ABM Industries (ABM) Q4 2006 earnings summary

Executive summary

• FY06 sales and other income rose 4.9% to $2.713B; total revenue, including the $80M World Trade Center (WTC) insurance settlement, reached $2.793B, up 7.9%.

• Income from continuing operations was $93.2M, or $1.88 diluted EPS, versus $43.6M and $0.86 in FY05; results included a $45.1M after-tax WTC settlement gain.

• Sales growth reflected internal new business and expanded services, recent acquisitions, and higher managed-parking expense reimbursements; Janitorial remained the largest segment.

Financial highlights

• Sales and other income increased to $2.713B from $2.587B; excluding the separately reported $80M WTC settlement, revenue was $2.713B.

• Operating expenses and cost of goods sold were $2.422B; SG&A was $207.1M, including $3.3M of IT outsourcing costs and $3.2M of share-based compensation.

• Income from continuing operations before taxes was $157.7M, versus $64.4M in FY05; net income was $93.2M, versus $57.9M.

• FY06 included $14.1M of self-insurance reserve benefits versus $8.2M in FY05; FY05 included $12.8M of lawsuit losses and a $3.4M SSA LLC reserve charge.

Outlook and guidance

• Near-term priorities included winning new business and integrating recent acquisitions; longer-term focus remained growth in businesses positioned to become leading national service providers.

• A new payroll system was expected in 2008, with approximately $10M of planning and implementation costs expected during FY07 and Q1 FY08.

• Liquidity, operating cash generation, and the credit facility were expected to cover long-term cash needs, including acquisitions.