ABM Industries (ABM) Q4 2009 earnings summary

Executive summary

• FY09 operating profit rose across all four operating segments despite recession-driven service reductions, price compression, contract losses and weaker tag work; corporate costs drove consolidated operating profit lower YoY.

• Cost controls and selective exits from lower-margin client relationships supported segment profitability; operating cash flow improved substantially with better collections.

Financial highlights

• FY09 revenue fell 3.9% to $3.482B; operating profit declined 7.4% to $92.1M; continuing income rose 5.2% to $55.5M.

• Net income increased 19.5% to $54.3M and diluted EPS rose to $1.05 from $0.88; FY08 included a $3.5M after-tax Lighting sale loss and $7.3M discontinued-operations loss.

• Q4 FY09 revenue was $868.0M, continuing income $15.3M, net income $15.0M and diluted EPS $0.29.

• Gross margin was 10.5% vs. 11.0% in FY08; reported results included a $9.4M prior-year insurance reserve increase and a $9.6M legal settlement benefit in FY09.

• FY09 interest expense decreased 61.3% to $5.9M; effective tax rate was 34.5% and included $4.4M of non-recurring tax benefits.

Outlook and guidance

• Near-term priorities: cost control, retaining clients at target margins, passing through cost increases where possible, and exiting high-bankruptcy-risk or low-margin arrangements.

• Long-term growth plans emphasize organic expansion and acquisitions, including international expansion; active acquisition searches were underway domestically and internationally.