ABM Industries Incorporated — FY2021 Form 10-K
Reporting period: Fiscal year ended October 31, 2021; this filing reports full-year results, not standalone fourth-quarter results. ABM provides integrated facility services across Business & Industry (B&I), Technology & Manufacturing (T&M), Education, Aviation, and Technical Solutions. Approximately 94% of revenue came from U.S. operations.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $6,228.6 million | $5,987.6 million |
| Gross margin | 15.6% | 13.9% |
| Operating profit | $206.3 million | $95.7 million |
| Income from continuing operations | $126.3 million | $0.2 million |
| Diluted EPS | $1.86 | $0.00 |
| Operating cash flow | $314.3 million | $457.4 million |
Revenue grew 4.0%. Operating profit improved by $110.6 million, but the comparison benefited substantially from the absence of $172.8 million of goodwill and intangible-asset impairments recorded in 2020. FY2021 also included a $142.9 million Bucio litigation accrual and $9.1 million non-cash impairment of ERP software. Gross-margin gains reflected higher-margin work orders and new business, as well as lower self-insurance expense.
Segment revenue and operating profit: B&I, $3,346.5 million and $337.8 million; T&M, $987.1 million and $103.8 million; Education, $836.4 million and $60.5 million; Aviation, $668.8 million and $32.5 million; Technical Solutions, $534.0 million and $49.8 million. Aviation revenue declined 1.8%, with pandemic-related travel weakness continuing to affect volumes. Segment results were also affected by the prior-year impairments, which make several year-over-year profit comparisons less representative of underlying performance.
Liquidity, debt, and capital
Cash and cash equivalents were $62.8 million at year-end, compared with $394.2 million a year earlier. Gross credit-facility borrowings were $888.8 million; available borrowing capacity was $875.0 million. The weighted-average borrowing rate was 1.59%, and ABM reported compliance with its credit covenants. The facility was amended in June 2021, extending maturity to June 2026 and increasing revolving capacity to $1.3 billion. Net cash used in investing was $740.0 million, principally reflecting the Able acquisition. Operating cash flow fell $143.1 million, primarily due to working-capital timing, partly offset by payroll-tax deferrals.
ABM paid $51.0 million in dividends during FY2021 and declared $0.760 per common share. Share repurchases were suspended; $144.9 million remained authorized at year-end. The company deferred approximately $132 million of payroll taxes under the CARES Act, with $66 million payable within 12 months. It reported $508.3 million of net self-insurance reserves and $170.6 million of operating and finance lease obligations.
Material changes, outlook, and risks
- Able acquisition: Completed September 30, 2021, for a net cash purchase price of $741.7 million. It contributed $101.1 million of revenue and $4.4 million of net income after acquisition. The purchase accounting was preliminary; acquired goodwill was $554.0 million and is not tax-deductible.
- Strategy: ABM’s ELEVATE plan calls for $150–$175 million of investment over four years in client and employee experience, workforce capabilities, technology, data, and operating systems. The filing provides no specific FY2022 earnings or revenue guidance.
- Operating environment: Management said pandemic effects remained uncertain, particularly for Aviation. Labor-market tightness, wage and benefit costs, client facility closures, and supply availability could pressure operations and margins.
- Litigation: The Bucio class action settlement is $140 million, with a recorded $142.9 million accrual including payroll taxes. Preliminary approval was granted in December 2021; final approval remained pending, with a hearing scheduled for March 16, 2022.
- Other risks and unusual disclosures: Self-insurance reserve estimates are actuarial and sensitive to claims development; a 10% change in projected ultimate losses would affect net income by approximately $37.3 million. A U.K. subsidiary disclosed past aircraft-cleaning services for Iran Air, terminated in August 2021; ABM submitted a preliminary self-disclosure to OFAC and said it did not expect a material adverse effect. The company also cited cybersecurity, collective-bargaining, acquisition-integration, interest-rate, and pandemic risks.
KPMG issued unqualified opinions on the consolidated financial statements and internal controls. The internal-control assessment excluded Able, acquired shortly before year-end.
Important facts for investors to verify
- Final court approval, payment timing, and any changes to the Bucio settlement obligation.
- Able integration progress, final purchase-price allocation, and whether expected growth and synergies materialize.
- Underlying operating trends after adjusting for prior-year impairments, the Bucio accrual, and other unusual items.
- Cash conversion and working-capital needs, including repayment of deferred payroll taxes and the effect of acquisition-related debt.
- Self-insurance reserve development and exposure to labor shortages, wage inflation, and Aviation recovery pace.
- OFAC’s review of the Iran Air disclosure and the company’s enhanced compliance controls.