ABM Industries (ABM) Q4 2011 earnings summary

Executive summary

• FY11 revenue rose 21.5% to $4.247B, primarily from Linc, Diversco and L&R acquisitions; operating profit increased 8.0% to $117.6M and net income rose 6.8% to $68.5M.

• Weaker-than-expected economic conditions, client cost containment and delayed federal appropriations pressured results; management expected some government project starts to shift from 2011 to 2012.

Financial highlights

• Revenue was $4.247B versus $3.496B; acquisitions accounted for $724.7M of the $751.1M increase.

• Operating profit increased 8.0% to $117.6M; income from continuing operations rose 7.6% to $68.7M, and net income increased 6.8% to $68.5M.

• Q4 revenue was $1.081B, gross profit $121.8M, continuing income $18.2M and net income $18.0M; diluted EPS was $0.33.

• Operating cash flow reached $160.0M, including $156.8M from continuing operations, versus $149.9M total in FY10.

• Adjusted for one-time items, FY11 included a $4.7M tax benefit from remeasurement of uncertain tax benefits, a $3.7M health-premium refund and a net $2.7M L&R settlement benefit.

Outlook and guidance

• Strategy emphasized organic growth and further domestic and international acquisitions, while maintaining a target leverage ratio and pursuing clients at desirable margins.

• Management aimed to expand in technical vertical markets and differentiate services through technology and infrastructure investments.

• Government bid activity remained active, but delayed appropriations and contract awards shifted some project starts into 2012; proposed FY12 budget effects remained under assessment.