Transcript
Traditional values. Visionary thinking.2006 ABM Industries Annual Report to the Stockholders
Table of Contents
Five-Year Selected Financial Data 1
President’s Letter 2
Operations Reports
ABMJanitorialServices 18
ABMSecurityServices 20
AmpcoSystemParking 22
ABMFacilityServices 24
AmtechLightingServices 26
Financial Reports 28
Board and Executive Officers 33
Traditional values. Visionary thinking.
“As we stand here today, a Fortune 1000, New York Stock Exchange listed company with $2.7 billion in sales, we must always keep in mind the values that allowed us to reach this level of success. These values – integrity, trade competence, respect for people, whether they are customers, employees, stockholders or the general public, and recognition of our responsibilities to these people – will always be the cornerstones of our operations and planning.
But “Traditional Values” does not imply traditional structure or traditional processes and methods. The world of today has changed in many ways from the world that Morris Rosenberg faced in 1909. Corporate outsourcing was an undeveloped concept, single sourcing on a regional or national level was not practical, technology and communications were limited and the demands placed on organizations by government regulation were far less extensive. Had the past “visionaries” of ABM not recognized the need to evolve, it is unlikely that we would exist as a company today. Indeed most of the companies that ABM considered major national competitors as recently as the 1980’s do not exist today.”
— Henrik C. Slipsager President and Chief Executive Officer
Year ended October 31 2006 2005 2004 2003 2002(Inthousands,exceptpersharedataandratios)
Salesandotherincome $ 2,712,668 $2,586,566 $2,375,149 $2,222,367 $2,021,698Incomefromcontinuingoperations 93,205 43,554 29,644 34,598 41,489Netincome $ 93,205 $ 57,941 $ 30,473 $ 90,920 $ 44,354Incomefromcontinuingoperationspercommonshare Basic $ 1.90 $ 0.88 $ 0.61 $ 0.71 $ 0.84 Diluted $ 1.88 $ 0.86 $ 0.59 $ 0.69 $ 0.81Averagecommonandcommonequivalentshares Basic 49,054 49,332 48,641 49,065 49,116 Diluted 49,678 50,367 50,064 50,004 51,015Dividendsdeclaredpercommonshare $ 0.44 $ 0.42 $ 0.40 $ 0.38 $ 0.36Stockholders’equity $ 541,247 $ 475,926 $ 442,161 $ 430,022 $ 372,194Commonsharesoutstanding 48,635 49,051 48,707 48,367 48,997Stockholders’equitypercommonshare $ 11.13 $ 9.70 $ 9.08 $ 8.89 $ 7.60Workingcapital $ 312,456 $ 246,379 $ 230,698 $ 244,671 $ 214,876Netoperatingcashflowsfromcontinuingoperations $ 130,367 $ 44,799 $ 64,412 $ 50,746 $ 95,583Currentratio 1.98 1.90 $ 1.91 $ 1.95 $ 1.94Totalassets $ 1,016,274 $ 903,710 $ 842,524 $ 804,306 $ 712,550Tradeaccountsreceivable–net $ 383,977 $ 345,104 $ 307,237 $ 278,330 $ 285,827Goodwill $ 247,888 $ 243,559 $ 225,495 $ 186,857 $ 162,057Property,plantandequipment–net $ 32,185 $ 34,270 $ 31,191 $ 31,738 $ 35,533Capitalexpenditures $ 14,065 $ 17,738 $ 11,460 $ 11,535 $ 7,212Depreciation $ 14,981 $ 13,918 $ 13,024 $ 13,673 $ 13,674
Five-year Selected Financial Data
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Intra-day Stock Price High
Dividends Declared per
Common ShareSales ($ millions)
Income from Continuing
Operations per Diluted Share (1)
(1)IncomefromContinuingOperationsperDilutedShareforthefiscalyearendedOctober31,2006is$1.88,whichincludes$0.91fromthesettlementoftheWorldTradeCenter(WTC)insuranceclaims.
WTCsettlementincomeper
dilutedshare
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Dear Stockholders, Employees and Other Friends of ABM:
The President’s Perspective
Fiscal2006wasanexcellentyearforABM.Weenteredtheyear facingchallenges in thefirstquarter,mostof them lingeringissuesfromfiscal2005.HoweverIampleasedtosaythatoverthecourseof 2006theCompanydemonstratedsteadygrowthandim-provement,notonlydeliveringsolidfinancialresults,butestablish-ingorcontinuingtrendsinallbusinesssegmentsthatareverystrongandbodewellforanexcitingandsuccessfulfiscal2007.Wecontinuetostriveforimprovedmargins,asdemonstratedbytheresultsthatmanyof thebusinessunitshavereported,andcontinuetofocusonthestrategicinitiativesthatwillpositionustoremainintheforefrontof ourindustry.Ourorganicgrowthisstrongerthanithasbeeninyearsandwecontinuetoincreasedividends.
TheCompanyreportedincomefromcontinuingoperationsduringthefiscalyearwhichendedOctober31,2006of $93.2mil-lion($1.88perdilutedshare)onsalesandotherincomeof $2.71bil-lion,comparedto$43.6million($0.86perdilutedshare)onsalesandotherincomeof $2.59billionforlastyear.Theincreaseinincomeincludesthe$45.1millionforthesettlementof theWorldTradecen-terinsuranceclaims.
The Year in ReviewABM Janitorial Services, long a cornerstone of the ABM
family,continueditsstrongperformancebydeliveringdoubledigitbottom linegrowth infiscal2006aspartof a continuingperfor-mance trend.Therewas substantial successpenetratingcustomerbasesrequiringspecializedormoretechnicalservices,suchashigh-tech,pharmaceuticalandfinancialservices.JanitorialServicesalsocontinued todevelopandrollout innovativenewprograms, suchastheQMS24-7qualityprogramandourGreenCareprogram.Fiscal2006sawanincreaseinmajornationalengineeringsubcon-tractingawards.ABMFacilityServicesthroughitsengineeringunit,ABMEngineeringServices,posteddoubledigittopandbottomlinegrowthforthethirdyearinarow.ABMEngineeringistheonlyfa-cilitymaintenancecompanytohaveachievedandmaintainedISOcertification for all services nationally. At Ampco System Parkingtheanticipatedgrowththatbeganwiththeoverallimprovementof theeconomyin2004hascontinuedthroughfiscal2005and2006andtheyarewellpositionedforanexcellentyearin2007.AmpcocontinuestobeanindustrypioneerandleaderinitsinvestmentinbothpeopleandtechnologythroughprogramssuchasSCORE4,asophisticatedautomatedfeecollectionsystem(whichoptimizesrev-enueandreportingtechnology)andSOP(ournewesttrainingtoolandreferenceguideformanagers).TheSecuritysegmentbeganfis-cal2006withcontinuingchallengestiedtotheissuesidentifiedwith
oursubsidiary–SecurityServicesof America(SSA).Oureffortstoconsolidateoperations,restructurecontracts,closebranches,andre-alignmanagement,restoredmomentum,whichenabledthisopera-tiontoreturntoprofitabilitybythesecondhalf of theyear.AmtechLightingServicesexperiencedadifficultyear.However,theywereabletobuildpositivemomentumthroughtheyearandendonahighnote,withindividualsuccessesbuildingtocreatethelargestbacklogof workinthehistoryof theCompanyatyear’sclose.Thismilestoneisasignificantsignof healththatservestoheightenmyoptimismforareturntosolidperformancein2007forAmtechLighting.
Insummary,for2006weachieveddoubledigitgrowthinfouroutof fiveof ouroperatingsegments.Weendedtheyearwithastrongfourthquarterandthroughanumberof keyprograms,en-hancedourleadershippositionandcompetitivestaturewithinthefacilityservicesindustry.InmytenureaspresidentandCEO,Ihaveneverfeltbetteraboutthefutureof ourcompany.
Transitions InMarchof 2006,MartinnMandlesresignedasChairman
of theBoardof Directorsof ABMIndustriesIncorporated.Martinnremainsamemberof theBoardof Directors.HeissucceededasChairmanbyMaryellenHerringer,amemberof andvaluablecon-tributortotheBoardof Directorssince1993.IcongratulateMaryel-lenandlookforwardtohercontinuedguidanceandsupport.
Thisisalsoatimeof significantchangeformanyotherlongtermleadersof ABM.TomBarnett,Presidentof AmpcoSystemParkingandanABMexecutive for35years,retiredthisyear.Hewasreplacedbyhislong-timeprotégé,RichKindorf.Tomplayedavitalrole in thegrowthof AmpcoandABM,wewishhimtheverybest.JamesScranton,Presidentof ABMEngineeringServices,madethedecisiontoretireinfiscal2007.Jimisanotheroneof thoseleaderswhose30plusyearsof serviceandcontributionshelpedtakeuswherewearetoday,andweareextremelygratefulforthatlead-ership.JimwillbereplacedbyMikeLathaminMayof 2007.WeexpectEngineeringtocontinueitsrapidgrowthandtoenhanceitsstatusasthepremierthirdpartyproviderof on-siteengineers.Tofurther the consolidation of American Commercial Security Ser-vicesandSSA,wehavenamedLarrySmithasthenewPresidentof thecombinedABMSecuritybusinesses.LarrywasformerlytheSe-niorVicePresidentof AmericanBuildingMaintenanceCompany,headingABM’sJanitorialbusinessintheSouthwest.Larry’sstrongcustomerrelationshiphistorycoupledwithhispriorsecurityexperi-encewillservetohelphimasheexpandsthesebusinesses,andIamconfidentof hissuccess.
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Important Milestones and Moving into the Future
ThereisnodoubtthatthecomingyearswillbeexcitingonesforABM,andwehavepassedsomeimportantmilestonesthatposi-tionus for that future.Certainlyputting theWorldTradeCenterinsuranceissuesfirmlybehindusandsettlingthoseclaimsnotonlyenhancesourcashpositionbutallowsagreaterdegreeof focusbyseniormanagementaswemoveahead.Of greatimportancetousisourcertificationthisyearunderSection404of theSarbanes-OxleyAct.Thisisakeyindicatorof ourstressonethicsandaccountability.Inbusiness,asinpersonallife,entitiesareknownbythecompanytheykeepandsurroundingoneself withhighcaliberstrategicpart-nersisnotonlydesirabletoday,itiscritical.Wewishtobeknownasthebestof partnersforallof ourcustomers.
Anothercornerturnedisoursteadilyimprovingcompeti-tivenessthroughthecombinedeffortsof ourinternalRiskMan-agementgroup,ourfieldteamsinthesubsidiariesandanewand better managed third party administrator, allof whichcombinewithnewlegislationtoimproveourinsurancepicturegoingforward.AsIplanforthefutureIcantellyouthatwewillcontinuetobuildorganizationsfocusedonorganicgrowth.Wewillalsobeaggressiveinourapproachtoac-quisitions.Aswelookaheaditisalsoimportanttonotethatwemustfollowourcustomersasglobalizationaccelerates.IampleasedtosaythatourBoardof Directorsapprovedastrategythatcallsforcustomerdriveninternationalexpansion.
Thank youI would very much like to thank our employees across the
countryfortheircontributionsthispastyear.Asisalwaysthecase,itiswhatyoudothatmakesallthingspossible.IwouldalsoliketothanktheBoardof Directorsandthestockholdersforthesupportthat Ihavereceived.Aspecialnoteof thanks toour Chairman,MaryellenHerringer,forherguidanceandsupport.
Traditional Values. Visionary Thinking.Ihavewrittenoftenandat length fromtimeto timeabout
howthisconceptisimportanttoallof usatABM.Butthetruetestiswhetheryouseeitinaction.Ihopethatyourecognizeitinourwillingnesstoinvestinourpeopleandprocesses,whetheritisanewtrainingprogramorthesignificantinvestmentwearenowmakinginITtechnology.IhopeyouseeitintheobviouspridewetakeinourABMfamily.Ialsohopethatyouwilltakenotewhenothersapplaudit,suchasourrecentrecognitionasa“Top25”CaliforniaCorpora-
tionforWomenDirectorsandExecutiveOfficers.OnthefollowingpagesIwouldliketosharewithyoua
senseof whatthosevaluesmeantous.
Sincerely,
HenrikC.SlipsagerPresidentand
Chief ExecutiveOfficer
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Integrity
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“Integrity is not a 90 percent thing, not a 95 percent thing; either you have it or you don’t.”
– Peter Scotese
In1908attheheightofadevastatingfinancialdepressionthathittheentire
countryandespeciallythecityofSanFrancisco.Integrityandhisgoodnamewas
essentiallyallthatABMfounderMorrisRosenberghadtokeephimgoing.Itwas
duringthistimethatMorrisbuilthisbusinessfromahumblestart–justafew
simpletoolsandanunflinchingbeliefthathecouldbuildacompanyunlikeany
otheronafoundationofhonestyandintegrity.
The ABM Industries of today is proud to uphold Morris’ early tradition and
uncompromisingethicalstandards.“Doingtherightthing”isnotjustanoptionaswe
goaboutthedailyoperationofourbusiness,fromoverseeingthefinancialreporting
process in ABM’s corporate controller’s department to ABM employee-customer
interactionsatthesubsidiarycompanylevel.Wetreatourcustomersandeachother
withaclearlydefinedsenseofintegrity.
MorrispainstakinglybuiltABM’sbusinessrelationshipsoneatatime,andweareproud
tosaythatmanyofthoseoriginalrelationshipsstillexisttoday,underscoringthefact
thatABMremains100percentcommittedtohisidealofdoingbusinesswithhonesty,
integrityandvision.
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Trade competence
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“The quality of your work, in the long run, is the deciding factor on how much your services are valued by the world.”
— Orison Swett Marden
ThevalueweplaceontradecompetenceatABMisunequivocally
high.Asakeyprovideroffacilityservicestocustomersallover
theUnitedStates,thecontinuedsuccessofourorganizationis
directlylinkedtotheprofessionalismandexpertiseofourserviceemployees.
Being merely “competent” does not meet expectations atABM.
Beinghighlyskilledandthebestinallthatwedoaremandatory.For
itistheoverallqualityofourwork,dayinanddayout,thatmakesthe
differencetoourcustomers.Itisadifferencethatcanbeexperienced
wheneveryoucomeintocontactwithoneofourtradespeople–from
thesenseofpridewithwhichtheyperformtheirresponsibilitiestothe
confidentattitudeofahighlytrainedprofessionalwhichtheybringto
everytask.ItistheABMdifference.
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Investment
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“Treat people as they are, and they will remain as they are. Treat them as they could be, and they will become what they should be.”
– Jimmy Johnson
Weinvest inthebesttoolsandinternalsupportsystemsto
ensurethatourcompanyremainsaleader,butweunderstand
thatthesethingsremainjusttools.Ourgreatestinvestmentis
theonethatwemakeinouremployees.
AtABM,everydayisanewbeginning,andeverymomentanew
possibility.Ouremployeesarethelifeforceofourcompany,andour
commitmenttothemisevidencedbythewaywerunourbusiness.
Every employee who joins our company brings a particular work
history.Withouremphasisontraining,educationandcommunication
skills,ABM supports employees in attaining their current goals and
establishingfar-reachingnewones.
We continue to invest in the professional development of our
employees.Webelieveinthegreatnessthatresidesinsideeveryhuman
being.Stayingconnectedwithouremployees—helpingthemachieve
theirfullpotentialandrealizetheirdreams—isnotonlyourpriority,
butalsoourmission.
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Respect for people
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Every human being, of whatever origin, of whatever station, deserves respect. We must each respect others even as we respect ourselves.
— U Thant
Havingatruesenseoftheinherentworthofeveryindividual,
even in a company with approximately 75,000 employees,
isessential toABM’s long-termwellbeing,aswellas to the
continuedhealthofourworld.
Whileagoodcompanyisbuiltonqualityserviceandasolid
infrastructure,exceptionalpeoplecancreateagreatcompany.
Fromitsverybeginningnearlyacenturyago,ourorganization
hasoperatedfromaplaceofdeeprespectfortheemployees
whoworksopurposefullytoachievethegreatergoodforour
customersandtobringoutthebestineachother.
Webelievethatcorporationscanpositivelychangetheworldwe
livein,andthattheverybasisofhumangrowthandprogress
comes from the respect we have for ourselves and for each
other.We respectouremployees for theirdiversity, creativity,
visionandworkethic.
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Recognition of Responsibilities
“The price of greatness is responsibility.”
— Winston Churchill
Thelargeranorganizationis,thegreatertheresponsibilities.Asoneofthelargest
facilityservicesproviderslistedontheNewYorkStockExchange,ABMIndustries’
listofresponsibilitiesisdetailedandeverexpanding.
Weareresponsiblenotonlyforensuringthesatisfactionofourcustomers,butalsofor
runningacompanythatisfiscallyandethicallysound.Also,asaproviderofjanitorial,
engineering,parking,security,lightingandotherfacilityservices,weareresponsiblefor
thesafetyof thousandsofemployees.Recognizing these typesof responsibilitiesand
adaptingourbusinessplantocarrythemoutensuresnotonlyourownsuccess,butour
customers’successaswell.
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Responsiveness
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”The golden rule for every businessman is this: Put yourself in your customer’s place.”
— Orison Swett Marden
Whatdoesacustomerexpect?It’sasimplequestiontoask,buttheansweris
sometimescomplicated.
AtABMwetrytoexamineeveryservicesituationfromtheperspectiveofevery
customer.Weknow thatexpectations change,and thata client’s concernsand
needsmaybedifferentfromonedaytothenext.AndthatplaysintooneofABM’s
greateststrengths,ourabilitytoanticipatetrendsandplanourserviceresponses
accordingly.
Whatdoourcustomersreallyexpect?Thatwewillapproacheverytaskwithaquiet
confidenceandingenuity,andwithopenlinesofcommunicationandresponsiveness
ineveryinteraction.Theywantustosharetheirvision,theirgoals,andtoanticipatetheir
long-termneeds.Additionally,theyalsoneedustomanagetheirday-to-dayconcerns,
evenasweworkwiththemtodevelopmeanstocustomizeourserviceinwaysthatwill
meettheirspecificandoften-changingrequirements.
Inthisworldofconstantmotionandrapidinteraction,itmaybeeasytotakethecustomer’s
needsforgranted.ButnotatABM.Meetingclientneedsisthefoundation
ofourserviceplatformandthebackboneofourbusiness.
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Operations Reports
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We’ve developed our service expertise by evolving and adapting to the changing needs of our customers over the course of nearly a century.
Subsidiary OverviewWith 50,000 employees operating from 111 branch offices
locatedacrosstheUnitedStates,ABMJanitorialServicesprovidesinnovativecleaningprogramstoadiversecustomerpopulation.Cus-tomersincludeClassAcommercialofficeproperties,high-techin-dustrial,pharmaceutical,collegeanduniversitycampuses,medical,datacentersandfinancialinstitutions,amongothers.
While2005wasayearmarkedbyseveralacquisitions,in2006ABMJanitorialServicesgrewprimarilyfromwithin,andinthepro-cessexperienceda20percentprofitgrowth;duemostlytosuccesseswithhigh-tech,pharmaceuticalandfinancialmarketclients.Thesesaleswinshaveoutpacedlossesexperiencedinourtraditional,lower-marginclientbase,andareattributableinlargemeasuretobetterriskmanagementandlowerinsurancecosts.
Top AchievementsInJuneABMJanitorialServicescelebratedamulti-year,multi-
milliondollarcontractrenewalwithSaltRiverProject(SRP)inAri-zona,thenation’sthird-largestpublicpowerutility.Theprojectcov-erscomprehensivejanitorialserviceandmaintenanceformorethan1millionsquarefeetatmultipleSaltRiverProjectfacilitiesthrough-outa100-squaremileradiusinPhoenix,anddramaticallyillustratesourgrowthcapabilityinunique,complexcleaningenvironments.
Industry TrendsWecontinuedtobenefitfromtheindustrytrendof outsourc-
ing facility services to a multiple-service provider. ABM JanitorialServices worked closely with ABM’s other operating segments inprovidingavarietyof custodialservicesinmajormarkets,whileuti-lizingproven,andqualifiedsubcontractors inoutlyingareas.Thishasbeenaparticularlystrongtrendinthemanufacturingandtele-communicationsindustries.
Theconsolidationof vendorsandservicesintonationalac-countstoachievecostreductionswasalsoarisingtrendthatwepre-paredforandembraced.Ourextensivebranchnetworkremainstheindustryprototype,servingcustomerswithanalreadyestablishedna-tionalsupplyandequipmentvendornetworkaswellasutilizingtheessentialdistributionsystemsalreadyinplace.Customersbenefitedfromournationalbuyingpowerandestablishedprocedurestopro-videconsistent,high-levelservicethroughoutourbranchnetwork.
In2006wecontinuedourprogressinanotherareaof growingcustomerinterest—themovementtowardenvironmentallyfriendlycleaningprograms.Whilecompaniesareunderincreasingscrutinytoprovidebuildingtenantswithenhancedindoorairqualitythroughhealthycleaningsolutions,ABMJanitorialServicesintroduceditsin-novativeGreenCareprogram.GreenCaresupportsandemphasiz-esenvironmentallyresponsiblecleaning,andutilizeshighefficiencyequipment,tools,suppliesandeco-friendlycleaningmethods.
Greatest StrengthsWeareworkingdiligentlytostrategicallyutilizeourvastgeo-
graphicnetworkof fullystaffedbranchandregionalofficesnation-wide.Thisvastnetworkisoneof ABMJanitorialServices’majorstrengths in its’ ability to provide customers with responsive localmanagement, coupled with regional and national oversight. Thisstructureallowsforbranchpersonneltofocuslocallyonservicedeliv-eryandcustomersatisfaction,whileregionalandnationalpersonneloverseecontractmanagement,customerrelationsanddeliveryof standardizedtraining,safetyandhumanresourceprograms.
Exceptional TrainingTheABMQualityManagementSystem,QMS24-7,isour
proprietary,web-basedquality control program.QMSautomateswork order management and periodic maintenance scheduling,communicationsandresponses.Thesystemallowsforaquickerandmorepreciseresponsetoourclients’needs,monitorsworkcomple-tionandquality,anddeliverscarefullytailoredcustomerreports.In-spectionresultsareenteredintothesystem,andcustomizedqualitycontrolinspectionreportsshowingresultsandtrendsaremadeavail-ableon-line,andcanbedownloadedasanExcelspreadsheet.
Future PlansOursalesobjectivesfor2006weretofocusoncriticalclean-
ingneedsforourclientsinmanufacturing,high-techandfinancialmarkets.Thishaspaidoff withlargercontractsandhighermargins.Wewillcontinuetobolstersalesandoperationsexpertise intheseandothercriticalmarkets,withaconcentrationonclientswithcom-plex,andspecializedcleaningneeds,suchasthepharmaceuticalandeducationmarkets.
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Based on years of experience gained by providing cleaning services in a variety of markets, ABM has
developed best practice cleaning procedures and methods for all markets, from clean rooms in
high-tech and pharmaceutical markets to warehouse and industrial specialization
in the automotive field. We have the in-house expertise to produce a
customized program, resulting in maximum efficiencies and cost
containment for each market.
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We are qualified, capable, dependable and prepared to respond to the unique requirements of our diverse security customers.Subsidiary Overview
Withmore than13,000employeesoperatingcoast-to-coastin34statesfrom61branchoffices,ABMSecurityServicesbusinessachievedrevenueinexcessof $300millionforfiscalyear2006.AkeyfocusforABM’ssecuritysubsidiarieswastofurthergrowitscus-tomerbaseandmarkets,whichnowincludeClassAcommercialofficebuildings,officeparks,high-techcampuses,agriculturalcen-ters,hospitalsandmedicalcenters,educationalinstitutions,religiousorganizations,retailcenters,patroloperations,industrialmanufac-turing,ports, residential communities,background screening,andinvestigation.
Key PromotionsTofurthertheconsolidationof AmericanCommercialSecurity
ServicesandSSASecurity,ABMnamedanewpresidentof thecom-binedABMSecuritybusinesses,LarryT.Smith.SmithwasformerlySeniorVicePresidentof AmericanBuildingMaintenanceCompanyandheadedABM’sJanitorialbusinessintheSouthwest.WithstrongtiestomanyABMcustomersandpriorexperienceinABM’ssecuritybusi-nessSmithwillhelpexpandthenationalfootprintof ABMSecurity.
Top AchievementsByunifyingmultiplesecurityoperationsintoasinglecohesive
unit,ABMsecuritybusinessinvigorateditsnationalsalesopportuni-
“Our core strengths are the professional experience of our management team combined with the unique security programs we’ve designed to be flexible to meet the changing security requirements of our diverse customer base.”
— Larry T. Smith President, ABM Security Services,
American Security Services, and SSA Security
tiesin2006.Withthegoalof introducingnationalcapabilitytolocalandregionalcustomers,ABMSecurityhelpedguidelocalizedclientrelationshipsintogrowth-orientednationalsecurityprograms.
LarryT.Smith,Presidentof ABMsecuritybusiness,notes“Ascompaniesleanmoretowardnationalprocurementinitiatives,wehaveincreasedourabilitytocompetenationallywhilewecontinuetosuccess-fullyandefficientlydeliverservicesonalocalandmorepersonalbasis.”
Greatest StrengthsFromhelpingcustomerssurviveandcomebackfromnation-
aldisasterssuchashurricanesandfloodstoofferingoneof themostexperienced management teams found in the security industry,
SECURITY SERVICES
OF AMERICA
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ABMSecurityServicesfurtheradvanceditsinherentcorestrengthsinfiscalyear2006.
“Ournationaldisasterresponsivenessprogram,trainingcapa-bilities,andthelongevityandexperienceof ourmanagementteamarestrengthsourcustomershavecometorelyupon,”notedSmith.Additionally,bydesigningsecurityprogramsthatarecustomizedtomeettheuniqueneedsof individualclientsandmarkets,ABMSe-curitycontinuedtomeet thechangingsecurityrequirementsof adiverseandevolvingcustomerbase.
Technology UpdateInfiscalyear2006,ABMSecurityServicesintroducedanewweb-
basedtrainingprogramincollaborationwithPrivateSecurityTelevisionNetwork (PTSN) a professional training development company. Thisstate-of-the-artprogramprovides employeeswith24-houraccess toacomprehensivetraininglibrarythatisunmatchedintheindustry.
Future OutlookABM Security Services business will continue to focus on
organicsalesgrowthinbothcurrentmarketsandintargetednewgeographicareasthroughtheexpansionof existingservicesandthedevelopmentof newservices.
“Ourfirstpriority is to serviceourcustomersneedsand toanticipatetheirevolvingrequirements,”concludedSmith.
We are qualified, capable, dependable and prepared to respond to the unique requirements of our diverse security customers.
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“Our immediate plans are to continue to expand our base of operations strategically across the
U.S. into non-saturated markets, where our business model and operating
philosophy mirrors that of many of our national and regional
customers.”
— Rich Kindorf President of Ampco
System Parking
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From Florida to California, Ampco System Parking experienced the best sales growth in its history in fiscal 2006.
Subsidiary Overview More than 8,000 employees operate and manage parking
facilities coast-to-coast for hundreds of Ampco System Parkingcustomers,includingairports,amusementparks,educationalandfi-nancialinstitutions,governmententities,hospitality,medicalcenters,multi-usedevelopments,officebuildings,shoppingmalls,andsportsandentertainmentvenues.
AmpcoSystemParkingcollectedmorethan$440millioninrevenueforcustomersthispastfiscalyear,producingagrowthrateof 7percent.
Executive Promotions Tom Barnett, President of Ampco System Parking and an
ABMexecutivefor35years,retiredin2006.RichKindorf,whohadworkedunderBarnettfor23years,succeededhim.Inothermanage-mentnews,AmpcoSystemParking’sMarkMuglichwaspromotedtoExecutiveVicePresident.
Top Achievements Ampco System Parking signed a multi-year, multi-million-
dollaragreementwiththeCityof Minneapolistooverseeoff-streetmunicipalparkingoperationsinthecity.With30parkingfacilitiesandmorethan25,000parkingspaces,theMinneapolisoperationisoneof thelargestmunicipallyownedparkingsystemsintheUnitedStates.
OntheWestCoast,AmpcoSystemParkingwasawardeda multi-year, multi-million-dollar contract with Sacramento In-ternational Airport. The contract covers parking managementserviceandshuttleoperationsfortheairport’smorethan12,000parkingspaces.
Thetransportationsegmentof ourbusinessalsoexpandedintheformof shuttleservicestoamajoraerospaceindustryemployerinElSegundo,California.Eightbusestransportmorethan550employ-eesadayacrossthe7-square-blockcampus.AndinaserviceadditiontotheJohnWayneAirportinOrangeCounty,morethan1,800em-ployeesareshuttleddailyfromanoff-sitelottotheterminal.
Inthehigh-endretailmarketsegment,AmpcoSystemPark-ingwasawardedtheparkingmanagementcontractfor“TheShipsatMidtown”inMiami,Florida.Whencompleted,thismega-de-
velopmentwill include600,000square feetof retail space,3,000condominiumsand350apartments.The fullyautomated3,000-spaceparkingstructurewillusethelatesttechnology,including20paystations.
Industry Trends Automatedfeecollectionisanothergrowingindustrytrend.
Wehaverespondedbyoverseeingtheconversionof existingcashier-basedfeecollectionsystemstoautomatedparkingfeecollectionsys-tems,andbyconsultingintheredesignandconversionprocessof newparkinggaragesinthedevelopmentstage.
Technology Update Ensuringaccurateandtimelyfinancialaccountabilityhasbeen
criticaltooursuccessandisakeyingredientintheparkingindustry’sprovider-customer relationship.AmpcoSystemParkingcontinuedtoenhanceitsproprietarysoftwareSCORE4(SimplifiedComputerOn-SiteRevenueEntry)system,whichpropelledustoaleadershippositioninrevenueoptimizationandreportingtechnology.
Training Update We completed a substantial updating in fiscal 2006 of the
Company’skey training tool, theStandardOperatingProcedures(SOP) program. This comprehensive manual standardizes everyprocedureusedinparkingfacilityoperation.Fromproperaccount-ingandreportingprocedurestorevenuecontrolsystemsandsite-specificoperationsquestions,theSOPfunctionsasastudyguideandreferencemanualforallfacilitymanagers.
Future Outlook “Ourimmediateplansaretocontinuetoexpandourbaseof
operationsstrategicallyacrosstheU.S.intonon-saturatedmarkets,whereourbusinessmodelandoperatingphilosophymirrorsthatof manyof ournationalandregionalcustomers,”notesRichKindorf,Presidentof AmpcoSystemParking.
“Secondarily,wewill focusonexpandingthetransportationsegment of our business through shared-ride services, on-airportshuttleservices,campusshuttleservices,andthroughoutthehospi-talitymarket.”
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Our long-term investment in critical training, safety and human
resources programs and protocols support our employees,
shareholders and customers.
Subsidiary OverviewServingthousandsof sitesacrosstheU.S.,ABMFacilitySer-
vicesdeliveredauniquecombinationof best-in-classmaintenanceservices,supportresourcesandmanagementtalentforavarietyof propertiesandclientsin2006.With16branchescoveringpropertiesin40states,keycustomermarketsincludedcorporaterealestate,in-dustrialandmanufacturingsites,corporatefacilities,bankingbranchoffices, data centers and critical systems, government and publicfacilities, education, retail, healthcare, airports, hospitality, centralplantsandtelecommunications.
Through a well-defined integrated facility services’ solutionthatofferedcustomerssevenlinesof servicesandaccessto66,000professionals nationally, ABM Facility Services realized businessgrowthof 19percentinfiscalyear2006.AccordingtoStevenZac-cagnini,ExecutiveVicePresidentof ABMandPresidentof ABMFacilityServices, thisrobustgrowthwasachievedthrough“strongsaleseffortsbackedbyanationalnetworkof operatingmanagers.”
Key PromotionsToddRichardsonandCharlesBoothwereappointedSenior
VicePresidentsof ABMFacilityServicesinearly2006.“Withtheirrespective,extensiveexpertiseinsales,marketingandbuildingmain-tenance, they furtherstrengthenourFacilityServicesoperationtocontinuedeliveringthehighstandardsourcustomershavecometoexpect,”saidZaccagnini.
Top TrendThe facility services’ industry,and inparticularengineering
maintenance services, saw an increase in major national subcon-tractingawards.ABMFacility’sengineeringunit,ABMEngineeringServices,furtherexpandedanddevelopedastrongnationalteamtoaddresschangingcustomerneeds.
“Ourfacilitymanagementprogramsallowourclientstofo-cusmoreondrivingtheircorebusinesswhileweruntheirfacilitiesefficientlyandkeepthemcost-competitiveintoday’smarketplace,”saidZaccagnini.
“Designing innovative, cost-effective consolidation solutionsforclientsisourcorebusiness,andonethatisincrediblyrelevant.”
Greatest StrengthsOverthecourseof theyearthroughacomprehensivenational
networkof technicalmanagers,subcontractorsandstate-of-the-artoperatingprograms,location-specificclientneedsrepresentingava-rietyof diverseclientindustrieswerefullymet.
ABMEngineeringServicescontinuedtomaintainitsqualitycontrolInternationalOrganizationforStandardization(ISO)certifi-cationstatus.In2006,ISOcontinuedtorecognizeABMEngineer-ingforitscommitmenttosafetyandquality.ABMEngineeringistheonlyfacilitymaintenancecompanytohaveachievedandmaintainedISO certification for all operations nationally. ABM EngineeringServicesfirstreceivedthedesignationin1999.
Technology UpdateTechnologyenhancementswereakeyfocusof ABMFacil-
ityServices’client-drivenstrategy.ABMFacilityServicesbuiltuponanexceptionallystronggroupingof proprietaryweb-basedsupportprograms,includingtheprimaryclient-friendlytechnologiesof web-basedpreventivemaintenanceandworkordermanagementsystems,aNationalServiceCenter,atechnicalintranetsite,costaccountingandreportingsystemsaswellaslivecustomersupport.
Future OutlookWithanetworkof morethan25regionalanddistrictman-
agersensuringcomprehensivegeographiccoverage,ABMFacilityServices is committed to expanding nationally. Anticipated addi-tionalofficeopeningsareplannedforDallasandSeattle.
SaidZaccagnini, “We remaincommitted to the long-termdevelopmentof ourmanagementteamandoperationsteam.Weanticipateourclientswillcontinuetobenefitfromourinvestmentinouremployees,technologyandcustomers.”
24
“Designing an innovative, cost-effective consolidation solution for clients is an incredibly rewarding experience. Our facility management programs allow our clients to focus on driving their core business, while we run their facilities efficiently and keep them cost competitive in today’s marketplace.”
— Linda Peralta ABM Facility Services
National Sales and Marketing
2�
“With an operating team that has the most experience in the industry, our strengths cover all the major
bases that are important to clients. We offer national clients full-service coverage with the
ability of servicing multi-location accounts as a one-stop shop.”
— Steven Zaccagnini Executive Vice President of ABM
and President of Amtech Lighting Services
2626
Our reputation for exhibiting trade excellence is a distinction we work diligently to maintain.
Subsidiary OverviewWithagrowingcustomerbaseincommercial,industrial,re-
tail,governmentmunicipalities,andcollegeanduniversitymarkets,AmtechLightingServices continued toevolve infiscal year2006with27full-servicebranchesand64satelliteoperationsnationally,andwithwell-establishedbasesintheNortheast,Southeast,SouthCentralandWestCoastregions.
Asoneof thenation’sleadinglightingmanagementcompa-nies,AmtechLightingServicesprovidesserviceforinteriorandex-teriorlightingmaintenance,includingsignsandelectricalrepairs,forsome35,000customerslocatedthroughouttheUnitedStates.
Top AchievementsAmtechLighting reported severalkeyachievements for the
pastfiscalyear,suchasthecreationof auniqueenergysolutionpro-gram,aswellascompletinghurricanedisasterrecoveryservicesforseverallargeclients.
Toeffectivelyaddressthecurrentindustry-wideconcernwithenergyconservationandenvironmentalstewardship,ABMandAm-techLightingestablished“ABMEnergySolutions,”acomprehen-siveproviderof innovativeenergyservices.
This program offers a variety of solutions that address thegrowingenvironmentalconcernsof everyABMsubsidiarycompa-nyaswellastheconcernsof ABMcustomerswhoarecommittedtotakingagreaterroleinprotectingtheworld’snaturalresources.
Otheraccomplishments includethecompletionof ade-tailedandextensiveproject foranational client that includedservicing8,000 individual locations.Thiswasaccomplished injust120days.
Industry TrendsEnergycostscontinuedtorise steadily infiscal2006,creat-
inganurgentneedforadditionalenergyconservationprogramsandresources throughout the lighting industry.Ascostawarenessandconcernsaboutglobalwarmingrosethroughourclientpopulation,
wefocusedoureffortsondevelopingnewprogramsthatdecreasedourclients’ totalenergyconsumption through lighting technologyupgrades.Someof theseprogramsspecificallytiedintotheEnergyPolicyActof 2005,whichallowedfortaxdeductionsforenergy-sav-ingupgradestocommercialbuildings,beginningJanuary1,2006.TheActoffersapartial lightingtaxdeductionbasedonqualifiedlightingupgradesthatwereputintoplaceduringthefirsttwoyearsof theAct.
Other technology-related changes for2006 includedan in-creasedfocusonLEDapplications.BypartneringwithseveralLEDtechnologyleaders,AmtechLightingServiceswasabletosuccess-fullyintroduceandpromotethisresourcetoclients.
Greatest Strengths“Withanoperatingteamthathasthemostexperienceinthe
industry,ourstrengthscoverallthemajorbasesthatareimportanttoclients,”notesStevenZaccagnini,ExecutiveVicePresidentof ABMandPresidentof AmtechLightingServices.“Weoffernationalcli-entsfull-servicecoveragewiththeabilityof servicingmulti-locationaccountsasaone-stopshop.
“Additionally, we successfully manage national roll-outprojectsandassigndedicatedaccountrepresentativestoactasavitalcommunicationresourcetokeepclientsupdatedwithdailyprogressreports.”
Future OutlookGiventhecontinuingriseinenergycostsandconcernsabout
theenvironment,AmtechLightingplanstodevelopandpresentthebestenergy-efficientsolutionstocustomersandtohelpthemlowertheirenergyconsumption.Wewillcontinuetoleadthewayinnewtechnologyofferingsandpartnerstrategicallywiththemanufactur-ersanddistributorsthatofferthemostsuitablesolutionsforourcli-ents’energyneeds.InpartnershipwithABMEnergySolutions,wewilldelivereffectiveandresponsibleturnkeyenergyprograms,usingabroadspectrumof potentialenergyconservationmeasures.
2�2�
Financial Reports
28
Consolidated Balance SheetsOctober31 2006 2005 Inthousands,exceptpersharedata
Assets Cashandcashequivalents $ 134,001 $ 56,793Tradeaccountsreceivable(lessallowancesof$8,041and$7,932) 383,977 345,104Inventories 22,783 21,280Deferredincometaxes 43,945 46,795Prepaidexpensesandothercurrentassets 47,035 44,690Prepaidincometaxes — 6,791 Totalcurrentassets 631,741 521,453Investmentsandlong-termreceivables 14,097 12,955Property,plantandequipment(lessaccumulateddepreciationof $86,837and$80,370) 32,185 34,270Goodwill(lessaccumulatedamortizationof$67,557) 247,888 243,559Otherintangibles(lessaccumulatedamortizationof$15,550and$13,478) 23,881 24,463Deferredincometaxes 42,120 46,426Otherassets 24,362 20,584 Totalassets $ 1,016,274 $903,710
Liabilities Tradeaccountspayable $ 66,336 $ 47,605Incometaxespayable 36,712 2,349Accruedliabilities: Compensation 78,673 72,034 Taxes–otherthanincome 20,587 18,832 Insuranceclaims 66,364 71,455 Other 50,613 62,799 Totalcurrentliabilities 319,285 275,074Retirementplansandothernon-currentliabilities 26,917 25,596Insuranceclaims 128,825 127,114 Totalliabilities 475,027 427,784
Stockholders’ equityPreferredstock,$0.01parvalue;500,000sharesauthorized;noneissued — —Commonstock,$0.01parvalue;100,000,000sharesauthorized;55,663,472 and54,650,514sharesissuedatOctober31,2006and2005,respectively 557 547Additionalpaid-incapital 225,796 206,369Accumulatedothercomprehensiveincome(loss) 149 (68)Retainedearnings 437,083 365,455Costoftreasurystock(7,028,500and5,600,000sharesatOctober31,2006 andOctober31,2005,respectively) (122,338 ) (96,377) Totalstockholders’equity 541,247 475,926 Totalliabilitiesandstockholders’equity $ 1,016,274 $903,710
2�
Consolidated Statements of Stockholders’ Equity (Condensed)
Accumulated Other CommonStock TreasuryStock Additional Comprehensive RetainedInthousands Shares Amount Shares Amount Paid-inCapital Income(Loss) Earnings Total
Balance November 1, 2003 51,767 $518 (3,400) $(53,986) $166,497 $(268) $317,261 $430,022Netincome — — — — — — 30,473 30,473Foreigncurrencytranslation — — — — 160 — 160Dividends: Commonstock — — — — — — (19,476) (19,476)Stockpurchases — — (600) (11,073) — — — (11,073)Stockissued 940 9 — — 12,046 — — 12,055
Balance October 31, 2004 52,707 $527 (4,000) $(65,059) $178,543 $(108) $328,258 $442,161Netincome — — — — — — 57,941 57,941Foreigncurrencytranslation — — — — — 40 — 40Dividends: Commonstock — — — — — — (20,744) (20,744)Stockpurchases — — (1,600) (31,318) — — — (31,318)Stockissued 1,944 20 — — 27,826 — — 27,846
Balance October 31, 2005 54,651 $547 (5,600) $(96,377) $206,369 $(68) $365,455 $475,926Netincome — — — — — — 93,205 93,205Foreigncurrencytranslation — — — — — 217 — 217Dividends: Commonstock — — — — — — (21,577) (21,577)Stockpurchases — — (1,428) (25,961) — — — (25,961)Stockissued 1,012 10 — — 16,183 — — 16,193Share-basedcompensationexpense — — — — 3,244 — — 3,244
Balance October 31, 2006 55,663 $557 (7,028) $(122,338) $225,796 $149 $437,083 $541,247
Consolidated Statements of Income (Condensed)
Years ended October 31 2006 2005 2004Inthousands,exceptpersharedata
Revenues Salesandotherincome $ 2,712,668 $ 2,586,566 $ 2,375,149 Gainoninsuranceclaim 80,000 1,195 — 2,792,668 2,587,761 2,375,149Expenses Operatingexpensesandcostofgoodssold 2,421,552 2,312,687 2,157,637 Selling,generalandadministrative 207,116 204,131 166,981 Intangibleamortization 5,764 5,673 4,519 Interest 495 884 1,016 2,634,927 2,523,375 2,330,153Incomefromcontinuingoperationsbeforeincometaxes 157,741 64,386 44,996Incometaxes 64,536 20,832 15,352Incomefromcontinuingoperations 93,205 43,554 29,644Incomefromdiscontinuedoperations,netofincometaxes — 166 829Gainonsaleofdiscontinuedoperations,netofincometaxes — 14,221 —Net income $ 93,205 $ 57,941 $ 30,473Net income per common share – Diluted Incomefromcontinuingoperations $ 1.88 $ 0.86 $ 0.59 Incomefromdiscontinuedoperations — — 0.02 Gainonsaleofdiscontinuedoperations — 0.29 — $ 1.88 $ 1.15 $ 0.61
30
Consolidated Statements of Cash FlowsYears ended October 31 2006 2005 2004Inthousands
Cash flows from operating activities: Netincome $ 93,205 $ 57,941 $ 30,473Lessincomefromdiscontinuedoperations — (14,387) (829)Incomefromcontinuingoperations 93,205 43,554 29,644Adjustments to reconcile income from continuing operations to net cash provided by continuing operating activities: Depreciationandintangibleamortization 20,745 19,591 17,543Share-basedcompensationexpense 3,244 — —Provisionforbaddebts 341 1,112 4,482Gainonsaleofassets (829 ) (419) (225)Decrease(increase)indeferredincometaxes 7,156 (4,465) (12,262)Increaseintradeaccountsreceivable (38,922 ) (31,844) (35,369)(Increase)decreaseininventories (1,503 ) (726) 9(Increase)decreaseinprepaidexpensesandothercurrentassets (2,255 ) (5,888) 6,643Increaseinotherassetsandlong-termreceivables (4,982 ) (2,132) (3,074)Increase(decrease)innetincometaxes 41,154 (11,304) 5,935Increase(decrease)inretirementplansandothernon-currentliabilities 1,321 (62) 1,483(Decrease)increaseininsuranceclaims (3,380 ) 10,630 37,622Increaseintradeaccountspayableandotheraccruedliabilities 15,072 26,752 11,981Totaladjustmentstoincomefromcontinuingoperations 37,162 1,245 34,768Netcashflowsfromcontinuingoperatingactivities 130,367 44,799 64,412Netoperationalcashflowsfromdiscontinuedoperations — (7,348) (30,722)Netcashprovidedbyoperatingactivities 130,367 37,451 33,690Cash flows from investing activities:Additionstoproperty,plantandequipment (14,065 ) (17,738) (11,460)Proceedsfromsaleofassets 2,253 1,775 795Purchaseofbusinesses (10,002 ) (26,884) (54,152)Proceedsfromsaleofbusiness — 32,250 —Other — (2,505) 4,064Netcashusedininvestingactivities (21,814 ) (13,102) (60,753)Cash flows from financing activities: Commonstockissued 16,193 21,137 10,034Commonstockpurchased (25,961 ) (31,318) (11,073)Dividendspaid (21,577 ) (20,744) (19,476)Netcashusedinfinancingactivities (31,345 ) (30,925) (20,515)Netincrease(decrease)incashandcashequivalents 77,208 (6,576) (47,578)Cashandcashequivalentsbeginningofyear 56,793 63,369 110,947Cash and cash equivalents end of year $ 134,001 $ 56,793 $ 63,369 Supplemental data: Cashpaidforincometaxes $ 13,166 $ 43,901 $ 52,723Taxbenefitfromexerciseofoptions $ 3,055 $ 3,203 $ 2,021Cashreceivedfromexerciseofoptions $ 13,138 $ 21,137 $ 10,034Non-cashinvestingactivities: Commonstockissuedforbusinessacquired $ — $ 3,506 $ —
31
Segment Information (Condensed) AssetsHeld ConsolidatedInthousands Janitorial Parking Security Engineering Lighting Corporate ForSale Totals
Year ended October 31, 2006 Salesandotherincome $1,563,756 $440,033 $307,851 $285,241 $113,014 $ 2,773 $ — $ 2,712,668Gainoninsuranceclaim — — — — — 80,000 — 80,000Totalrevenues $1,563,756 $440,033 $307,851 $285,241 $113,014 $ 82,773 $ — $ 2,792,668Operatingprofit $ 81,578 $ 13,658 $ 4,329 $ 16,736 $ 1,375 $(39,440) $ — $ 78,236Gainoninsuranceclaim — — — — — 80,000 — 80,000Interestexpense — — — — — (495) — (495)Incomefromcontinuingoperations beforeincometaxes $ 81,578 $ 13,658 $ 4,329 $ 16,736 $ 1,375 $ 40,065 $ — $ 157,741Identifiableassets $ 416,097 $ 86,541 $104,174 $ 69,467 $100,576 $239,419 $ — $ 1,016,274
Year ended October 31, 2005 Salesandotherincome $1,525,565 $409,886 $294,299 $238,794 $116,218 $ 1,804 $ — $ 2,586,566Gainoninsuranceclaim — — — — — 1,195 — 1,195Totalrevenues $1,525,565 $409,886 $294,299 $238,794 $116,218 $ 2,999 $ — $ 2,587,761Operatingprofit $ 67,754 $ 10,527 $ 3,089 $ 14,200 $ 3,805 $(35,300) $ — $ 64,075Gainoninsuranceclaim — — — — — 1,195 — 1,195Interestexpense — — — — — (884) — (884)Incomefromcontinuingoperations beforeincometaxes $ 67,754 $ 10,527 $ 3,089 $ 14,200 $ 3,805 $(34,989) $ — $ 64,386Identifiableassets $ 398,361 $ 87,663 $106,451 $ 50,875 $ 94,904 $165,456 $ — $ 903,710
Year ended October 31, 2004 Salesandotherincome $1,442,901 $384,547 $224,715 $209,156 $112,074 $ 1,756 $ — $ 2,375,149Operatingprofit $ 60,574 $ 9,514 $ 9,002 $ 12,096 $ 2,822 $(47,996) $ — $ 46,012Interestexpense — — — — — (1,016) — (1,016)Incomefromcontinuingoperations beforeincometaxes $ 60,574 $ 9,514 $ 9,002 $ 12,096 $ 2,822 $(49,012) $ — $ 44,996Identifiableassets $ 383,566 $ 78,548 $ 90,627 $ 38,715 $ 85,411 $151,216 $14,441 $ 842,524
Report of Independent Registered Public Accounting Firm
TheBoardofDirectorsandStockholdersABMIndustriesIncorporated:
Wehaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOver-sightBoard(UnitedStates),theconsolidatedbalancesheetsofABMIndustriesIncorporatedandsubsidiariesasofOctober31,2006and2005,andtherelatedconsolidatedstatementsofincome,stockholders’equityandcomprehensiveincome,andcashflowsforeachoftheyearsinthethree-yearperiodendedOctober31,2006;andinourreportdatedDecember21,2006,weexpressedanunqualifiedopiniononthoseconsolidatedfinancialstatements.
Inouropinion,theinformationsetforthintheaccompanyingcondensedconsolidatedfinancialstatementsisfairlystated,inallmaterialrespects,inrelationtotheconsolidatedfinancialstatementsfromwhichithasbeenderived.
AsdiscussedinNote1totheconsolidatedfinancialstatementsincludedinthe2006annualreportonForm10-KfiledbytheCompanywiththeSecuritiesandExchangeCommission,effec-tiveNovember1,2005,theCompanyadoptedtheprovisionsofStatementofFinancialAccountingStandardsNo.123(R),Share-BasedPayment.
/s/KPMGLLP
SanFrancisco,California
December21,2006
Factors That May Affect Future Results
ThisAnnualReportcontainsforward-lookingstatementsthatsetforthmanagement’santicipatedresultsbasedonmanagement’splansandassumptions.AnynumberoffactorscouldcausetheCompany’sactualresultstodiffermateriallyfromthoseanticipated.Theserisksanduncertaintiesinclude,butarenotlimitedto:(1)achangeinthefrequencyorseverityofclaimsagainsttheCompany,adeteriorationinclaimsmanagement,thecancellationornon-renewaloftheCompany’sprimaryinsurancepoliciesorachangeinourcustomers’insuranceneeds;(2)achangeinactuarialanalysisthatcausesanunanticipatedchangeininsurancereserves;(3)inadequatetechnologysystemsthatcannotsupportthegrowthofthebusiness;(4)acquisitionactivityslowsorisunsuccessful;(5)labordisputesthatleadtoalossofsalesorexpensevariations;(6)adeclineincommercialofficebuildingoccupancyandrentalrateslowerssalesandprofitability;(7)financialdifficultiesorbankruptcyofamajorcustomer;(8)thelossoflong-termcustomers;(9)intensecompetitionthatlowersrevenueorreducesmargins;(10)anincreaseincoststhattheCompanycannotpassontocustomers;(11)naturaldisastersoractsofterrorismthatdisrupttheCompanyinprovidingservices;(12)significantaccountingandothercontrolcoststhatreducetheCompany’sprofitability; and (13) other issues and uncertainties that may include: new accounting pronouncements orchangesinaccountingpolicies,laborshortagesthatadverselyaffecttheCompany’sabilitytoemployentrylevelpersonnel, low levelsof capital investmentsby customers,which tend tobe cyclical innature, that adverselyimpacttheresultsoftheCompany’sLightingsegment,legislationorothergovernmentalactionthatdetrimentallyimpactstheCompany’sexpensesorreducessalesbyadverselyaffectingtheCompany’scustomers,unanticipatedadversejurydeterminations,judicialrulingsorotherdevelopmentsinlitigationtowhichtheCompanyissubject,areductionorrevocationoftheCompany’slineofcreditthatincreasesinterestexpenseandthecostofcapital,andtheresignation,termination,deathordisabilityofoneormoreoftheCompany’skeyexecutivesthatadverselyaffectscustomerretentionorday-to-daymanagementoftheCompany.Additionalinformationregardingtheseandother risksanduncertainties theCompany faces is contained in theCompany’sAnnualReporton Form10-KandinotherreportsitfilesfromtimetotimewiththeSecuritiesandExchangeCommission.TheCompanyundertakesnoobligationtopubliclyupdateforward-lookingstatements,whetherasaresultofnewinformation,futureeventsorotherwise.
32
Board of Directors
Maryellen C. Herringer(a,b)Chairmanof theBoardAttorneyatLaw
Linda L. Chavez (b,d)President,CenterforEqualOpportunity
Luke S. Helms (a,c,d)ManagingPartner,SonataCapitalManagement
Charles T. Horngren(c)EdmundW.Littlefield,Professorof Accounting,EmeritusStanfordBusinessSchool
Henry L. Kotkins, Jr. (b,d)ChairmanandChief ExecutiveOfficer,SkywayLuggageCompany
Martinn H. MandlesFormerChairmanof theBoard
Theodore T. Rosenberg (a)FormerChairmanof theBoard
Henrik C. Slipsager(a)PresidentandChief ExecutiveOfficer
William W. Steele (a,c)FormerPresidentandChief ExecutiveOfficer
Executive Officers
Henrik C. Slipsager(a)PresidentandChief ExecutiveOfficer
James P. McClureExecutiveVicePresidentandPresident,JanitorialServices
George B. Sundby ExecutiveVicePresidentandChief FinancialOfficer
Steven M. Zaccagnini ExecutiveVicePresidentandPresident,FacilityServicesandLightingServices
Erin M. AndreSeniorVicePresident,HumanResources
Linda S. AuwersSeniorVicePresident,GeneralCounselandSecretary
David L. FarwellSeniorVicePresident,Chief of Staff andTreasurer
Gary R. WallaceSeniorVicePresident,BusinessDevelopmentandChief MarketingOfficer
Maria De Martini VicePresident,ControllerandChief AccountingOfficer
Special Notices
Listing: NewYorkStockExchange
Ticker Symbol: ABM
Registrar and Transfer Agent MellonInvestorServicesLLC480WashingtonBoulevardJerseyCity,NJ07310-1900Tel:(800)850-3292WebAddress:www.melloninvestor.com/isd
AuditorsKPMGLLP55SecondStreetSuite1400SanFrancisco,CA94105
10-K ReportAdditionalcopiesavailabletostockholdersatnochargeuponrequestto:ABMCorporateCommunicationsPostOfficeBox193224,SanFrancisco,CA94119oratwww.abm.com
StockholdersAsof November30,2006,therewere3,669registeredholdersof theCompany’sCommonStock,inadditiontostockholdersinstreetname.
Annual MeetingTheAnnualMeetingof Stockholdersof ABMIndustriesIncorporatedwillbeheldonTuesday,March6,2007,at10:00a.m.intheBoardRoomBankof AmericaCenter,555CaliforniaStreet,51stFloorSanFrancisco,CA94104.
DividendsTheCompanyhaspaidquarterlycashdividendsonitsCommonStockwithoutinterruptionsince1965.TheBoardof Directorsconsidersthepaymentof cashdividendsonaquarterlybasis,subjecttotheCompany’searnings,financialconditionandotherfactors.
(a)ExecutiveCommittee(b)CompensationCommittee(c)AuditCommittee(d)GovernanceCommittee
33
ABM Corporate Headquarters160 Pacific Avenue, Suite 222 San Francisco, CA 94111
Tel: 415-733-4000 www.abm.com
ABM-934
10%
Cert no. SCS-COC-00648
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