ABM Industries Incorporated

50 Fremont Street, Suite 2600

San Francisco, California 94105
U.S.A.
(415) 597-4500
Fax: (415) 597-7160
(800) 470-4357
Web site: http://www.abm.com

Public Company
Incorporated: 1909 as American Building and Maintenance Company
Employees: 52,000
Sales: $1.25 billion (1997)
Stock Exchanges: New York
Ticker Symbol: ABM
SICs: 7349 Building Cleaning & Maintenance Services; 7521 Automobile Parking; 7382 Security Systems Services

ABM Industries Incorporated is one of the nation’s largest suppliers of janitorial and other services to the owners of commercial, industrial, and institutional buildings. Started by one man with a mop and a bucket, the company now offers a wide range of functions including cleaning; elevator maintenance; air conditioning, heating, engineering, and energy conservation services; lighting and electrical sign maintenance; building security; parking garage management; and janitorial supplies. Much of ABM’s operations take place on the West Coast, where the company first began. However, the company established a strong nationwide presence in its industry by acquiring companies in other geographical areas and in other industries throughout the 1960s, 1970s, and 1980s.

Humble Beginnings

ABM got its start in San Francisco in 1909, when Morris Rosenberg found himself out of work after his restaurant and hotel business failed in a general economic downturn. Sensing an opportunity in the dusty store windows of San Francisco’s commercial district, Rosenberg invested $4.50 in a bucket, mop, sponge, broom, and brush, and began calling on merchants, offering to wash their windows for whatever pay they thought the job was worth. At the end of the first day, Rosenberg had earned back the money he spent, plus an additional $3.50 in profit. From this modest start, Rosenberg founded the industry of contract janitorial services.

Soon, however, Rosenberg encountered competition: a man who called himself the Chicago Window Cleaning Company and transported his supplies in a Ford Model T car. When it became clear that there was not enough demand for cleaning services to sustain both companies, Rosenberg bought out his competitor for $300, acquiring both the company’s name and its vehicle.

Encouraged by his new capabilities, Rosenberg began offering annual cleaning contracts to San Francisco merchants. He signed his first contract with the Hotel St. Francis. Optimistic that his business would provide a steady income, Rosenberg opened an office in the Phelan Building and set out to win other clients. Soon, the Joseph Magnin Company, Praeger & Company, the Union Trust Company, and others had signed on.

With new clients, Rosenberg needed capital to add new equipment, supplies, and employees, so he sought a bank loan. After being turned down for lack of collateral at the first institution he tried, Rosenberg made inquiries to the Bank of Italy, which not only lent him the money he needed but also employed him to clean its buildings throughout San Francisco. With this development, Rosenberg’s business broadened its offerings from simple window cleaning to full janitorial services. In April 1913 Rosenberg named his company American Building and Maintenance Company (ABM), reflecting its wide range of activities.

Prewar Expansion

By 1920 ABM had expanded its activities throughout San Francisco and across the bay to Oakland. In addition, the company had opened offices in Los Angeles, Portland, and Seattle. ABM entered the lucrative business of cleaning theaters where popular movies were shown. The company had contracts with 15 cinemas in San Francisco, as well as with the Grauman’s chain in Los Angeles and the Loew’s theater systems in Oregon and Washington.

In the following year, ABM entered another area of the cleaning business when it signed a contract to clean Stanford University in Palo Alto, California, its first educational or institutional client. Throughout the 1920s, ABM continued to expand by offering customers cheaper services than they themselves could provide. It was this cost effectiveness that allowed the company to survive the stock market crash of 1929 and the ensuing Great Depression without losing ground and, in fact, with a slight increase in business.

ABM expanded to the East Coast in 1932, when the company won yet another movie theater contract—a $250,000 assignment from RKO to maintain properties it owned on both coasts. Morris Rosenberg’s son Theodore was dispatched to New York to follow up on this success and solicit other eastern business. A year and half later Theodore Rosenberg returned to San Francisco in time for his father’s retirement from the business as a result of ill health. In 1935 Morris Rosenberg died, leaving ABM to Theodore, then 26 years old. At the time, ABM’s annual revenue had reached $750,000.

During this period ABM also acquired an electrical services subsidiary, the Alta Electric Company, which provided electrical wiring for the Golden Gate Bridge, the San Francisco Bridge, and the city’s opera house. When the United States entered World War II in 1941, ABM also entered the temporary business of cleaning military ships, joining the war effort by maintaining U.S. Navy carriers and destroyers that put into West Coast ports. Because the military had called up many of the company’s employees, ABM began employing women on its cleaning crews. All-female janitorial teams cleaned the buildings of the company’s clients throughout the war.

Postwar Boom

In the 1940s ABM slightly altered its corporate name to American Building Maintenance Company and began to prepare for aggressive future growth by inaugurating a management training program for college graduates. At that time, the company had expanded into Canada and had operations in a total of 17 cities.

By the end of the 1950s, ABM had offices in 45 cities across North America and employed 6,000 people. In 1962 the company offered stock to the public for the first time in the over-the-counter market. One year later, revenue was reported at $31 million for operations in 74 towns in 13 states and two Canadian provinces. With the capital it raised through its stock offering, ABM set out on a policy of rapid expansion into all 50 states through the acquisition of other janitorial services companies. The company had already branched out into related industries with the purchase of the Easterday Supply Company, a cleaning equipment and supplies distributor. In addition, ABM bought Advance Chemical Company, a manufacturer and vendor of sanitation chemicals.

Although ABM had attained a leading place in the contract janitorial services industry by the early 1960s, much of the market for its services remained untapped, with building owners handling cleaning chores through their own staff. The company set out to expand its market share by enhancing awareness of its industry and the benefits of contract cleaning. By 1965 over 50 percent of the nation’s commercial buildings had switched to professional cleaning services. ABM’s list of clients had grown to include 4,500 customers, and its sales exceeded $40 million.

In addition to its acquisition of cleaning services in new territories, ABM also set out to enter complementary fields in order to offer clients comprehensive maintenance services. Toward that end, the company purchased Commercial Air Conditioning of Northern California in 1967 and established its CommAir Division to provide equipment maintenance. ABM also bought the largest public parking company in San Jose, California. This became the foundation of AMPCO Auto Parks, Inc., which ran public parking facilities.

In the following year the company added to these divisions when it bought American Air Conditioning, located in Los Angeles, and Mr. Maintenance, another equipment upkeep firm based in Denver. ABM also branched out further when it bought four-fifths of the Rose Exterminator Company, a pest control firm. In 1969 the company purchased the General Elevator Corporation, located in Southern California, adding yet another concern to its array of integrated maintenance services, which also included security services and lighting maintenance by that time.

Growth Through Acquisitions in the 1970s and 1980s

ABM developed and implemented a two-part strategy for growth, involving sales efforts to gain a larger share of the markets in which it already operated, and acquisitions to open up opportunities in new markets. By 1970 these efforts had garnered the company $75 million in annual revenue; the company bought six other firms in that year alone. In the following year, ABM stock made its debut on the New York Stock Exchange. The company continued with its acquisitions program when it bought SMI Industries, specialists in the maintenance of illuminated signs.

In 1974 ABM’s revenue topped $100 million for the first time. In the next few years, the company’s sales accelerated dramatically as ABM continued to acquire new companies. In 1977 ABM bought the Jones Janitor Service of Memphis, Tennessee; Beverly Pest Control, a California firm; and Real Estate Maintenance, located in Philadelphia. Two years later ABM purchased the American Janitor Service. By that time earnings had more than doubled—in just a five-year period—to $213 million.

Company Perspectives:

Our mission is to excel in all that we do for our customers, stockholders and employees by expanding our family of services through continuous improvement in the total quality of our services, competitiveness, accident prevention and complete customer satisfaction.

At the start of the 1980s, ABM announced plans to offer its full range of services in each major American city. At that time, only Los Angeles and San Francisco had the entire range of ABM operations. In addition, the company announced ambitious plans to again double its revenue in just five years. A key element of that expansion was ABM’s increased involvement in ancillary, nonjanitorial services, which promised a much higher profit margin than its traditional functions. The janitorial services industry was heavily fragmented and highly competitive, which kept earnings down. To gain a more diverse earnings base, the company moved aggressively into the energy management business, from which it expected high growth in the coming years. In 1981 ABM created the American Technical Services Company, abbreviated Amtech, by combining its air conditioning, elevator, lighting, and energy services operations into one division. With its operations consolidated, the company was better able to respond to innovations in technology and energy conservation.

By 1982, sales exceeded $300 million, and ABM had offices in over 190 locations. In the mid-1980s, ABM arranged its activities into three groups: Janitorial Services, which handled cleaning and building engineering; Public Services, made up of the security, parking, pest control, and Janitorial Supplies Division; and Amtech, its energy-related branch.

ABM’s earnings continued to rise throughout the second half of the 1980s, reaching $7.1 million in 1988. In the following year Sydney and Theodore Rosenberg, the founder’s sons, who controlled approximately 30 percent of the company’s stock, announced that they were involved in discussions about the possible sale of the company. In February of 1990 ABM began to explore different ways of restructuring itself and rearranging its financing, including the possibility of buying out its stockholders and becoming privately held. Eight months later, the company announced that a plan on the part of its management and other investors for a leveraged buy-out to take ABM private had foundered on the opposition of the Rosenberg brothers. Subsequently, the company’s president left ABM, and several lawsuits were filed in the wake of the collapsed deal. Despite this turmoil, the company reported an extraordinary gain in revenue and earnings at the close of 1990.

In October of the next year ABM streamlined its operations by selling its residential extermination service, Rose Pest Control, to Terminix, one of its competitors. All of the company’s other divisions provided services in commercial, industrial, or institutional settings; the residential nature of the pest control division made it an inappropriate fit with the rest of ABM’s operations.

Strong Growth in the 1990s

In the following month, ABM rearranged its corporate structure somewhat, moving several departments out of the Janitorial Services Division and into other areas of the company. ABM Engineering Services became a stand-alone division, and the Property Services Division was merged with the company’s security, parking, and cleaning supplies operations, under the heading “Other Services.” Although Sydney Rosenberg had ceded his position of chief executive officer when he was named chair of the board in 1984, he reclaimed the CEO position in 1992. That same year the company exceeded three-quarters of a billion dollars in sales.

The company continued its program of steady acquisition by purchasing System Parking West. The acquisition, which bolstered ABM’s nonjanitorial business, was merged into ABM’s existing parking subsidiary, AMPCO Auto Parks. The new entity was named Ampco System Parking. The company’s diversification into a variety of facilities services other than building maintenance had made the name American Building Maintenance Industries obsolete. To better represent the diversity of its services, the company changed its name to ABM Industries Incorporated in 1994.

Also in 1994, Sydney Rosenberg again stepped down from the CEO position, although he remained chair of the board. Bill Steele, president of ABM Industries, was promoted to chief executive officer and also retained his duties as president.

ABM’s strong growth broke several company records in 1996. Revenue surpassed the $1 billion mark, reaching $1.09 billion for fiscal 1996. The 13 percent revenue gain over the previous year was exceeded by the 21 percent gain in earnings, to over $38 million. Earnings per share also hit an all-time high, reaching $1.05, a 14 percent increase over the previous year.

The company’s financial health helped fuel further expansion in 1997. ABM made two major acquisitions that year. The first, the purchase of the assets of Polaris Inc., added to the company’s Janitorial Services Division. According to Steele, “The acquisition of the Polaris business allows our janitorial division to better serve our national client base. The Midwest is a key market for ABM Janitorial Services, and Polaris Inc. is clearly one of the most visible and highly respected janitorial service companies servicing that area.” The second acquisition, of Ogden Corp.’s building maintenance and on-site engineering operations, gave ABM a greater foothold in New York City.

Sydney Rosenberg stepped down as chair of the company’s board in 1997, although he accepted the positions of chairman emeritus and honorary director of the company. His departure marked the end of family control of the company founded by his father almost a century earlier. When he handed over the reins to Martinn Mandles, the company was in excellent health: revenue hit a new high in fiscal 1997, exceeding $1.25 billion.

Principal Subsidiaries

Easterday Supply Company, Inc.; AMPCO Auto Parks, Inc.; American Building Service Company; CommAir; ABMI Security Services, Inc.; Associated Building Maintenance of Canada, Ltd.; Elevator Engineering Company; Amtech Energy Services Company; Amtech Light Service Company; American Technical Services Company; Servall Mechanical Contractors, Inc.