ABM (NYSE: ABM), a leading provider of facility solutions, today
announced financial results for the third quarter of fiscal 2019.
Scott Salmirs, President and Chief Executive
Officer of ABM Industries, commented, "The third quarter
represented another period of consistently solid execution from our
teams. These results demonstrate our ongoing commitment to
manage our business strategically and profitably."
|
|
Three Months Ended July 31, |
|
Increase/ (Decrease) |
|
Nine Months Ended July 31, |
|
Increase/ (Decrease) |
(in millions, except per share
amounts) (unaudited) |
2019 |
|
2018 |
|
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
1,647.9 |
|
|
$ |
1,624.3 |
|
|
1.5 |
% |
|
$ |
4,850.6 |
|
|
$ |
4,793.5 |
|
|
1.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
$ |
57.3 |
|
|
$ |
48.1 |
|
|
19.0 |
% |
|
$ |
142.1 |
|
|
$ |
112.9 |
|
|
25.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ |
36.5 |
|
|
$ |
33.7 |
|
|
8.3 |
% |
|
$ |
79.4 |
|
|
$ |
87.1 |
|
|
(8.7 |
)% |
Income from continuing operations per diluted share |
$ |
0.55 |
|
|
$ |
0.51 |
|
|
7.8 |
% |
|
$ |
1.19 |
|
|
$ |
1.31 |
|
|
(9.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income from continuing operations |
$ |
40.2 |
|
|
$ |
38.0 |
|
|
5.8 |
% |
|
$ |
92.5 |
|
|
$ |
86.6 |
|
|
6.8 |
% |
Adjusted income from continuing operations per diluted share |
$ |
0.60 |
|
|
$ |
0.57 |
|
|
5.3 |
% |
|
$ |
1.38 |
|
|
$ |
1.31 |
|
|
5.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
$ |
36.8 |
|
|
$ |
33.6 |
|
|
9.3 |
% |
|
$ |
79.4 |
|
|
$ |
88.1 |
|
|
(9.8 |
)% |
Net income per diluted share |
$ |
0.55 |
|
|
$ |
0.51 |
|
|
7.8 |
% |
|
$ |
1.19 |
|
|
$ |
1.33 |
|
|
(10.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities of continuing
operations |
$ |
57.4 |
|
|
$ |
74.2 |
|
|
(22.6 |
)% |
|
$ |
114.0 |
|
|
$ |
206.4 |
|
|
(44.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
93.0 |
|
|
$ |
88.4 |
|
|
5.2 |
% |
|
$ |
246.5 |
|
|
$ |
236.6 |
|
|
4.2 |
% |
Adjusted EBITDA margin |
5.6 |
% |
|
5.4 |
% |
|
20 bps |
|
5.1 |
% |
|
4.9 |
% |
|
20 bps |
* Not meaningful (due to
variance greater than or equal to +/-100%) |
This release refers to certain non-GAAP
financial measures described as “Adjusted EBITDA”, defined as
earnings before income from discontinued operations, net of taxes,
interest, taxes, depreciation and amortization and excluding items
impacting comparability, "Adjusted EBITDA margin", defined as
adjusted EBITDA divided by revenue, “Adjusted income from
continuing operations,” "Adjusted income from continuing operations
per diluted share”, and "organic revenue". Organic revenue is
defined as revenue adjusted for the impact of acquisitions and
divestitures, as well as the impact of the adoption of ASC 853 and
ASC 606. These adjustments have been made with the intent of
providing financial measures that give management and investors a
more representative understanding of underlying operational results
and trends as well as the Company’s operational performance.
Management also uses Adjusted EBITDA as a basis for planning and
forecasting future periods. Please refer to the accompanying
financial schedules for supplemental financial data and
corresponding reconciliation of these non-GAAP financial measures
to certain GAAP financial measures. We round amounts in these
schedules to millions and calculate all percentages and per-share
data from the underlying whole-dollar amounts. As a result, certain
amounts may not foot, crossfoot, or recalculate based on reported
numbers due to rounding. Unless otherwise noted, all references to
years are to our fiscal year, which ends on October 31.
Third Quarter Summary
- Record third quarter revenue of $1,647.9 million.
- Organic revenue growth (which excludes the impact from ASC 853
and ASC 606) of 2.3%, primarily driven by growth within the
Technical Solutions and Aviation segments.
- Income from continuing operations of $36.5 million, or $0.55
per diluted share versus $33.7 million, or $0.51 per diluted share
last year.
- Adjusted income from continuing operations of $40.2 million, or
$0.60 per diluted share versus $38.0 million, or $0.57 per diluted
share last year.
- Net income of $36.8 million, or $0.55 per diluted share.
- Adjusted EBITDA of $93.0 million compared to $88.4 million last
year, leading to an adjusted EBITDA margin of 5.6%.
- Net cash provided by continuing operating activities of $57.4
million for the quarter.
- Legacy Healthcare business integrated into Business &
Industry, Technical Solutions, and Education segments.
- Results reflect the adoption of Accounting Standards
Codification ("ASC") 853 and ASC 606. ASC 853, related to
service concession arrangements, had a revenue impact of ($12.5)
million predominantly in the Aviation segment. ASC 606,
related to revenue from contracts with customers, had a ($0.5)
million impact to revenue and $0.02 impact to income from
continuing operations per diluted share on both a GAAP and adjusted
basis.
Third Quarter Results
For the third quarter of fiscal 2019, the
Company achieved record revenues of approximately $1.6 billion
driven by organic growth of 2.3%, excluding the adoption of ASC 853
and ASC 606. Organic revenue growth was driven primarily by
growth within the Technical Solutions and Aviation segments.
Organic revenue growth was partially offset by a decline in revenue
primarily within the Business & Industry including the loss of
lower margin contracts.
On a GAAP basis, income from continuing
operations was $36.5 million, or $0.55 per diluted share, compared
to income from continuing operations of $33.7 million, or $0.51 per
diluted share last year.
Adjusted income from continuing operations for
the third quarter of 2019 was $40.2 million, or $0.60 per diluted
share, compared to $38.0 million, or $0.57 per diluted share for
the third quarter of fiscal 2018. Adjusted results exclude
items impacting comparability. A description of items
impacting comparability can be found in the "Reconciliation of
Non-GAAP Financial Measures" table.
Income from continuing operations for the
quarter on both a GAAP and adjusted basis reflects higher revenue
contribution from the Technical Solutions segment, as well as
higher margin revenue mix and benefits of improved labor
management primarily within the Business & Industry
segment. The Company also saw a $0.02 favorable impact
related to the Company's adoption of ASC 606. This benefit
was partially offset by a higher tax rate versus last year given an
expected decrease in the deductibility of certain taxable
items.
Net income for the third quarter of 2019 was
$36.8 million, or $0.55 per diluted share, compared to net income
of $33.6 million, or $0.51 per diluted share last year.
Adjusted EBITDA for the quarter was $93.0
million compared to $88.4 million in the third quarter of fiscal
2018. Adjusted EBITDA margin for the quarter was 5.6% versus
5.4% last year. Adjusted results exclude items impacting
comparability.
Mr. Salmirs continued, "I am proud of our teams
for continuing to navigate the unchanging challenges in the current
labor environment. Process improvements and investments in
people and systems, have enabled us to mitigate the pressures we
have experienced all year due to the tight labor market. IT
implementations continue to advance across the organization as part
of our ongoing infrastructure improvement plans.
Additionally, despite an increase in working capital during the
quarter, we continued to make sequential progress against our
leverage."
Liquidity & Capital
Structure
The Company ended the quarter with total debt,
including standby letters of credit, of $1.1 billion.
Total debt to proforma adjusted EBITDA was 3.2x.
In addition, the Company paid its 213th
quarterly cash dividend of $0.18 per common share for a total
distribution of $11.9 million.
Declaration of Quarterly Cash
Dividend
The Company also announced that the Board of
Directors has declared a cash dividend of $0.18 per common share
payable on November 4, 2019 to shareholders of record on October 3,
2019. This will be the Company's 214th consecutive quarterly cash
dividend.
Guidance
The Company is reaffirming its outlook for
fiscal 2019. As previously announced, the Company expects
GAAP income from continuing operations of $1.70 to $1.80 per
diluted share. Excluding items impacting comparability, adjusted
income from continuing operations is expected to be in the range of
$1.95 to $2.05 per diluted share for the 2019 fiscal year.
With the exception of the 2019 Work Opportunity Tax Credits and
anticipated excess tax benefits on stock-based awards (ASU
2016-09), this guidance does not include any potential benefits
associated with certain other discrete tax items and other
unrecognized tax benefits.
On November 1, 2018, the Company adopted the
Financial Accounting Standards Board’s new revenue recognition
standards, ASC 853 and ASC 606, using the modified retrospective
approach with a cumulative- effect adjustment to retained earnings
as of the beginning of fiscal 2019. The year-to-date impact
primarily reflects the deferral of sales commission costs related
to strong year-to-date growth within the Company's Technical
Solutions segment. The expected full year impact from the new
accounting standards are reflected in the current guidance
outlook.
Mr. Salmirs concluded, "We are working
diligently to achieve our full year targets. Looking to 2020,
we intend to adhere to our disciplined pricing model while closely
monitoring the macroeconomic environment. Our focus
will also remain on people, processes and systems to build upon the
foundation we established in 2019 as part of our long term
transformation."
Conference Call Information
ABM will host its quarterly conference call for
all interested parties on Friday, September 6, 2019
at 8:30 AM (ET). The live conference call can be accessed via
audio webcast at the "Investors" section of the Company's website,
located at www.abm.com, or by dialing (877) 451-6152
approximately 15 minutes prior to the scheduled time.
A supplemental presentation will accompany the
webcast on the Company's website.
A replay will be available approximately two hours after the
recording through September 20, 2019 and can be accessed by dialing
(844) 512-2921 and then entering ID #13693863. An archive
will also be available on the ABM website for 90 days.
ABOUT ABM
ABM (NYSE: ABM) is a leading provider of
facility solutions with revenues of approximately $6.4 billion and
approximately 140,000 employees in 350+ offices throughout the
United States and various international locations. ABM's
comprehensive capabilities include janitorial, electrical &
lighting, energy solutions, facilities engineering, HVAC &
mechanical, landscape & turf, mission critical solutions and
parking, provided through stand-alone or integrated solutions. ABM
provides custom facility solutions in urban, suburban and rural
areas to properties of all sizes - from schools and commercial
buildings to hospitals, data centers, manufacturing plants and
airports. ABM Industries Incorporated, which operates through its
subsidiaries, was founded in 1909. For more information, visit
www.abm.com.
Cautionary Statement under the Private
Securities Litigation Reform Act of 1995
This press release contains both historical and
forward-looking statements about ABM Industries Incorporated
(“ABM”) and its subsidiaries (collectively referred to as “ABM,”
“we,” “us,” “our,” or the “Company”). We make forward-looking
statements related to future expectations, estimates and
projections that are uncertain, and often contain words such as
“anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,”
“intend,” “likely,” “may,” “outlook,” “plan,” “predict,” “should,”
“target,” or other similar words or phrases. These statements are
not guarantees of future performance and are subject to known and
unknown risks, uncertainties, and assumptions that are difficult to
predict. For us, particular uncertainties that could cause our
actual results to be materially different from those expressed in
our forward-looking statements include: (1) we may not realize the
full extent of growth opportunities and synergies that we
anticipated from the acquisition of GCA; (2) we incurred a
substantial amount of debt to complete the acquisition of GCA. To
service our debt we will require a significant amount of cash. Our
ability to generate cash depends on many factors beyond our
control. We also depend on the profitability of our subsidiaries to
satisfy our cash needs. If we cannot generate the required cash, we
may not be able to make the necessary payments required to service
our indebtedness or we may be required to suspend certain
discretionary payments, including our dividend; (3) changes to our
businesses, operating structure, financial reporting structure, or
personnel relating to the implementation of our 2020 Vision
strategic transformation initiative, together with process and
technology initiatives following the acquisition of GCA, may not
have the desired effects on our financial condition and results of
operations; (4) our success depends on our ability to gain
profitable business despite competitive pressures and on our
ability to preserve long-term client relationships; (5) our
business success depends on our ability to attract and retain
qualified personnel and senior management; (6) our use of
subcontractors or joint venture partners to perform work under
customer contracts exposes us to liability and financial risk; (7)
our international business involves risks different from those we
face in the United States that could have an effect on our results
of operations and financial condition; (8) unfavorable developments
in our class and representative actions and other lawsuits alleging
various claims could cause us to incur substantial liabilities; (9)
we insure our insurable risks through a combination of insurance
and self-insurance and we retain a substantial portion of the risk
associated with expected losses under these programs, which exposes
us to volatility associated with those risks, including the
possibility that changes in estimates of ultimate insurance losses
could result in material charges against our earnings; (10) our
risk management and safety programs may not have the intended
effect of reducing our liability for personal injury or property
loss; (11) impairment of goodwill and long-lived assets could have
a material adverse effect on our financial condition and results of
operations; (12) changes in general economic conditions, including
changes in energy prices, government regulations, and changing
consumer preferences, could reduce the demand for facility services
and, as a result, reduce our earnings and adversely affect our
financial condition; (13) our business may be materially affected
by changes to fiscal and tax policies. Negative or unexpected
tax consequences could adversely affect our results of operations;
(14) we may experience breaches of, or disruptions to, our
information technology systems or those of our third-party
providers or clients, or other compromises of our data that could
adversely affect our business; (15) a significant number of our
employees are covered by collective bargaining agreements that
could expose us to potential liabilities in relationship to our
participation in multiemployer pension plans, requirements to make
contributions to other benefit plans, and the potential for
strikes, work slowdowns or similar activities, and union-organizing
drives; (16) if we fail to maintain proper and effective internal
control over financial reporting in the future, our ability to
produce accurate and timely financial statements could be
negatively impacted, which could harm our operating results and
investor perceptions of our Company and, as a result may have a
material adverse effect on the value of our common stock; (17) our
business may be negatively impacted by adverse weather conditions;
(18) catastrophic events, disasters, and terrorist attacks could
disrupt our services; and (19) actions of activist investors could
disrupt our business. The list of factors above is illustrative and
by no means exhaustive. For additional information on these and
other risks and uncertainties we face, see ABM’s risk factors, as
they may be amended from time to time, set forth in our filings
with the Securities and Exchange Commission, including our most
recent Annual Report on Form 10-K and subsequent filings. We
urge readers to consider these risks and uncertainties in
evaluating our forward-looking statements. We caution readers not
to place undue reliance upon any such forward-looking statements,
which speak only as of the date made. We undertake no obligation to
publicly update any forward-looking statements, whether as a result
of new information, future events, or otherwise, except as required
by law.
Use of Non-GAAP Financial
Information
To supplement ABM’s consolidated financial
information, the Company has presented income from continuing
operations and income from continuing operations per diluted share
as adjusted for items impacting comparability, for the third
quarter of fiscal years 2019 and 2018. These adjustments have been
made with the intent of providing financial measures that give
management and investors a better understanding of the underlying
operational results and trends as well as ABM’s operational
performance. In addition, the Company has presented earnings before
income from discontinued operations, net of taxes, interest, taxes,
depreciation and amortization and excluding items impacting
comparability (adjusted EBITDA) for the third quarter of fiscal
years 2019 and 2018. Adjusted EBITDA is among the indicators
management uses as a basis for planning and forecasting future
periods. The Company has also presented organic revenue growth to
provide investors with useful supplemental information regarding
the Company's ongoing performance and trends by presenting revenue
growth excluding the impact of acquisitions and divestitures, as
well as the impact of the adoption of ASC 606 and ASC 853.
The presentation of these non-GAAP financial measures is not meant
to be considered in isolation or as a substitute for financial
statements prepared in accordance with accounting principles
generally accepted in the United States of America. (See
accompanying financial tables for supplemental financial data and
corresponding reconciliations to certain GAAP financial
measures.)
Contact: |
|
Investor Relations &
Treasury: |
Susie A. Kim |
|
(212) 297-9721 |
|
susie.kim@abm.com |
|
ABM
INDUSTRIES INCORPORATED AND
SUBSIDIARIESCONSOLIDATED INCOME STATEMENT
INFORMATION (UNAUDITED) |
|
|
Three Months Ended July 31, |
|
|
(in millions, except per share
amounts) |
|
2019 |
|
2018 |
|
Increase / (Decrease) |
Revenues |
|
$ |
1,647.9 |
|
|
$ |
1,624.3 |
|
|
1.5 |
% |
Operating expenses |
|
1,454.1 |
|
|
1,446.7 |
|
|
0.5 |
% |
Selling, general and
administrative expenses |
|
119.8 |
|
|
110.0 |
|
|
8.9 |
% |
Restructuring and related
expenses |
|
2.0 |
|
|
2.9 |
|
|
(31.8 |
)% |
Amortization of intangible
assets |
|
14.9 |
|
|
16.6 |
|
|
(10.6 |
)% |
Operating
profit |
|
57.3 |
|
|
48.1 |
|
|
19.0 |
% |
Income from unconsolidated
affiliates |
|
0.7 |
|
|
1.0 |
|
|
(27.7 |
)% |
Interest expense |
|
(12.9 |
) |
|
(12.9 |
) |
|
— |
% |
Income from continuing
operations before income taxes |
|
45.0 |
|
|
36.1 |
|
|
24.6 |
% |
Income tax provision |
|
(8.5 |
) |
|
(2.4 |
) |
|
NM* |
|
Income from continuing
operations |
|
36.5 |
|
|
33.7 |
|
|
8.3 |
% |
Income (loss) from
discontinued operations, net of taxes |
|
0.2 |
|
|
(0.1 |
) |
|
NM* |
|
Net
income |
|
$ |
36.8 |
|
|
$ |
33.6 |
|
|
9.3 |
% |
Net income per common
share — Basic |
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.55 |
|
|
$ |
0.51 |
|
|
7.8 |
% |
Income from discontinued operations |
|
— |
|
|
— |
|
|
NM* |
|
Net income |
|
$ |
0.55 |
|
|
$ |
0.51 |
|
|
7.8 |
% |
Net income per common
share — Diluted |
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.55 |
|
|
$ |
0.51 |
|
|
7.8 |
% |
Income from discontinued operations |
|
— |
|
|
— |
|
|
NM* |
|
Net income |
|
$ |
0.55 |
|
|
$ |
0.51 |
|
|
7.8 |
% |
Weighted-average
common and common equivalent shares
outstanding |
|
|
|
|
|
|
Basic |
|
66.6 |
|
|
66.1 |
|
|
|
Diluted |
|
67.0 |
|
|
66.3 |
|
|
|
Dividends declared per
common share |
|
$ |
0.180 |
|
|
$ |
0.175 |
|
|
|
* Not meaningful (due to
variance greater than or equal to +/-100%) |
ABM
INDUSTRIES INCORPORATED AND
SUBSIDIARIESCONSOLIDATED INCOME STATEMENT
INFORMATION (UNAUDITED) |
|
|
|
Nine Months Ended July 31, |
|
|
(in millions, except per share
amounts) |
|
2019 |
|
2018 |
|
Increase / (Decrease) |
Revenues |
|
$ |
4,850.6 |
|
|
$ |
4,793.5 |
|
|
1.2 |
% |
Operating expenses |
|
4,314.2 |
|
|
4,281.8 |
|
|
0.8 |
% |
Selling, general and
administrative expenses |
|
340.9 |
|
|
326.8 |
|
|
4.3 |
% |
Restructuring and related
expenses |
|
8.5 |
|
|
22.5 |
|
|
(62.2 |
)% |
Amortization of intangible
assets |
|
44.9 |
|
|
49.5 |
|
|
(9.3 |
)% |
Operating
profit |
|
142.1 |
|
|
112.9 |
|
|
25.9 |
% |
Income from unconsolidated
affiliates |
|
2.4 |
|
|
2.5 |
|
|
(4.5 |
)% |
Interest expense |
|
(39.2 |
) |
|
(41.0 |
) |
|
(4.4 |
)% |
Income from continuing
operations before income taxes |
|
105.3 |
|
|
74.4 |
|
|
41.6 |
% |
Income tax (provision)
benefit |
|
(25.8 |
) |
|
12.7 |
|
|
NM* |
|
Income from continuing
operations |
|
79.4 |
|
|
87.1 |
|
|
(8.7 |
)% |
Income from discontinued
operations, net of taxes |
|
— |
|
|
1.0 |
|
|
NM* |
|
Net
income |
|
79.4 |
|
|
88.1 |
|
|
(9.8 |
)% |
Net income per common
share — Basic |
|
|
|
|
|
|
Income from continuing operations |
|
$ |
1.19 |
|
|
$ |
1.32 |
|
|
(9.8 |
)% |
Income from discontinued operations |
|
— |
|
|
0.02 |
|
|
NM* |
|
Net income |
|
$ |
1.19 |
|
|
$ |
1.33 |
|
|
(10.5 |
)% |
Net income per common
share — Diluted |
|
|
|
|
|
|
Income from continuing operations |
|
$ |
1.19 |
|
|
$ |
1.31 |
|
|
(9.2 |
)% |
Income from discontinued operations |
|
— |
|
|
0.02 |
|
|
NM* |
|
Net income |
|
$ |
1.19 |
|
|
$ |
1.33 |
|
|
(10.5 |
)% |
Weighted-average
common and common equivalent shares
outstanding |
|
|
|
|
|
|
Basic |
|
66.5 |
|
|
66.0 |
|
|
|
Diluted |
|
66.8 |
|
|
66.3 |
|
|
|
Dividends declared per
common share |
|
$ |
0.540 |
|
|
$ |
0.525 |
|
|
|
* Not meaningful (due to
variance greater than or equal to +/-100%) |
ABM
INDUSTRIES INCORPORATED AND SUBSIDIARIESSELECTED
CONSOLIDATED CASH FLOW INFORMATION (UNAUDITED) |
|
|
Three Months Ended July 31, |
(in millions) |
|
2019 |
|
2018 |
Net cash provided by operating activities of continuing
operations |
|
$ |
57.4 |
|
|
$ |
74.2 |
|
Net cash provided by (used in)
operating activities of discontinued operations |
|
0.2 |
|
|
(0.1 |
) |
Net cash provided by
operating activities |
|
$ |
57.6 |
|
|
$ |
74.1 |
|
Other |
|
(17.0 |
) |
|
(11.9 |
) |
Net cash used in
investing activities |
|
$ |
(17.0 |
) |
|
$ |
(11.9 |
) |
Proceeds from issuance of
share-based compensation awards, net of taxes withheld |
|
1.3 |
|
|
0.3 |
|
Dividends paid |
|
(11.9 |
) |
|
(11.5 |
) |
Borrowings from credit
facility |
|
554.1 |
|
|
418.5 |
|
Repayment of borrowings from
credit facility |
|
(583.0 |
) |
|
(501.1 |
) |
Changes in book cash
overdrafts |
|
7.5 |
|
|
5.9 |
|
Financing of energy savings
performance contracts |
|
1.6 |
|
|
3.5 |
|
Repayment of capital lease
obligations |
|
(0.9 |
) |
|
(0.6 |
) |
Net cash used in
financing activities |
|
$ |
(31.4 |
) |
|
$ |
(85.0 |
) |
Effect of exchange
rate changes on cash and cash equivalents |
|
(2.5 |
) |
|
(0.9 |
) |
ABM
INDUSTRIES INCORPORATED AND SUBSIDIARIESSELECTED
CONSOLIDATED CASH FLOW INFORMATION (UNAUDITED) |
|
|
Nine Months Ended July 31, |
(in millions) |
|
2019 |
|
2018 |
Net cash provided by operating activities of continuing
operations |
|
$ |
114.0 |
|
|
$ |
206.4 |
|
Net cash provided by operating
activities of discontinued operations |
|
— |
|
|
1.0 |
|
Net cash provided by
operating activities |
|
$ |
114.0 |
|
|
$ |
207.4 |
|
Adjustments to purchase and
sale of business |
|
— |
|
|
(1.9 |
) |
Other |
|
(44.1 |
) |
|
(34.3 |
) |
Net cash used in
investing activities |
|
$ |
(44.1 |
) |
|
$ |
(36.3 |
) |
Proceeds and (taxes withheld)
from issuance of share-based compensation awards, net |
|
0.7 |
|
|
(0.3 |
) |
Dividends paid |
|
(35.8 |
) |
|
(34.5 |
) |
Deferred financing costs
paid |
|
— |
|
|
(0.1 |
) |
Borrowings from credit
facility |
|
1,219.9 |
|
|
887.0 |
|
Repayment of borrowings from
credit facility |
|
(1,236.8 |
) |
|
(1,042.1 |
) |
Changes in book cash
overdrafts |
|
3.4 |
|
|
1.1 |
|
Financing of energy savings
performance contracts |
|
4.9 |
|
|
3.5 |
|
Repayment of capital lease
obligations |
|
(2.7 |
) |
|
(2.3 |
) |
Net cash used in
financing activities |
|
$ |
(46.4 |
) |
|
$ |
(187.7 |
) |
Effect of exchange
rate changes on cash and cash equivalents |
|
(2.1 |
) |
|
(0.2 |
) |
ABM
INDUSTRIES INCORPORATED AND SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEET INFORMATION (UNAUDITED) |
|
(in millions) |
|
July 31, 2019 |
|
October 31, 2018 |
ASSETS |
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
60.5 |
|
|
$ |
39.1 |
|
Trade accounts receivable, net of allowances |
|
1,061.3 |
|
|
1,014.1 |
|
Costs incurred in excess of amounts billed |
|
68.4 |
|
|
— |
|
Prepaid expenses |
|
75.5 |
|
|
80.8 |
|
Other current assets |
|
53.5 |
|
|
37.0 |
|
Total current assets |
|
1,319.2 |
|
|
1,171.0 |
|
Other investments |
|
15.1 |
|
|
16.3 |
|
Property, plant and equipment,
net of accumulated depreciation |
|
147.1 |
|
|
140.1 |
|
Other intangible assets, net
of accumulated amortization |
|
310.4 |
|
|
355.7 |
|
Goodwill |
|
1,832.0 |
|
|
1,834.8 |
|
Other noncurrent assets |
|
120.2 |
|
|
109.6 |
|
Total assets |
|
$ |
3,744.0 |
|
|
$ |
3,627.5 |
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
Current liabilities |
|
|
|
|
Current portion of long-term debt, net |
|
$ |
52.2 |
|
|
$ |
37.0 |
|
Trade accounts payable |
|
249.0 |
|
|
221.9 |
|
Accrued compensation |
|
165.7 |
|
|
172.1 |
|
Accrued taxes—other than income |
|
83.6 |
|
|
56.0 |
|
Insurance claims |
|
150.9 |
|
|
149.5 |
|
Income taxes payable |
|
9.6 |
|
|
3.2 |
|
Other accrued liabilities |
|
166.4 |
|
|
152.7 |
|
Total current liabilities |
|
877.4 |
|
|
792.5 |
|
Long-term debt, net |
|
872.2 |
|
|
902.0 |
|
Deferred income tax liability,
net |
|
31.6 |
|
|
37.8 |
|
Noncurrent insurance
claims |
|
368.0 |
|
|
360.8 |
|
Other noncurrent
liabilities |
|
75.6 |
|
|
62.9 |
|
Noncurrent income taxes
payable |
|
15.6 |
|
|
16.9 |
|
Total liabilities |
|
2,240.4 |
|
|
2,172.9 |
|
Total stockholders'
equity |
|
1,503.6 |
|
|
1,454.6 |
|
Total liabilities and
stockholders’ equity |
|
$ |
3,744.0 |
|
|
$ |
3,627.5 |
|
|
ABM
INDUSTRIES INCORPORATED AND SUBSIDIARIESREVENUES
AND OPERATING PROFIT BY SEGMENT (UNAUDITED) |
|
|
|
Three Months Ended July 31, |
|
Increase/ (Decrease) |
(in millions) |
|
2019 |
|
2018 |
|
Revenues |
|
|
|
|
|
|
Business & Industry |
|
$ |
807.9 |
|
|
$ |
822.6 |
|
|
(1.8 |
)% |
Aviation |
|
263.3 |
|
|
260.5 |
|
|
1.1 |
% |
Technology &
Manufacturing |
|
226.9 |
|
|
231.0 |
|
|
(1.8 |
)% |
Education |
|
215.4 |
|
|
215.9 |
|
|
(0.3 |
)% |
Technical Solutions |
|
165.7 |
|
|
130.3 |
|
|
27.2 |
% |
Elimination of inter-segment
revenues |
|
(31.3 |
) |
|
(36.0 |
) |
|
12.9 |
% |
Total
revenues |
|
$ |
1,647.9 |
|
|
$ |
1,624.3 |
|
|
1.5 |
% |
Operating profit
(loss) |
|
|
|
|
|
|
Business & Industry |
|
$ |
45.3 |
|
|
$ |
40.1 |
|
|
12.8 |
% |
Aviation |
|
8.6 |
|
|
9.7 |
|
|
(11.7 |
)% |
Technology &
Manufacturing |
|
17.0 |
|
|
16.9 |
|
|
0.6 |
% |
Education |
|
12.6 |
|
|
12.1 |
|
|
4.0 |
% |
Technical Solutions |
|
17.9 |
|
|
13.1 |
|
|
37.1 |
% |
Corporate |
|
(43.5 |
) |
|
(42.7 |
) |
|
(1.9 |
)% |
Adjustment for income from
unconsolidated affiliates, included in Aviation |
|
(0.7 |
) |
|
(0.9 |
) |
|
20.2 |
% |
Adjustment for tax deductions
for energy efficient government buildings, included in Technical
Solutions |
|
0.1 |
|
|
(0.3 |
) |
|
NM* |
|
Total operating
profit |
|
57.3 |
|
|
48.1 |
|
|
19.0 |
% |
Income from unconsolidated
affiliates |
|
0.7 |
|
|
1.0 |
|
|
(27.7 |
)% |
Interest expense |
|
(12.9 |
) |
|
(12.9 |
) |
|
— |
% |
Income from continuing
operations before income taxes |
|
45.0 |
|
|
36.1 |
|
|
24.6 |
% |
Income tax provision |
|
(8.5 |
) |
|
(2.4 |
) |
|
NM* |
|
Income from continuing
operations |
|
36.5 |
|
|
33.7 |
|
|
8.3 |
% |
Income (loss) from
discontinued operations, net of taxes |
|
0.2 |
|
|
(0.1 |
) |
|
NM* |
|
Net
income |
|
$ |
36.8 |
|
|
$ |
33.6 |
|
|
9.3 |
% |
* Not meaningful (due to variance greater than or equal to
+/-100%)
|
ABM
INDUSTRIES INCORPORATED AND SUBSIDIARIESREVENUES
AND OPERATING PROFIT BY SEGMENT (UNAUDITED) |
|
|
|
Nine Months Ended July 31, |
|
Increase/ (Decrease) |
(in millions) |
|
2019 |
|
2018 |
|
Revenues |
|
|
|
|
|
|
Business & Industry |
|
$ |
2,444.5 |
|
|
$ |
2,446.0 |
|
|
(0.1 |
)% |
Aviation |
|
765.8 |
|
|
769.7 |
|
|
(0.5 |
)% |
Technology &
Manufacturing |
|
687.3 |
|
|
691.0 |
|
|
(0.5 |
)% |
Education |
|
633.6 |
|
|
637.8 |
|
|
(0.7 |
)% |
Technical Solutions |
|
417.7 |
|
|
360.3 |
|
|
15.9 |
% |
Elimination of inter-segment
revenues |
|
(98.3 |
) |
|
(111.4 |
) |
|
11.7 |
% |
Total
revenues |
|
$ |
4,850.6 |
|
|
$ |
4,793.5 |
|
|
1.2 |
% |
Operating profit
(loss) |
|
|
|
|
|
|
Business & Industry |
|
$ |
131.2 |
|
|
$ |
114.8 |
|
|
14.3 |
% |
Aviation |
|
17.2 |
|
|
20.6 |
|
|
(16.3 |
)% |
Technology &
Manufacturing |
|
54.4 |
|
|
49.8 |
|
|
9.2 |
% |
Education |
|
33.4 |
|
|
32.1 |
|
|
4.0 |
% |
Technical Solutions |
|
35.3 |
|
|
28.8 |
|
|
22.4 |
% |
Government Services |
|
(0.1 |
) |
|
(0.8 |
) |
|
91.5 |
% |
Corporate |
|
(127.1 |
) |
|
(127.3 |
) |
|
0.2 |
% |
Adjustment for income from
unconsolidated affiliates, included in Aviation |
|
(2.4 |
) |
|
(2.5 |
) |
|
4.9 |
% |
Adjustment for tax deductions
for energy efficient government buildings, included in Technical
Solutions |
|
0.1 |
|
|
(2.6 |
) |
|
NM* |
|
Total operating
profit |
|
142.1 |
|
|
112.9 |
|
|
25.9 |
% |
Income from unconsolidated
affiliates |
|
2.4 |
|
|
2.5 |
|
|
(4.5 |
)% |
Interest expense |
|
(39.2 |
) |
|
(41.0 |
) |
|
(4.4 |
)% |
Income from continuing
operations before income taxes |
|
105.3 |
|
|
74.4 |
|
|
41.6 |
% |
Income tax (provision)
benefit |
|
(25.8 |
) |
|
12.7 |
|
|
NM* |
|
Income from continuing
operations |
|
79.4 |
|
|
87.1 |
|
|
(8.7 |
)% |
Income from discontinued
operations, net of taxes |
|
— |
|
|
1.0 |
|
|
NM* |
|
Net
income |
|
$ |
79.4 |
|
|
$ |
88.1 |
|
|
(9.8 |
)% |
* Not meaningful (due to variance greater than or equal to
+/-100%)
|
ABM
INDUSTRIES INCORPORATED AND
SUBSIDIARIESRECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES (UNAUDITED) |
|
(in millions, except per share
amounts) |
|
Three Months Ended July 31, |
|
Nine Months Ended July 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Reconciliation of Income
from Continuing Operations to Adjusted Income from Continuing
Operations |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
36.5 |
|
|
$ |
33.7 |
|
|
$ |
79.4 |
|
|
$ |
87.1 |
|
Items impacting
comparability(a) |
|
|
|
|
|
|
|
|
Prior year self-insurance adjustment(b) |
|
(3.7 |
) |
|
5.9 |
|
|
1.3 |
|
|
7.1 |
|
Union pension settlement(c) |
|
3.9 |
|
|
— |
|
|
3.9 |
|
|
— |
|
Other(d) |
|
1.2 |
|
|
0.5 |
|
|
3.3 |
|
|
0.5 |
|
Restructuring and related(e) |
|
2.0 |
|
|
2.9 |
|
|
8.5 |
|
|
22.5 |
|
Acquisition costs |
|
— |
|
|
0.5 |
|
|
0.3 |
|
|
2.5 |
|
Litigation and other settlements |
|
4.2 |
|
|
1.0 |
|
|
3.3 |
|
|
1.8 |
|
Impairment loss |
|
— |
|
|
— |
|
|
— |
|
|
0.7 |
|
Total items impacting
comparability |
|
7.6 |
|
|
10.8 |
|
|
20.7 |
|
|
35.1 |
|
Income tax benefit(f) (g) |
|
(4.0 |
) |
|
(6.5 |
) |
|
(7.6 |
) |
|
(35.6 |
) |
Items impacting comparability,
net of taxes |
|
3.6 |
|
|
4.2 |
|
|
13.0 |
|
|
(0.5 |
) |
Adjusted income from continuing
operations |
|
$ |
40.2 |
|
|
$ |
38.0 |
|
|
$ |
92.5 |
|
|
$ |
86.6 |
|
|
|
Three Months Ended July 31, |
|
Nine Months Ended July 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Reconciliation of Net
Income to Adjusted EBITDA |
|
|
|
|
|
|
|
|
Net income |
|
$ |
36.8 |
|
|
$ |
33.6 |
|
|
$ |
79.4 |
|
|
$ |
88.1 |
|
Items impacting comparability |
|
7.6 |
|
|
10.8 |
|
|
20.7 |
|
|
35.1 |
|
(Income) loss from discontinued operations |
|
(0.2 |
) |
|
0.1 |
|
|
— |
|
|
(1.0 |
) |
Income tax provision (benefit) |
|
8.5 |
|
|
2.4 |
|
|
25.8 |
|
|
(12.7 |
) |
Interest expense |
|
12.9 |
|
|
12.9 |
|
|
39.2 |
|
|
41.0 |
|
Depreciation and amortization |
|
27.5 |
|
|
28.6 |
|
|
81.3 |
|
|
86.1 |
|
Adjusted EBITDA |
|
$ |
93.0 |
|
|
$ |
88.4 |
|
|
$ |
246.5 |
|
|
$ |
236.6 |
|
|
|
Three Months Ended July 31, |
|
Nine Months Ended July 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Reconciliation of Income
from Continuing Operations per Diluted Share to Adjusted Income
from Continuing Operations per Diluted Share |
|
|
|
|
|
|
|
|
Income from continuing operations per diluted share |
|
$ |
0.55 |
|
|
$ |
0.51 |
|
|
$ |
1.19 |
|
|
$ |
1.31 |
|
Items impacting comparability, net of taxes |
|
0.05 |
|
|
0.06 |
|
|
0.20 |
|
|
(0.01 |
) |
Adjusted income from continuing
operations per diluted share |
|
$ |
0.60 |
|
|
$ |
0.57 |
|
|
$ |
1.38 |
|
|
$ |
1.31 |
|
Diluted shares |
|
67.0 |
|
|
66.3 |
|
|
66.8 |
|
|
66.3 |
|
|
|
Three Months Ended July 31, |
|
Nine Months Ended July 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Reconciliation of
Revenues to Organic Revenues |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
1,647.9 |
|
|
$ |
1,624.3 |
|
|
$ |
4,850.6 |
|
|
$ |
4,793.5 |
|
Changes pursuant to ASC 606 and
ASC 853 (h) |
|
13.1 |
|
|
— |
|
|
36.5 |
|
|
— |
|
Organic revenues |
|
$ |
1,661.0 |
|
|
$ |
1,624.3 |
|
|
$ |
4,887.1 |
|
|
$ |
4,793.5 |
|
|
|
|
|
|
|
|
|
|
Revenues growth |
|
1.5 |
% |
|
|
|
1.2 |
% |
|
|
Organic revenues growth |
|
2.3 |
% |
|
|
|
2.0 |
% |
|
|
(a) The Company adjusts income from continuing
operations to exclude the impact of certain items that are unusual,
non-recurring, or otherwise do not reflect management's views of
the underlying operational results and trends of the Company.
(b) Represents the net adjustments to our
self-insurance reserve for general liability, workers’
compensation, automobile and medical and dental insurance claims
related to prior period accident years. Management
believes these prior period reserve changes do not illustrate
the performance of the Company’s normal ongoing operations given
the current year's insurance expense is estimated by management in
conjunction with the Company's outside actuary to take into
consideration past history and current costs and regulatory trends.
Once the Company develops its best estimate of insurance expense
premiums for the year, the Company fully allocates such costs out
to the business leaders to hold them accountable for the current
year costs within operations. However, since these prior period
reserve changes relate to claims that could date back many years,
current management has limited ability to influence the
ultimate development of the prior year changes. Accordingly,
including the prior period reserve changes in the Company's current
operational results would not depict how the business is run as the
Company holds its management accountable for the current year’s
operational performance. The Company believes the exclusion of the
self-insurance adjustment from income from continuing operations is
useful to investors by enabling them to better assess our operating
performance in the context of current year profitability. For the
nine months ended July 31, 2019 and 2018, our self-insurance
general liability, workers’ compensation, and automobile and
medical and dental insurance claims related to prior period
accident years was increased by $1.3 million and $7.1 million,
respectively.
(c) The Company lost a client account where ABM
employees assigned to the account participated in a defined-benefit
multiemployer pension fund where contributions to the pension fund
by ABM were limited to that single client account. As a result of
losing the account, ABM anticipates receiving a withdrawal
liability assessment pursuant to the Multiemployer Pension Plan
Amendments Act of 1980. The estimated amount of the withdrawal
liability is $3.9M. In most cases, ABM’s pension
contributions are made pursuant to union agreements that cover
multiple client accounts across specific geographic areas, such
that the loss of single client accounts would not trigger this type
of liability.
(d) Primarily represents costs related to the
requirements associated with General Data Protection Regulation
standards.
(e) Represents restructuring costs related to
the continued integration of GCA acquisition in September 2017.
(f) The Company's tax impact is calculated using
the federal and state statutory rate of 28.1% for QTD and YTD
FY19, and 29.8% for QTD and YTD FY18. We calculate tax from
the underlying whole-dollar amounts, as a result, certain amounts
may not recalculate based on reported numbers due to rounding.
(g) The QTD FY19 and YTD FY19 includes $1.8M
related to the expiring statute of limitations. The QTD FY18
includes $3.6M related to the expiring statute of limitations. YTD
FY18 includes $3.6M related to the expiring statute of limitations
and $21.5M related to the enactment of the Tax Act.
(h) Consistent with the required disclosures
under U.S. GAAP in the year of adoption of ASC 606 and ASC 853, we
are providing information in each reporting period during the year
of adoption on what revenue would have been under our historical
method of accounting that existed prior to November 1, 2018 as part
of the reconciliation of reported revenues to organic revenues.
ABM
INDUSTRIES INCORPORATED AND SUBSIDIARIES2019
GUIDANCE |
|
|
Year Ending October 31, 2019 |
Reconciliation of
Estimated Income from Continuing Operations per Diluted Share to
Estimated Adjusted Income from Continuing Operations per Diluted
Share |
|
Low Estimate |
|
High Estimate |
Income from continuing operations per diluted share (a) |
|
1.70 |
|
|
1.80 |
|
Adjustments (b) |
|
0.25 |
|
|
0.25 |
|
Adjusted
Income from continuing operations per diluted share (a) |
|
$ |
1.95 |
|
|
$ |
2.05 |
|
(a) With the exception of the 2019 Work
Opportunity Tax Credits and ASU 2016-09, this guidance does not
include any potential benefits associated with certain other
discrete tax items and other unrecognized tax benefits.
(b) Adjustments include costs associated with
the strategic review, legal settlements, adjustments to
self-insurance reserves pertaining to prior year's claims and other
unique items impacting comparability.
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