UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10 Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
---- EXCHANGE ACT OF 1934
For the quarterly period ended JULY 31, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
---- EXCHANGE ACT OF 1934
For the transition period from to
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Commission file Number 1-8929
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ABM INDUSTRIES INCORPORATED
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(Exact name of registrant as specified in its charter)
DELAWARE 94-1369354
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 FREMONT STREET, 26TH FLOOR, SAN FRANCISCO, CALIFORNIA 94105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 597-4500
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
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Number of shares of Common Stock outstanding as of July 31, 1997: 20,300,406
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
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ASSETS: OCTOBER 31, 1996 JULY 31, 1997
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,567 $ 1,665
Accounts receivable, net 183,716 197,562
Inventories 16,492 19,772
Deferred income taxes 11,684 11,012
Prepaid expenses and other current assets 20,296 23,746
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Total current assets 233,755 253,757
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INVESTMENTS AND LONG-TERM RECEIVABLES 15,941 15,611
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and buildings 4,750 4,857
Transportation equipment 9,750 10,924
Machinery and other equipment 39,899 43,125
Leasehold improvements 8,202 9,893
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62,601 68,799
Less accumulated depreciation and amortization (40,031) (44,085)
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Property, plant and equipment, net 22,570 24,714
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INTANGIBLE ASSETS, NET 76,366 84,073
DEFERRED INCOME TAXES 22,046 23,566
OTHER ASSETS 9,092 7,748
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$ 379,770 $ 409,469
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(continued)
1
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
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LIABILITIES AND STOCKHOLDERS' EQUITY: OCTOBER 31, 1996 JULY 31, 1997
(Unaudited)
CURRENT LIABILITIES:
Current portion of long-term debt $ 902 $ 1,384
Bank overdraft 4,935 3,788
Trade accounts payable 27,091 26,899
Income taxes payable 1,864 2,225
Accrued Liabilities:
Compensation 27,862 28,338
Taxes - other than income 9,952 11,136
Insurance claims 23,256 24,601
Other 17,936 21,829
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Total current liabilities 113,798 120,200
Long-Term Debt (less current portion) 33,664 27,062
Retirement plans 10,140 12,953
Insurance claims 51,475 54,348
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Total Liabilities 209,077 214,563
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SERIES B 8% SENIOR REDEEMABLE CUMULATIVE
PREFERRED STOCK 6,400 6,400
6,400 shares authorized, issued and
outstanding, stated at redemption value,
$1,000 per share
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 500,000
shares authorized; none issued - -
Common stock, $.01 par value; 28,000,000 shares
authorized; 19,489,000 and 20,300,000 shares
issued and outstanding at October 31, 1996
and July 31, 1997, respectively 195 203
Additional capital 48,548 61,000
Retained earnings 115,550 127,303
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Total stockholders' equity 164,293 188,506
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$ 379,770 $ 409,469
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The accompanying notes are an integral part of the consolidated financial
statements.
2
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share amounts)
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THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31 JULY 31
1996 1997 1996 1997
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REVENUES AND OTHER INCOME $ 281,911 $ 308,471 $ 798,381 $ 894,418
EXPENSES:
Operating Expenses and Cost of Goods Sold 244,601 264,738 691,837 770,744
Selling, General and Administrative 25,717 29,853 77,907 89,671
Interest 1,004 974 2,701 2,667
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Total Expenses 271,322 295,565 772,445 863,082
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INCOME BEFORE INCOME TAXES 10,589 12,906 25,936 31,336
INCOME TAXES 4,553 5,420 11,152 13,161
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NET INCOME $ 6,036 $ 7,486 $ 14,784 $ 18,175
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NET INCOME PER COMMON SHARE $ 0.29 $ 0.34 $ 0.72 $ 0.82
DIVIDENDS PER COMMON SHARE $ 0.0875 $ 0.10 $ 0.2625 $ 0.30
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 20,478 21,858 20,129 21,624
Per share amounts have been restated to retroactively reflect the two-for-one
common stock split on July 15, 1996
The accompanying notes are an integral part of the consolidated financial
statements.
3
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND 1997
(In thousands)
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JULY 31, JULY 31,
1996 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 778,468 $ 881,230
Other operating cash receipts 1,871 1,063
Interest received 327 434
Cash paid to suppliers and employees (749,376) (840,658)
Interest paid (2,893) (2,802)
Income taxes paid (14,116) (13,648)
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Net cash provided by operating
activities 14,281 25,619
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (8,458) (8,699)
Proceeds from sale of assets 343 239
(Increase) decrease in investments and
long-term receivables (5,488) 330
Intangible assets acquired (11,694) (7,257)
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Net cash used in investing activities (25,297) (15,387)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued 5,987 6,360
Dividends paid (5,402) (6,422)
Decrease in cash overdraft (3,610) (1,152)
Increase in notes payable 223 482
Long-term borrowings 97,777 64,662
Repayments of long-term borrowings (84,038) (74,064)
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Net cash provided by (used in) financing
activities 10,937 (10,134)
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NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (79) 98
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 1,840 1,567
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CASH AND CASH EQUIVALENTS END OF PERIOD $ 1,761 $ 1,665
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(Continued)
4
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND 1997
(In thousands)
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JULY 31, JULY 31,
1996 1997
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RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 14,784 $ 18,175
Adjustments:
Depreciation and amortization 9,755 11,485
Provision for bad debts 1,240 1,442
Gain on sale of assets (196) (15)
Deferred income taxes (2,521) (848)
Increase in accounts and other receivables (16,071) (11,864)
(Increase)decrease in inventories and
Supplies 332 (2,944)
Increase in prepaid expenses (1,981) (3,369)
(Increase)decrease in other assets (1,060) 1,344
Increase(decrease) in income taxes payable (443) 361
Increase in retirement plans accrual 1,509 2,813
Increase in insurance claims liability 3,396 4,218
Increase in accounts payable and other
accrued liabilities 5,537 4,821
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Total adjustments to net income (503) 7,444
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NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 14,281 $ 25,619
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The accompanying notes are an integral part of the consolidated financial
statements.
5
ABM INDUSTRIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all material adjustments, which are necessary to
present fairly the Company's financial position as of July 31, 1997 and the
results of operations, and cash flows for the nine months then ended. These
adjustments are of a normal, recurring nature.
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's Form 10K filed for
the fiscal year ended October 31, 1996 with the Securities and Exchange
Commission.
2. NET INCOME PER SHARE
NET INCOME PER COMMON SHARE: Net income per common and common equivalent
share, after the reduction for preferred stock dividends in the amount of
$384,000 during the nine months ended July 31, 1997, is based on the weighted
average number of shares outstanding during the year and the common stock
equivalents that have a dilutive effect. Net income per common share assuming
full dilution is not significantly different than net income per share as
reported.
On June 18, 1996, the Company's Board of Directors approved a two-for-one stock
split, payable to shareholders of record as of the close of business on July 15,
1996. A total of 9,669,000 shares of common stock were issued in connection
with the stock split. All share and per share amounts have been restated to
retroactively reflect the common stock split.
6
PART II. OTHER INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FINANCIAL CONDITION
Funds provided from operations and bank borrowings have historically been
the sources for meeting working capital requirements, financing capital
expenditures and acquisitions, and paying cash dividends. Management believes
that funds from these sources will remain available and adequately serve the
Company's liquidity needs. During the quarter, the Company replaced its $125
million syndicated line of credit expiring September 22, 1999, with a new $125
million syndicated 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 July 31, 1997, the total amount outstanding was approximately $94 million,
which was comprised of loans in the amount of $22 million and standby letters of
credit of $72 million. This agreement requires the Company to meet certain
financial ratios and places some limitations on dividend payments and outside
borrowing. The Company is prohibited from declaring or paying cash dividends
exceeding 50% of its net income for any fiscal year. In February 1996, the
Company entered into a loan agreement with a major U.S. bank which provided a
seven-year term loan at a fixed interest rate of 6.78 %. Annual payments of
principal and interest in varying amounts are due February 15, 1998 through
February 15, 2003 on the remaining balance of $4,777,054. The Company also has a
9.35% note payable to an insurance company with a remaining amount of
$1,272,000. Interest is payable monthly and principal amounts of $636,000 are
due annually through October 1, 1998. The Company's effective interest rate for
all borrowings for the nine months ended July 31, 1997 was 7.1%.
At July 31, 1997, working capital was $133.6 million, as compared to $120.0
million at October 31, 1996.
EFFECT OF INFLATION
The low rates of inflation experienced in recent years had no material
impact on the financial statements of the Company. The Company attempts to
recover inflationary costs by increasing sales prices to the extent permitted by
contracts and competition.
ENVIRONMENTAL MATTERS
The 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.
7
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 or its results of operations.
The Company is currently involved in five proceedings relating to
environmental matters: one involving alleged potential groundwater contamination
at a Company facility in Florida; one involving alleged soil contamination at a
former Company facility in Arizona; one involving a claim under Proposition 65
in California relating to an alleged failure to post statutory warning signs in
Company operated parking garages; one involving prior leaks from an underground
gas tank in Washington; and one involving soil and groundwater contamination
under a dry-cleaning shop previously 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 affect on the Company's financial position or its results of operations.
ACQUISITIONS AND DISPOSITIONS
The operating results of businesses acquired have been included in the
accompanying consolidated financial statements from their respective dates of
acquisition.
Effective November 1, 1996, the Company acquired the operations and net
assets of Sica Electrical and Maintenance Corp., of Ozone Park, New York. Sica
Electrical and Maintenance Corp. is an electrical and lighting maintenance
company which operates in the greater New York City metropolitan area, New
Jersey, up-state New York, Pennsylvania, and Connecticut. In connection with
this acquisition, the Company issued 348,323 of its common shares at the time of
closing and will make additional payments in common shares over a five-year
period based on the operating profits (income before taxes and interest) of the
acquired business. A maximum of 348,323 common shares may be issued in
connection with future payments. Effective November 1, 1996, the Company's
earnings per common share calculation includes the 696,646 shares issued and to
be issued under the contract with the sellers.
Effective August 1, 1997, the Company acquired from Ogden Corporation all of
Ogden's building maintenance and on-site engineering operations in New York
City.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements of the Company. All information in the
discussion and references to the years and quarters are based on the Company's
fiscal year and third quarter which end on October 31 and July 31, respectively.
8
NINE MONTHS ENDED JULY 31, 1997 VS. NINE MONTHS ENDED JULY 31, 1996
Revenues and other income (hereafter called revenues) for the first nine
months of fiscal year 1997 were $894 million compared to $798 million in 1996, a
12% increase over the same period of the prior year. This growth was
attributable to business and price increases as well as revenues generated from
acquisitions. For the nine months ended July 31, 1997, the increase in revenues
relating to acquisitions made during fiscal years 1996 and 1997 was
approximately $36 million on a total revenue increase of $96 million.
Net income for the first nine months of 1997 was $18,175,000 an increase of
23%, compared to the net income of $14,784,000 for the first nine months of
1996. Net income per share rose 14% to 82 cents for the first nine months of
1997 compared to 72 cents for the same period in 1996. The increase in net
income per share was not proportional to the increase in net income due to the
increased average number of common and common equivalent shares outstanding.
This improvement in net income and net income per share is primarily the result
of increased revenues as well as control of operating costs. As a percentage of
revenues, operating expenses and cost of goods sold decreased to 86.2% for the
first nine months of 1997 compared to 86.7% in 1996. Consequently, as a
percentage of revenues, the Company's gross profit (revenue minus operating
expenses and cost of goods sold) was 13.8% compared to the prior year's 13.3%.
This improvement is partly attributable to increased sales without a
corresponding increase in insurance costs during 1997.
Selling, general and administrative expense for the first nine months of
fiscal year 1997 was $89.7 million compared to $77.9 million for the
corresponding nine months of fiscal year 1996. As a percentage of revenues,
selling, general and administrative expense increased slightly, from 9.8% for
the nine months ended July 31, 1996, to 10.0% for the same period in 1997. This
increase was due to a number of factors including: increased selling expenses
associated with national accounts; promotion of the ABM Family of Services;
expenses associated with acquisitions; and an increase in employee benefits.
Interest expense was $2,667,000 for the first nine months of fiscal year
1997, only slightly lower than the 1996 interest expense of $2,701,000, due to
lower average borrowings outstanding compared to the prior year.
The pre-tax income for the first nine months of 1997 was $31,336,000
compared to $25,936,000 in 1996, an increase of 21% over the corresponding
period in 1996. The growth in pre-tax income outpaced the revenue growth due
primarily to lower operating expenses and cost of goods sold as a percentage of
revenue.
9
The effective income tax rates for the first nine months of fiscal years
1997 and 1996 were 42% and 43%, respectively. The lower rate in the current year
reflects an expected increase in the utilization of tax credits.
The Company's divisions (consisting of one or more subsidiaries of the
Company), listed below, operate in three functionally oriented segments of the
building services industry--Janitorial Divisions, Public Service Divisions and
Technical Divisions.
PUBLIC SERVICE
JANITORIAL DIVISIONS TECHNICAL
DIVISIONS DIVISIONS
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American Building American ABM
Maintenance Commercial Engineering
Security Services Services
Easterday
Janitorial Supply Ampco System Amtech Elevator
Parking Services
Amtech Lighting
Services
CommAir Mechanical
Services
The results of operations from the Company's three industry segments and
its eight operating divisions for the nine months ended July 31, 1997, as
compared to the nine months ended July 31, 1996, are more fully described below:
The Janitorial Divisions segment, which includes American Building
Maintenance (also known as ABM Janitorial Services) and Easterday
Janitorial Supply, accounted for approximately 56% of the Company's total
revenues for the first nine months of the 1997 fiscal year. Revenues of
this segment for the first nine months of fiscal year 1997 were $505
million, an increase of approximately $59 million, or 13% over the first
nine months of fiscal 1996. The operating profits of this segment
increased 14% over the comparable period in 1996. Revenues of AMERICAN
BUILDING MAINTENANCE increased 13% for the first nine months of fiscal year
1997 compared to the same period in 1996, both as a result of acquisitions
in the Midwest and Southwest Regions, and internal revenue growth
throughout the majority of its regions, particularly in the Northeast.
This Division's operating profits increased 14% when compared to the same
period last year. The
10
increase in operating profits is proportionate to the revenue increase, and
can be attributed to the revenue growth, with slightly lower insurance
costs improving margins. EASTERDAY JANITORIAL SUPPLY'S revenue for the
first nine months increased by approximately 16% compared to the same
period in 1996 generally due to obtaining new customers, particularly in
Portland, Oregon. Operating profits increased 19% due to the increase in
sales volume at a higher gross margin percentage.
The Public Service Divisions segment, which includes Ampco System Parking
and American Commercial Security Services (also known as "ACSS" and "ABM
Security Services"), accounted for approximately 20% of the Company's total
revenues. Revenues of this segment for the first nine months of 1997 were
approximately $179 million, a 7% increase over the same period in fiscal
year 1996. The operating profits of this segment increased by 7% as Ampco
System Parking posted higher profits when compared to the first nine months
of the prior year. AMPCO SYSTEM PARKING'S revenue increased by 6% and its
profits increased 15% during the first nine months of fiscal year 1997.
The increase in revenues and operating profits resulted primarily from
increased airport business and new parking locations in the Northwest
region. AMERICAN COMMERCIAL SECURITY reported an increase in revenues of
9% but its profits were down 4% in the first nine months of 1997 compared
to the same period of 1996. The revenue growth was largely due to the
acquisition of CBM Industries in Minneapolis in May of 1996 and new
business, particularly in the Midwest and Southwest regions. The increase
in operating income did not keep pace with the increase in revenues during
the first nine months of 1997 when compared to the same period in 1996, due
to increased labor costs related to the acquisition, an increase in
overtime throughout the division, and several large accounts bid at lower
profit margins.
The Company's Technical Services Divisions segment includes ABM Engineering
Services, Amtech Elevator Services, Amtech Lighting Services and CommAir
Mechanical Services. This segment reported revenues of $211 million, which
represent approximately 24% of the Company's total revenues for the first
nine months of fiscal year 1997. Revenues were up 14% compared to the same
period last year, with increases reported by all its divisions. Operating
profit of this segment increased 52% compared to the first nine months of
fiscal year 1996 due to significant increases in the Elevator and Lighting
divisions. ABM ENGINEERING'S revenues increased by 6% and its operating
profits were flat the first nine months of 1997 compared to the same period
in 1996. Revenue increased in a majority of its regions primarily as a
result of sales to new customers. Operating profits did not increase due to
increased workers' compensation insurance costs, and selling, general and
administrative expenses. Revenues for AMTECH ELEVATOR were up by 13% for
the first nine months of fiscal year 1997 compared to the same period in
1996 largely due to growth in its elevator service and repair revenues.
The Division's operating profit for the first nine months of 1997 was more
than four times that of the corresponding period in fiscal year 1996. This
was primarily due to the absence of losses reported in
11
the prior year by its Mexican subsidiary, which was sold May 31, 1996, and
lower insurance costs. Improved profitability in Southern California and
Pennsylvania also contributed to the increase in operating profits. AMTECH
LIGHTING posted a 24% increase in revenues due primarily to the acquisition
on November 1, 1996. Operating profits were up 83% the first nine months
of fiscal year 1997 primarily because of an acquisition, and a decrease in
selling, general and administrative expenses as a percentage of revenue.
COMMAIR MECHANICAL'S operating profits for the first nine months of 1997
increased by 12%, on a revenue increase of 15%. Additional revenues
resulted from an increase in construction project work as well as the
acquisition of Preferred Mechanical Services as of March 1, 1997. The
increase in operating profits for the first nine months of the current year
was primarily a result of increased sales offset slightly by a lower gross
margin percentage and by higher selling, general and administrative
expenses as a percentage of revenue.
THREE MONTHS ENDED JULY 31, 1997 VS. THREE MONTHS ENDED JULY 31, 1996
Revenues and other income for the third quarter of fiscal year 1997 were
$308 million compared to $282 million in 1996, a 9% increase over the same
quarter of the prior year. This growth was attributable to volume and price
increases as well as revenues generated from acquisitions.
Net income for the third quarter of 1997 was $7,486,000, an increase of
24%, compared to the net income of $6,036,000 for the third quarter of 1996.
Net income per share rose 17% to 34 cents for the third quarter of 1997 compared
to 29 cents for the same period in 1996. The increase in net income per share
was not proportional to the increase in net income due to the increased average
number of common and common equivalent shares outstanding. Cost controls
coupled with revenue growth enabled the company to realize improved earnings.
Operating expenses and cost of goods sold as a percentage of revenues
decreased from 86.8% for the third quarter of 1996 to 85.8% in 1997.
Consequently, as a percentage of revenues, the Company's gross profit increased
to 14.2% from the prior year's third quarter at 13.2% due to increased margins
in several of its divisions.
Selling, general and administrative expenses for the third quarter of
fiscal year 1997 were $29.9 million compared to $25.7 million in the third
quarter of 1996, an increase of $4.2 million or 16%, compared to the
corresponding period of fiscal year 1996. As a percentage of revenues, selling,
general and administrative expense increased from 9.1% for the three months
ended July 31, 1996, to 9.7% for the same period in 1997 due to increased
selling expenses associated with national accounts and promotion of the ABM
Family of Services.
12
Interest expense was $974,000 for the third quarter of fiscal year 1997
compared to $1,004,000 in 1996, a decrease of $30,000 or 3%, from the same
period of the prior fiscal year. The decrease in interest expense for the
comparable periods is due to lower average borrowings in 1997.
The effective income tax rate for the third quarter of 1997 was 42%
compared to 43% in 1996. The lower rate in the current quarter was due to an
expected increase in the utilization of tax credits.
The results of operations from the Company's three industry segments and
its eight operating divisions for the three months ended July 31, 1997, as
compared to the three months ended July 31, 1996, are more fully described
below:
Revenues of the Janitorial Divisions segment for the third quarter of
fiscal year 1997 were $174.4 million, an increase of approximately $15.6
million or 10%, over the third quarter of fiscal 1996, while its operating
profits increased by 13% over the comparable quarter of 1996. Janitorial
Divisions accounted for approximately 57% of the Company's total revenues
for the current quarter. AMERICAN BUILDING MAINTENANCE'S revenues
increased 9% during the third quarter of fiscal year 1997 compared to the
same quarter of 1996, due to revenue growth throughout the majority of its
regions, particularly in the Midwest and Southwest regions, due to
acquisitions. The Division's operating profits increased 13% when compared
to the same period last year. In comparison with the 9% revenue increase,
a higher 13% increase in operating profits is due to lower operating
expenses, particularly insurance expense, as a percentage of revenue.
EASTERDAY JANITORIAL SUPPLY'S third quarter revenue increased by
approximately 23% compared to the same quarter in 1996 generally due to an
increase in new customers, particularly in the metropolitan areas of Los
Angeles and San Francisco, California, as well as Portland, Oregon. An
increase of 12% in operating profits resulted from a higher sales volume,
but at lower gross margins.
Revenues of the Public Services Divisions segment for the third quarter of
1997 were approximately $61.9 million, a 6% increase over the same quarter
of fiscal year 1996. The Public Services Divisions segment accounted for
approximately 20% of the Company's total revenues. The operating profits
of this segment were up by 7% due to its Ampco System Parking division.
AMERICAN COMMERCIAL SECURITY reported an increase in revenues of 4%, but
its profits declined 13% in the third quarter of 1997 compared to the same
period of 1996. The revenue growth was largely due to increased sales to
several large customers, and new customers in its Midwest, Northwest, and
Southern California Regions. Benefits from revenue gains were offset by
competitive market conditions that eroded the gross margins causing
operating profits to drop below the third quarter of 1996. An increase in
overtime and higher selling, general and administrative expenses also had a
negative impact on the Division's
13
profit. AMPCO SYSTEM PARKING'S revenues increased by 7% while its profits
increased 20% during the third quarter of fiscal year 1997. The increase
in revenues and operating profits resulted primarily from increased airport
parking business and new parking locations in the Northwest region.
The Company's Technical Divisions segment reported revenues of $72.1
million, which represent approximately 23% of the Company's total revenues
for the third quarter of fiscal year 1997, an increase of approximately 12%
over the same quarter of last year. This segment's profit increased 46%
for the third quarter of 1997 when compared to the third quarter of fiscal
year 1996. ABM ENGINEERING'S revenues increased by 5% and it reported a 2%
decrease in operating profits the third quarter of 1997 compared to the
same period in 1996. Revenue increases generally were due to gains in new
business in most regions. The decrease in operating profits resulted from
increased operating costs, particularly workers' compensation insurance, as
well as a slight increase in selling, general and administrative expenses
as a percentage of sales. Revenues for AMTECH ELEVATOR were up 11% for the
third quarter of fiscal year 1997 compared to the same quarter of 1996,
largely due to growth in its elevator service base, which also contributed
to increased repair sales. The Elevator Division's operating profit for
the third quarter of 1997 was ten times that of the corresponding quarter
of fiscal year 1996 primarily due to the sale of its Mexican subsidiary,
which had been reporting losses, as well as decreased insurance costs, and
the continued phase-out of less profitable new construction projects. A
decrease in selling, general and administrative expenses as a percentage of
revenue also contributed to this increase. AMTECH LIGHTING reported
increases in revenues of 22%, and operating profit of 45% over the same
period of the prior year, due primarily to the acquisition mentioned
previously. COMMAIR MECHANICAL'S operating profits for the third quarter
of 1997 declined 5% on a revenue increase of 10%. Revenues increased
during the third quarter of 1997 largely due to an acquisition on March 1,
1997. Profit decreased primarily as a result of higher selling, general
and administrative costs.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 4.1 - Credit Agreement, dated July 25, 1997, between Bank of
America National Trust and Savings Association and the Company.
Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
quarter ended July 31, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ABM Industries Incorporated
September 12, 1997 /s/ David H. Hebble
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Vice President, Principal Financial Officer
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