,000 at October 31, 1999. This loan bears interest at a fixed rate of
6.78% with annual payments of principal, in varying amounts, and interest due
each February 15 through 2003.
The long-term debt of $29,801,000 matures in the years ending October 31 as
follows: $898,000 in 2000; $902,000 in 2001; $26,916,000 in 2002, $990,000 in
2003, $47,000 in 2004, and $48,000 in subsequent years.
Long-term debt at October 31, is summarized as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(in thousands of dollars) 1998 1999
- ---------------------------------------------------------------
<S> <C> <C>
Revolving credit facility with interest at
5.79 -- 8.25% $30,000 $26,000
Note payable to bank with interest at
6.78% 4,104 3,386
Other 481 415
- ---------------------------------------------------------------
34,585 29,801
Less current portion 865 898
- ---------------------------------------------------------------
$33,720 $28,903
===============================================================
</TABLE>
6. EMPLOYEE BENEFIT PLANS
(A) RETIREMENT AGREEMENTS
The Company has unfunded retirement agreements for approximately 44 current
and former directors and senior executives, many of which are fully vested. The
agreements provide for annual benefits for ten years commencing at the later of
the respective retirement dates of those executives or age 65. The benefits are
accrued over the period these directors and senior executives are expected to be
employed by the Company. During 1997, 1998 and 1999, amounts accrued under these
agreements were $629,000, $513,000 and $674,000, respectively. Payments were
made in 1997, 1998 and 1999 in the amounts of $124,000, $207,000 and $231,000,
respectively.
(B) 401(K) AND PROFIT SHARING PLAN
The Company has a profit sharing and 401(k) plan covering certain qualified
employees, which includes employer participation in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. The plan allows
participants to make pretax contributions and the Company matches certain
percentages of employee contributions depending on the participant's length of
service. The profit sharing portion of the plan is discretionary and
noncontributory. All amounts contributed to the plan are deposited into a trust
fund administered by independent trustees.
The Company provided for profit sharing contributions of $1,336,000,
$1,534,000 and $1,643,000 for 1997, 1998 and 1999, respectively. The Company's
matching 401(k) contributions required by the 401(k) plan for 1997, 1998 and
1999 were approximately $873,000, $1,066,000 and $1,210,000, respectively.
19
<PAGE> 20
(C) SERVICE AWARD BENEFIT PLAN
In 1989 the Company adopted an unfunded service award benefit plan, with a
retroactive vesting period of five years. This plan is a "severance pay plan" as
defined by the Employee Retirement Income Security Act (ERISA) and covers
certain qualified employees. The plan provides participants, upon termination,
with a guaranteed seven days pay for each year of employment subsequent to
November 1, 1989. The Company, at its discretion, may also award additional days
each year.
Net cost of the plan is comprised of:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
(in thousands of dollars) 1997 1998 1999
- -----------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 298 $ 300 $ 396
Interest 233 247 255
- -----------------------------------------------------------------
Net cost $ 531 $ 547 $ 651
=================================================================
Actuarial present value of:
Vested benefit obligation $2,964 $3,280 $3,724
Accumulated benefit obligation $3,102 $3,391 $3,850
Projected benefit obligation $3,853 $4,072 $4,571
=================================================================
</TABLE>
Assumptions used in accounting for the plan as of October 31 were:
<TABLE>
<CAPTION>
- ------------------------------------------------------
1997 1998 1999
- ------------------------------------------------------
<S> <C> <C> <C>
Weighted average discount rate 7% 7% 6.5%
Rate of increase in compensation
level 5% 5% 5%
======================================================
</TABLE>
(D) PENSION PLANS UNDER COLLECTIVE BARGAINING
Certain qualified employees of the Company are covered under
union-sponsored collectively bargained multi-employer defined benefit plans.
Contributions for these plans were approximately $14,993,000, $20,763,000 and
$25,516,000 in 1997, 1998 and 1999, respectively. These plans are not
administered by the Company and contributions are determined in accordance with
provisions of negotiated labor contracts.
7. LEASE COMMITMENTS AND RENTAL EXPENSE
The Company is obligated under noncancelable operating leases for various
facilities and equipment.
As of October 31, 1999, future minimum lease commitments under
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Years ending (in thousands of dollars)
- ---------------------------------------------------------------
<S> <C>
2000 $ 40,128
2001 32,223
2002 26,231
2003 19,544
2004 13,507
Thereafter 70,841
- ---------------------------------------------------------------
Total minimum lease commitments $202,474
===============================================================
</TABLE>
Rental expense for the years ended October 31, is summarized as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(in thousands of dollars) 1997 1998 1999
- ---------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals under
noncancelable leases $52,997 $61,648 $52,231
Contingent rentals 32,031 26,071 41,441
Short-term rental agreements 12,201 11,379 2,758
- ---------------------------------------------------------------
$97,229 $99,098 $96,430
===============================================================
</TABLE>
Contingent rentals are applicable to leases of parking lots and garages and
are based on percentages of the gross receipts attributable to the related
facilities.
8. COMMITMENTS AND CONTINGENCIES
The Company and certain of its subsidiaries have been named defendants in
certain litigation arising in the ordinary course of business. In the opinion of
management, based on advice of legal counsel, such matters should have no
material effect on the Company's consolidated financial statements taken as a
whole.
9. REDEEMABLE CUMULATIVE PREFERRED STOCK
On June 23, 1993, the Company authorized 6,400 shares of preferred stock
having a par value of $0.01 per share. These shares designated as Series B 8%
Senior Redeemable Cumulative Preferred Stock (Series B Preferred Stock) shall be
entitled to one vote per share on all matters upon which common stockholders are
entitled to vote and have a redemption price of $1,000 per share, together with
accrued and unpaid dividends thereon. Redemption of the Series B Preferred Stock
is at the option of the holders for any or all of the outstanding shares after
September 1, 1998 or at the option of the Company after September 1, 2002. The
total redemption value of the shares outstanding at October 31, 1998 and
20
<PAGE> 21
1999 in an amount of $6,400,000 is classified on the Company's balance sheet as
redeemable cumulative preferred stock. In the event of any liquidation,
dissolution or winding up of the affairs of the Company, holders of the Series B
Preferred Stock shall be paid the redemption price plus all accrued dividends to
the date of liquidation, dissolution or winding up of affairs before any payment
to other stockholders.
On September 1, 1993, the Company issued 6,400 shares of its Series B
Preferred Stock in conjunction with the acquisition of System Parking. The
acquisition agreement provided that one-half, or 3,200 shares, of the Series B
Preferred Stock be placed in escrow and will be released upon certain earnout
requirements. As of October 31, 1999, none of these shares have been released.
Dividends of $128,000 are due and payable each quarter and are deducted
from net income in determining net income per common share.
10. CAPITAL STOCK
In March 1999, the stockholders approved an amendment to the Company's
Certificate of Incorporation to increase the number of shares of common stock,
par value $.01 per share, authorized for issue from 28,000,000 to 100,000,000.
The Company is also authorized to issue 500,000 shares of preferred stock,
of which 50,000 shares have been designated as Series A Junior Participating
Preferred Stock of $.01 par value. None of these preferred shares have been
issued.
In March 1998, the Company's Board of Directors adopted a stockholder
rights plan to replace an existing rights plan that expired on April 22, 1998.
The new plan provides for a dividend distribution of one preferred stock
purchase right (a "Right") for each outstanding share of common stock,
distributed to stockholders of record on April 22, 1998. The Rights will be
exercisable only if a person or group acquires 20% or more of the Company's
common stock (an "Acquiring Person") or announces a tender offer for 20% or more
of the common stock. Each Right will entitle stockholders to buy one-thousandth
of a share of newly created Participating Preferred Stock, par value $.01 per
share, of the Company at an initial exercise price of $175 per Right, subject to
adjustment from time to time. However, if any person becomes an Acquiring
Person, each Right will then entitle its holder (other than the Acquiring
Person) to purchase at the exercise price common stock (or, in certain
circumstances, Participating Preferred Stock) of the Company having a market
value at that time of twice the Right's exercise price. These Rightsholders
would also be entitled to purchase an equivalent number of shares at the
exercise price if the Acquiring Person were to control the Company's Board of
Directors and cause the Company to enter into certain mergers or other
transactions. In addition, if an Acquiring Person acquired between 20% and 50%
of the Company's voting stock, the Company's Board of Directors may, at its
option, exchange one share of the Company's common stock for each Right held
(other than Rights held by the Acquiring Person). Rights held by the Acquiring
Person will become void. The Rights Plan excludes from its operation The
Theodore Rosenberg Trust and The Sydney J. Rosenberg Trust, and certain related
persons, and, as a result, their holdings will not cause the Rights to become
exercisable or nonredeemable or trigger the other features of the Rights. The
Rights will expire on April 22, 2008, unless earlier redeemed by the Board at
$0.01 per Right.
As discussed in Note 1, the Company continues to account for its
stock-based awards using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and its related interpretations. Accordingly, no compensation
expense has been recognized in the financial statements for employee stock
awards.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation", requires the disclosure of pro forma net earnings and
earnings per share had the Company adopted the fair value method as of the
beginning of fiscal 1996. Under SFAS 123, the fair value of stock-based awards
to employees is calculated through the use of option pricing models. The use of
these models requires subjective assumptions, including future stock price
volatility and expected time to exercise, which can have a significant effect on
the calculated values. The Company's calculations were made using the
Black-Scholes option pricing model with the following weighted average
assumptions: expected life 9.8 years, 11.4 years, and 11.9 years from the date
of grant in fiscal 1997, 1998, and 1999, respectively; expected stock price
volatility of 19.5%, 25.3%, and 26.2%, respectively; expected dividend yields of
2.6%, 1.5%, and 1.9%, and risk free interest rates of 6.5%, 6.0%, and 5.0% in
fiscal 1997, 1998, and 1999, respectively.
The Company's calculations are based on a single option valuation approach
and forfeitures are
21
<PAGE> 22
recognized as they occur. If the computed fair values of the fiscal awards had
been amortized to expense over the vesting period of the awards, pro forma net
earnings would have been $24,376,000 ($1.09 per share) for fiscal 1997,
$27,496,000 ($1.17 per share) for fiscal 1998, and $35,409,000 ($1.47 per share)
for fiscal 1999. The impact of outstanding stock options granted prior to fiscal
1996 has been excluded from the pro forma calculation; accordingly, the fiscal
1997, 1998, and 1999 pro forma adjustments are not indicative of future period
pro forma adjustments, when the calculation will apply to all future applicable
stock grants.
Although most of the options granted under the "Price-Vested" Performance
Stock Option Plan adopted in fiscal 1996 were granted in fiscal 1997, the
recognition of expense in the SFAS 123 footnote for this Plan increased from
$724,296 in fiscal 1997 to $5,879,059 in fiscal 1998. This accounts for the
majority of the increase in the total recognition from all plans from $4,682,235
in fiscal 1997 to $10,513,464 in fiscal 1998. This large increase results from
the requirements contained in SFAS 123. The options from this Plan were granted
with a ten-year term. If, during the first four years, the stock price achieved
and maintained a set price for ten out of thirty consecutive trading days, the
options associated with the price would vest. The prices established were $25,
$30, $35 and $40, with 25% of the options vesting at each price point. If, at
the end of four years, any of the stock price performance targets were not
achieved, then the remaining options would vest at the end of eight years from
the date the options were granted. SFAS 123 requires that the projected value of
the options be determined on the grant date and recognized over the period in
which the options are earned (the vesting period). For these options, the
projected value of the options was determined and that value was to be
recognized over the eight-year vesting period unless vesting occurred at an
earlier date. In fiscal 1998 ABM stock achieved and maintained for the requisite
ten-day period, the first three price targets. As a result, 75% of the options
are now vested, and the projected value of that 75% less the amount recognized
in fiscal 1997 for those options is recognized in this year's footnote. Of the
remaining 25% of the originally granted options yet to be vested, one-eighth was
recognized in each of the last three years. The remaining amount will be
recognized over the next five years unless sooner vested by the stock achieving
a price of $40 per share and maintaining that price for ten out of 30
consecutive trading days.
"Time-Vested" Incentive Stock Option Plan adopted in 1987, as amended
In 1987, the Company adopted a stock option plan under which 1,200,000
shares were reserved for grant until December 31, 1996. In March 1994, this plan
was amended to reserve an additional 1,000,000 shares. In March 1996, the plan
was amended again to reserve another 2,000,000 shares. Options which terminate
without being exercised may be reissued. At October 31, 1999, 1,017,210 shares
remained available for grant.
Transactions under this plan are summarized as follows:
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------
Weighted
Average
Number of Exercise
Options Price
- ---------------------------------------------------------------
Balance October 31, 1996 2,398,000 $12.21
Granted (Weighted average fair value of
$4.55) 89,000 $19.83
Exercised (108,000) $ 8.70
Terminated (64,000) $13.28
- ---------------------------------------------------------------
Balance October 31, 1997 2,315,000 $12.41
Granted (Weighted average fair value of
$10.20) 266,000 $32.28
Exercised (486,000) $ 7.35
Terminated (83,000) $15.16
- ---------------------------------------------------------------
Balance October 31, 1998 2,012,000 $16.40
Granted (Weighted average fair value of
$8.34) 126,000 $30.86
Exercised (296,000) $10.28
Terminated (35,000) $18.30
- ---------------------------------------------------------------
Balance October 31, 1999 1,807,000 $18.37
===============================================================
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
Outstanding Exercisable
- ---------------------------------------------------- --------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of of Contractual Exercise of Exercise
Prices Options Life (Years) Price Options Price
- ---------------------------------------------------------------------------
$ 8.49 - 13.32 604,000 3.9 $ 9.03 598,000 $ 9.00
$17.44 - 26.94 849,000 6.8 $19.18 549,000 $19.01
$29.41 - 36.59 354,000 8.5 $32.31 103,000 $32.39
===========================================================================
</TABLE>
"Price-Vested" Performance Stock Option Plan adopted in 1996
In December 1996, the Company adopted a stock option plan under which
1,500,000 shares have been reserved. The options expire 10 years after the date
of grant and any options which terminate without being exercised may be
reissued. Each option will have a pre-defined vesting price which provides for
accelerated vesting if the fair market value of the Company's common stock is
equal to or greater than the pre-defined vesting price for 10 trading days in
any period of 30 consecutive trading days. Vested options will become
exercisable only after the first anniversary of its grant date. Any option that
has not
22
<PAGE> 23
vested prior to the fourth anniversary of its grant date will vest on the
eighth anniversary of its grant date. At October 31, 1999, 310,000 shares
remained available for grant.
Transactions under this plan are summarized as follows:
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------
Weighted
Average
Number of Exercise
Options Price
- ---------------------------------------------------------------
Granted December 17, 1996 (Weighted
average fair value of $6.32) 1,120,000 $20.40
Terminated (40,000) $20.00
- ---------------------------------------------------------------
Balance October 31, 1997 1,080,000 $20.41
Granted (Weighted average fair value of
$14.95) 140,000 $36.59
Exercised (70,000) $20.00
- ---------------------------------------------------------------
Balance October 31, 1998 1,150,000 $22.40
Exercised (15,000) $20.00
- ---------------------------------------------------------------
Balance October 31, 1999 1,135,000 $22.37
===============================================================
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
Outstanding Exercisable
- ---------------------------------------------------- --------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of of Contractual Exercise of Exercise
Prices Options Life (Years) Price Options Price
- ---------------------------------------------------------------------------
$20.00 - 25.59 995,000 7.2 $20.45 770,000 $20.44
$36.59 140,000 8.4 $36.59 70,000 $36.59
===========================================================================
</TABLE>
"Age-Vested" Career Stock Option Plan
adopted in 1984, as amended
In 1984, the Company adopted a stock option plan whereby 680,000 shares
were reserved for grant. In March of 1996, another 1,000,000 shares were
reserved for grant under the plan. As amended December 20, 1994, options which
have been granted at fair market value are 50% exercisable when the option
holders reach their 61st birthday and the remaining 50% will vest on their 64th
birthday. To the extent vested, the options may be exercised at any time prior
to one year after termination of employment. Options which terminate without
being exercised may be reissued. At October 31, 1999, 434,000 shares remained
available for grant.
Transactions under this plan are summarized as follows:
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------
Weighted
Average
Number of Exercise
Options Price
- ---------------------------------------------------------------
Balance October 31, 1996 639,000 $ 7.55
Granted (Weighted average fair value of
$6.65) 6,000 $19.44
Terminated (22,000) $11.25
- ---------------------------------------------------------------
Balance October 31, 1997 623,000 $ 7.53
Granted (Weighted average fair value of
$13.79) 573,000 $30.01
Terminated (12,000) $18.82
- ---------------------------------------------------------------
Balance October 31, 1998 1,184,000 $18.29
Granted (Weighted average fair value of
$14.59) 75,000 $31.88
Exercised (56,000) $ 6.22
Terminated (16,000) $ 9.31
- ---------------------------------------------------------------
Balance October 31, 1999 1,187,000 $19.86
===============================================================
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
Outstanding Exercisable
- ---------------------------------------------------- --------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of of Contractual Exercise of Exercise
Prices Options Life (Years) Price Options Price
- ---------------------------------------------------------------------------
$ 5.72 - 8.72 382,000 4 $ 5.96 135,000 $ 6.39
$11.25 - 13.28 159,000 7 $11.33 29,000 $11.25
$19.44 6,000 12 $19.44 -- --
$29.41 - 36.94.. 640,000 12 $30.23 86,000 $29.41
===========================================================================
</TABLE>
Employee Stock Purchase Plan
adopted in 1985, as amended
In 1985, the Company adopted an employee stock purchase plan under which
sale of 5 million shares of its common stock has been authorized. In March of
1996, the sale of an additional 1,200,000 shares were authorized, and again in
March of 1999, 1,200,000 additional shares were authorized under this plan. The
purchase price of the shares under the plan is the lesser of 85% of the fair
market value at the commencement of each plan year or 85% of the fair market
value on the date of purchase. Employees may designate up to 10% of their
compensation for the purchase of stock. During 1997, 1998, and 1999, 520,000,
562,160, and 602,000 shares of stock were issued under the plan for an aggregate
purchase price of $7,841,000, $10,873,000, and $13,632,000, respectively. The
weighted average fair value per share of purchases in 1997, 1998, and 1999 was
$5.75, $5.11, and $7.32, respectively, and were issued at a weighted-average
price of $15.08, $19.34, and $23.25, respectively. At October 31, 1999, 908,000
shares remained unissued under the plan.
23
<PAGE> 24
11. INCOME TAXES
The provision for income taxes is made up of the following components for
each of the years ended October 31:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(in thousands of dollars) 1997 1998 1999
- ---------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $18,685 $22,415 $29,807
State 2,809 5,647 4,286
Foreign 8 37 9
Deferred
Federal (1,619) (4,149) (6,022)
State (158) (372) (515)
- ---------------------------------------------------------------
$19,725 $23,578 $27,565
===============================================================
</TABLE>
Income tax expense attributable to income from operations differs from the
amounts computed by applying the U.S. statutory rates to pretax income from
operations as a result of the following for the years ended October 31:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
1997 1998 1999
- -------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0 % 35.0 % 35.0 %
State and local taxes on
income, net of federal tax
benefit 3.4 % 5.6 % 5.5 %
Tax credits (0.9)% (2.7)% (2.6)%
Nondeductible expenses and
other -- net 4.5 % 3.1 % 3.1 %
- -------------------------------------------------------------
42.0 % 41.0 % 41.0 %
=============================================================
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at October 31,
are presented below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(in thousands of dollars) 1998 1999
- ---------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Self-insurance claims $28,767 $30,484
Bad debt allowance 1,073 2,401
Deferred and other compensation 6,103 7,361
Intangible amortization 2,853 3,384
State taxes 1,105 1,408
Other 3,122 3,172
- ---------------------------------------------------------------
Total gross deferred tax assets 43,023 48,210
- ---------------------------------------------------------------
Deferred tax liabilities:
Union pension contributions (5,161) (4,051)
Depreciation 152 392
- ---------------------------------------------------------------
Total gross deferred tax
liabilities (5,009) (3,659)
- ---------------------------------------------------------------
Net deferred tax assets $38,014 $44,551
===============================================================
</TABLE>
Management has determined the total net deferred tax asset will more likely
than not be realized.
At October 31, 1999, ABM has a capital loss carryover of $1,135,516, which
can be carried forward to offset capital gains, if any, to reduce future federal
income taxes through October 31, 2001.
12. ACQUISITIONS AND DIVESTITURES
All acquisitions have been accounted for using the purchase method of
accounting; operations of the companies and businesses acquired have been
included in the accompanying consolidated financial statements from their
respective dates of acquisition. The excess of the purchase price over fair
value of the net assets acquired is generally included in goodwill. Most
purchase agreements provide for contingent payments based on the annual pretax
income for subsequent periods ranging generally from three to five years. Any
such future payments are generally capitalized as goodwill when paid. Cash paid
for acquisitions, including any contingent amounts based on subsequent earnings,
were approximately $11 million in 1999. In addition, common shares, with a fair
market value of approximately $1.7 million at the date of issuance, were issued
in 1999 under the contingent payment provisions of a prior year acquisition.
Acquisitions and dispositions made during the fiscal year 1999 are discussed
below:
Effective February 1, 1999, the Company acquired the operations and
selected assets of VIP Valet Parking, with customers located in Austin and
Houston, Texas. The terms for the purchase of this acquisition were a cash
downpayment made at closing plus annual contingent payments based on operating
profits to be made over five years. This acquisition contributed approximately
$0.9 million in revenues in fiscal year 1999.
Effective April 1, 1999, the Company acquired the operations and selected
assets of Commercial Landscaping Services, with operations located in the
Carolinas and Tennessee. The terms for the purchase of this acquisition were a
cash downpayment made at closing plus annual contingent payments based on
operating profits to be made over five years. This acquisition contributed
approximately $4 million in revenues in fiscal year 1999.
Effective April 1, 1999, the Company acquired the operations and selected
assets of Integra Services Corporation, with customers located in Des Moines,
Iowa. The terms for the purchase of this acquisition were a cash downpayment
made at closing plus annual contingent payments based on operating profits to be
made over five years. This acquisition contributed approximately $2.3 million in
revenues in fiscal year 1999.
Effective May 1, 1999, the Company acquired the operations and stock of
Masterclean Systems, Inc., with customers located in Louisville, Kentucky, and
24
<PAGE> 25
Master-Klean, Inc. with customers in Indianapolis, Indiana. The terms for the
purchase of these acquisitions were a cash downpayment made at closing plus
annual contingent payments based on gross profits to be made over five years.
This acquisition contributed approximately $1.9 million in revenues in fiscal
year 1999.
Effective July 1, 1999, the Company acquired the operations and selected
assets of Suburban Lighting Company, with customers located in Minnesota and
other parts of the upper Midwest. The terms for the purchase of this acquisition
were a cash downpayment made at closing plus annual contingent payments based on
operating profits to be made over five years. This acquisition contributed
approximately $1.3 million in revenues in fiscal year 1999.
Effective August 1, 1999, the Company acquired the operations and selected
assets of FaciliTech, with customers located in the Minneapolis/St. Paul
metropolitan area of Minnesota. The terms for the purchase of this acquisition
were a cash downpayment made at closing plus annual contingent payments based on
gross profits to be made over three years. This acquisition contributed
approximately $0.9 million in revenues in fiscal year 1999.
Effective August 1, 1999, the Company acquired the operations and selected
assets of Private Patrol Agency, with customers located in San Jose, California.
The terms for the purchase of this acquisition were a cash payment made at
closing.
These seven business combinations were accounted for under the purchase
method of accounting. The aggregate consideration paid for these acquisitions
consisted of $7,199,000. The aggregate purchase price does not include payments
of contingent consideration based upon the results of operations of the
businesses acquired.
Effective November 1, 1999, the Company acquired the operations and
selected assets of NPS Corporation, with customers located in Anchorage, Alaska.
The terms for the purchase of this acquisition were a cash downpayment made at
closing plus annual contingent payments based on operating profits to be made
over five years.
Effective December 1, 1999, the Company acquired the operations and
selected assets of Centre City Parking, with customers located in Miami,
Florida. The terms for the purchase of this acquisition were a cash downpayment
made at closing plus annual contingent payments based on operating profits to be
made over five years.
13. DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash and cash
equivalents approximate fair value due to the short-maturity of these
instruments.
Financial instruments included in investments and long-term receivables
have no quoted market prices and, accordingly, a reasonable estimate of fair
market value could not be made without incurring excessive costs. However, the
Company believes by reference to stated interest rates and security held, the
fair value of the assets would not differ significantly from the carrying value.
The fair value of the Company's long-term debt approximates carrying value
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining maturities.
The Company believes that it is not practical to estimate a fair market
value different from the redeemable cumulative preferred stock's carrying value
of $6.4 million, as this security was issued in conjunction with an acquisition
and has numerous features unique to this security as described in Note 9.
However, the Company believes the carrying value would not differ significantly
from the fair value.
14. SEGMENT INFORMATION
In fiscal 1999, the Company adopted Statements of Financial Accounting
Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and
Related Information". SFAS 131 supersedes SFAS 14, "Financial Reporting for
Segments of a Business Enterprise", replacing the industry segment approach with
the management approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. SFAS
131 also requires disclosures about products and services, geographic areas and
major customers. The Company is organized into nine separate operating segments
as defined under SFAS 131. However the ABM Janitorial, Amtech Elevator, ABM
Engineering, Amtech Lighting and Ampco System Parking operating segments are
reportable using the quantitative threshold criteria under SFAS 131. Included in
all other segments are the ABM Facility Services, American Commercial Security,
CommAir Mechanical Services and Easterday Janitorial Supply Company segments. In
addition, the corporate expenses are not allocated, and, therefore, have been
included, as
25
<PAGE> 26
in the past, to provide more meaningful information. All of these segments are
distinct business units. They are managed separately because of their unique
services, technology and marketing requirements. Nearly 100% of the operations
and related revenues are within the United States and no single customer
accounts for more than 10% of sales. The adoption of SFAS 131 had no impact on
the results of operations or financial position.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Ampco
(in thousands of dollars) ABM Amtech ABM Amtech System ALL
For the year ended October 31, 1997 Janitorial Elevator Engineering Lighting Parking Other Corporate
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues and other income $685,234 $82,531 $ 94,048 $79,913 $144,206 $166,030 $ 510
Intersegment revenues 1,553 0 335 611 0 12,191
- --------------------------------------------------------------------------------------------------------------------------
Total Revenues $686,787 $82,531 $ 94,383 $80,524 $144,206 $178,221 $ 510
==========================================================================================================================
Operating profit $ 32,845 $ 4,654 $ 7,377 $ 6,260 $ 6,349 $ 6,804 $(14,650)
Interest, expense (24) 1 0 0 (5) (8) (2,639)
- --------------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 32,821 $ 4,655 $ 7,377 $ 6,260 $ 6,344 $ 6,796 $(17,289)
==========================================================================================================================
Identifiable assets $195,890 $28,827 $ 27,898 $48,320 $ 73,759 $ 44,513 $ 45,044
==========================================================================================================================
Depreciation expense $ 3,538 $ 375 $ 122 $ 1,610 $ 2,085 $ 894 $ 697
==========================================================================================================================
Amortization expense $ 3,525 $ 192 $ 90 $ 366 $ 2,366 $ 258 $ 0
==========================================================================================================================
Capital expenditures $ 4,668 $ 265 $ 244 $ 1,813 $ 3,568 $ 1,547 $ 1,167
==========================================================================================================================
FOR THE YEAR ENDED OCTOBER 31, 1998
- --------------------------------------------------------------------------------------------------------------------------
Revenues and other income $859,066 $89,263 $136,439 $87,901 $154,050 $174,579 $ 529
Intersegment revenues 324 0 367 288 0 12,981 0
- --------------------------------------------------------------------------------------------------------------------------
Total Revenues $859,390 $89,263 $136,806 $88,189 $154,050 $187,560 $ 529
==========================================================================================================================
Operating profit $ 44,615 $ 6,453 $ 8,044 $ 6,926 $ 6,984 $ 8,073 $(20,122)
Interest, expense (19) 1 0 0 0 (9) (3,438)
- --------------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 44,596 $ 6,454 $ 8,044 $ 6,926 $ 6,984 $ 8,064 $(23,560)
==========================================================================================================================
Identifiable assets $212,714 $29,903 $ 34,606 $54,134 $ 77,690 $ 47,335 $ 44,981
==========================================================================================================================
Depreciation expense $ 4,281 $ 391 $ 146 $ 1,617 $ 2,125 $ 1,029 $ 1,109
==========================================================================================================================
Amortization expense $ 5,135 $ 192 $ 368 $ 417 $ 2,468 $ 315 $ 0
==========================================================================================================================
Capital expenditures $ 5,577 $ 115 $ 97 $ 1,330 $ 1,485 $ 786 $ 2,325
==========================================================================================================================
FOR THE YEAR ENDED OCTOBER 31, 1999
- --------------------------------------------------------------------------------------------------------------------------
Revenues and other income $933,293 $96,618 $153,758 $95,521 $162,358 $187,306 $ 862
Intersegment revenues 374 0 188 270 0 12,567 0
- --------------------------------------------------------------------------------------------------------------------------
Total Revenues $933,667 $96,618 $153,946 $95,791 $162,358 $199,873 $ 862
==========================================================================================================================
Operating profit $ 49,496 $ 6,651 $ 8,352 $ 7,461 $ 8,539 $ 7,336 $(18,644)
Interest, expense (13) 0 0 0 0 (10) (1,936)
- --------------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 49,483 $ 6,651 $ 8,352 $ 7,461 $ 8,539 $ 7,326 $(20,580)
==========================================================================================================================
Identifiable assets $242,117 $32,411 $ 34,864 $59,921 $ 84,360 $ 52,798 $ 56,913
==========================================================================================================================
Depreciation expense $ 4,575 $ 381 $ 101 $ 1,454 $ 1,998 $ 1,032 $ 1,274
==========================================================================================================================
Amortization expense $ 5,866 $ 192 $ 368 $ 531 $ 2,568 $ 358 $ 0
==========================================================================================================================
Capital expenditures $ 6,632 $ 354 $ 168 $ 1,506 $ 1,763 $ 1,468 $ 7,560
==========================================================================================================================
<CAPTION>
- ---------------------------------------- ---------------------------
(in thousands of dollars) CONSOLIDATED
For the year ended October 31, 1997 ELIMINATIONS TOTALS
- ----------------------------------------
<S> <C> <C>
Revenues and other income $ 0 $1,252,472
Intersegment revenues (14,690) 0
- ----------------------------------------
Total Revenues $(14,690) $1,252,472
========================================
Operating profit $ 0 $ 49,639
Interest, expense 0 (2,675)
- ----------------------------------------
Income before income taxes $ 0 $ 46,964
========================================
Identifiable assets $ 0 $ 464,251
========================================
Depreciation expense $ 0 $ 9,321
========================================
Amortization expense $ 0 $ 6,797
========================================
Capital expenditures $ 0 $ 13,272
========================================
FOR THE YEAR ENDED OCTOBER 31, 1998
- ----------------------------------------
Revenues and other income $ 0 $1,501,827
Intersegment revenues (13,960) 0
- ----------------------------------------
Total Revenues $(13,960) $1,501,827
========================================
Operating profit $ 0 $ 60,973
Interest, expense 0 (3,465)
- ----------------------------------------
Income before income taxes $ 0 $ 57,508
========================================
Identifiable assets $ 0 $ 501,363
========================================
Depreciation expense $ 0 $ 10,698
========================================
Amortization expense $ 0 $ 8,895
========================================
Capital expenditures $ 0 $ 11,715
========================================
FOR THE YEAR ENDED OCTOBER 31, 1999
- ----------------------------------------
Revenues and other income $ 0 $1,629,716
Intersegment revenues (13,399) 0
- ----------------------------------------
Total Revenues $(13,399) $1,629,716
========================================
Operating profit $ 0 $ 69,191
Interest, expense 0 (1,959)
- ----------------------------------------
Income before income taxes $ 0 $ 67,232
========================================
Identifiable assets $ 0 $ 563,384
========================================
Depreciation expense $ 0 $ 10,815
========================================
Amortization expense $ 0 $ 9,883
========================================
Capital expenditures $ 0 $ 19,451
========================================
</TABLE>
Intersegment revenues are recorded at prices negotiated between the entities.
26
<PAGE> 27
15. QUARTERLY INFORMATION (UNAUDITED)
(in thousands, except earnings per share)
<TABLE>
- --------------------------------------------------------------------------------------------------------
Fiscal Quarter
--------------------------------------------
First Second Third Fourth YEAR
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
1998
Revenues and other income $358,747 $369,034 $381,036 $393,010 $1,501,827
Gross profit 46,253 48,506 52,292 56,353 203,404
Net income 5,735 7,105 9,526 11,564 33,930
Net income per common share:
Basic 0.27 0.33 0.44 0.53 1.58
Diluted 0.25 0.30 0.40 0.49 1.44
1999
Revenues and other income $391,831 $398,291 $412,689 $426,905 $1,629,716
Gross profit 50,155 50,228 56,584 59,208 216,175
Net income 6,969 8,366 11,129 13,203 39,667
Net income per common share:
Basic 0.32 0.37 0.50 0.58 1.77
Diluted 0.29 0.35 0.46 0.55 1.65
- --------------------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE II
ABM Industries Incorporated and Subsidiaries
CONSOLIDATED VALUATION ACCOUNTS
Years ended October 31, 1997, 1998 and 1999
(in thousands of dollars)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Balance Charges to Deductions Other Balance
Beginning Costs and Net of Additions End of
of Year Expenses Recoveries (Reductions) Year
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Allowance for Doubtful Accounts
Years ended October 31:
1997 $4,442 $2,988 ($1,507) $0 $5,923
1998 5,923 2,821 (1,983) 0 6,761
1999 6,761 2,257 (1,528) 0 7,490
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT.
The information required by this item regarding the Company's executive
officers is incorporated by reference to the information set forth under the
caption "Election of Directors" contained in the Proxy Statement to be used by
the Company in connection with its 2000 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference to the
information set forth under the caption "Executive Compensation" contained in
the Proxy Statement to be used by the Company in connection with its 2000 Annual
Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
The information required by this item is incorporated by reference to the
information set forth under the caption "Principal Stockholders" contained in
the Proxy Statement to be used by the Company in connection with its 2000 Annual
Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference to the
information set forth under the captions "Executive Compensation" and "Certain
Relationships and Related Transactions" contained in the Proxy Statement to be
used by the Company in connection with the 2000 Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED
FINANCIAL STATEMENT
SCHEDULES AND REPORTS
ON FORM 8-K.
(a) The following documents are filed as part of this Form 10-K:
1. Consolidated Financial Statements of ABM Industries Incorporated
and Subsidiaries (see Item 8):
Independent Auditors' Report
Consolidated Balance Sheets --
October 31, 1998 and 1999
Consolidated Statements of Income -- Years ended October 31,
1997, 1998 and 1999
Consolidated Statements of Stockholders' Equity and Comprehensive
Income -- Years ended October 31, 1997, 1998 and 1999
Consolidated Statements of Cash Flows -- Years ended October 31,
1997, 1998 and 1999
Notes to Consolidated Financial Statements.
2. Consolidated Financial Statement Schedule of ABM Industries
Incorporated and Subsidiaries (see Item 8):
Schedule II -- Consolidated Valuation Accounts -- Years ended October 31,
1997, 1998 and 1999.
All other schedules are omitted because they are not applicable or because
the required information is included in the consolidated financial statements or
the notes thereto.
The individual financial statements of the registrant's subsidiaries have
been omitted since the registrant is primarily an operating company and all
subsidiaries included in the consolidated financial statements are wholly owned
subsidiaries.
3. Exhibits:
See Exhibit Index.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the fourth quarter of fiscal
year 1999.
28
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ William W. Steele
-----------------------------------------------------------
William W. Steele
President, Chief Executive Officer and Director
January 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ William W. Steele /s/ Martinn H. Mandles
- ------------------------------------------------------------ ------------------------------------------------------------
William W. Steele Martinn H. Mandles
President, Chief Executive Officer and Director Chairman of the Board,
(Principal Executive Officer) Chief Administrative Officer and Director
January 28, 2000 January 28, 2000
/s/ David H. Hebble /s/ Vernon E. Skelton
- ------------------------------------------------------------ ------------------------------------------------------------
David H. Hebble Vernon E. Skelton
Senior Vice President and Vice President, Controller and
Chief Financial Officer Chief Accounting Officer
(Principal Financial Officer) (Principal Accounting Officer)
January 28, 2000 January 28, 2000
/s/ Maryellen B. Cattani /s/ Linda Chavez
- ------------------------------------------------------------ ------------------------------------------------------------
Maryellen B. Cattani Linda Chavez
Director Director
January 28, 2000 January 28, 2000
/s/ Luke S. Helms /s/ Charles T. Horngren
- ------------------------------------------------------------ ------------------------------------------------------------
Luke S. Helms Charles T. Horngren
Director Director
January 28, 2000 January 28, 2000
/s/ Henry L. Kotkins, Jr. /s/ Theodore Rosenberg
- ------------------------------------------------------------ ------------------------------------------------------------
Henry L. Kotkins, Jr. Theodore Rosenberg
Director Chairman of the
January 28, 2000 Executive Committee and Director
January 28, 2000
/s/ William E. Walsh
- ------------------------------------------------------------
William E. Walsh
Director
January 28, 2000
</TABLE>
29
<PAGE> 30
EXHIBIT INDEX:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
<C> <S>
Exhibit
Number Description
- ---------------------------------------------------------------
3.1[j] Certificate of Incorporation, as amended
3.1.1[s] Certificate of Amendment of Certificate of
Incorporation dated March 16, 1999
3.2 Restated By-laws, as amended
4.1[k] Credit Agreement, dated June 25, 1997, between Bank
of America National Trust and Savings Association
and the Company
4.2[q] First Amendment to Credit Agreement dated as of
October 31, 1997
4.3 Second Amendment to Credit Agreement dated as of
September 22, 1999
4.5[c] Business Loan Agreement dated February 13, 1996
10.2[j]* 1985 Employee Stock Purchase Plan as amended
effective December 19, 1995
10.3[b]* Supplemental Medical and Dental Plan
10.4[j]* 1984 Executive Stock Option Plan as amended
effective December 19, 1995 (now known as "Age-
Vested" Career Stock Option Plan)
10.9[f]* Short Form Deed of Trust and Assignment of Rents
(dated December 17, 1991) between the Company and
John F. Egan, together with the related Promissory
Note (dated January 1, 1992)
10.13[j]* 1987 Stock Option Plan as amended effective
December 19, 1995 (now known as "Time-Vested"
Incentive Stock Option Plan)
10.16[d] Rights Agreement, dated as of March 17, 1998,
between the Company and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent
10.19[e]* Service Award Plan
10.20[f]* Executive Employment Agreement with William W.
Steele
10.21[f]* Amended and Restated Retirement Plan for Outside
Directors
10.22[f]* Amendment No. 1 to Service Award Plan
10.23[g]* Form of Outside Director Retirement Agreement
(dated June 16, 1992)
10.24[g]* Executive Employment Agreement with John F. Egan
10.25[g]* Executive Employment Agreement with Jess E. Benton,
III
10.27[h] Guaranty of American Building Maintenance
Industries, Inc.
10.28[i]* Deferred Compensation Plan
10.29[i]* Form of Existing Executive Employment Agreement
Other Than Those Specifically Named Above
10.30[l]* Executive Employment Agreement with Martinn H.
Mandles, as amended by Amendments One and Two
10.31[l]* Amendment of Corporate Executive Employment
Agreement with William W. Steele
10.32[l]* First and Second Amendments of Corporate Executive
Employment Agreement with John F. Egan
10.34[l]* First and Second Amendments of Corporate Executive
Employment Agreement with Jess E. Benton, III
10.35[l]* Form of Amendments of Corporate Executive
Employment Agreements with Other Than Those Named
Above
10.36[m]* Form of Indemnification for Directors
10.37[n]* Second Amendment of Corporate Executive Employment
Agreement with William W. Steele
10.39[n]* Third Amendment of Corporate Executive Employment
Agreement with Martinn H. Mandles
10.40[p]* 1996 ABM Industries Incorporated Long-Term Senior
Executive Stock Option Plan (now known as "Price-
Vested" Performance Stock Option Plan)
10.40[o]* Amendment of Corporate Executive Employment
Agreement with Martinn H. Mandles
10.41[o]* Amendment of Corporate Executive Employment
Agreement with Jess E. Benton III
10.42[r]* Executive Employment Agreement with Henrik
Slipsager
10.43[r]* Second Amendment of Division Executive Employment
Agreement with Henrik Slipsager
10.44[r]* Third Amendment of Division Executive Employment
Agreement with Henrik Slipsager
10.45[r]* Amendment of Division Executive Employment
Agreement with Henrik Slipsager
10.46[s]* Amendment numbers 1, 2 and 3 to the Employee Stock
Purchase Plan (Incorporated by reference to
exhibits 99.1, 99.2 and 99.3 to Form S-8
Registration Statement (File No. 333-78425) filed
by the registrant)
10.47* Amendment No. 1 to the 1987 Incentive Stock Option
Plan
10.48* Amendment No. 2 to the ABM Industries Incorporated
1987 Incentive Stock Option Plan (December 19, 1994
Restatement)
10.49* Amendment No. 3 to the "Time-Vested" Incentive
Stock Option Plan
10.50* Amendment No. 4 to the ABM Industries Incorporated
"Time-Vested" Incentive Stock Option Plan (December
19, 1994 Restatement)
10.51* Amendment No. 1 to the 1984 Executive Stock Option
Plan
10.52* Amendment No. 2 to the 1984 Executive Stock Option
Plan (December 1994 Restatement)
10.53* Amendment No. 3 to the ABM Industries Incorporated
"Age-Vested" Career Stock Option Plan (December 19,
1995 Restatement)
10.54* Amendment No. 1 to the Long-Term Senior Executive
Incentive Stock Option Plan Adopted December 1996
10.55* Amendment No. 2 to the "Price-Vested" Performance
Stock Option Plan
10.56* Amendment No. 3 to the ABM Industries Incorporated
"Price-Vested" Performance Stock Option Plan
10.57* Fourth Amendment of Division Executive Employment
Agreement with Henrik Slipsager
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Certified Public Accountants
27.1 Financial Data Schedule
</TABLE>
- ------------------------------
[b] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1984.
[c] Incorporated by reference to the exhibit bearing the same numeric
description, which was filed as an exhibit to the Company's quarterly report
on Form 10-Q for the fiscal quarter ended January 31, 1996.
[d] Incorporated by reference to exhibit 4.1 to the Company's report on Form 8-K
dated March 17, 1998.
[e] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1990.
[f] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1991.
[g] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's quarterly report
on Form 10-Q for the fiscal quarter ended July 31, 1992.
[h] Incorporated by reference to the exhibit bearing the same numeric reference
which was filed as an exhibit to the Company's quarterly report on Form 10-Q
for the fiscal quarter ended July 31, 1993.
30
<PAGE> 31
[i] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1993.
[j] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's quarterly report
on Form 10-Q for the fiscal quarter ended April 30, 1996.
[k] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's quarterly report
on Form 10-Q for the fiscal quarter ended July 31, 1997.
[l] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1994.
[m] Incorporated by reference to exhibit 10.20 which was filed as an exhibit to
the Company's quarterly report on Form 10-Q for the fiscal quarter ended
April 30, 1991.
[n] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1996.
[o] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's quarterly report
on Form 10-Q for the fiscal quarter ended July 31, 1998.
[p] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's quarterly report
on Form 10-Q for the fiscal quarter ended April 30, 1997.
[q] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1997.
[r] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1998.
[s] Incorporated by reference to the exhibit bearing the same numeric
description which was filed as an exhibit to the Company's quarterly report
on Form 10-Q for the fiscal quarter ended April 30, 1999.
* Management contract, compensatory plan or arrangement.
31
<PAGE> 1
EXHIBIT 3.2
ABM INDUSTRIES INCORPORATED
BY-LAWS
As Restated Effective June 15, 1999
and Amended 11/1/99
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office shall be
located in the City of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meeting. All meetings of stock-holders shall be
held at the principal executive office of the Corporation or at any other place,
either within or without the State of Delaware, as may be designated by the
Board of Directors.
Section 2.2. Annual Meeting. The annual meeting of stockholders
shall be held on such date and at such time as the Board of Directors may
designate.
At each annual meeting the stockholders shall elect directors to
succeed those whose terms expire in that year and to serve until their
successors are elected, and shall transact such other business as may properly
be brought before the meeting.
Section 2.3. Notice of Annual Meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Such notice shall be given either
personally or by mail or other means of written communication, addressed or
delivered to each stockholder entitled to vote at such meeting at the address of
such stockholder appearing on the books of the Corporation or given by him to
the Corporation for the purpose of such notice. If no such address appears or is
given, notice shall be given either personally or by mail or
1
<PAGE> 2
other means of written communication addressed to the stockholder at the place
where the principal executive office of the Corporation is located. The notice
shall be deemed to have been given at the time when delivered personally or
deposited in the mail or sent by other means of written communication.
Section 2.4. Business at Annual Meetings. At an annual meeting of
stockholders, only such business shall be conducted as shall have been brought
before the meeting (i) pursuant to the Corporation's notice of the meeting, (ii)
by or at the direction of the Board of Directors or (iii) by any stockholder of
the Corporation who is a stockholder of record at the time of giving of the
notice provided for in this Bylaw, who shall be entitled to vote at such meeting
and who shall have complied with the notice procedures set forth in this Bylaw.
For business to be properly brought before an annual meeting by a
stockholder pursuant to Section 2.4(a) of this Bylaw, notice in writing must be
delivered or mailed, postage prepaid, to the Secretary of the Corporation and
received at the principal executive offices of the Corporation not less than 60
days prior to the first anniversary of the date on which the Corporation first
mailed its proxy materials for the preceding year's annual meeting of
stockholders; provided, however, that in the event that the date of the meeting
is advanced by more than 30 days or delayed by more than 60 days from such
meeting's anniversary date, notice by the stockholder must be received not later
than the close of business on the later of the 60th day prior to such date of
mailing of proxy materials or the 10th day following the day on which public
announcement of the date of the annual meeting is first made. Such stockholder's
notice shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business to be brought
before the annual meeting and the reasons for conducting such business at such
meeting; (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, and the name and address of the
beneficial owner, if any, on whose behalf the proposal is made; (iii) the class
and number of shares of the Corporation's stock which are beneficially owned by
the stockholder, and by the beneficial owner, if any, on whose behalf the
proposal is made; and (iv) any material interest of the stockholder, and of the
beneficial owner, if any, on whose behalf the proposal is made, in such
business. Business. For purposes of these Bylaws, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
2
<PAGE> 3
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the procedures
set forth in this Bylaw. The chairman of the meeting may, if the facts warrant,
determine that the business was not properly brought before the meeting in
accordance with the provisions of this Bylaw; and if the chairman should so
determine, the chairman shall so declare to the meeting, and any such business
not properly brought before the meeting shall not be transacted. Notwithstanding
the foregoing provisions of this Bylaw, a stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Bylaw. Nothing in this
Bylaw shall be deemed to affect any rights of stockholders to request inclusion
of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under
the Exchange Act.
Section 2.5. List of Stockholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of the
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 2.6. Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, may be called at any time by the Board of
Directors, or by a committee of the Board of Directors which has been duly
designated by the Board of Directors and whose power and authority, as provided
in a resolution of the Board of Directors, include the power to call such
meetings, but such special meetings may not be called by any other person or
persons.
Section 2.7. Notice of Special Meetings. Written notice of a
special meeting of stockholders stating the place, date and hour of the meeting
and the purpose or purposes for which the meeting is called shall be given not
less than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 2.8. Business at Special Meetings. The business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
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Section 2.9. Adjourned Meetings and Notice Thereof. Any stockholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares represented either in
person or by proxy, but in the absence of a quorum, no other business may be
transacted at such meeting, except as provided in Section 2.10 of these by-laws.
When a stockholders' meeting is adjourned to another time or place,
notice of the adjourned meeting need not be given if the time and place thereof
are announced at the meeting at which the adjournment is taken; except that if
the adjournment is for more than thirty days or if after the adjournment a new
record date is fixed for the adjourned meeting, notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote thereat.
At the adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting.
Section 2.10. Quorum. The holders of a majority of the shares issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation.
Section 2.11. Majority Vote. If a quorum is present at any meeting, the
vote of the holders of a majority of the shares having voting power, present in
person or represented by proxy, shall decide any question brought before such
meeting, unless a different vote is required on that question by express
provision of statute or of the certificate of incorporation, in which case such
express provision shall govern and control.
The stockholders present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum, in any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum, unless a different vote is required as set
forth above.
Section 2.12. Voting. Except as otherwise provided in the certificate
of incorporation and subject to Section 8.4 of these by-laws, each stockholder
shall be entitled to one vote, in person or by proxy, for each share of capital
stock having voting power held by such stockholder, but no proxy shall be voted
or acted upon after three years from its date, unless the proxy provides for a
longer period. Vote may be viva voce or by ballot; provided, however, that
elections for directors must be by ballot.
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Any holder of shares entitled to vote on any matter may vote part of
the shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, other than elections to office but, if the
stockholder fails to specify the number of shares such stockholder is voting
affirmatively, it shall be conclusively presumed that the stockholder's
approving vote is with respect to all shares said stockholder is entitled to
vote.
Section 2.13. Stockholder Action. Any action required or permitted to
be taken by the stockholders must be effected at a duly called annual or special
meeting of such holders and may not be effected by any consent in writing by
such holders.
Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when a person objects, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened; provided, that attendance at a meeting is not a waiver of any right to
object to the consideration of matters required by law or these by-laws to be
included in the notice but not so included if such objection is expressly made
at the meeting.
Section 2.14. Presiding Officer. The chairman of the Board of
Directors, if there be such officer, shall, if present, call the meetings of the
stockholders to order and shall act as the presiding officer thereof.
Section 2.15. Secretary. The secretary of the Corporation, if present,
shall act as secretary of all meetings of the stockholders. In the absence of
the secretary, an assistant secretary if present shall act as secretary of the
meetings of the stockholders. In the absence of the secretary or any assistant
secretary, the presiding officer may appoint a person to act as secretary of
such meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number of Directors, Election and Term of Office. The
number of directors which shall constitute the whole board shall be nine. The
Board of Directors shall be classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
possible, as determined by the Board of Directors, one class to hold office
initially for a term expiring at the annual meeting of stockholders to be held
in 1986, another class to hold office initially for a term expiring at the
annual meeting of stockholders to be held in 1987, and another class to hold
office initially for a term expiring at the annual meeting of stockholders
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to be held in 1988, with the members of each class to hold office until their
successors are elected and qualified. At each annual meeting of stockholders,
the successors of the class of directors whose term expires at that meeting
shall be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election.
The term "entire board" as used in these by-laws means the
total number of directors which the Corporation would have if there were no
vacancies.
Section 3.2. Vacancies. A vacancy in the Board of Directors shall be
deemed to exist in case of the death, resignation, or removal of any director,
or if the authorized number of directors be increased, or if the stockholders
fail at any annual or special meeting of stockholders to elect the full
authorized number of directors to be voted for at that meeting.
Unless otherwise provided in the certificate of incorporation,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director, and any
director so chosen shall hold office until the next election of the class for
which he was chosen and until his successor is fully elected and qualified,
unless sooner displaced. If at any time the Corporation should have no directors
in office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the entire board (as constituted immediately prior to any such increase), the
Court of the Chancery may upon application of any stockholder or stockholders
holding at least ten percent (10%) of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships or
to replace the directors chosen by the directors then in office.
Section 3.3. Powers. The business and affairs of the
Corporation shall be managed by its Board of Directors which may exercise all
such powers of the Corporation and do all such lawful acts and things as are not
by statute or by the certificate of incorporation or by these by-laws directed
or required to be exercised or done by the stockholders.
Section 3.4. Compensation of Directors. The Board of Directors
shall have the authority to fix the compensation of directors. No such
compensation shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
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Section 3.5. Resignation. Any director may resign effective
upon giving written notice to the chief executive officer, the secretary, or the
Board of Directors of the Corporation, unless the notice specifies a later time
for the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to take office when the resignation
becomes effective.
Section 3.6. Nominations of Directors. Only persons who are
nominated in accordance with the procedures set forth in these Bylaws shall be
eligible for election as directors. Nominations of persons for election to the
Board of Directors may be made at a meeting of stockholders (i) by the Board of
Directors or a committee appointed by the Board of Directors authorized to make
such nominations or (ii) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of the notice provided for in this
Bylaw, who shall be entitled to vote for the election of directors at the
meeting and who complies with the notice procedures set forth in this Bylaw.
Nominations by stockholders shall be made pursuant to notice in writing,
delivered or mailed, postage prepaid, to the Secretary of the Corporation and
received at the principal executive offices of the Corporation (i) in the case
of an annual meeting, not less than 60 days prior to the first anniversary of
the date on which the Corporation first mailed its proxy materials for the
preceding year's annual meeting of stockholders, provided, however, that in the
event that the date of the meeting is advanced by more than 30 days or delayed
by more than 60 days from such anniversary date, notice by the stockholder must
be received not later than the close of business on the later of the 60th day
prior to such date of mailing of proxy materials or the 10th day following the
day on which public announcement of the date of the meeting is first made; or
(ii) in the case of a special meeting at which directors are to be elected, not
later than the close of business on the later of the 60th day prior to such
special meeting or the 10th day following the day on which public announcement
of the date of the meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting is first made. Such stockholder's notice
shall set forth (i) the name and address of the stockholder who intends to make
the nomination and of the person or persons to be nominated; (ii) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (iii) a description of all arrangements or understandings between the
stockholder and each nominee and
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any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (iv) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated by the Board of Directors; and (v) the written consent
of such nominee to serve as a director of the Corporation if elected. At the
request of the Board of Directors, or any committee appointed by the Board of
Directors authorized to make such nominations, any person nominated by the Board
of Directors, or such committee, for election as a director shall furnish to the
Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination that pertains to the nominee. Notwithstanding
anything in this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public statement naming all the nominees for Director
or specifying the size of the increased Board of Directors made by the
Corporation at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Bylaw shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the Corporation.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in
these Bylaws. The chairman of the meeting may, if the facts warrant, determine
that a nomination was not made in accordance with the procedures prescribed in
this Bylaw; and if the chairman should so determine, the chairman shall so
declare to the meeting, and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall also
comply with all applicable requirements of the Exchange Act, and the rules and
regulations thereunder with respect to the matters set forth in this Bylaw.
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ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1. Place of Meeting. The Board of Directors of
the Corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 4.2. Organization Meeting. Immediately after each
annual meeting of stockholders, the Board of Directors shall hold a regular
meeting for the purpose of organization, electing officers and transacting other
business. No notice of such meeting need be given. In the event such meeting is
not so held, the meeting may be held at such time and place as shall be
specified in a notice given as hereafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.
Section 4.3. Regular Meetings. Regular meetings of the Board
of Directors may be held at such time and at such place as shall from time to
time be determined by the Board of Directors; provided, however, that if the
date so designated falls upon a legal holiday, then the meeting shall be held at
the same time and place on the next succeeding day which is not a legal holiday.
Such regular meetings may be held without notice.
Section 4.4. Special Meetings. Special meetings of the Board
of Directors may be called by the chairman of the board of directors, chairman
of the executive committee of the Board of Directors, the chief executive
officer or the president or on the written request of the directors constituting
a majority of the entire board.
Section 4.5. Notice of Special Meetings. Notice of the time
and place of special meetings of the Board of Director shall be delivered
personally to each director, or sent to each director by mail, telephone, or
telegraph. In case such notice is sent by mail or telegraphed it shall be
deposited in the United States mail or delivered to the telegraph company in the
place in which the principal office of the Corporation is located at least 48
hours prior to the time of the holding of the meeting. In case such notice is
delivered personally or by telephone, it shall be so delivered at least 24 hours
prior to the time of the holding of the meeting. Such notice shall not be
necessary if appropriate waivers, consents and/or approvals are filed in
accordance with Section 4.6 of these by-laws.
Section 4.6. Waiver of Notice. Notice of a meeting need not be
given to any director who signs a waiver of notice, whether before or after the
meeting, or who
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attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such director.
The transactions of any meeting of the Board of Directors,
however called and noticed or wherever held, shall be as valid as though had at
a meeting duly held after regular call and notice if a quorum is present and if,
either before or after the meeting, each of the directors not present signs a
written waiver of notice, a consent to holding the meeting or an approval of the
minutes thereof. All such waivers, consents and approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
Section 4.7. Quorum. At all meetings of the board, the
presence of one-third of the entire board shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meetings at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
without notice other than announcement at the meeting, until a quorum shall be
present. A meeting at which a quorum is initially present may continue to
transact business, notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for such
meeting.
Section 4.8. Adjournment. Any meeting of the Board of
Directors, whether or not a quorum is present, may be adjourned to another time
and place by the vote of a majority of the directors present. Notice of the time
and place of the adjourned meeting need not be given to absent directors if said
time and place are fixed at the meeting adjourned.
Section 4.9. Action Without Meeting. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting, if all members of the
board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the board or
committee.
Section 4.10. Conference Communication. Unless otherwise
restricted by the certificate of incorporation or these by-laws, members of the
Board of Directors or any committee designated by the board may participate in a
meeting of the Board of Directors or committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can
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hear one another. Participation in a meeting pursuant to this action shall
constitute presence in person at such meeting.
ARTICLE V
COMMITTEES OF DIRECTORS
Section 5.1. Committees of Directors. The Board of Directors
may, by resolution passed by a majority of the entire board, designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolutions of the Board of Directors,
shall have and may exercise all the power and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the by-laws of the Corporation and, unless the resolution or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Section 5.2. Committee Minutes. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
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ARTICLE VI
OFFICERS
Section 6.1 Officers The officers of the Corporation shall be
a chief executive officer, a chief administrative officer, a president, a
chairman of the Board, one or more executive vice presidents, one or more senior
vice presidents, one or more vice presidents, a secretary, a controller, and a
treasurer, each of whom shall be an executive officer of the Corporation
appointed by the Board of Directors. The Corporation may also have one or more
assistant vice presidents, one or more assistant secretaries, one or more
assistant controllers, and one or more assistant treasurers, each of whom shall
be an assistant officer of the Corporation appointed by the Executive Committee
of the Board of Directors. Any number of offices may be held by the same person,
unless the certificate of incorporation or these bylaws otherwise provide.
Section 6.2 Election. The Board of Directors at its first
meeting after each annual meeting of stockholders shall elect all principal
officers for the ensuing year and shall designate a chief executive officer and
a chief financial officer. At its first meeting after each annual meeting of
stockholders, the Executive Committee shall elect all assistant officers.
Section 6.3 Other Officers. The Board of Directors may appoint
such other officers and agents as it shall deem necessary and they shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
Section 6.4 Term. Subject to an applicable written employment
agreement, if any, between the Corporation and any principal officer elected or
appointed by the Board of Directors or any assistant officer appointed by the
Executive Committee of the Board of Directors, said officer may be removed at
any time, either with or without cause, by the affirmative vote of a majority of
the Board of Directors or of the Executive Committee of the Board of Directors,
respectively. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors or by the Executive Committee of the Board of
Directors pursuant to the requirements of Section 6.1 of this Article VI.
Compensation and other terms and conditions of employment of
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any principal officer shall be subject to approval of the Officer Compensation
and Stock Option Committee and the Board of Directors. Compensation and other
terms and conditions of employment of assistant officers shall be subject to
approval of the Executive Committee of the Board of Directors.
Section 6.5 The Chairman of the Board of Directors. The
chairman of the Board of Directors shall be responsible to the Board of
Directors, shall prepare communications to the Board, and with input from the
Executive Committee, shall prepare agenda for meetings of the Board of
Directors. The Chairman of the Board of Directors shall be a member of the
Executive Committee and shall preside over all meetings of the Board of
Directors and of the stockholders. At the request of the President and Chief
Executive Officer, the Chairman shall assist him in communications with
stockholders, the press and the investment community. The chairman shall
exercise and perform such other powers and duties as may, from time to time, be
assigned to him by the Board of Directors or prescribed by these by-laws.
Section 6.6 The President. The president shall have general
and active management over the business and affairs of the corporation, subject,
however, to the powers and authority of the chief executive officer and to the
control of the Board of Directors. In the absence or disability of the chief
executive officer, the president shall perform the duties of the chief executive
officer, and when so acting, shall have all the powers of, and be subject to all
the restrictions upon, the chief executive officer.
Section 6.7 The Chief Administrative Officer. In the absence
or disability of the chief executive officer and the president, the chief
administrative officer or any other officer of the corporation designated by the
Board of Directors, shall perform the duties of the chief executive officer, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the chief executive officer. The chief administrative officer
shall have such powers and perform such other duties as from time to time may be
prescribed by the chief executive officer.
Section 6.8 The Senior Vice Presidents. In the absence of the
chairman of the board or any executive vice presidents, the senior vice
presidents, in order of their rank as fixed by the board of directors, or, if
not ranked, the senior vice president designated by the Board of Directors shall
perform the duties of the president, and when so acting shall have all the
powers of, and be subject to all the restrictions upon the president. The senior
vice
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presidents shall have such other powers and perform such other duties as
from time to time may be prescribed for them respectively by the Executive
Committee of the Board of Directors.
Section 6.9 The Vice Presidents. The vice presidents shall
have such powers and perform such duties as may from time to time be prescribed
by the Executive Committee of the Board of Directors.
Section 6.10 The Secretary. The secretary shall keep, or cause
to be kept, a book of minutes in written form of the proceedings of the Board of
Directors, committees of the board, and stockholders. Such minutes shall include
all waivers of notice, consents to the holding of meeting, or approvals of the
minutes of meetings executed pursuant to these by-laws or statute. The secretary
shall keep, or cause to be kept, at the principal executive office or at the
office of the Corporation's transfer agent or registrar, a record of its
stockholders, giving the names and addresses of all stockholders, and the number
and class of shares held by each.
The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required by these
by-laws or by law to be given, and shall keep the seal of the Corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or these by-laws.
Section 6.11 The Assistant Secretary. The assistant secretary
shall have all the powers and perform all the duties of the secretary in the
absence or inability of the secretary to act.
Section 6.12 The Controller. The Controller of the Corporation
shall be the general manager of the accounting, tax and internal audit functions
of the Corporation and its subsidiaries, subject to the control of the chief
financial officer. The controller shall have such other powers and perform such
other duties as from time to time may be prescribed by the chief financial
officer.
Section 6.13 The Treasurer. The treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Company and
shall deposit all monies and other valuables in the name and to the credit of
the Company. The treasurer shall also have such other powers and perform such
other duties as may be prescribed by the Executive Committee of the Board of
Directors.
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ARTICLE VII
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
Section 7.1. Actions, Suits or Proceedings Other Than by or in
the Right of the Corporation. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges, expenses (including attorneys'
fees) judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; provided however, that the
foregoing indemnity shall not be applicable as to any person who is or was or
agreed to become an employee or agent of the Corporation (other than employees
or agents who are or were also officers or directors of the Corporation), or is
or was serving or agreed to serve at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (other than employees or agents who are or were also officers
or directors of any such other corporation, partnership, joint venture, trust or
enterprise), unless and until such indemnity is specifically approved by the
Board of Directors. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
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Section 7.2. Actions or Suits by or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges and expenses (including
attorneys' fees) actually and reasonably incurred by him or on his behalf in
connection with the defense or settlement of such action or suit and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such costs, charges and expenses which the Court of Chancery or
such other court shall deem proper; provided, however, that the foregoing
indemnity shall not be applicable as to any person who is or was or agreed to
become an employee or agent of the Corporation (other than employees or agents
who are or were also officers or directors of the Corporation), or is or was
serving or agreed to serve at the request of the Corporation as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise other than employees or agents who are or were also officers or
directors of any such other corporation, partnership, joint venture, trust or
enterprise), unless and until such indemnity is specifically approved by the
Board of Directors.
Section 7.3. Indemnification for Costs, Charges and Expenses
of Successful Party. Notwithstanding the other provisions of this Article, to
the extent that a director, officer, employee or agent of the Corporation has
been successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Sections 7.1 and 7.2 of this Article, or in defense of
any claim, issue or matter therein, he shall be indemnified against all costs,
charges and expenses (including attorneys' fees) actually and reasonably
incurred by him or on his behalf in connection therewith.
16
<PAGE> 17
Section 7.4. Determination of Right to Indemnification. Any
indemnification under Sections 7.1 and 7.2 of this Article (unless ordered by a
court) shall be paid by the Corporation unless a determination is made (1) by
the Board of Directors by a majority vote of the quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders, that indemnification of the director, officer, employee or agent
is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Sections 7.1 and 7.2 of this Article.
Section 7.5. Advance of Costs, Charges and Expenses. Costs,
charges and expenses (including attorneys' fees incurred by a person referred to
in Sections 7.1 and 7.2 of this Article in defending a civil or criminal action,
suit or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding; providing, however, that the
payment of such costs, charges and expenses incurred by a director or officer in
his capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer) in
advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by or on behalf of the director or
officer to repay all amounts so advanced in the event that it shall ultimately
be determined that such director or officer is not entitled to be indemnified by
the Corporation as authorized in this Article. Such costs, charges and expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate. The Board of
Directors may, in the manner set forth above, and upon approval of such
director, officer, employee or agent of the Corporation, authorize the
Corporation's counsel to represent such person, in any action, suit or
proceeding, whether or not the Corporation is a party to such action suit or
proceeding.
Section 7.6. Procedure for Indemnification. Any
indemnification under Sections 7.1., 7.2 or 7.3, or advance of costs, charges
and expenses under Section 7.5 of this Article, shall be made promptly, and in
any event within 30 days, upon the written request of the director, officer,
employee or agent. The right to indemnification or advances as granted by this
Article shall be enforceable by the director, officer, employee or agent in any
court of competent jurisdiction, if the Corporation denies such request, in
whole or in part, or if no disposition thereof is made within 30 days. Such
persons; costs and expenses incurred in connection with successfully
establishing his
17
<PAGE> 18
right to indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for the advance of costs, charges and
expenses under Section 7.5 of this Article where the required undertaking, if
any, has been received by the Corporation) that the claimant has not met the
standard of conduct set forth in Sections 7.1 or 7.2 of this Article, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in Sections 7.1 or 7.2 of this Article, nor the fact that there has been
an actual determination by the Corporation (including its Board of Directors,
its independent legal counsel, and its stockholders) that the claimant has not
met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
Section 7.7. Other Rights; Continuation of Right to
Indemnification. The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which a person seeking indemnification
may be entitled under any law (common or statutory), agreement, vote of
stockholders or disinterested director or otherwise, both as to action in his
official capacity and as to action in another capacity while holding office or
while employed by or acting as agent for the Corporation, and shall continue as
to a person who has ceased to be a director, officer, employee or agent, and
shall inure to the benefit of the estate, heirs, executors and administrators of
such person. All rights to indemnification under this Article shall be deemed to
be a contract between the Corporation and each director, officer, employee or
agent of the Corporation who serves or served in such capacity at any time while
this Article is in effect. Any repeal or modification of this Article or any
repeal or modification of relevant provisions of the Delaware General
Corporation Law or any other applicable laws shall not in any way diminish any
rights to indemnification of such director, officer, employee or agent or the
obligations of the Corporation arising hereunder.
Section 7.8. Insurance. The Corporation shall purchase and
maintain insurance on behalf of any person who is or was or has agreed to become
a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability
18
<PAGE> 19
asserted against him and incurred by him or on his behalf in any such capacity,
or arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
Article, provided that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 7.9. Savings Clause. If this Article or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each director,
officer, employee and agent of the Corporation as to costs, charges and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, including an action by or in the right of the
Corporation, to the full extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the full extent permitted by
applicable law.
ARTICLE VIII
STOCKHOLDERS
Section 8.1. Certificates of Stock. Every holder of shares in
the Corporation shall be entitled to have a certificate, signed by, or in the
name of the Corporation by, the chairman, the president or a vice president and
the secretary or an assistant secretary of the Corporation, or the treasurer or
an assistant treasurer, certifying the number of shares owned by him in the
Corporation. Any or all the signatures on the certificate may be a facsimile. In
case any officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 8.2. Lost Certificates. The Board of Directors may
direct a new certificate or certificates of stock to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates the
Corporation may, in its discretion, and as a condition precedent to the issuance
thereof, require the owner of such
19
<PAGE> 20
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond (or other adequate security) in such sum as it
may direct as indemnity against any claim that may be made against the
Corporation on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 8.3. Transfer of Stock. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 8.4. Stockholders of Record. In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of the stockholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion,
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting, unless the Board of Directors fixes a new record date for the
adjourned meeting, but the board shall fix a new record date if the meeting is
adjourned for more than forty-five days from the date set for the original
meeting.
Section 8.5. No Record Date. If no record date is fixed, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business at the day next
preceding the day on which notice is given, or, if notice is waived, at the end
of business of the day next preceding the day on which the meeting is held. The
record date for determining stockholders for any other purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
Section 8.6. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in
20
<PAGE> 21
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1. Fiscal Year. The fiscal year of the
Corporation shall be fixed by resolution of the Board of Directors.
Section 9.2. Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization, and the name
of the state of its incorporation. The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE X
AMENDMENTS
Section 10.1. Amendments. Subject to the provisions of the
Certificate of Incorporation, these by-laws may be altered, amended or repealed
at any regular meeting of the stockholders (or at any special meeting thereof
duly called for that purpose) by a vote of not less than 70% of the outstanding
stock entitled to vote at such meeting; provided that in the notice of such
special meeting notice of such purpose shall be given. Subject to the laws of
the State of Delaware, the certificate of incorporation and these by-laws, the
Board of Directors may by majority vote of those present at any meeting at which
a quorum is present amend these by-laws, or enact such other by-laws as in their
judgment may be advisable for the regulation of the conduct of the affairs of
the Corporation.
21
<PAGE> 1
Exhibit 4.3
This SECOND AMENDMENT AGREEMENT, dated as of September 22, 1999 (this
"Agreement"), is among ABM INDUSTRIES INCORPORATED, a Delaware corporation (the
"Company"), the several financial institutions (collectively, the "Banks";
individually, a "Bank") party to the Credit Agreement, dated as of June 25,
1997, as amended (the "Credit Agreement"), among the Company, the Banks, and
BANK OF AMERICA, N.A. (formerly known as BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION), as agent for the Banks (in such capacity, the "Agent").
The parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement, as
amended hereby, are used herein with the same meanings unless otherwise
specifically defined herein.
Section 2. Amendments to the Credit Agreement. The Credit Agreement is
hereby amended to amend and restate in its entirety the definition of "Permitted
Stock Repurchases" as follows:
"Permitted Stock Repurchases" means repurchases or redemptions
by the Company of its capital stock for fair and reasonable
consideration not exceeding in aggregate amount $35,000,000 with respect
to all such repurchases or redemptions made on or after the Closing
Date.
Section 3. Effect. Except as specifically set forth herein, this
Agreement does not limit, modify, amend, waive, grant any consent with respect
to, or otherwise affect (a) any right, power or remedy of the Agent or any Bank
under the Credit Agreement or any other Loan Document, (b) any provision of the
Credit Agreement or any other Loan Documents all of which shall remain in full
force and effect and are hereby ratified and confirmed. This Agreement does not
entitle, or imply any consent or agreement to, any further or future
modification of, amendment to, waiver of, or consent with respect to any
provision of the Credit Agreement or any other Loan Document.
Section 4. Costs. The Company shall pay all fees, costs, and expenses of
any kind (including the reasonable fees and disbursements of counsel and
allocated costs for in-house legal services and a $5,000 amendment fee to each
Bank upon such Bank's execution and delivery of this Agreement) incurred by the
Agent in connection with the negotiation, preparation, and execution of this
Agreement and the other documents contemplated hereby.
Section 5. Conditions of Effectiveness. This Agreement shall become
effective as of the date hereof when the Agent has received counterparts hereof
signed by the Company and the Majority Banks. Promptly upon the occurrence
thereof, the Agent shall notify the Company and the Banks of the effectiveness
of this Agreement, and such notice shall be conclusive and binding as to the
occurrence thereof on all parties hereto.
<PAGE> 2
Section 6. Representations and Warranties. The Company represents and
warrants to the Agent and each Bank that:
(a) The execution, delivery and performance by the Company of
this Agreement are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, and require no action by or in
respect of, or filing with, any governmental body, agency or official, and the
execution, delivery and performance by the Company of this Agreement do not
contravene, or constitute a default under, any provision of applicable law or
regulations or of the certificate or articles of incorporation or the by-laws of
the Company or any of its Subsidiaries, or any other material agreement,
judgment, injunction, order, decree or other instrument binding upon the Company
or any of its Subsidiaries or any assets of the Company or any of its
Subsidiaries.
(b) This Agreement constitutes the valid and binding obligation
of the Company, enforceable against the Company in accordance with its
respective terms, except as enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws now or
hereafter in effect relating to creditors' rights, and to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law).
(c) After giving effect to this Agreement, no Event of Default or
Default has occurred and is continuing, and after giving effect to this
Agreement, the representations and warranties of the Company contained in the
Credit Agreement and the other Loan Documents delivered pursuant thereto are
true and correct in all material respects as of the date hereof as if made on
the date hereof (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and correct
as of such earlier date).
Section 7. Counterparts; Facsimile Signatures. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original with the same effect as if all the signatures were on
the same instrument. Delivery of an executed counterpart of the signature page
to this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement. Any party delivering an executed
counterpart of the signature page to this Agreement by telecopier shall
thereafter promptly deliver a manually executed counterpart of this Agreement,
but the failure to deliver such manually executed counterpart shall not affect
the validity, enforceability, and binding effect of this Agreement.
Section 8 Governing Law and Jurisdiction; Waiver of Jury Trial. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA AND IS SUBJECT TO THE PROVISIONS OF SECTIONS
11.15 AND 11.16 OF THE CREDIT AGREEMENT, RELATING TO GOVERNING LAW AND
JURISDICTION AND WAIVER OF JURY TRIAL, THE PROVISIONS OF WHICH ARE BY THIS
REFERENCE HEREBY INCORPORATED HEREIN IN FULL.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in San Francisco, California, by their proper and
duly authorized officers as of the day and year first above written.
COMPANY: ABM INDUSTRIES INCORPORATED
By: /s/ Douglas B. Bowlus
------------------------------------
Title: Vice President and Treasurer
---------------------------------
AGENT BANK: BANK OF AMERICA, N.A. (formerly known as
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION), as Agent Bank
By: /s/ Christine Cordi
------------------------------------
Title: Vice President
---------------------------------
BANKS: BANK OF AMERICA, N.A. (formerly known as
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION), as a Bank and as
Issuing Bank
By: /s/ Henry Rogers
------------------------------------
Title: Senior Vice President
---------------------------------
KEYBANK NATIONAL ASSOCIATION
By: /s/ Mary K. Young
------------------------------------
Title: Assistant Vice President
---------------------------------
UNITED STATES NATIONAL BANK OF OREGON
By: /s/ Aaron J. Gordon
------------------------------------
Title: Vice President
---------------------------------
<PAGE> 1
EXHIBIT 10.47
ABM INDUSTRIES INCORPORATED
AMENDMENT NO. 1 TO THE
1987 INCENTIVE STOCK OPTION PLAN
ABM INDUSTRIES INCORPORATED, having established the 1987 Incentive Stock
Option Plan (the "Plan"), hereby amends the Plan effective as of December 19,
1995 as follows:
The second sentence of section 4 of Article I of the Plan is amended to
read as follows:
The aggregate number of shares which may be issued under the Plan shall
not exceed 2,100,000 shares of Common Stock, unless an adjustment is required
in accordance with Article III.
IN WITNESS WHEREOF, ABM INDUSTRIES INCORPORATED, by its duly authorized
officer, has executed this Amendment No. 1 on the date indicated below.
ABM INDUSTRIES INCORPORATED
By: /s/ LORRAINE P. O'HARA
-----------------------------
Title: Assistant Secretary
-----------------------------
Dated: March 19, 1996
-----------------------------
<PAGE> 1
EXHIBIT 10.48
AMENDMENT NO. 2 TO THE
ABM INDUSTRIES INCORPORATED
1987 INCENTIVE STOCK OPTION PLAN
(DECEMBER 19, 1994 RESTATEMENT)
ABM INDUSTRIES INCORPORATED, having established the 1987 Incentive Stock
Option Plan (December 19, 1994 Restatement) (the "Plan"), hereby amends the
Plan, effective as of March 30, 1999 as follows:
The name of the Plan shall be "Time Vested" Incentive Stock Option Plan.
IN WITNESS WHEREOF, ABM INDUSTRIES INCORPORATED, by its duly authorized
officer, has executed this Amendment No. 2 on the date indicated below.
ABM INDUSTRIES INCORPORATED
BY: /s/ LORRAINE P. O'HARA
-----------------------------
TITLE: Assistant Secretary
-----------------------------
DATED: March 30, 1999
-----------------------------
<PAGE> 1
EXHIBIT 10.49
ABM INDUSTRIES INCORPORATED
AMENDMENT NO. 3 TO THE
"TIME-VESTED" INCENTIVE STOCK OPTION PLAN
ABM INDUSTRIES INCORPORATED, having established the "Time-Vested"
Incentive Stock Option Plan effective on March 17, 1987, as amended (the
"Plan"), hereby amends the Plan, as of April 19, 1999 as follows:
Subsection 4(E) of Article II of the Plan is amended by adding a final
sentence to the end of the second paragraph thereof to read as follows:
Notwithstanding any inconsistent or contrary Plan provisions, in the
event an optionee who is at least age 64 dies while in the service of the
Company or of a subsidiary, all unvested options granted after April 19, 1999
shall immediately vest and become fully exercisable as of the date of such
death.
IN WITNESS WHEREOF, ABM INDUSTRIES INCORPORATED, by its duly authorized
officer, has executed this Amendment No. 3 on the date indicated below.
ABM INDUSTRIES INCORPORATED
BY: /s/ LORRAINE P. O'HARA
----------------------------------
TITLE: Assistant Secretary
-------------------------------
DATED: October 13, 1999
-------------------------------
<PAGE> 1
EXHIBIT 10.50
AMENDMENT NO. 4 TO THE
ABM INDUSTRIES INCORPORATED
"TIME-VESTED" INCENTIVE STOCK OPTION PLAN
(December 19, 1994 Restatement)
ABM INDUSTRIES INCORPORATED, having established the ABM Industries
Incorporated "Time-Vested" Incentive Stock Option Plan (December 19, 1994
Restatement) (the "Plan"), hereby amends the Plan, effective as of September
22, 1999 as follows:
1. The second paragraph of Article III of the Plan is amended and
restated in its entirety to read as follows:
If the Company shall be the surviving corporation in any merger or
consolidation, each outstanding option shall pertain to and apply to the
securities to which a holder of the same number of shares of Common Stock
that are subject to that option would have been entitled (unless the
Committee determines the provisions of the following sentences are
applicable to such merger or consolidation). A Change in Control of the
Company (as defined below) shall cause each outstanding option to
terminate, provided that each optionee in the event of a Change in Control
which will cause his option to terminate shall have the right immediately
prior to such Change in Control to exercise his option in whole or in
part, subject to every limitation on the exercisability of such option
other than any vesting provisions. For purposes hereof, a "Change in
Control" means:
(1) the acquisition (other than by ABM or by an employee benefit plan
or related trust sponsored or maintained by ABM), directly or indirectly,
in one or more transactions, by any person or by any group of persons,
within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934 or any comparable successor provisions (the "Exchange Act"), of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act)
of twenty-five percent or more of either the outstanding shares of common
stock or the combined voting power of ABM's outstanding voting securities
entitled to vote generally, if the acquisition was not previously approved
by the existing directors;
(2) the acquisition (other than by ABM or by an employee benefit plan
or related trust sponsored or maintained by ABM), directly or indirectly,
in one or more transactions, by any such person or by any group of persons
of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange
Act) of fifty percent or more of either the outstanding shares of common
stock or the combined voting power of ABM's outstanding voting securities
entitled to vote generally, whether or not the acquisition was approved by
the existing directors, other than an acquisition that complies with clause
(i) and (ii) of paragraph (3);
<PAGE> 2
(3) consummation of a reorganization, merger or consolidation of ABM
or the sale or other disposition of all or substantially all of ABM's
assets unless, immediately following such event, (i) all or substantially
all of the stockholders of ABM immediately prior to such event own,
directly or indirectly, seventy-five percent or more of the then
outstanding voting securities entitled to vote generally of the resulting
corporation (including without limitation, a corporation which as a result
of such event owns ABM or all or substantially all of ABM's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership of ABM's outstanding voting securities
entitled to vote generally immediately prior to such event and (ii) the
securities of the surviving or resulting corporation received or retained
by the stockholders of ABM is publicly traded;
(4) approval by the stockholders of the complete liquidation or
dissolution of ABM; or
(5) a greater than one-third change in the composition of the Board
of Directors within 24 months if not approved by a majority of the
pre-existing directors.
provided that, with respect of options that are outstanding as of September
22, 1999 the following shall also apply;
A dissolution or liquidation of the Company, a merger or consolidation in
which the Company is not the surviving corporation or a "change in
control" of the Company (as defined below) (each a "Terminating
Transaction"), shall cause each outstanding option to terminate, unless
the agreement of merger or consolidation or any agreement relating to a
dissolution, liquidation or change in control shall otherwise provide,
provided that each optionee in the event of a Terminating Transaction
which will cause his option to terminate shall have the right immediately
prior to such Terminating Transaction to exercise his option in whole or in
part, subject to every limitation on the exercisability of such option
other than any vesting provisions. For purposes of this proviso only,
a"change of control" shall be deemed to have occurred when (i) a person or
group or persons acquires fifty percent (50%) or more of the Company's
voting securities, and (ii) the Board of Directors of the company or the
Committee shall have determined that such a "change of control," as
established by the Board or Committee, has been satisfied.
IN WITNESS WHEREOF, ABM INDUSTRIES INCORPORATED, by its duly authorized
officer, has executed this Amendment No. 2 on the date indicated below.
ABM INDUSTRIES INCORPORATED
Dated: 9/22/99 By /s/ LORRAINE H. O'HARA
----------------- -------------------------
Title: Assistant Secretary
2
<PAGE> 1
EXHIBIT 10.51
ABM INDUSTRIES INCORPORATED
AMENDMENT NO. 1 TO THE
1984 EXECUTIVE STOCK OPTION PLAN
ABM INDUSTRIES INCORPORATED, having established the 1984 Executive Stock
Option Plan (the "Plan"), hereby amends the Plan effective as of December 19,
1995 as follows:
Section 5.1 of Article V of the Plan is amended to read as follows:
Subject to adjustment pursuant to the provisions of Section 5.3 hereof,
the number of shares of stock which may be issued and sold hereunder shall not
exceed eight hundred forty thousand (840,000) shares. Such shares may be
authorized and unissued shares or shares issued and thereafter acquired by the
Company.
IN WITNESS WHEREOF, ABM INDUSTRIES INCORPORATED, by its duly authorized
officer, has executed this Amendment No. 1 on the date indicated below.
ABM INDUSTRIES INCORPORATED
BY: /s/ LORRAINE P. O'HARA
-----------------------------
TITLE: Assistant Secretary
-----------------------------
DATED: March 30, 1996
-----------------------------
<PAGE> 1
EXHIBIT 10.52
ABM INDUSTRIES INCORPORATED
AMENDMENT NO. 2 TO THE
1984 EXECUTIVE STOCK OPTION PLAN
(DECEMBER 1994 RESTATEMENT)
ABM INDUSTRIES INCORPORATED, having established the 1984 Executive Stock
Option Plan (the "Plan"), hereby amends the Plan effective as of March 30, 1999
as follows:
The name of the Plan shall be "Age-Vested" Career Stock Option Plan
IN WITNESS WHEREOF, ABM INDUSTRIES INCORPORATED, by its duly authorized
officer, has executed this Amendment No. 2 on the date indicated below.
ABM INDUSTRIES INCORPORATED
BY: /s/ LORRAINE P. O'HARA
-----------------------------
TITLE: Assistant Secretary
-----------------------------
DATED: March 30, 1999
-----------------------------
<PAGE> 1
EXHIBIT 10.53
AMENDMENT NO. 3 TO THE
ABM INDUSTRIES INCORPORATED
"AGE-VESTED" CAREER STOCK OPTION PLAN
(DECEMBER 19, 1995 RESTATEMENT)
ABM INDUSTRIES INCORPORATED, having established the ABM Industries
Incorporated "Age-Vested" Career Stock Option Plan (December 19, 1995
Restatement) (the "Plan"), hereby amends the Plan, effective as of September
22, 1999 as follows:
1. Section 5.3(c) of the Plan is amended and restated in its entirety to
read as follows:
5.3(c) In the event of a Change in Control, each outstanding Option
granted hereunder shall terminate, but the Optionee shall have the right,
immediately prior to such Change in Control, to exercise his Option in
whole or in part, without regard to any time of exercise provision.
"Change in Control" means:
(i) the acquisition (other than by ABM or by an employee benefit plan
or related trust sponsored or maintained by ABM), directly or indirectly,
in one or more transactions, by any person or by any group of persons,
within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934 or any comparable successor provisions (the "Exchange Act"),
of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange
Act) of twenty-five percent or more of either the outstanding shares of
common stock or the combined voting power of ABM's outstanding voting
securities entitled to vote generally, if the acquisition was not
previously approved by the existing directors;
(ii) the acquisition (other than by ABM or by an employee benefit
plan or related trust sponsored or maintained by ABM), directly or
indirectly, in one or more transactions, by any such person or by any
group of persons of beneficial ownership (within the meaning of Rule 13d-3
of the Exchange Act) of fifty percent or more of either the outstanding
shares of common stock or the combined voting power of ABM's outstanding
voting securities entitled to vote generally, whether or not the
acquisition was approved by the existing directors, other than an
acquisition that complies with clause (x) and (y) of paragraph (iii);
(iii) consummation of a reorganization, merger or consolidation of
ABM or the sale or other disposition of all or substantially all of ABM's
assets unless, immediately following such event, (x) all or substantially
all of the stockholders of ABM immediately prior to such event own,
directly or indirectly, seventy-five percent or more of the then
outstanding voting securities entitled to vote generally of the resulting
corporation (including without limitation, a corporation which as a
<PAGE> 2
result of such event owns ABM or all or substantially all of ABM's assets
either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership of ABM's outstanding voting securities
entitled to vote generally immediately prior to such event and (y) the
securities of the surviving or resulting corporation received or retained
by the stockholders of ABM is publicly traded;
(iv) approval by the stockholders of the complete liquidation or
dissolution of ABM; or
(v) a greater than one-third change in the composition of the Board
of Directors within 24 months if not approved by a majority of the
pre-existing directors.
provided that, in respect of options outstanding as of September 22, 1999
"Change of Control" also means any dissolution or liquidation of the
Company or any merger or combination in which the Company is not a
surviving corporation.
IN WITNESS WHEREOF, ABM INDUSTRIES INCORPORATED, by its duly authorized
officer, has executed this Amendment No. ______ on the date indicated below.
ABM INDUSTRIES INCORPORATED
Dated: 9/22/99 By /s/ LORRAINE P. O'HARA
---------------------------- -------------------------------------
Title: Assistant Secretary
2
<PAGE> 1
EXHIBIT 10.54
ABM INDUSTRIES INCORPORATED
AMENDMENT NO. 1 TO THE
LONG-TERM SENIOR EXECUTIVE INCENTIVE STOCK OPTION PLAN
ADOPTED DECEMBER 1996
ABM INDUSTRIES INCORPORATED, having established the Long-Term Senior
Executive Incentive Stock Option Plan (the "Plan") hereby amends the Plan
effective as of March 30, 1999 as follows:
The name of the Plan shall be "Price-Vested" Performance Stock Option Plan
IN WITNESS WHEREOF, ABM INDUSTRIES INCORPORATED, by its duly authorized
officer, has executed this Amendment No. 1 on the date indicated below.
ABM INDUSTRIES INCORPORATED
By: /s/ LORRAINE P. O'HARA
------------------------------------
TITLE: Assistant Secretary
------------------------------------
DATED: 3/30/99
------------------------------------
<PAGE> 1
EXHIBIT 10.55
ABM INDUSTRIES INCORPORATED
AMENDMENT NO. 2 TO THE
"PRICE-VESTED" PERFORMANCE STOCK OPTION PLAN
ABM INDUSTRIES INCORPORATED, having established the "Price-Vested"
Performance Stock Option Plan (the "Plan") on December 17, 1996, hereby amends
the Plan, effective as of April 19, 1999 as follows:
The Plan is amended by adding a final sentence to Subsection 5.d to read
as follows:
Notwithstanding any inconsistent or contrary provision of the Plan, in the
event an Optionee who is at least age 64 dies while in the service of the
Company or of a subsidiary of the Company, the then unvested portion of such
Optionee's Stock Options granted after April 19, 1999 shall immediately vest
and become fully exercisable as of the date of such death.
IN WITNESS WHEREOF, ABM INDUSTRIES INCORPORATED, by its duly authorized
officer, has executed this Amendment No. 2 on the date indicated below.
ABM INDUSTRIES INCORPORATED
BY: /s/ LORRAINE P. O'HARA
-----------------------------
TITLE: Assistant Secretary
-----------------------------
DATED: October 13, 1999
-----------------------------
<PAGE> 1
EXHIBIT 10.56
EXHIBIT C
AMENDMENT NO. 3 TO THE
ABM INDUSTRIES INCORPORATED
"PRICE-VESTED" PERFORMANCE
STOCK OPTION PLAN
ABM INDUSTRIES INCORPORATED, having established the ABM Industries
Incorporated "Price-Vested" Performance Stock Option Plan (the "Plan")
effective as of December 17, 1996, hereby amends the Plan, effective as of
September 22, 1999 as follows:
1. Section 6.b. of the Plan is amended to insert the following after the
sentence that reads, "For purposes of the Plan, a "Change of Control" shall mean
the happening of any of the following events:"
(i) the acquisition (other than by ABM or by an employee benefit
plan or related trust sponsored or maintained by ABM), directly or
indirectly, in one or more transactions, by any person or by any group of
persons, within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934 or any comparable successor provisions (the "Exchange
Act"), of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of twenty-five percent or more of either the outstanding
shares of common stock or the combined voting power of ABM's outstanding
voting securities entitled to vote generally, if the acquisition was not
previously approved by the existing directors;
(ii) the acquisition (other than by ABM or by an employee benefit
plan or related trust sponsored or maintained by ABM), directly or
indirectly, in one or more transactions, by any such person or by any group
of persons of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of fifty percent or more of either the outstanding shares of
common stock or the combined voting power of ABM's outstanding voting
securities entitled to vote generally, whether or not the acquisition was
approved by the existing directors, other than an acquisition that complies
with clause (x) and (y) of paragraph (iii);
(iii) consummation of a reorganization, merger or consolidation of ABM
or the sale or other disposition of all or substantially all of ABM's
assets unless immediately following such event, (x) all or substantially
all of the stockholders of ABM immediately prior to such event own,
directly or indirectly, seventy-five percent or more of the then
outstanding voting securities entitled to vote generally of the resulting
corporation (including without limitation, a corporation which as a result
of such event owns ABM or all or substantially all of ABM's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership of ABM's outstanding voting securities
entitled to vote generally immediately prior to such event and (y) the
securities of the surviving or
<PAGE> 2
resulting corporation received or retained by the stockholders of ABM
is publicly traded;
(iv) approval by the stockholders of the complete liquidation or
dissolution of ABM; or
(v) a greater than one-third change in the composition of the
Board of Directors within 24 months if not approved by a majority of
the pre-existing directors.
provided that, in respect of options outstanding as of September 22, 1999,
a "Change of Control" shall also mean the happening at any of the following
events:
IN WITNESS WHEREOF, ABM INDUSTRIES INCORPORATED, by its duly
authorized officer, has executed this Amendment No. 2 on the date indicated
below.
ABM INDUSTRIES INCORPORATED
Dated: 9/22/99 By: /s/ LORRAINE P. O'HARA
-----------------------------
Title: Assistant Secretary
2
<PAGE> 1
Exhibit 10.57
January 10, 2000
Henrik Slipsager
Executive Vice President
ABM Industries Incorporated
551 Fifth Avenue
Suite 300
New York, New York 10176
Re: Fourth Amendment ("Amendment") of Division Executive Employment
Agreement ("Agreement")
Dear Henrik:
Your employment Agreement, which was previously amended effective March 17, 1998
is hereby modified as follows:
PARAGRAPH B. TITLE shall be amended in its entirety to read:
"Executive's title shall be President of Company and of the Janitorial
Division of Company and Executive Vice President of ABM Industries
Incorporated, Company's parent Corporation ("ABM")."
PARAGRAPH C. DUTIES and RESPONSIBILITIES shall be amended in its entirety to
read:
"Executive shall report to and be accountable to and shall be expected
to assume and perform such executive or managerial duties and
responsibilities as are assigned to Executive from time-to-time by the
Chairman of the Board of Company (with regard to Company matters) and by
the President of ABM (with regard to ABM matters) or their respective
designees or successors."
PARAGRAPH X.1(a) SALARY shall be amended in its entirety to read:
"Effective November 1, 1999 until October 31, 2000 at the annual rate of
Four Hundred One Thousand Three Hundred Twenty Two Dollars ($401,322.00)
payable at the monthly rate of $33,443.50."
<PAGE> 2
Mr. Henrik Slipsager
January 10, 2000
Page Two
PARAGRAPH X.5(a) BONUS shall be amended in its entirety to read:
"Such Bonus for each Fiscal Year shall be 0.3132% of the Janitorial
Division's Bonus Profit plus 1.2500% of the Supply Division's Bonus
Profit."
The effective date of this Amendment shall be November 1, 1999.
In all other respects, the Agreement, as previously amended, shall remain
unchanged.
Please sign all three (3) originals of this Amendment and return two (2) to me.
Sincerely,
/s/ Harry H. Kahn
Harry H. Kahn
I agree to the foregoing:
/s/ Henrik Slipsager /s/ W.W. Steele
- ------------------------------------ ----------------------------
Henrik Slipsager (Executive) W.W. Steele (Company)
<PAGE> 1
Exhibit 21.1
Subsidiaries of Registrant
as of 10/31/99
<TABLE>
<CAPTION>
Percentage
of Voting
Securities
Owned by
State of Immediate
Name Incorporation Parent
- ---- ------------- ----------
<S> <C> <C>
ABM Industries Incorporated Delaware Registrant
(*) ABM Engineering Services Company California 100%
ABM Family of Services California 100%
ABM Janitorial Services - Northern California California 100%
ABM Janitorial Services - Southern California + California 100%
ABM Janitorial Services Co., Ltd. British Columbia 100%
American Building Maintenance Co. of Boston + California 100%
American Building Maintenance Co. of Georgia California 100%
American Building Maintenance Co. of Kentucky California 100%
American Building Maintenance Co. of Illinois California 100%
American Building Maintenance Co. of New York California 100%
American Building Service Company + California 100%
American Building Maintenance Co. of Utah + California 100%
American Building Maintenance Co. - West California 100%
Canadian Building Maintenance Co., Ltd. British Columbia 100%
Supreme Building Maintenance, Ltd. British Columbia 100%
Commercial Property Services, Inc. California 100%
Bonded Maintenance Company Texas 100%
Servall Services Inc. Texas 100%
American Building Maintenance Co. California 100%
American Public Services California 100%
Easterday Janitorial Supply Company California 100%
American Security and Investigative Services, Inc. California 100%
ABMI Investigative Services + California 100%
ABMI Security Services, Inc. California 100%
American Commercial Security Services, Inc. California 100%
Amtech Lighting Services of the Northeast. California 100%
ABM Facility Services Company California 100%
Amtech Energy Services California 100%
Amtech Lighting Services California 100%
Amtech Lighting Services of Illinois California 100%
CommAir Mechanical Services California 100%
Amtech Elevator Services California 100%
Amtech Reliable Elevator Company of Texas + Texas 100%
ABM Engineering Services Company California 100%
Bradford Building Services, Inc. California 100%
Commercial Air Conditioning of Northern
California, Inc. + California 100%
Accurate Janitor Service, Inc. + California 100%
Ampco System Parking California 100%
Beehive Parking, Inc. Utah 100%
System Parking, Inc. California 100%
Towel and Linen Service, Inc. + California 100%
</TABLE>
(*) Subsidiary relationship to registrant or to subsidiary parents shown by
progressive indentation.
+ Inactive companies.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
ABM Industries Incorporated:
We consent to incorporation by reference in the following Registration
Statements on Form S-8 of ABM Industries Incorporated of our report dated
December 13, 1999, relating to the consolidated balance sheets of ABM Industries
Incorporated and subsidiaries as of October 31, 1998 and 1999, and the related
consolidated statements of income, stockholders' equity and comprehensive
income, and cash flows for each of the years in the three-year period ended
October 31, 1999, and related financial statement schedule II, which report
appears in the October 31, 1999, annual report on Form 10-K of ABM Industries
Incorporated.
<TABLE>
<CAPTION>
Registration No. Form Plan
---------------- ---- -------------------------------------
<S> <C> <C>
2-86666 S-8 "Age-Vested" Career Stock Option Plan
333-78425 S-8 1985 Employee Stock Purchase Plan
33-14269 S-8 "Time-Vested" Incentive Stock Option Plan
333-48857 S-8 "Price-Vested" Performance Stock Option Plan
</TABLE>
/s/ KPMG LLP
---------------------------------
KPMG LLP
San Francisco, California
January 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> OCT-31-1999
<CASH> 2,139
<SECURITIES> 0
<RECEIVABLES> 305,086
<ALLOWANCES> 7,490
<INVENTORY> 23,296
<CURRENT-ASSETS> 367,589
<PP&E> 93,445
<DEPRECIATION> 58,264
<TOTAL-ASSETS> 563,384
<CURRENT-LIABILITIES> 183,310
<BONDS> 28,903
0
6,400
<COMMON> 224
<OTHER-SE> 276,727
<TOTAL-LIABILITY-AND-EQUITY> 563,384
<SALES> 1,629,716
<TOTAL-REVENUES> 1,629,716
<CGS> 1,413,541
<TOTAL-COSTS> 1,413,541
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,257
<INTEREST-EXPENSE> 1,959
<INCOME-PRETAX> 67,232
<INCOME-TAX> 27,565
<INCOME-CONTINUING> 39,667
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,667
<EPS-BASIC> 1.77
<EPS-DILUTED> 1.65
</TABLE>
