ABM INDUSTRIES INC DE

Previous wording

A large M&D client has mostly completed rebidding and rebalancing a portion of its work needs as part of its normal procurement process. We expect M&D’s financial results to be adversely impacted in the near-term.

Current wording

A large M&D client has completed rebidding and is now rebalancing a portion of its work needs as part of its normal procurement process. We expect M&D’s financial results to be adversely impacted in the near-term.

Previous wording

During the third quarter of 2023, we performed a comprehensive actuarial review of the majority of our casualty insurance programs to evaluate changes made to claims reserves and claims payment activity for the period of November 1, 2022, through April 30, 2023 (the “Actuarial Review”). The Actuarial Review was comprehensive in nature and was based on loss development patterns, trend assumptions, and underlying expected loss costs during the period analyzed.

Current wording

During the second quarter of 2024, we performed an interim actuarial update of the majority of our casualty insurance programs that considered changes in claims development and claims payment activity for the period of November 1, 2023, through January 31, 2024 (the “Interim Update”). This Interim Update was abbreviated in nature based on actual versus expected developments during the periods analyzed and relied on the key assumptions in the Actuarial Review (most notably loss development patterns, trend assumptions, and underlying expected loss costs).

Previous wording

The claims management strategies and programs that we have implemented have resulted in improvements. Based on the results of the Actuarial Review, we increased our total reserves related to prior years for known claims as well as our estimate of the loss amounts associated with IBNR claims by $5.3 million during the nine months ended January 31, 2024. The favorable review was primarily attributable to reduced claim frequency and severity development within the workers’ compensation program. During the three months ended January 31, 2023, it was determined that there was no adjustment required for our total reserves related to prior year. We will continue to assess ongoing developments, which may result in further adjustments to reserves.

Current wording

Based on the results of the Actuarial Review and Interim Update at April 30, 2024, we increased our total reserves related to prior years for known claims as well as our estimate of the loss amounts associated with IBNR claims by $9.7 million during the six months ended April 30, 2024. During the six months ended April 30, 2023, it was determined that there was no adjustment required for our total reserves related to prior year. We will continue to assess ongoing developments, which may result in further adjustments to reserves.

Previous wording

•Net cash provided by operating activities was $0.1 million during the three months ended January 31, 2024. Our total net cash provided by operating cash flows was higher compared to the prior year period, primarily due to the timing of working capital requirements, which included a $66.0 million payment of previously deferred payroll taxes during the three months ended January 31, 2023.

Current wording

•Net cash provided by operating activities was $116.9 million during the six months ended April 30, 2024. Our total net cash provided by operating cash flows was higher compared to the prior year period, primarily due to the timing of working capital requirements, including customer payments and absence of a $66.0 million payment of previously deferred payroll taxes made during the three months ended January 31, 2023.

Previous wording

•Dividends of $14.1 million were paid to shareholders, and dividends totaling $0.225 per common share were declared during the three months ended January 31, 2024.

Current wording

•Dividends of $28.3 million were paid to shareholders, and dividends totaling $0.45 per common share were declared during the six months ended April 30, 2024.

Previous wording

•At January 31, 2024, total outstanding borrowings under our Amended Credit Facility were $1.3 billion. At January 31, 2024, we had up to $449.8 million of borrowing capacity.

Current wording

•At April 30, 2024, total outstanding borrowings under our Amended Credit Faci lity were $1.3 billion. At April 30, 2024, we had up to $501.1 million of borrowing capacity.

Previous wording

Operating expenses increased by $76.5 million, or 4.4%, to $1,826.3 million during the three months ended January 31, 2024, as compared to the prior year period. Gross margin decreased by 37 bps to 11.8% in the three months ended January 31, 2024, from 12.1% in the prior year period. The decrease in gross margin was primarily driven by the change in contact mix as well as an unfavorable self-insurance adjustment related to prior year claims as the result of actuarial evaluations completed.

Current wording

Operating expenses increased by $48.3 million, or 2.8%, to $1,763.5 million during the three months ended April 30, 2024, as compared to the prior year period. Gross margin decreased by 93 bps to 12.6% in the three months ended April 30, 2024, from 13.6% in the prior year period. The decrease in gross margin was primarily driven by $12.6 million in revenue recognized for the Aviation parking project during the three months ended April 30, 2023, whereby all the direct labor and related costs were recognized prior to January 31, 2023, and a $4.3 million unfavorable self-insurance reserve adjustment related to prior year claims from actuarial evaluations completed in the three months ended April 30, 2024, partially offset by labor efficiencies across most of our industry groups and the contract mix within M&D and Technical Solutions.

Previous wording

Selling, general and administrative expenses increased by $4.0 million to $154.6 million during the three months ended January 31, 2024, as compared to the prior year period. The increase in selling, general and administrative expenses was primarily attributable to:

Current wording

Selling, general and administrative expenses increased by $3.3 million to $159.9 million during the three months ended April 30, 2024, as compared to the prior year period. The increase in selling, general and administrative expenses was primarily attributable to:

Previous wording

Amortization of intangible assets decreased by $4.9 million, or 24.8%, to $14.6 million during the three months ended January 31, 2024, as compared to the prior year period. The decrease was primarily due to the amortization of intangibles acquired as part of the RavenVolt Acquisition.

Current wording

Amortization of intangible assets decreased by $5.9 million, or 30.5%, to $13.6 million during the three months ended April 30, 2024, as compared to the prior year period. The decrease was primarily due to the lower amortization of intangibles, primarily intangibles acquired as part of the RavenVolt Acquisition.

Previous wording

•Interest expense increased by $1.5 million, to $21.3 million during the three months ended January 31, 2024, as compared to the prior year period, and was driven by higher interest rates on our Amended Credit Facility.

Current wording

Interest expense decreased by $0.5 million to $20.6 million during the three months ended April 30, 2024, as compared to the prior year period, and was driven by lower borrowings from our Amended Credit Facility.

Previous wording

Our effective tax rates from income on operations for the three months ended January 31, 2024, and January 31, 2023, were 17.3% and 26.9%, respectively, resulting in provisions for taxes of $9.3 million and $14.2 million, respectively.

Current wording

Our effective tax rates from income on operations for the three months ended April 30, 2024, and April 30, 2023, were 29.9% and 28.2%, respectively, resulting in provisions for taxes of $18.7 million and $20.4 million, respectively.

Previous wording

We had a loss of $16.0 million on interest rate swaps during the three months ended January 31, 2024, as compared to a loss of $13.1 million during the three months ended January 31, 2023, primarily due to underlying changes in the fair value of our interest rate swaps.

Current wording

We had a gain of $10.3 million on interest rate swaps during the three months ended April 30, 2024, as compared to a loss of $2.5 million during the three months ended April 30, 2023, primarily due to underlying changes in the fair value of our interest rate swaps.

Previous wording

We had a foreign currency translation gain of $5.4 million during the three months ended January 31, 2024, as compared to a foreign currency translation gain of $10.5 million during the three months ended January 31, 2023. This change was due to fluctuations in the exchange rate between the U.S. dollar (“USD”) and the British pound sterling (“GBP”). Future gains and losses on foreign currency translation will be dependent upon changes in the relative value of foreign currencies to the USD and the extent of our foreign assets and liabilities.

Current wording

We had a foreign currency translation loss of $1.7 million during the three months ended April 30, 2024, as compared to a foreign currency translation gain of $2.3 million during the three months ended April 30, 2023. This change was due to fluctuations in the exchange rate between the U.S. dollar (“USD”) and the British pound sterling (“GBP”). Future gains and losses on foreign currency translation will be dependent upon changes in the relative value of foreign currencies to the USD and the extent of our foreign assets and liabilities.

Previous wording

B&I revenues decreased by $3.5 million, or 0.3%, to $1,033.1 million during the three months ended January 31, 2024, as compared to the prior year period. The revenue decrease was primarily driven by the decline in work orders, soft commercial office market conditions, and expected attrition of certain engineering clients, partially offset by client expansions and increases in revenue in the sports sector and parking. Management reimbursement revenues for this segment totaled $70.5 million and $64.4 million for the three months ended January 31, 2024 and 2023, respectively.

Current wording

B&I revenues decreased by $8.9 million, or 0.9%, to $989.6 million during the three months ended April 30, 2024, as compared to the prior year period. The revenue decrease was primarily driven by the soft commercial office market conditions and attrition of certain engineering clients, partially offset by client expansions and increases in revenue in the sports sector and parking. Management reimbursement revenues for this segment totaled $68.6 million and $65.7 million for the three months ended April 30, 2024 and 2023, respectively.

Previous wording

M&D revenues increased by $20.4 million, or 5.4%, to $400.9 million during the three months ended January 31, 2024, as compared to the prior year period. The increase was primarily attributable to the expansion of business with existing customers.

Current wording

M&D revenues increased by $15.4 million, or 4.1%, to $388.6 million during the three months ended April 30, 2024, as compared to the prior year period. The increase was primarily attributable to the expansion of business with existing customers.

Previous wording

Education revenues increased by $5.2 million, or 2.4%, to $220.1 million during the three months ended January 31, 2024, as compared to the prior year period. The increase was primarily attributable to net new business and increases in scope of work with existing customers.

Current wording

Education revenues increased by $8.9 million, or 4.1%, to $225.6 million during the three months ended April 30, 2024, as compared to the prior year period. The increase was primarily attributable to net new business and expansion of business with existing customers.

Previous wording

Corporate expenses increased by $3.2 million, or 4.4%, to $74.7 million during the three months ended January 31, 2024, as compared to the prior year period. The increase in corporate expenses was primarily attributable to:

Current wording

Corporate expenses increased by $10.5 million, or 15.2%, to $79.7 million during the three months ended April 30, 2024, as compared to the prior year period. The increase in corporate expenses was primarily attributable to:

Previous wording

•a $2.9 million increase in bad debt, including a favorable adjustment of $1.0 million in the prior year.

Current wording

•a $2.2 million increase in bad debt.

Previous wording

Interest expense increased by $1.5 million, to $21.3 million during the three months ended January 31, 2024, as compared to the prior year period, and was driven by higher interest rates on our Amended Credit Facility.

Current wording

Interest expense increased by $1.0 million, to $41.9 million during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023. The increase was driven by higher interest rates on our Amended Credit Facility.

Previous wording

Our effective tax rate for the three months ended January 31, 2024, benefited from discrete items, primarily by $2.9 million for uncertain tax positions, $2.1 million for share-based compensation, and $2.0 million for return to provision adjustments related to our non-U.S. operations. Our effective tax rate for the three months ended January 31, 2023, benefited by $1.3 million for share-based compensation.

Current wording

Our effective tax rate for the six months ended April 30, 2024, benefited from discrete items, primarily from $2.4 million for uncertain tax positions, $2.2 million for share-based compensation, and $2.2 million for return to provision adjustments related to our non-U.S. operations. Our effective tax rate for the six months ended April 30, 2023, benefited from discrete items, primarily from $1.4 million for share-based compensation.

Previous wording

Technical Solutions revenues increased by $18.9 million, or 12.9%, to $165.9 million during the three months ended January 31, 2024, as compared to the prior year period. The increase was primarily driven by higher project revenues due to the timing of completions of certain energy solutions projects, including microgrid systems installation, partially offset by a decrease in electric vehicle charging station installation sales.

Current wording

Technical Solutions revenues increased by $26.6 million, or 8.5%, to $342.1 million during the six months ended April 30, 2024, as compared to the prior year period. The increase was primarily driven by higher project revenues due to the timing of completions of certain energy solutions projects, including microgrid systems and generators installation, partially offset by a decrease in electric vehicle charging station installation sales.

Previous wording

Operating profit increased by $0.9 million, or 7.6%, to $12.7 million for the three months ended January 31, 2024, as compared to the prior year period. Operating profit margin increased by 28 bps to 5.8% in the three months ended January 31, 2024, from 5.5% in the prior year period. The increase in operating profit margin was primarily attributable to labor efficiencies and lower amortization of intangible assets.

Current wording

Operating profit increased by $6.1 million, or 35.3%, to $23.5 million during the six months ended April 30, 2024, as compared to the prior year period. Operating profit margin increased by 137 bps to 6.9% in the six months ended April 30, 2024, from 5.5% in the six months ended April 30, 2023. The increase in operating profit margin was primarily attributable to the contract mix and lower amortization of intangible assets.

Previous wording

During the three months ended January 31, 2024, we made principal payments of $8.1 million under the term loan. At January 31, 2024, the total outstanding borrowings under our Amended Credit Facility in the form of cash borrowings and standby letters of credit were $1.3 billion and $58.2 million, respectively, and our weighted average interest rate on all outstanding borrowings, excluding letters of credit, was 7.20%. At January 31, 2024, we had up to $449.8 million of borrowing capacity.

Current wording

During the six months ended April 30, 2024, we made principal payments of $16.3 million under the term loan. At April 30, 2024, the total outstanding borrowings under our Amended Credit Facility in the form of cash borrowings and standby letters of credit were $1.3 billion and $57.9 million, respectively, and our weighted average interest rate on all outstanding borrowings, excluding letters of credit, was 7.17%. At April 30, 2024, we had up to $501.1 million of borrowing capacity.

Previous wording

We did not repurchase shares under the share repurchase program during the three months ended January 31, 2024 and 2023. Share repurchases may take place on the open market or otherwise, and all or part of the repurchases may be made pursuant to Rule 10b5-1 plans or in privately negotiated transactions. The timing of repurchases is at our discretion and will depend upon several factors, including market and business conditions, future cash flows, share price, share availability, and other factors. Repurchased shares are retired and returned to an authorized but unissued status. The share repurchase programmay be suspended or discontinued at any time without prior notice. At January 31, 2024, authorization for $210.3 million of repurchases remained under our share repurchase program.

Current wording

We repurchased shares under the share repurchase program during the three and six months ended April 30, 2024, as summarized below. Share repurchases may take place on the open market or otherwise, and all or part of the repurchases may be made pursuant to Rule 10b5-1 plans or in privately negotiated transactions. The timing of repurchases is at our discretion and will depend upon several factors, including market and business conditions, future cash flows, share price, share availability, and other factors. Repurchased shares are retired and returned to an authorized but unissued status. The share repurchase programmay be suspended or discontinued at any time without prior notice. At April 30, 2024, authorization for $186.5 million of repurchases remained under our share repurchase program.

Previous wording

Net cash used in operating activities was $0.1 million during the three months ended January 31, 2024, as compared to net cash used by operating activities of $70.9 million during the prior year period. The change was primarily driven by the timing of working capital requirements, which included a $66.0 million payment for the deferred payroll taxes during the three months ended January 31, 2023.

Current wording

Net cash provided by operating activities was $116.9 million during the six months ended April 30, 2024, as compared to net cash used by operating activities of $45.0 million during the prior year period. The change was primarily driven by the timing of working capital requirements, including customer payments and an absence of a $66.0 million payment for the deferred payroll taxes made during the three months ended January 31, 2023.

Previous wording

Net cash used in investing activities increased by $0.5 million during the three months ended January 31, 2024, as compared to the prior year period. This quarter’s activity primarily related to purchases of property, plant and equipment.

Current wording

Net cash used in investing activities increased by $6.4 million during the six months ended April 30, 2024, as compared to the prior year period. This quarter’s activity was primarily related to purchases of property, plant and equipment.

Previous wording

Net cash provided by financing activities was $0.5 million during the three months ended January 31, 2024, as compared to net cash provided by financing activities of$96.2 million during the prior year period. The change was primarily related to a decrease in net borrowings from our Amended Credit Facility.

Current wording

Net cash used in financing activities was $98.0 million during the six months ended April 30, 2024, as compared to net cash provided by financing activities of$62.8 million during the prior year period. The change was primarily related to a decrease in net borrowings from our Amended Credit Facility due to the $116.9 million cash provided by operating activities.