ABM Industries (ABM) Q4 2010 earnings summary

Executive summary

• FY2010 revenue was $3,495.7M, up 0.4% YoY, while net income rose 18.1% to $64.1M and diluted EPS increased to $1.21 from $1.05.

• Excluding the L&R and Diversco acquisitions, revenue declined 0.8%; higher Engineering and Parking profits and cost controls supported operating performance.

Financial highlights

• Operating profit increased 18.2% to $108.8M; income from continuing operations rose 15.1% to $63.9M.

• Operating cash flow reached $149.9M, up from $140.9M; cash and cash equivalents were $39.4M at Oct. 31, 2010.

• 2010 SG&A included a $5.8M Morales settlement, $2.3M acquisition costs, and a $3.4M reversal of share-based compensation expense.

• Adjusted for acquisition contributions, revenue decreased $29.1M, or 0.8%, YoY; acquisitions contributed $43.0M of revenue.

Outlook and guidance

• Near-term priorities include integrating recent acquisitions, maintaining cost controls, and exiting client arrangements with high bankruptcy risk or low margins.

• Long-term growth plans emphasize organic expansion and acquisitions, including international growth, amid demand for integrated facility services.

• Management expected operating cash generation and availability under the new credit facility to fund operations and cash needs, except for significant acquisitions.