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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

As of April 30, 2004 (the last business day of registrant’s most recently completed second fiscal quarter), non-affiliates of the registrant beneficially owned shares of the registrant’s common stock with an aggregate market value of $715,370,172, computed by reference to the price at which the common stock was last sold.

As of December 31, 2004, there were 49,279,156 shares of the registrant’s common stock outstanding.

Portions of the Proxy Statement to be used by the Company in connection with its 2005 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

ABM Industries Incorporated (“ABM”) is one of the largest facility services contractors listed on the New York Stock Exchange. With annual revenues in excess of $2.4 billion and approximately 70,000 employees, ABM and its subsidiaries (the “Company”) provide janitorial, parking, security, engineering, lighting and mechanical services for thousands of commercial, industrial, institutional and retail facilities in hundreds of cities throughout the United States and in British Columbia, Canada.

ABM was reincorporated in Delaware on March 19, 1985, as the successor to a business founded in California in 1909. The corporate headquarters of the Company is located at 160 Pacific Avenue, Suite 222, San Francisco, California 94111, and the Company’s telephone number at that location is (415) 733-4000.

The Company’s Website is www.abm.com. Through a link on the Investor Relations section of the Company’s Website, the following filings and amendments to those filings are made available as soon as reasonably practicable after they are electronically filed with or furnished to the SEC: (1) Annual Reports on Form 10-K, (2) Quarterly Reports on Form 10-Q, (3) Current Reports on Form 8-K and (4) filings by ABM’s directors and executive officers under Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act.”) All such filings are available free of charge. The Company also makes available on its Website and in print to those who request them its Corporate Governance Guidelines, Code of Business Conduct & Ethics and the charters of its audit, compensation and governance committees.

The Company conducts business through a number of subsidiaries, which are grouped into seven segments based on the nature of the business operations. The operating subsidiaries within each segment generally report to the same senior management. Referred to collectively as the “ABM Family of Services,” at October 31, 2004 the seven segments were:


	•	Janitorial

	•	Parking

	•	Security

	•	Engineering

	•	Lighting

	•	Mechanical

	•	Facility Services

The Company also provided elevator services until August 15, 2003, on which date substantially all of the operating assets of Amtech Elevator Services, Inc., a wholly-owned subsidiary of ABM (“Amtech Elevator”), were sold to Otis Elevator Company, a wholly-owned subsidiary of United Technologies Corporation (“Otis Elevator”). See “Discontinued Operation” contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The business activities of the Company by industry segment, as they existed at October 31, 2004, are more fully described below.

• Janitorial. The Company performs janitorial services through a number of the Company’s subsidiaries, primarily operating under the names “ABM Janitorial Services,” “American Building Maintenance” and “ABM Lakeside Building Maintenance.” The Company provides a wide range of basic janitorial services for a variety of facilities, including commercial office buildings, industrial plants, financial institutions, retail stores, shopping centers, warehouses, airport terminals, health and educational facilities, stadiums and arenas, and government buildings. Services provided include floor cleaning and finishing, window washing, furniture polishing, carpet cleaning and dusting, as well as other building cleaning services. The Company’s Janitorial

subsidiaries maintain 111 offices in 42 states, the District of Columbia and one Canadian province, and operate under thousands of individually negotiated building maintenance contracts, nearly all of which are obtained by competitive bidding. The Company’s Janitorial contracts are either fixed-price agreements or “cost-plus” (i.e., the customer agrees to reimburse the agreed upon amount of wages and benefits, payroll taxes, insurance charges and other expenses plus a profit percentage). Generally, profit margins on maintenance contracts tend to be inversely proportional to the size of the contract. In addition to services defined within the scope of the contract, the Company also generates sales from extra services, such as when the customer requires additional cleaning, with extra services frequently providing higher margins. The majority of Janitorial contracts are for one-year periods, but are subject to termination by either party after 30 to 90 days’ written notice and contain automatic renewal clauses.

• Parking. The Company provides parking services through a number of subsidiaries, primarily operating under the names “Ampco System Parking,” “Ampco System Airport Parking” and “Ampco Express Airport Parking.” The Company’s Parking subsidiaries maintain 29 offices and operate in 29 states. The Company operates approximately 1,700 parking lots and garages, including, but not limited to, the following airports: Austin, Texas; Buffalo, New York; Denver, Colorado; Honolulu, Hawaii; Minneapolis/ St. Paul, Minnesota; Omaha, Nebraska; Orlando, Florida; San Francisco and San Jose, California. The Company also operates off-airport parking facilities in Philadelphia, Pennsylvania; Houston, Texas; Los Angeles and San Diego, California, and operates 18 parking shuttle bus services. Approximately 40% of the lots and garages are leased and 60% are operated through management contracts for third parties. The lease terms generally range from three to 20 years and provide for payment of a fixed amount of rent, plus a percentage of revenue. The leases usually contain provisions for renewal options and may be terminated by the customer for various reasons including development of the real estate. Leases which expire may continue on a month-to-month basis. Management contract terms are generally from one to three years and often can be cancelled without cause by the customer upon 30 days’ notice and may also contain renewal clauses. Management contracts generally provide that all expenses incurred are to be reimbursed including the amount of wages, payroll taxes, insurance charges and all other expenses and including a management fee for parking services provided. More than half of the Company’s parking revenues come from reimbursements of expenses for which the Company does not derive any profit. Therefore, the level of parking revenues is not directly indicative of profitability.

• Security. The Company provides security services through a number of subsidiaries, primarily operating under the names “American Commercial Security Services,” “ACSS,” “ABM Security Services,” “SSA Security, Inc.” (dba, “Security Services of America”), “Silverhawk Security Specialists” and “Elite Protection Services.” The Company provides security officers; investigative services; electronic monitoring of fire, life safety systems and access control devices; and security consulting services to a wide range of businesses. The Company’s Security subsidiaries maintain 54 offices and operate in 33 states and the District of Columbia. The sales under the majority of Security contracts are based on actual hours of service at contractually specified rates. Additionally, the majority of Security contracts are for one-year periods, but are subject to termination by either party after 30 to 90 days’ written notice and contain automatic renewal clauses.

• Engineering. The Company provides engineering services through a number of subsidiaries, primarily operating under the name “ABM Engineering Services.” The Company provides facilities with on-site engineers to operate and maintain mechanical, electrical and plumbing systems utilizing in part computerized maintenance management systems. These services are designed to maintain equipment at optimal efficiency for customers such as high-rise office buildings, schools, computer centers, shopping malls, manufacturing facilities, museums and universities. The Company’s Engineering subsidiaries maintain 14 branches and operate in 28 states. The majority of Engineering contracts contain clauses under which the customer agrees to reimburse the full amount of wages, payroll taxes, insurance charges and other expenses plus a profit percentage. Additionally, the majority of Engineering contracts are for one-year periods, but are subject to termination by either party after 30 to 90 days’ written notice. ABM Engineering Services Company, a wholly-owned subsidiary, has maintained ISO 9000 Certification for the past six years, the only national engineering services provider of on-site operating engineers to earn this prestigious designation. ISO is a quality standard

• Lighting. The Company provides lighting services through a number of subsidiaries, primarily operating under the name “Amtech Lighting Services.” The Company provides relamping, fixture cleaning, energy retrofits and lighting maintenance service to a variety of commercial, industrial and retail facilities. The Company’s Lighting subsidiaries also repair and maintain electrical outdoor signage, and provide electrical service and repairs. The Company’s Lighting subsidiaries maintain 27 offices and operate in 50 states. Lighting contracts are either fixed-price agreements or time and materials based where the customer is billed according to actual hours of service and materials used at specified prices. Contracts range from one to six years, but the majority are subject to termination by either party after 30 to 90 days’ written notice. Most maintenance agreements involving initial services, such as relamping and fixture cleaning, include cancellation clauses.

• Mechanical. The Company provides mechanical services through a number of subsidiaries, primarily operating under the names “CommAir Mechanical Services” and “CommAir Preferred Mechanical Services.” The Company installs, maintains and repairs heating, ventilation, and air conditioning and refrigeration equipment, performs chemical water treatment and provides energy conservation services for commercial, industrial and institutional facilities. The Company’s Mechanical subsidiaries maintain seven offices in California and Arizona. Mechanical contracts are either fixed-price agreements or time and materials based where the customer is billed according to actual hours of service and materials used at contractually specified prices. The majority of such contracts are for one-year periods, but are subject to termination by either party after 30 to 90 days’ written notice. Contracts for projects, however, typically cannot be cancelled.

• Facility Services. The Company provides facility services through a number of subsidiaries, primarily operating under the name “ABM Facility Services.” The Company provides customers with streamlined, centralized control and coordination of multiple facility service needs. This process is consistent with the greater competitive demands on corporate organizations to become more efficient in the business market today. By leveraging the core competencies of the Company’s other service offerings, the Company attempts to reduce overhead (such as redundant personnel) for its customers by providing multiple services under a single contract, with one contact and one invoice. Its National Service Call Center provides centralized dispatching, emergency services, accounting and related reports to financial institutions, high-tech companies and other customers regardless of industry or size. Facility Services is headquartered in Oakland, California, where it also maintains its National Service Call Center, but operates nationally utilizing the ABM Engineering platform in many states.

Additional information relating to the Company’s industry segments appears in Note 18 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.”

The Company believes that it owns or is licensed to use all corporate names, tradenames, trademarks, service marks, copyrights, patents and trade secrets which are material to the Company’s operations.

The Company believes that each aspect of its business is highly competitive, and that such competition is based primarily on price and quality of service. The Company provides nearly all its services under contracts originally obtained through competitive bidding. The low cost of entry to the facility services business has led to strongly competitive markets made up of large numbers of mostly regional and local owner-operated companies, located in major cities throughout the United States and in British Columbia, Canada (with particularly intense competition in the janitorial business in the Southeast and South Central regions of the United States). The Company also competes with the operating divisions of a few large, diversified facility services and manufacturing companies on a national basis. Indirectly, the Company competes with building owners and tenants that can perform internally one or more of the services provided by the Company. These building owners and tenants might have a competitive advantage when the Company’s services are subject to sales tax and internal operations are not. Furthermore, competitors may have lower costs because

privately-owned companies operating in a limited geographic area may have significantly lower labor and overhead costs. These strong competitive pressures could inhibit the Company’s success in bidding for profitable business and its ability to increase prices even as costs rise, thereby reducing margins.

The Company’s sales and marketing efforts are conducted by its corporate, subsidiary, region, branch and district offices. Sales, marketing, management and operations personnel in each of these offices participate directly in selling and servicing customers. The broad geographic scope of these offices enables the Company to provide a full range of facility services through intercompany sales referrals, multi-service “bundled” sales and national account sales. The Company also has designated a nationwide group of “ABM Family of Services” executives to market all of the Company’s facility services capabilities.

The Company has a broad customer base, including, but not limited to, commercial office buildings, industrial plants, financial institutions, retail stores, shopping centers, warehouses, airports, health and educational facilities, stadiums and arenas, government buildings, apartment complexes, and theme parks. No customer accounted for more than 5% of its revenues during the fiscal year ended October 31, 2004.

The Company employs approximately 70,000 persons, of whom the vast majority are service employees who perform janitorial, parking, engineering, security, lighting and mechanical services. Approximately 29,000 of these employees are covered under collective bargaining agreements at the local level. There are about 3,900 employees with executive, managerial, supervisory, administrative, professional, sales, marketing or clerical responsibilities, or other office assignments.

The Company’s operations are subject to various federal, state and/or local laws regulating the discharge of materials into the environment or otherwise relating to the protection of the environment, such as discharge into soil, water and air, and the generation, handling, storage, transportation and disposal of waste and hazardous substances. These laws generally have the effect of increasing costs and potential liabilities associated with the conduct of the Company’s operations, although historically they have not had a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company has corporate, subsidiary, regional, branch or district offices in over 250 locations throughout the United States and in British Columbia, Canada. Fourteen of these facilities are owned by the Company. At October 31, 2004, the real estate owned by the Company had an aggregate net book value of $3.3 million and was located in: Phoenix, Arizona; Fresno, California; Jacksonville and Tampa, Florida; Portland, Oregon; Arlington, Houston and San Antonio, Texas; and Kennewick, Seattle, Spokane and Tacoma, Washington.

Rental payments under long and short-term lease agreements amounted to $96.9 million for the fiscal year ended October 31, 2004. Of this amount, $63.7 million in rental expense was attributable to public parking lots and garages leased and operated by Parking. The remaining expense was for the rental or lease of office space, computers, operating equipment and motor vehicles.

In September 1999, a former employee filed a gender discrimination lawsuit against ABM in the state of Washington. On May 19, 2003, a Washington state court jury for the Spokane County Superior Court, in the case named Forbes v. ABM, awarded $4.0 million in damages. The court later awarded costs of $0.7 million to the plaintiff, pre-judgment interest in the amount of $0.3 million and an additional $0.8 million to mitigate the federal tax impact of the plaintiff’s award. The U.S. Supreme Court is currently deciding whether courts are permitted to award any amounts for mitigation for federal tax consequences in wrongful termination cases. ABM is appealing the jury’s verdict and the award of costs to the State Court of Appeals on the grounds that it was denied a fair trial and that Forbes failed to prove that ABM engaged in discrimination or retaliation. ABM has stayed enforcement of the judgment by procuring a $7.0 million letter of credit. ABM believes that the award against ABM was excessive and that the verdict was inconsistent with the law and the evidence. Because ABM believes that the judgment will be reversed upon appeal and that it will prevail in a new trial, ABM has not recorded any liability in its financial statements associated with the judgment. However, there can be no assurance that ABM will prevail in this matter. Oral arguments are scheduled for February 17, 2005.

ABM and some of its subsidiaries have been named defendants in certain other litigation arising in the ordinary course of business. In the opinion of management, based on advice of legal counsel, such matters should have no material effect on the Company’s financial position, results of operations or cash flows.

ABM’s common stock is listed on the New York Stock Exchange. The following table sets forth the high and low intra-day prices of ABM’s common stock on the New York Stock Exchange and quarterly cash dividends declared on common shares for the periods indicated:

To the Company’s knowledge, there are no current factors that are likely to materially limit the Company’s ability to pay comparable dividends for the foreseeable future.

At December 31, 2004, there were 4,008 registered holders of ABM’s common stock, in addition to stockholders in street name.


(1)	On December 9, 2003, ABM’s Board of Directors authorized the purchase of up to 2.0 million shares of ABM’s outstanding common stock at any time through December 31, 2004. The Company did not purchase any shares of ABM’s common stock in the fourth quarter of fiscal 2004 and 1.5 million shares remained available for purchase at October 31, 2004 under this authorization.

(2)	Participants in the Company’s “Time-Vested” Incentive Stock Option Plan (the “Plan”) may exercise stock options by surrendering shares of ABM’s common stock that the participants already own as payment of the exercise price. Shares so surrendered by participants in the Plan are repurchased by the Company pursuant to the terms of the Plan and applicable award agreement and not pursuant to publicly announced share repurchase programs.

The following selected financial data is derived from the Company’s consolidated financial statements for each of the years in the five-year period ended October 31, 2004. It should be read in conjunction with the consolidated financial statements and the notes thereto, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”), which are included elsewhere in this report.


(1)	The World Trade Center (“WTC”) represented the Company’s largest worksite; its destruction has directly and indirectly impacted subsequent Company results. See MD&A.

(2)	The prior period selected financial data presented in the table above have been restated for various correcting adjustments. These adjustments are discussed in more detail below.


	Correction of insurance reserve methodology. In the fourth quarter of 2004, the Company corrected its methodology for insurance reserves to comply with generally accepted accounting principles and restated its financial statements for each of the fiscal years in the four-year period ended October 31, 2003. The correction brought the Company’s self-insurance reserves to the actuarial point estimate of claim costs and liabilities resulting in a cumulative increase in the Company’s self-insurance reserves of $22.3 million at October 31, 2003, of which $7.6 million is the impact on the four-year period ended October 31, 2003.

	Late adoption of an accounting pronouncement. The restated financial statements also reflect the correction of the fair value calculation for other intangibles, primarily customer relationship intangibles, under Emerging Issues Task Force (“EITF”) Issue No. 02-17, “Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination.” EITF Issue No. 02-17 was effective for business combinations consummated after October 25, 2002, but the Company did not originally report the effect it had on the three business combinations completed in 2003 until the second quarter of 2004. The correction increased intangibles other than goodwill by $13.1 million for acquisitions completed in 2003 with an equal offsetting reduction to goodwill.


	Other adjustments. As a result of its decision to restate, the Company further determined to make three additional corrections to its financial statements, which affect the years ended October 31, 2003 and 2002. The first was to record in the proper period vacation and sick leave accruals in the Northeast region of Janitorial resulting in an increase in operating expenses and cost of goods sold of $1.2 million in 2002, with an equal and offsetting decrease in 2003. The second was a $1.3 million increase in bad debt expense resulting from the write-off of the unpaid balance of a major WTC account settled in 2002 that is not specifically covered by the outstanding insurance claim. The Company continues to pursue insurance claims for accounts receivable not collected due to the loss of Company documentation and additional property lost in the terrorist attacks of September 11, 2001. The third was a $2.0 million ($1.2 million after-tax) increase in the gain on sale of the Elevator segment resulting from the reversal of the write-off of an allocated portion of the capitalized costs associated with the prior implementation of the Company’s enterprise-wide financial system because the Company has continued to use the entire system. See Note 13 of Notes to Consolidated Financial statements contained in Item 8, “Financial Statements and Supplementary Data.” The cost is being amortized over the remainder of the original life of the system with the adjustment impacting income from continuing operations for the fourth quarter of 2003 and thereafter.

	The effects of the restatement for the correction of these errors are shown below.


	The effects of the restatement adjustments on the balance sheets at October 31, 2003, 2002, 2001 and 2000 are shown below.


	(See Note 2 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” and “Restatement Due to Correction of Errors” in MD&A for a more detailed explanation of the adjustments.)


(3)	In 2002, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” under which goodwill is no longer amortized, but is subject to at least an annual assessment for impairment.

(4)	Stockholders’ equity per common share is calculated by dividing stockholders’ equity at the end of the fiscal year by the number of shares of common stock outstanding at that date. This calculation may not be comparable to similarly titled measures reported by other companies.

The following discussion should be read in conjunction with the consolidated financial statements of the Company and the notes thereto contained in Item 8, “Financial Statements and Supplementary Data.” All information in the discussion and references to the years are based on the Company’s fiscal year that ends on October 31. Prior periods have been restated for correction of errors. (See Note 2 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” and the section below entitled “Restatement Due to Correction of Errors.”)

The Company provides janitorial, parking, security, engineering, lighting and mechanical services for thousands of commercial, industrial, institutional and retail facilities in hundreds of cities throughout the United States and in British Columbia, Canada. The Company also provided elevator services until August 15, 2003, when it sold substantially all of the operating assets of its Elevator segment (see “Discontinued Operation”). The largest segment of the Company’s business is Janitorial which generated over 59% of the Company’s sales and other income from continuing operations (hereinafter called “sales”) and over 63% of its operating profit before corporate expenses for 2004.

The Company’s sales are substantially based on the performance of labor-intensive services at contractually specified prices. Janitorial and other maintenance service contracts are either fixed-price or “cost-plus” (i.e., the customer agrees to reimburse the agreed upon amount of wages and benefits, payroll taxes, insurance charges and other expenses plus a profit percentage). In addition to services defined within the scope of the contract, the Company also generates sales from extra services, such as when the customer requires additional cleaning or emergency repair services, with extra services frequently providing higher margins. The quarterly profitability of fixed-price contracts is impacted by the variability of the number of work days in the quarter.

The majority of the Company’s contracts are for one-year periods, but are subject to termination by either party after 30 to 90 days’ written notice. Upon renewal of the contract, the Company may renegotiate the price although competitive pressures and customers’ price-sensitivity could inhibit the Company’s ability to pass on cost increases. Such cost increases include, but are not limited to, wage, benefit, payroll tax (including unemployment insurance tax), workers’ compensation and general liability insurance increases. However, for some renewals the Company is able to restructure the scope and terms of the contract such that the costs are reduced thereby keeping the price competitive.

Sales have historically been the major source of cash for the Company, while payroll expenses, which are substantially related to sales, have been the largest use of cash. Hence operating cash flows significantly depend on the sales level and timing of collections, as well as the quality of the customer accounts receivable. The timing and level of the payments to suppliers and other vendors, as well as the magnitude of self-insured claims, also affect operating cash flows. The Company’s management views operating cash flows as a good indicator of financial strength. Strong operating cash flows provide opportunities for growth both internally and through acquisitions.

The Company’s most recent acquisitions significantly contributed to the growth in sales and operating profit in 2004 from 2003. The Company also experienced internal growth in sales in 2004, but it was partially offset by the reduction in project sales at Lighting and terminations of some unprofitable contracts, as well as the loss of profitable contracts to competition. Internal growth in sales represents not only sales from new customers, but also expanded services or increases in the scope of work for existing customers. Sales in the Company’s Lighting and Mechanical businesses are primarily related to the level of capital investments by customers. To mitigate the adverse effect on operating profit of low levels of capital investment by customers, in 2004 the Company successfully lowered its overhead expenses in Lighting and Mechanical. In the long run, achieving the desired levels of sales and profitability will depend on the Company’s ability to gain and retain, at acceptable profit margins, more customers than it loses, pass on cost increases to customers, and keep overall costs down to remain competitive, particularly against privately-owned companies that typically have the lower cost advantage.

In the short-term, management is focused on actively managing its business, converting bids into sales and integrating its most recent acquisitions. In the long-term, management is focused on implementing its strategic plan to grow the business through a combination of internal growth and selective acquisitions in the Company’s core disciplines.

Funds provided from operations and bank borrowings have historically been the sources for meeting working capital requirements, financing capital expenditures and acquisitions, and paying cash dividends. As of October 31, 2004 and 2003, the Company’s cash and cash equivalents totaled $63.4 million and $110.9 million, respectively. The relatively high cash balance at October 31, 2003 was primarily due to the $112.4 million of cash proceeds received from the Elevator divestiture during 2003. The decline in 2004 reflects the payment of $30.5 million estimated income taxes associated with this divestiture (see “Discontinued Operation”), $44.2 million initial cash payments made for the purchases of the operations of Security Services of America (“SSA”), acquired on March 15, 2004, and Initial Contract Services, Inc. (“Initial”), acquired on April 2, 2004 and the $11.1 million cash payments for the purchases of 0.6 million of ABM’s common stock, offset in part by cash from operations.

Working Capital. Working capital decreased by $10.8 million to $231.7 million at October 31, 2004 from $242.4 million at October 31, 2003 primarily due to the initial cash payments made for the purchase of SSA and Initial, offset in part by cash from operations. The largest component of working capital consists of trade accounts receivable, which totaled $321.4 million at October 31, 2004, compared to $286.6 million at October 31, 2003. These amounts were net of allowances for doubtful accounts of $8.4 million and $6.1 million at October 31, 2004 and 2003, respectively. The increase in trade accounts receivable balance as of the end of 2004 compared to the end of 2003 was due to higher sales and slower payments by some large customers in 2004. As of October 31, 2004, accounts receivable that were over 90 days past due had decreased $7.4 million to $19.2 million (5.8% of the total outstanding) from $26.6 million (9.1% of the total outstanding) at October 31, 2003.

Cash Flows from Operating Activities. During 2004, 2003 and 2002, operating activities from continuing operations generated net cash of $64.2 million, $53.7 million, and $100.0 million, respectively. Operating cash from continuing operations increased in 2004 from 2003 primarily due to the delay in 2004 year-end payments to vendors and suppliers as the year-end fell on a weekend, partially offset by slower payments by some large customers. In 2002, cash from continuing operations was higher than in 2003 primarily due to greater collection of outstanding accounts receivable during 2002. In addition, in 2002 two partial settlements totaling $13.3 million related to the WTC insurance claim were received.

Cash Flows from Investing Activities. Net cash used in investing activities in 2004 was $60.8 million, compared to net cash provided by investing activities in 2003 of $66.1 million and net cash used in investing

activities in 2002 of $59.3 million. Investing activities in 2003 generated net cash of $66.1 million primarily due to the $112.4 million of cash proceeds received from the Elevator divestiture during 2003 (see “Discontinued Operation”). Additionally, in comparison with the $54.2 million in 2004, cash used for the purchase of businesses was lower in 2003 at $40.6 million. Of the $54.2 million used for the purchase of businesses in 2004, $44.2 million was used for the purchase of the operations of SSA and Initial, while of the $40.6 million used in 2003, $29.2 million was used for the purchase of operations of Horizon National Commercial Services, LLC (“Horizon”), Valet Parking Services (“Valet”) and HGO Janitorial Services (“HGO”). Cash used for the purchase of businesses in 2002 was $52.4 million, of which $36.9 million was used for the initial payment for the purchase of the operations of Lakeside Building Maintenance, Inc. and an affiliated company (collectively, “Lakeside”) in July 2002.

Cash Flows from Financing Activities. Net cash used in financing activities was $20.5 million in 2004, $34.7 million in 2003 and $35.2 million in 2002. The Company purchased 0.6 million shares of ABM’s common stock at a cost of $11.1 million in 2004, compared to 2.0 million shares at $30.4 million in 2003 and 1.4 million shares at $23.6 million in 2002. The lower common stock purchases in 2004 compared to 2003 was partially offset by the lower cash generated from the issuance of ABM’s common stock in 2004 compared to 2003 as the employee stock purchase plan terminated upon issue of all the available shares in November 2003. A new employee stock purchase plan was approved by the stockholders in March 2004 and the first offering period began on August 1, 2004. (See Note 9 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.”) The decrease in net cash used in financing activities in 2003 from 2002 was primarily due to no debt repayments in 2003 compared to $11.8 million in 2002, offset by greater common stock purchases and lower common stock issuance in 2003.

Line of Credit. In April 2003, the Company increased the amount of its syndicated line of credit to $250.0 million. This line of credit will expire July 1, 2005. No compensating balances are required under the facility and the interest rate is determined at the time of borrowing based on the London Interbank Offered Rate (“LIBOR”) plus a spread of 0.875% to 1.50% or, for overnight borrowings, at the prime rate plus a spread of 0.00% to 0.25% or, for overnight to one week, at the Interbank Offered Rate (“IBOR”) plus a spread of 0.875% to 1.50%. The spreads for LIBOR, prime and IBOR borrowings are based on the Company’s leverage ratio. The facility calls for a commitment fee payable quarterly, in arrears, of 0.175%, based on the average daily unused portion. For purposes of this calculation, irrevocable standby letters of credit issued primarily in conjunction with the Company’s self-insurance program plus cash borrowings are considered to be outstanding amounts. As of October 31, 2004 and 2003, the total outstanding amounts under this facility were $96.5 million and $69.0 million, respectively, in the form of standby letters of credit. The provisions of the credit facility require the Company to maintain certain financial ratios and limit outside borrowings. The Company was in compliance with all covenants as of October 31, 2004.

The Company is contractually obligated to make future payments under non-cancelable operating lease agreements for various facilities, vehicles and other equipment. As of October 31, 2004, future contractual payments were as follows:

Additionally, the Company has the following commercial commitments and other long-term liabilities:

Not included in the retirement plans in the table above are union-sponsored collectively bargained multi-employer defined benefit plans under which certain union employees of the Company are covered. These plans are not administered by the Company and contributions are determined in accordance with provisions of negotiated labor contracts. Contributions for these plans were $34.9 million, $29.2 million and $26.7 million in 2004, 2003 and 2002, respectively.

The Company self-insures certain insurable risks such as general liability, automobile property damage, and workers’ compensation. Commercial policies are obtained to provide for $150.0 million of coverage for certain risk exposures above the self-insured retention limits (i.e., deductibles). For claims incurred after November 1, 2002, substantially all of the self-insured retentions increased from $0.5 million (inclusive of legal fees) to $1.0 million (exclusive of legal fees). Effective April 14, 2003, the deductible for California workers’ compensation insurance increased to $2.0 million per occurrence due to general insurance market conditions. While the higher self-insured retention increases the Company’s risk associated with workers’ compensation liabilities, during the history of the Company’s self-insurance program, few claims have exceeded $1.0 million. The Company annually retains an outside actuary to provide an actuarial estimate of its insurance claims. The 2004 actuarial review completed in November 2004 indicated that there were adverse developments in the Company’s insurance reserves primarily related to workers’ compensation claims in the State of California during the four-year period ended October 31, 2003, for which the Company recorded a charge of $17.2 million in the fourth quarter of 2004. The Company believes a substantial portion of the $17.2 million is related to poor claims management by a third party administrator and is taking action to mitigate the impact. The Company is in the process of transferring the administration of its workers’ compensation claims from that third party administrator to another administrator which has been more successfully handling the Company’s claims reported since November 1, 2003.

Additionally, in the fourth quarter of 2004, the Company corrected its methodology for estimating self-insurance reserves to comply with generally accepted accounting principles and restated the prior period financial statements presented in this Annual Report on Form 10-K. The correction brought the Company’s self-insurance reserves to the actuarial point estimate of claim costs and liabilities resulting in a cumulative increase in the Company’s self-insurance reserves of $22.3 million at October 31, 2003, of which $1.5 million and $1.2 million decreased consolidated pre-tax income in 2003 and 2002, respectively. (See Note 2 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” and the section below entitled “Restatement Due to Correction of Errors.”)

The combined impact on the self-insurance reserves of correcting the Company’s reserving methodology and the adverse development recognized in 2004 totaled $41.6 million and consisted of the $22.3 million cumulative increase in reserves at October 31, 2003 and $19.3 million of insurance charges in 2004 included in Corporate, of which $17.2 million is attributable to the adverse development in insurance reserves.

The self-insurance claims paid in 2004, 2003 and 2002 were $60.7 million, $58.9 million and $52.7 million, respectively. Claim payments vary based on the frequency and/or severity of claims incurred and timing of the settlements and therefore may have an uneven impact on the Company’s cash balances. The actuarial projection of payments on self-insurance claims to be made in fiscal 2005 is $66.3 million.

The Company has no significant commitments for capital expenditures and believes that the current cash and cash equivalents, cash generated from operations and the expected renewal of its line of credit prior to July 2005 will be sufficient to meet the Company’s cash requirements for the long term.

Insurance Claims Related to the Destruction of the World Trade Center in New York City on September 11, 2001

The Company had commercial insurance policies covering business interruption, property damage and other losses related to the WTC complex in New York, which was the Company’s largest single job-site with annual sales of approximately $75.0 million (3% of the Company’s consolidated sales for 2001). As of October 31, 2002, Zurich Insurance (“Zurich”) had paid two partial settlements totaling $13.3 million, of which $10.0 million was for business interruption and $3.3 million for property damage, which substantially settled the property portion of the claim. The Company realized a pre-tax gain of $10.0 million in 2002 on the proceeds received.

In December 2001, Zurich filed a Declaratory Judgment Action in the Southern District of New York claiming the loss of the business profit falls under the policy’s contingent business interruption sub-limit of $10.0 million. On June 2, 2003, the court ruled on certain summary judgment motions in favor of Zurich. Subsequent to the June 2003 ruling, additional rulings by the court have limited the Company’s recourse under the policy to the amounts paid plus additional amounts related to physical property of the Company located on the WTC premises and certain accounts receivable from customers that could not be collected. Based on a review of the policy and consultation with legal counsel and other specialists, the Company continues to believe that its business interruption claim does not fall under the $10.0 million sub-limit on contingent business interruption and that the Company’s losses under its WTC contracts are eligible for additional business interruption coverage up to the policy maximum of $124.0 million. Therefore, the Company is appealing the court’s rulings. Oral arguments occurred in September 2004 and the Company is awaiting the outcome.

Under EITF Issue No. 01-10, “Accounting for the Impact of the Terrorist Attacks of September 11, 2001,” the Company has not recognized future amounts it expects to recover from its business interruption insurance as income. Any gain from insurance proceeds is considered a contingent gain and, under SFAS No. 5, “Accounting for Contingencies,” can only be recognized as income in the period when any and all contingencies for that portion of the insurance claim have been resolved.

The Company is currently involved in three environmental matters: one involving alleged potential soil contamination at a former Company facility in Arizona, one involving alleged potential soil and groundwater contamination at a Company facility in Florida, and one involving an alleged de minimis contribution to a landfill in Southern California. While it is difficult to predict the ultimate outcome of these matters, based on information currently available, management believes that none of these matters, individually or in the aggregate, are reasonably likely to have a material adverse effect on the Company’s financial position, results of operations, or cash flows. As any liability related to these matters is neither probable nor estimable, no accruals have been made related to these matters.

The Company is party to a variety of contractual agreements under which it may be obligated to indemnify the other party for certain matters. Primarily, these agreements are standard indemnification arrangements in its ordinary course of business. Pursuant to these arrangements, the Company may agree to indemnify, hold harmless and reimburse the indemnified parties for losses suffered or incurred by the indemnified party, generally its customers, in connection with any claims arising out of the services that the Company provides. The Company also incurs costs to defend lawsuits or settle claims related to these indemnification arrangements and in most cases these costs are paid from its insurance program. The term of these indemnification arrangements is generally perpetual. Although the Company attempts to place limits on this indemnification reasonably related to the size of the contract, the maximum obligation is not always explicitly stated and, as a result, the maximum potential amount of future payments the Company could be required to make under these arrangements is not determinable.

ABM’s certificate of incorporation and bylaws may require it to indemnify Company directors and officers against liabilities that may arise by reason of their status as such and to advance their expenses incurred as a result of any legal proceeding against them as to which they could be indemnified. ABM has also entered into indemnification agreements with its directors to this effect. The overall amount of these obligations cannot be reasonably estimated, however, the Company believes that any loss under these obligations would not have a material adverse effect on the Company’s financial position, results of operations or cash flows. The Company currently has directors’ and officers’ insurance.

The low rates of inflation experienced in recent years have had no material impact on the financial statements of the Company. The Company attempts to recover increased costs by increasing sales prices to the extent permitted by contracts and competition.

The operating results of businesses acquired have been included in the accompanying consolidated financial statements from their respective dates of acquisition. Acquisitions made during the three years ended October 31, 2004 are discussed in Note 12 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” and contributed approximately $393.6 million (16.3%) to 2004 sales.

On August 15, 2003, the Company sold substantially all of the operating assets of Amtech Elevator, which represented the Company’s Elevator segment, to Otis Elevator. The consideration in connection with the sale included $112.4 million in cash and Otis Elevator’s assumption of trade payables and accrued liabilities. The Company realized a gain on the sale of $52.7 million, net of $32.7 million of income taxes. See “Discontinued Operation.”

The prior period financial statements presented in this Annual Report on Form 10-K have been restated for various correcting adjustments. These adjustments are discussed in more detail below. (See Note 2 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.”)

Correction of insurance reserve methodology. On December 14, 2004, the Company concluded that the methodology it was using to estimate its self-insurance reserve in its financial statements for prior years was not in accordance with generally accepted accounting principles. For the first three quarters of 2004 and the prior fiscal years presented in this Annual Report on Form 10-K, the Company consistently accrued self-insurance reserves at the low end of a range between 85 percent and 115 percent of the actuarial point estimate of claim costs and liabilities. Pursuant to SFAS No. 5, “Accounting for Contingencies” and Financial Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss,” the minimum amount in a range

may be used to accrue self-insurance reserves only if no amount within the range is a better estimate than any other amount. Because the actuarially calculated point estimate is considered a better estimate, the Company has now determined that it is, and was during these prior fiscal years, the correct liability to record.

Accordingly, effective as of October 31, 2004, the Company brought its self-insurance reserves to the actuarial point estimate of claim costs and liabilities resulting in a cumulative increase in the Company’s self-insurance reserves of $22.3 million at October 31, 2003, of which $1.5 million and $1.2 million decreased consolidated pre-tax income in 2003 and 2002, respectively.

Late adoption of an accounting pronouncement. The restated financial statements also reflect the correction of the fair value calculation for other intangibles, primarily customer relationship intangibles, under EITF Issue No. 02-17, “Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination.” EITF Issue No. 02-17 provides guidance regarding the use of certain assumptions, such as expectations of future contract renewals, in estimating the fair value of customer relationship intangible assets acquired in a business combination. EITF Issue No. 02-17 was effective for business combinations consummated after October 25, 2002, but the Company did not originally report the effect it had on the three business combinations completed in 2003 until the second quarter of 2004.

Prior to adopting EITF Issue No. 02-17, the Company assigned little or no value to acquired customer contracts and related customer relationships because the contracts generally had one year terms with 30-day cancellation provisions. With the effectiveness of EITF Issue No. 02-17, assumptions regarding expectations of future contract renewals must now be incorporated in estimating the fair value of customer relationship intangible assets. As a result of the adoption of EITF 02-17, purchase accounting for acquisitions completed in 2003 was adjusted to reflect a $13.1 million increase in acquired intangibles other than goodwill and an offsetting reduction in goodwill of $13.1 million. The reclassified intangible assets have finite lives and must therefore be amortized.

Based on the quantitative and qualitative analyses performed by the Company in the second quarter of 2004, the resulting catch-up amortization totaling $1.5 million for 2003 and the first quarter of 2004 did not warrant the restatement of those periods and, therefore, the adjustment was recorded in the second quarter of 2004. However, since the correction of the self-insurance reserves necessitated the restatement of prior periods, the Company decided also to restate its financial statements to reflect the impact of EITF 02-17.

Other adjustments. As a result of its decision to restate, the Company further determined to make three additional corrections to its financial statements, which affect the years ended October 31, 2003 and 2002. The first was to record in the proper period vacation and sick leave accruals in the Northeast region of Janitorial resulting in an increase in operating expenses and cost of goods sold of $1.2 million in 2002, with an equal and offsetting decrease in 2003. The second was a $1.3 million increase in bad debt expense resulting from the write-off of the unpaid balance of a major WTC account settled in 2002 that is not specifically covered by the outstanding insurance claim. The Company continues to pursue insurance claims for accounts receivable not collected due to the loss of Company documentation and additional property lost in the terrorist attacks of September 11, 2001. The third was a $2.0 million ($1.2 million after-tax) increase in the gain on sale of the Elevator segment resulting from the reversal of the write-off of an allocated portion of the capitalized costs associated with the prior implementation of the Company’s enterprise-wide financial system because the Company has continued to use the entire system. See Note 13 of Notes to Consolidated Financial statements contained in Item 8, “Financial Statements and Supplementary Data.” The cost is being amortized over the remainder of the original life of the system with the adjustment impacting income from continuing operations for the fourth quarter of 2003 and thereafter.

The effects of the restatement for the correction of these errors are shown below.

The effect of restatement adjustments on segment information is shown below. While virtually all insurance claims arise from the operating segments, the insurance restatement adjustments were included in unallocated corporate expenses. Had the Company allocated the insurance adjustment among the operating segments, the reported pre-tax operating profits of the operating segments, as a whole, would have been lower with an equal and offsetting change to unallocated Corporate expenses and therefore no change to consolidated pre-tax earnings for the periods presented.

See Note 2 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” and the section above entitled “Restatement Due to Correction of Errors.”

Income From Continuing Operations. Income from continuing operations in 2004 decreased 14.5% to $30.5 million ($0.61 per diluted share) from $35.6 million ($0.71 per diluted share) in 2003. The decline was primarily due to the $17.2 million ($10.4 million after tax, $0.21 per diluted share) insurance charge resulting from adverse developments in the Company’s California workers’ compensation claims believed to be related to poor claims management by a third party administrator. However, all operating segments showed improvement in income from continuing operations except for Lighting. The acquisitions completed in 2003 and 2004, new business and one fewer work day in 2004 partially offset the impact of the insurance charge.

Sales and Other Income. Sales and other income in 2004 of $2,416.2 million increased by $153.7 million, or 6.8%, from $2,262.5 million in 2003. Acquisitions completed in 2003 and 2004 contributed $131.9 million to the sales increase. Additionally, new business in Engineering, Janitorial and Security contributed to the higher sales in 2004. However, these increases were partially offset by decreased project sales in Lighting and termination of unprofitable contracts in Janitorial, Parking and Lighting.

Operating Expenses and Cost of Goods Sold. As a percentage of sales, gross profit was 9.5% in 2004 compared to 10.0% in 2003. The $17.2 million insurance charge more than offset the higher margin contributions from acquisitions in 2003 and 2004 and from the new businesses in Engineering and Security, as well as the impact of one fewer workday in 2004, termination of unprofitable contracts in Janitorial, Parking and Lighting and renegotiated contracts at Parking. The loss of profitable contracts in the Janitorial Northeast and Southeast regions and higher state unemployment insurance expenses, especially in California, also contributed to reduced gross profits.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $176.7 million in 2004 compared to $170.1 million in 2003. The increase was primarily due to an increase of $7.7 million in selling, general and administrative expenses attributable to 2003 and 2004 acquisitions, higher professional fees related to compliance with the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), higher cost associated with the transitioning in of the new Chief Operating Officer, as well as a charge in 2004 for a lump sum payment to a director. These increases were partially offset by staff reductions in Lighting and Mechanical and lower bad debt expense mostly in Janitorial.

Intangible Amortization. Intangible amortization was $4.5 million in 2004 compared to $2.0 million in 2003. The increase was due to the full year impact on 2004 of 2003 acquisitions and the amortization of intangibles related to the 2004 acquisitions of SSA and Initial.

Interest Expense. Interest expense was $1.0 million in 2004 compared to $0.8 million in 2003. The increase was primarily due to higher loan commitment fees in the first quarter of 2004.

Income Taxes. The effective tax rate for income from continuing operations was 34.3% for 2004, compared to 33.5% for 2003. The 34.3% effective tax rate reflects a higher estimated state income tax rate due to the combined income tax return filing requirements in certain states where separate income tax returns were previously filed. The income tax provision for continuing operations for 2004 included a tax benefit of $1.3 million principally attributable to adjusting the tax liability accounts after filing the 2003 income tax returns and from filing amended tax returns primarily to claim higher work opportunity tax credits. The income tax provision for continuing operations for 2003 included a tax benefit of $0.9 million principally from adjusting the tax liability accounts after filing the 2002 income tax returns and from refunds from prior years’ amended tax returns.

Under SFAS No. 131 criteria, Janitorial, Parking, Security, Engineering, and Lighting are reportable segments. The operating results of the former Elevator segment are reported separately under discontinued operation and are excluded from the table below, see “Discontinued Operation.” All other services are included in the “Other” segment. Corporate expenses are not allocated. Additionally, while virtually all insurance claims arise from the operating segments, the insurance restatement adjustments were included in unallocated corporate expenses. Had the Company allocated these insurance charges among the operating segments, the reported pre-tax operating profits of the operating segments, as a whole, would have been lower

Janitorial. Sales for Janitorial increased by $74.6 million, or 5.5%, from 2003 to 2004. The higher sales were primarily due to a $65.0 million increase in sales from the Horizon, HGO and Initial acquisitions completed in 2003 and 2004. Additionally, sales increased due to new business in the Southwest and Northern California regions, expansion of service to existing customers in the Midwest region, and price adjustments to pass through a portion of union wage, workers’ compensation insurance and state unemployment insurance increases in the Southwest and Midwest regions. These increases were substantially offset by decreased sales in the Northeast, Southeast and South Central regions primarily due to loss of profitable contracts to competition, as well as the termination of unprofitable contracts.

Operating profit improved by $6.7 million, or 12.4%, in 2004 compared to 2003. The increases in operating profits of Horizon, HGO and Initial were $3.4 million. Additionally, Janitorial 2004 operating profit included a $2.5 million benefit from lower bad debt expense and $2.3 million from one fewer work day in 2004, partially offset by increase in union wage, workers’ compensation insurance and state unemployment insurance not fully absorbed through increased pricing.

Other operating profit contributions from the Northeast, Northwest, Midwest and Northern California were more than offset by the impact of lost businesses in Southeast and South Central regions, and increased staffing and legal expenses in the Southwest region. The factors contributing to the operating profit improvement in the Northeast were the absence of costs associated with management changes which affected 2003, as well as termination of unprofitable contracts. The Northwest region operating profits improved primarily due to lower legal expenses. The 2004 operating profits in the Midwest and Northern California regions benefited from increased sales.

Parking. Parking sales increased by $4.0 million, or 1.0%, while operating profits increased by $3.3 million, or 52.5%, during 2004 compared to 2003. The 2003 Valet acquisition contributed $7.7 million to the sales increase. Despite the impact of severe weather conditions in various parts of the country on travel and airport parking during the first six months of 2004, airport sales at each location generally improved with increases in airline travel. However, these improvements were more than offset by the termination of two airport contracts in 2003. The increase in operating profits resulted from the termination of unprofitable airport contracts in 2003, increased activity at remaining airport locations, improved margins on renegotiated contracts, as well as new airport and commercial contracts. Additionally, operating profit for 2004 included incentive fee income and property tax benefits from two airport operations. The operating profit for 2003 included the receipt of a $1.1 million settlement for prior period services performed related to a managed parking lot contract in Houston, Texas, largely offset by a provision of $1.0 million for parking sales taxes for prior years based on a sales tax audit.

Security. Security sales increased $65.0 million, or 40.7%, primarily due to the SSA acquisition, which contributed $59.2 million to the sales increase, and the net effect of new business, including major contracts awarded in the third quarter of 2004. Operating profits increased $2.5 million, or 38.8%, primarily due to the $2.1 million profit contribution from SSA, operating profit from new business and slightly improved margins on existing business resulting from a rate increase program that absorbed wage increases and part of the state unemployment insurance increase, especially in California.

Engineering. Sales for Engineering increased $20.5 million, or 11.4%, during 2004 compared to 2003 due to successful sales initiatives resulting in the expansion of services to existing customers and new business in eight of nine regions in the country, most significantly in Northern California. Operating profits increased $2.1 million or 20.7% during 2004 compared to 2003 due to higher sales, partially offset by the increased management staff and the higher state unemployment insurance expense in California.

Lighting. Lighting sales decreased $15.5 million, or 12.1%, during 2004 compared to 2003 primarily due to significantly fewer retrofit projects, lower prices on renewed national contracts as a result of competitive pressures and the termination of certain underperforming national contracts throughout 2003. Operating profits decreased $2.8 million or 50.0% primarily due to decrease in sales, partially offset by savings from staff reductions.

Other. Sales for the Other Segment increased by $4.1 million, or 9.0%, for 2004 compared to 2003, while operating profit increased $0.1 million, or 11.1%. Higher sales were solely attributable to the new major contract awarded to Facility Services as sales at Mechanical were flat. The increase in operating profit was primarily due to higher sales in Facility Services from new contracts along with staff reductions at both Mechanical and Facility Services, partially offset by lower margins at Mechanical primarily due to higher union benefits.

Corporate. Corporate expenses for 2004 increased by $18.8 million, or 64.3%, compared to 2003, primarily due to the $17.2 million insurance charge in 2004 which resulted from adverse developments in the Company’s California workers’ compensation claims believed to be related to poor claims management by a third party administrator. (See Note 3 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.”) While virtually all insurance claims arise from the operating segments, this adjustment is included in unallocated corporate expenses. Had the Company allocated the insurance restatement adjustment and 2004 adverse development among the operating segments, the reported pre-tax operating profits of the operating segments, as a whole, would have been reduced by $19.3 million and $1.5 million in 2004 and 2003, respectively, with an equal and offsetting change to unallocated Corporate expenses and therefore no change to consolidated pre-tax earnings for 2004 and 2003.

Corporate expenses in 2004 also included increases in professional fees primarily related to Sarbanes-Oxley Act compliance and preparation of amended tax returns, higher cost associated with the transitioning in of the new Chief Operating Officer, and a charge in the fourth quarter of 2004 for the lump sum payment of $0.3 million to the non-employee Chairman of the Executive Committee of the Board of Directors of ABM. These increases were partially offset by the absence of fees related to the due diligence performed in 2003 for a

Income From Continuing Operations. Income from continuing operations in 2003 was $35.6 million ($0.71 per diluted share), a decrease of $6.1 million or 14.5% from $41.7 million ($0.82 per diluted share) in 2002. A number of items affected the comparability of the fiscal years. Fiscal 2002 results benefited from a $10.0 million pre-tax gain ($6.3 million after-tax, $0.12 per diluted share) from the receipt of two partial settlements totaling $13.3 million from the WTC insurance claim, and $2.0 million of income tax benefit ($0.04 per diluted share) from the adjustment of prior-year estimated tax liabilities, partially offset by $3.2 million of costs ($2.0 million after-tax, $0.04 per diluted share) associated with senior management changes. Fiscal 2003 results included $9.6 million ($6.0 million after-tax, $0.12 per diluted share) of higher operating profits contributed by acquisitions that did not significantly impact results until after July 31, 2002. However, the positive impact of the acquisitions on fiscal 2003 results was more than offset by declines in operating profits in 2003 from Janitorial, primarily in the Northeast and Northwest regions, as well as Lighting and Parking. (See “Segment Information.”)

Sales. Sales in 2003 of $2,262.5 million increased by $194.4 million or 9.4% from $2,068.1 million in 2002. Acquisitions that did not significantly impact results until after July 31, 2002 contributed $182.0 million to the sales increase, primarily Lakeside, Horizon, Valet and HGO. The remainder of the increase was attributable to new business, partially offset by the impact of contract terminations and declines in sales due to increased vacancies and decreased project work and extra services as customers tightened their budgets.

Operating Expenses and Cost of Goods Sold. As a percentage of sales, operating expenses and cost of goods sold were 90.0% for 2003, compared to 89.9% for 2002. Consequently, as a percentage of sales, the Company’s gross profit of 10.0% in 2003 was slightly lower than the gross profit of 10.1% in 2002. The decline was due primarily to lower margins on new business, delays in planned terminations of unprofitable contracts in the Northeast region of Janitorial, a decline in sales from higher margin business due to increased vacancies

in commercial office buildings, and higher reimbursements for out-of-pocket expenses from managed parking lot clients for which Parking had no margin benefit. Additionally, operating expenses for 2003 included higher insurance costs that could not be fully offset by price increases.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for 2003 were $170.1 million compared to $156.3 million for 2002. The $13.8 million increase included $12.6 million additional expenses contributed by acquisitions that did not impact results until after July 31, 2002, higher insurance costs, and annual salary increases. Additionally, corporate expenses in 2003 included higher directors and officers’ insurance costs and professional fees. However, 2002 also reflected a total of $7.0 million of charges including $3.2 million of costs associated with the elimination of the Chief Administrative Officer position, the early retirement of the former Corporate General Counsel, the replacement of the President of Facility Services, as well as $5.1 million higher bad debt provision in 2002 than in 2003. As a percentage of sales, selling, general and administrative expenses were 7.5% in 2003 and 2002.

Intangible Amortization. Intangible amortization was $2.0 million for the year ended October 31, 2003 compared to $1.1 million for the year ended October 31, 2002. As a result of the adoption of EITF 02-17 in 2003, a larger portion of the cost of business acquired was allocated to amortizable intangibles with a corresponding reduction in the amount allocated to goodwill.

Interest Expense. Interest expense, which includes loan amortization and commitment fees for the revolving credit facility, was $0.8 million in 2003 compared to $1.1 million in 2002. The decrease was primarily due to lower borrowings and interest rates during 2003, compared to 2002.

Income Taxes. The effective federal and state income tax rate for income from continuing operations was 33.5% for 2003, compared to 32.0% for 2002. The income tax provision for continuing operations for 2002 included a tax benefit of $2.0 million principally from tax liability adjustments made after the filing of the 2001 income tax returns, while 2003 included $0.7 million of tax benefit from the filing of the 2002 state and federal tax returns and $0.2 million of income tax refund from filing prior years’ amended returns.

Under SFAS No. 131 criteria, Janitorial, Parking, Engineering, Security, and Lighting are reportable segments. The operating results of the former Elevator segment are reported separately under discontinued operation and are excluded from the table below, see “Discontinued Operation.” All other services are included in the “Other” segment. Corporate expenses are not allocated. Additionally, while virtually all insurance claims arise from the operating segments, the insurance restatement adjustments were included in unallocated corporate expenses. Had the Company allocated these insurance charges among the operating segments, the reported pre-tax operating profits of the operating segments, as a whole, would have been lower with an equal and offsetting change to unallocated Corporate expenses and therefore no change to consolidated pre-tax earnings for the periods presented.

Janitorial. Sales for Janitorial were $171.2 million or 14.3% higher in 2003 than in 2002, primarily due to the $172.8 million contribution from Lakeside, Horizon and HGO. These increases in sales were substantially offset by the termination of unprofitable jobs in the Northeast and Southeast regions, the termination of a major contract due to collection issues in the Northwest region, and declines in sales from existing contracts due to increased vacancies and decreased extra services as customers tightened their budgets. In addition, sales for 2002 included $1.0 million of interest on receivables from the resolution of past-due balances with two customers.

Operating profits in 2003 were $2.1 million or 4.0% higher than in 2002 primarily due to the $8.8 million of operating profit improvement from Lakeside, Horizon and HGO, which was substantially offset by declines in operating profits in the Northeast and Northwest regions of $4.0 million and $2.5 million, respectively.

The decline in operating profits in the Northeast region of Janitorial, especially in New York City, was primarily due to new business priced at lower margins as a result of competitive pressures and a decline in sales from higher margin business due to increased vacancies. The benefit of terminating some unprofitable contracts has been offset by customer cancellations of some profitable service contracts. Further, first quarter 2002 results for New York City operations benefited from the extra clean-up work performed following the September 11, 2001 terrorist attacks. The region’s operating profits in 2003 were impacted by legal fees associated with a lawsuit related to the collection of a past-due accounts receivable from a large former customer and costs associated with implementing management changes in this region.

The decline in operating profits in the Northwest region of Janitorial was due to the loss of a major contract, reduced revenues from existing contracts and higher legal fees primarily due to a gender discrimination lawsuit filed against ABM by a former employee in September 1999 in the State of Washington. ABM has not recorded any liability in its financial statements associated with the damages and costs awarded to the former employee. However, as of October 31, 2003, ABM has incurred and recorded legal fees of $0.3 million associated with the appeal. See Item 3, “Legal Proceedings.”

Parking. Parking sales increased by $17.1 million or 4.7%, while operating profits decreased by $0.7 million or 10.2% during 2003 compared to 2002. The sales increase included $11.5 million of higher reimbursements for out-of-pocket expenses from managed parking lot clients for which Parking had no margin benefit, sales from the Valet acquisition, and the receipt of a $1.1 million settlement for prior period services performed related to a managed parking lot contract in Houston, Texas. These sales increases were partially offset by declines in sales from the hi-tech sectors of San Francisco and Seattle where the economic downturn resulted in high office building vacancies, the loss of a major contract in Seattle, and the declines in sales at airport and hotel facilities. The decrease in operating profits was primarily due to increased insurance costs, including self-insured reserve amounts, which could not be fully offset by price increases, and the adverse effect of the military conflict in Iraq and the outbreak of Severe Acute Respiratory Syndrome (“SARS”) on parking at airport and hotel facilities, as well as a provision of $1.0 million for parking sales taxes for prior years based on a pending sales tax audit. Additionally, operating profit for 2002 included a $0.5 million gain on the early termination of a parking lease.

Security. Security sales increased $19.1 million or 13.6% for 2003 compared to 2002 primarily due to an increase of $9.5 million in the sales contributed by the operations acquired from Triumph Security Corporation in New York City on January 26, 2002 and Foulke Associates, Inc. located throughout Georgia, Florida, Maryland, Pennsylvania and Virginia, on February 28, 2002. In addition, the award of a national contract from a Real Estate Investment Trust (“REIT”) added $8.4 million in sales for 2003. Operating profits increased by $0.8 million or 15.0% due to increased sales and tight control over operating expenses, partially offset by start-up costs incurred in 2003 related to the new contract with the REIT.

Engineering. Engineering sales increased $6.7 million or 3.8% during 2003 compared to 2002 primarily due to new business, offset in part by a $7.0 million decline in sales from existing large customers that have reduced their spending. Operating profits decreased by $0.1 million or 1.1% from 2002 to 2003 primarily due to settlements of disputed amounts with two customers totaling $0.5 million, a settlement with a competing firm on a bid-related issue requiring payment while the customer contract is in force, and consulting costs associated with a study to assist Engineering to expand into new markets and broaden the scope of its services.

Lighting. Lighting sales decreased $3.3 million or 2.5% and operating profits decreased $2.6 million or 31.7% during 2003 compared to 2002. The decrease in sales, particularly in the Northeast and North Central regions, was primarily due to significantly less retrofit projects in 2003 compared to 2002 and the termination of several national service contracts during 2003. Lighting’s customers, especially retailers, significantly reduced their capital budgets and spent less on energy saving initiatives in 2003. The decline in operating profits was primarily due to lower sales and higher selling, general and administrative expenses, partially offset by a $0.3 million gain recognized in the first quarter of 2003 related to the early termination of a contract. The

Other. Sales for the Other segment were down $16.6 million or 26.7% in 2003 compared to 2002. The lower sales in 2003 were primarily due to decreased capital project work as customers tightened their budgets and Facility Services’ loss of the Consolidated Freightways account due to bankruptcy in September 2002. The Other segment produced a profit of $1.3 million in 2003 compared to a loss of $1.2 million in 2002. Operating loss in 2002 included a $1.2 million write-down of work-in-progress in Mechanical, a $1.3 million bad debt provision in Facility Services for the Consolidated Freightways account, as well as $0.4 million in costs associated with the replacement of the President of Facility Services.

Corporate. Corporate expenses for 2003 were flat compared to 2002. However, 2002 included $2.8 million of costs associated with the elimination of the Chief Administrative Officer position and the early retirement of the former General Counsel. Corporate expenses for 2003 reflected a $1.1 million increase in premiums paid for directors and officers’ liability insurance (from $0.3 million in 2002 to $1.4 million in 2003), as well as higher professional fees related to the due diligence performed for a proposed acquisition that was not completed, Sarbanes-Oxley compliance, and additional use of outside legal counsel while in the process of recruiting a new General Counsel. The new General Counsel was hired on May 1, 2003.

On August 15, 2003, the Company completed the sale of substantially all of the operating assets of Amtech Elevator to Otis Elevator. The operating assets sold included customer contracts, accounts receivable, facility leases and other assets, as well as a perpetual license to the name “Amtech Elevator Services.” The consideration in connection with the sale included $112.4 million in cash and Otis Elevator’s assumption of trade payables and accrued liabilities. The Company realized a gain on the sale of $52.7 million, which is net of $32.7 million of income taxes, of which $30.5 million was paid with the extension of the federal and state income tax returns on January 15, 2004.

The operating results and cash flows of the Elevator segment have been reported as discontinued operation in the accompanying consolidated financial statements. Income taxes have been allocated using the estimated combined federal and state tax rates applicable to Elevator for each of the periods presented.

The operating results of the discontinued operation for the years ended October 31, 2003 and 2002 are shown below. Operating results for 2003 are for the period beginning November 1, 2002 through the date of sale, August 15, 2003.

On November 1, 2004, the Company acquired substantially all of the operating assets of Sentinel Guard Systems (“Sentinel”), a Los Angeles-based company, from Tracerton Enterprises, Inc. Sentinel, with annual revenues in excess of $13.0 million, was a provider of security officer services primarily to high-rise, commercial and residential structures. In addition to its Los Angeles business, Sentinel also operates an office in San Francisco. Sentinel operations have been merged into the Company’s American Commercial Security Services California operations. Under this transaction, the Company acquired customer accounts receivable and other assets of approximately $1.3 million and assumed liabilities of approximately $1.7 million. The consideration paid by the Company included an initial payment of $3.4 million in shares of ABM’s common stock. Additional consideration includes contingent payments, based on achieving certain revenue and

On December 22, 2004, the Company acquired the operating assets of Colin Service Systems, Inc., (“Colin Service”), a facility services company based in New York, for an initial payment of approximately $13.6 million in cash. Under certain conditions, additional consideration may include an estimated $1.9 million payment upon the collection of the acquired receivables and three annual contingent cash payments each for approximately $1.1 million, which are based on achieving annual revenue targets over a three-year period. With annual revenues in excess of $70 million, Colin Service is a provider of professional onsite management, commercial office cleaning, specialty cleaning, snow removal and engineering services. Under the transaction, the Company also acquired customer accounts receivables of $7.8 million and other operating assets. With the exception of office leases, the Company did not assume any of Colin Service’s liabilities.

In July 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 became effective in fiscal years beginning after December 15, 2001, with early adoption permitted. The Company adopted the provisions of SFAS No. 142 beginning with the first quarter of 2002. In accordance with this standard, goodwill is no longer amortized, but is subject to an annual assessment for impairment. The Company is required to perform goodwill impairment tests on an annual basis and, in certain circumstances, between annual tests. As of October 31, 2004, no impairment of the Company’s goodwill carrying value has been indicated.

In August 2001, the FASB issued SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 became effective for fiscal years beginning after December 15, 2001. SFAS No. 144 supercedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and reporting provisions of Accounting Principles Board (“APB”) Opinion No. 30, “Reporting Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” SFAS No. 144 requires that the same accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, and it broadens the presentation of discontinued operations to include more disposal transactions. SFAS No. 144 retains the requirements of SFAS No. 121 to recognize an impairment loss if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and to measure the impairment loss as the difference between the carrying amount and fair value of the asset. The Company’s adoption of SFAS No. 144 did not have an impact on its financial position, results of operations or liquidity.

In January 2002, the EITF released Issue No. 01-14, “Income Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred,” which the Company adopted in 2002. For the Company’s Parking segment this pronouncement requires both revenues and expenses be recognized, in equal amounts, for costs directly reimbursed from its managed parking lot clients. Previously, expenses directly reimbursed under managed parking lot agreements were netted against the reimbursement received. EITF No. 01-14 did not change the income statement presentation of revenues and expenses of any other segments and had no impact on the Company’s operating profits or net income. Parking sales related solely to the reimbursement of expenses totaled $215.8 million, $215.3 million and $203.8 million for years ended October 31, 2004, 2003 and 2002, respectively.

In October 2002, the EITF released Issue No. 02-17, “Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination.” EITF Issue No. 02-17 provides guidance regarding the use of certain assumptions, such as expectations of future contract renewals, in estimating the fair value of customer relationship intangible assets acquired in a business combination. EITF Issue No. 02-17 was effective for business combinations consummated after October 25, 2002. The impact of the adoption of EITF 02-17 is discussed in Note 2 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” and the section above entitled “Restatement Due to Correction of Errors.”

In November 2002, the EITF issued Issue No. 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.” EITF Issue No. 02-16 provides accounting guidance on how a customer (end user) and a reseller should characterize certain consideration received from a vendor and when to recognize and how to measure that consideration in the income statement. EITF Issue No. 02-16 was effective for fiscal periods beginning after December 15, 2002 for resellers, with early application permitted, while for customers it was effective prospectively for arrangements entered into after November 21, 2002. The Company, as a reseller of certain supplies and equipment, adopted the provisions of EITF Issue No. 02-16 in 2003. The Company’s adoption of EITF Issue No. 02-16 did not have a material impact on its financial position, results of operations or liquidity.

In November 2002, the FASB issued Financial Interpretation (“FIN”) No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of the Indebtedness of Others.” FIN 45 requires that upon issuance of a guarantee, the guarantor must disclose and recognize a liability for the fair value of the obligation it assumes under the guarantee. The initial recognition and measurement provisions of FIN 45 are effective for guarantees issued or modified after December 31, 2002. The Company’s adoption of FIN 45 did not have an impact on its financial position, results of operations or liquidity. (See Note 16 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” and the section above entitled “Off-Balance Sheet Arrangements.”)

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.” SFAS No. 148 amended SFAS No. 123 “Accounting for Stock-Based Compensation” to provide for alternative methods of transition to SFAS No. 123 and amended disclosure provisions. SFAS No. 148 was effective for financial statements for fiscal years ending after December 15, 2002. The Company continues to account for stock-based employee compensation plans using the intrinsic value method under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees” and adopted the disclosure provisions of SFAS No. 148 effective November 1, 2002.

In May 2003, the EITF released Issue No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” EITF Issue No. 00-21 provides accounting guidance on when and how an arrangement involving multiple deliverables should be divided into separate units of accounting. EITF Issue No. 00-21 is effective prospectively for arrangements entered into in fiscal periods beginning after June 15, 2003. The Company adopted the provisions of EITF Issue No. 00-21 effective in the fourth quarter of 2003. The Company’s Lighting segment earns revenues under service contracts that have multiple deliverables including initial services of relamping or retrofitting and future services of periodic maintenance. Lighting’s multiple deliverable contracts do not meet the criteria for treating the deliverables as separate units of accounting, hence, the revenues and direct costs associated with the initial services are deferred and amortized over the service period on a straight-line basis. This is consistent with the revenue recognition methodology used by Lighting prior to the adoption of EITF Issue No. 00-21. Therefore, the adoption had no material effect on the Company’s results of operations or financial condition.

In December 2003, the FASB issued FIN 46R, a revision to FIN 46, “Consolidation of Variable Interest Entities,” which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R clarifies some of the provisions of FIN 46 and exempts certain entities from its requirements. FIN 46R was effective at the end of the first interim period ending after March 15, 2004. The Company’s adoption of FIN 46R did not have a material impact on its financial position, results of operations or liquidity.

In December 2003, the FASB issued revised SFAS No. 132 (revised 2003), “Employer’s Disclosure about Pensions and Other Post-Retirement Benefits.” SFAS No. 132R revised employers’ disclosure about pension plans and other post-retirement benefit plans. SFAS No. 132R requires additional disclosures in annual financial statements about the types of plan assets, investment strategy, measurement dates, plan obligations, cash flows, and components of net periodic benefit cost of defined benefit pension plans and other post-retirement benefit plans. The annual disclosure requirements are effective for fiscal years ending after December 15, 2003. SFAS No. 132R also requires interim disclosure of the elements of net periodic benefit cost and the total amount of contributions paid or expected to be paid during the current fiscal year if

significantly different from amounts previously disclosed. The interim disclosure requirements of SFAS No. 132R are effective for interim periods beginning after December 15, 2003. The Company’s adoption of SFAS No. 132R did not have a material impact on its financial position, results of operations or liquidity. (See Note 7 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.”)

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” This statement is a revision to SFAS No. 123, “Accounting for Stock-Based Compensation” and APB Opinion No. 25, “Accounting for Stock Issued to Employees.” This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, primarily focusing on the accounting for transactions in which an entity obtains employee services in share-based payment transactions. Entities will be required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service, the requisite service period (usually the vesting period), in exchange for the award. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models. If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. This statement is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. In accordance with the standard, the Company will adopt SFAS No. 123R effective August 1, 2005.

Upon adoption, the Company has two application methods to choose from: the modified-prospective transition approach or the modified-retrospective transition approach. Under the modified-prospective transition method the Company would be required to recognize compensation cost for share-based awards to employees based on their grant-date fair value from the beginning of the fiscal period in which the recognition provisions are first applied as well as compensation cost for awards that were granted prior to, but not vested as of the date of adoption. Prior periods remain unchanged and pro forma disclosures previously required by SFAS No. 123 continue to be required. Under the modified-retrospective transition method, the Company would restate prior periods by recognizing compensation cost in the amounts previously reported in the pro forma disclosure under SFAS No. 123. Under this method, the Company is permitted to apply this presentation to all periods presented or to the start of the fiscal year in which SFAS No. 123R is adopted. The Company would follow the same guidelines as in the modified-prospective transition method for awards granted subsequent to adoption and those that were granted and not yet vested. The Company has not yet determined which methodology it will adopt but believes that the impact the adoption of SFAS No. 123R will have on its financial position or results of operations will approximate the magnitude of the stock-based employee compensation cost disclosed in Note 10 of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” pursuant to the disclosure requirements of SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.”

The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses. On an ongoing basis, the Company evaluates its estimates, including those related to self-insurance reserves, allowance for doubtful accounts, valuation allowance for the net deferred income tax asset, estimate of useful life of intangible assets, impairment of goodwill, and contingencies and litigation liabilities. The Company bases its estimates on historical experience, independent valuations and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Self-Insurance Reserves. Certain insurable risks such as general liability, automobile property damage and workers’ compensation are self-insured by the Company. However, commercial policies are obtained to provide coverage for certain risk exposures subject to specified limits. Accruals for claims under the Company’s self-insurance program are recorded on a claim-incurred basis. The Company uses an independent actuarial firm to provide an estimate of the Company’s claim costs and liabilities annually. In prior years, the Company consistently accrued its self-insurance reserves at the low end of a range between 85 percent to 115 percent of the actuarial point estimate of claim costs and liabilities. On December 14, 2004, the Company concluded that the methodology used in prior years was not in accordance with generally accepted accounting principles. Pursuant to SFAS No. 5, “Accounting for Contingencies” and FIN 14, “Reasonable Estimation of the Amount of a Loss,” the minimum amount in a range may be used to accrue self-insurance reserves only if no amount within the range is a better estimate than any other amount. Because the actuarially calculated point estimate is considered a better estimate, the Company has now determined that it is, and was during those prior fiscal years, the correct liability to record. Hence, the Company now accrues the actuarial point estimate.

Using the annual actuarial report, management develops annual insurance costs for each operation, expressed as a rate per $100 of exposure (labor and revenue) to estimate insurance costs on a quarterly basis. Additionally, management monitors new claims and claim development to assess the adequacy of the insurance reserves. The estimated future charge is intended to reflect the recent experience and trends. Trend analysis is complex and highly subjective. The interpretation of trends requires the knowledge of all factors affecting the trends that may or may not be reflective of adverse development (e.g., change in regulatory requirements and change in reserving methodology). If the trends suggest that the frequency or severity of claims incurred increased, the Company might be required to record additional expenses for self-insurance liabilities. Additionally, the Company uses third party service providers to administer its claims and the performance of the service providers can impact the reserves.

Allowance for Doubtful Accounts. The Company’s accounts receivable arise from services provided to its customers and are generally due and payable on terms varying from the receipt of invoice to net thirty days. The Company estimates an allowance for accounts it does not consider fully collectible. Changes in the financial condition of the customer or adverse development in negotiations or legal proceedings to obtain payment could result in the actual loss exceeding the estimated allowance.

Deferred Income Tax Asset Valuation Allowance. Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. If management determines it is more likely than not that the net deferred tax asset will be realized, no valuation allowance is recorded. At October 31, 2004, the net deferred tax asset was $89.7 million and no valuation allowance was recorded. Should future income be less than anticipated, the net deferred tax asset may not be fully recoverable.

Other Intangible Assets Apart from Goodwill. The Company engages a third party valuation firm to independently appraise the value of intangible assets acquired in larger sized business combinations. For smaller acquisitions, the Company performs an internal valuation of the intangible assets using the discounted cash flow technique. The customer relationship intangible assets are being amortized using the sum-of-the-years-digits method over the useful lives consistent with the estimated useful life considerations used in the determination of their fair values. The accelerated method of amortization reflects the pattern in which the economic benefits of the customer relationship intangible asset are expected to be realized. Trademarks and trade names are being amortized over their useful lives using the straight-line method. Other intangible assets, consisting principally of contract rights, are being amortized over the contract periods using the straight-line method. At least annually, the Company evaluates the remaining useful life of an intangible asset to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of the asset’s remaining useful life changes, the remaining carrying amount of the intangible asset would be amortized over the revised remaining useful life. Furthermore, the remaining unamortized book value of

intangibles will be reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets.” The first step of an impairment test under SFAS No. 144 is a comparison of the future cash flows, undiscounted, to the remaining book value of the intangible. If the future cash flows are insufficient to recover the remaining book value, a fair value of the asset, depending on its size, will be independently or internally determined and compared to the book value to determine if an impairment exists.

Goodwill. In accordance with SFAS No. 142, “Goodwill and Other Intangibles,” goodwill is no longer amortized. Rather, the Company performs goodwill impairment tests on an at least an annual basis, in the fourth quarter, using the two-step process prescribed in SFAS No. 142. The first step is to evaluate for potential impairment by comparing the reporting unit’s fair value with its book value. If the first step indicates potential impairment, the required second step allocates the fair value of the reporting unit to its assets and liabilities, including recognized and unrecognized intangibles. If the implied fair value of the reporting unit’s goodwill is lower than its carrying amount, goodwill is impaired and written down to its implied fair value. The fair value of the reporting unit, if required to be determined, will be independently appraised.

Contingencies and Litigation. ABM and certain of its subsidiaries have been named defendants in certain litigations arising in the ordinary course of business including certain environmental matters. When a loss is probable and estimable the Company records the estimated loss. The actual loss may be greater than estimated, or litigation where the outcome was not considered probable might result in a loss.

The disclosure and analysis in this Annual Report on Form 10-K contain some forward-looking statements that set forth anticipated results based on management’s plans and assumptions. From time to time, the Company also provides forward-looking statements in other written materials released to the public as well as oral forward-looking statements. Such statements give the Company’s current expectations or forecasts of future events; they do not relate strictly to historical or current facts. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, and the outcome of contingencies and other uncertainties, such as legal proceedings, and financial results. Management tries, wherever possible, to identify such statements by using words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project” and similar expressions.

Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they evaluate forward-looking statements.

The Company undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. Investors are advised, however, to consult any future disclosures the Company makes on related subjects in its Form 10-Q and Form 8-K reports to the Securities and Exchange Commission. Set forth below are factors that the Company thinks, individually or in the aggregate, could cause the Company’s actual results to differ materially from past results or those anticipated, estimated or projected. The Company notes these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. The public should understand that it is not possible to predict or identify all such factors. Consequently, the following should not be considered to be a complete discussion of all potential risks or uncertainties.

A decline in commercial office building occupancy and rental rates could affect the Company’s sales and profitability. The Company’s sales directly depend on commercial real estate occupancy levels and the rental income of building owners. Decreases in these levels reduce demand and also create pricing pressures on building maintenance and other services provided by the Company. In certain geographic areas and service segments, the Company’s most profitable work includes jobs performed for tenants in buildings in which it performs building services for the property owner or management company. A decline in occupancy rates could result in a decline in fees paid by landlords as well as tenant work which would lower sales and margins.

In addition, in those areas of its business where the Company’s workers are unionized, decreases in sales can be accompanied by relative increases in labor costs if the Company is obligated by collective bargaining agreements to retain workers with seniority and consequently higher compensation levels.

An increase in costs that the Company cannot pass on to customers could affect profitability. The Company attempts to negotiate contracts under which its customers agree to pay for increases in certain underlying costs associated with providing its services, particularly labor costs, workers’ compensation and other insurance costs, and any applicable payroll taxes. If the Company cannot pass through increases in its costs to its customers under its contracts in a timely manner or at all, then the Company’s expenses will increase without a corresponding increase in sales. Further, if the Company’s sales decline, the Company may not be able to reduce its expenses correspondingly or at all.

The financial difficulties or bankruptcy of one or more of the Company’s major customers could adversely affect results. The Company’s ability to collect its accounts receivable and future sales depend, in part, on the financial strength of its customers. The Company estimates an allowance for accounts it does not consider collectible and this allowance adversely impacts profitability. In the event customers experience financial difficulty, and particularly if bankruptcy results, profitability is further impacted by the Company’s failure to collect accounts receivable in excess of the estimated allowance. Additionally, the Company’s future sales would be reduced.

The Company could experience major collective bargaining disputes that would lead to the loss of sales or expense increases. Approximately 41% of the Company’s employees are subject to collective bargaining agreements at the local level. When one or more of the collective bargaining agreements are subject to renegotiation, the Company and the union may not agree on terms, which could result in a strike, work slowdown or other job action at one or more of the Company’s locations, which could disrupt the Company in providing its services. Alternatively, the result of renegotiating a collective bargaining agreement could be a substantial increase in labor and benefits expenses that the Company could be unable to pass through to its customers for some period of time, if at all. In addition, the Company’s non-union competitors may attempt to use any disputes that the Company has with its unions to the competitors’ advantage in gaining market share.

The Company is subject to intense competition. The Company believes that each aspect of its business is highly competitive, and that such competition is based primarily on price and quality of service. The Company provides nearly all its services under contracts originally obtained through competitive bidding. The low cost of entry to the facility services business has led to strongly competitive markets made up of large numbers of mostly regional and local owner-operated companies, located in major cities throughout the United States and in British Columbia, Canada (with particularly intense competition in the janitorial business in the Southeast and South Central regions of the United States). The Company also competes with the operating divisions of a few large, diversified facility services and manufacturing companies on a national basis. Indirectly, the Company competes with building owners and tenants that can perform internally one or more of the services provided by the Company. These building owners and tenants might have a competitive advantage when the Company’s services are subject to sales tax and internal operations are not. Furthermore, competitors may have lower costs because privately-owned companies operating in a limited geographic area may have significantly lower labor and overhead costs. These strong competitive pressures could inhibit the Company’s success in bidding for profitable business and its ability to increase prices even as costs rise, thereby reducing margins.

The Company’s success depends on its ability to preserve its long-term relationships with its customers. The Company’s contracts with its customers are generally cancelable upon relatively short notice. However, the business associated with long-term relationships is generally more profitable than that from short-term relationships because the Company incurs start-up costs with many new contracts, particularly for training, operating equipment and uniforms. Once these costs are expensed or fully depreciated over the appropriate periods, the underlying contracts become more profitable. Therefore, the Company’s loss of long-term customers could have an adverse impact on its profitability even if the Company generates equivalent sales from new customers.

Weakness in airline travel and the hospitality industry could adversely impact the Company’s Parking results. A significant portion of the Company’s parking sales is tied to the numbers of airline passengers and hotel guests. Parking results were adversely affected after the terrorist attacks of September 11, 2001, during the SARS crisis and at the start of the military conflict in Iraq as people curtailed both business and personal travel and hotel occupancy rates declined. As airport security precautions expanded, the decline in travel was particularly noticeable at airports associated with shorter flights for which ground transportation became the alternative. While it appears that airline travel and the hospitality industry are now recovering, there can be no assurance that airline travel will reach previous levels or increased concerns about terrorism, disease, or other adversities will not again reduce travel, adversely impacting Parking sales and operating profits.

Continued low levels of capital investments by customers could adversely impact the results at Lighting and Mechanical segments. While the economy appears to be recovering in recent months, the commercial office building and retail sectors have been slow to make capital expenditures for lighting and mechanical projects. While we expect capital investment in these areas to increase in the coming year, customers’ capital project budgets could continue at low levels, which would adversely impact the Company’s results.

Acquisition activity could slow or be unsuccessful. A significant portion of the Company’s historic growth has come through acquisitions. A slowdown in acquisitions could lead to a slower growth rate. Because new contracts frequently involve start-up costs, sales associated with acquired operations generally have higher margins than new sales associated with internal growth. Therefore a slowdown in acquisition activity could lead to constant or lower margins, as well as lower revenue growth. Because contracts in the Company’s businesses are generally short-term and personal relationships are significant in retaining customers, the Company relies on its ability to retain the managers of its acquired businesses. An inability to retain the services of the former owners and senior managers of acquired businesses could adversely affect the projected benefits of an acquisition. Moreover, the inability to successfully integrate acquisitions into the Company or to achieve the operational efficiencies anticipated in acquisitions could adversely impact sales and costs.

The Company incurs significant accounting and other control costs, which could increase. As a publicly-traded corporation, the Company incurs certain costs to comply with regulatory requirements. Most of the Company’s competitors are privately-owned so these costs can be a competitive disadvantage for the Company. Should the Company’s sales decline, its costs associated with regulatory compliance will rise as a percentage of sales and under certain circumstances could increase in dollars as well.

A change in the frequency or severity of claims against the Company, a deterioration in claims management, or the cancellation or nonrenewal of the Company’s primary insurance policies could adversely affect the Company’s results. While the Company attempts to establish adequate self-insurance reserves using an annual actuarial study, unanticipated increases in the frequency or severity of claims against the Company would have an adverse financial impact. Also, where the Company self-insures, a deterioration in claims management, whether by the Company or by a third party claims administrator, could lead to delays in settling claims thereby increasing cla


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the Fiscal Year Ended October 31, 2004

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the Transition Period from to


Delaware		94-1369354
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

160 Pacific Avenue, Suite 222, San Francisco, California (Address of principal executive offices)		94111 (Zip Code)


Title of Each Class		Name of Each Exchange on Which Registered

Common Stock, $.01 par value		New York Stock Exchange
Preferred Stock Purchase Rights		New York Stock Exchange


PART I
Item 1.	Business	2
	Executive Officers of the Registrant	6
Item 2.	Properties	7
Item 3.	Legal Proceedings	7
Item 4.	Submission of Matters to a Vote of Security Holders	7

PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8
Item 6.	Selected Financial Data	9
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 8.	Financial Statements and Supplementary Data	39
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosures	79
Item 9A.	Controls and Procedures	79
Item 9B.	Other Information	80

PART III
Item 10.	Directors and Executive Officers of the Registrant	81
Item 11.	Executive Compensation	81
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	82
Item 13.	Certain Relationships and Related Transactions	82
Item 14.	Principal Accountant Fees and Services	82
PART IV
Item 15.	Exhibits and Financial Statement Schedules	83
	Signatures	84
	Schedule II	85
	Exhibit Index	86
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 10.6
EXHIBIT 10.7
EXHIBIT 10.10
EXHIBIT 10.13
EXHIBIT 10.17
EXHBIT 10.23
EXHIBIT 10.24
EXHIBIT 21.1
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1


			Principal Occupations and Business Experience
Name	Age		During Past Five Years

Henrik C. Slipsager		50	President & Chief Executive Officer and a Director of ABM since November 2000; Executive Vice President of ABM and President of ABM Janitorial Services from November 1999 through October 2000.
Jess E. Benton III		64	Executive Vice President of ABM since November 1999; Chief Operating Officer of ABM from November 2000 through March 2004.
James P. McClure		47	Executive Vice President of ABM since September 2002; President of ABM Janitorial Services since November 2000; Senior Vice President of ABM Janitorial Services from July 1997 through October 2000.
William T. Petty		55	Executive Vice President & Chief Operating Officer of ABM since April 2004; Executive Vice President of North American Lodging Operations of Marriott International from January 1999 through March 2004.
George B. Sundby		53	Executive Vice President since March 2004; Chief Financial Officer of ABM since June 2001; Senior Vice President of ABM from June 2001 through March 2004; Senior Vice President & Chief Financial Officer of Transamerica Finance Corporation from September 1999 through March 2001; Vice President of Financial Planning and Analysis of Transamerica Corporation from January 1995 through March 2001.
Linda S. Auwers		57	Senior Vice President, General Counsel & Secretary of ABM since May 2003; Vice President, Deputy General Counsel & Secretary of Compaq Computer Corporation from May 2001 through May 2002; Vice President, Secretary & Associate General Counsel of Compaq Computer Corporation from September 1999 to April 2001.
Gary R. Wallace		55	Senior Vice President of ABM, Director of Business Development & Chief Marketing Officer since November 2000; Senior Vice President of ABM Janitorial Services from September 1995 through October 2000.
Steven M. Zaccagnini		43	Senior Vice President of ABM and President of CommAir Mechanical Services since September 2002; President of ABM Facility Services since April 2002; Senior Vice President of Jones Lang LaSalle from April 1995 through February 2002.
Maria De Martini		45	Vice President, Controller & Chief Accounting Officer of ABM since July 2001; Controller of Vectiv Corporation from March 2001 through June 2001; Assistant Controller of Transamerica Finance Corporation from December 1999 through March 2001.
David L. Farwell		43	Vice President & Treasurer of ABM since August 2002; Treasurer of JDS Uniphase Corporation from December 1999 through April 2002.

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ITEM 4.	*SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*


ITEM 5.	*MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES*



		Fiscal Quarter

		First		Second		Third		Fourth		Year

Fiscal Year 2004
Price range of common stock:
	High	$	18.83	$	18.85	$	19.63	$	21.01	$	21.01
	Low	$	15.10	$	16.85	$	17.53	$	16.77	$	15.10
Dividends declared per share		$	0.10	$	0.10	$	0.10	$	0.10	$	0.40

Fiscal Year 2003
Price range of common stock:
	High	$	16.36	$	16.34	$	16.73	$	16.57	$	16.73
	Low	$	13.50	$	12.50	$	13.25	$	13.94	$	12.50
Dividends declared per share		$	0.095	$	0.095	$	0.095	$	0.095	$	0.38



		Years Ended October 31,

		2004		2003		2002		2001		2000

				As Restated		As Restated		As Restated		As Restated

		(In thousands, except per share data and ratios)
OPERATIONS(1)(2)
Revenues
	Sales and other income	$	2,416,223	$	2,262,476	$	2,068,058	$	2,027,800	$	1,879,450
	Gain on insurance claim		—		—		10,025		—		—

			2,416,223		2,262,476		2,078,083		2,027,800		1,879,450

Expenses
	Operating expenses and cost of goods sold		2,187,659		2,035,982		1,858,356		1,823,764		1,667,513
	Selling, general and administrative		176,667		170,125		156,257		144,566		132,952
	Interest		1,016		758		1,052		2,600		3,319
	Goodwill amortization(3)		—		—		—		12,065		11,006
	Intangible amortization		4,519		2,044		1,085		361		61

			2,369,861		2,208,909		2,016,750		1,983,356		1,814,851

Income from continuing operations before income taxes			46,362		53,567		61,333		44,444		64,599
Income taxes			15,889		17,943		19,649		16,757		25,325

Income from continuing operations			30,473		35,624		41,684		27,687		39,274
Income from discontinued operation, net of income taxes			—		2,560		2,670		2,958		4,228
Gain on sale of discontinued operation, net of income taxes			—		52,736		—		—		—

Net income		$	30,473	$	90,920	$	44,354	$	30,645	$	43,502

Net income per common share — Basic
	Income from continuing operations	$	0.63	$	0.73	$	0.85	$	0.57	$	0.86
	Income from discontinued operation		—		0.05		0.05		0.06		0.09
	Gain on sale of discontinued operation		—		1.07		—		—		—

		$	0.63	$	1.85	$	0.90	$	0.63	$	0.95

Net income per common share — Diluted
	Income from continuing operations	$	0.61	$	0.71	$	0.82	$	0.54	$	0.82
	Income from discontinued operation		—		0.05		0.05		0.06		0.09
	Gain on sale of discontinued operation		—		1.06		—		—		—

		$	0.61	$	1.82	$	0.87	$	0.60	$	0.91

Average common and common equivalent shares
	Basic		48,641		49,065		49,116		47,598		45,102
	Diluted		50,064		50,004		51,015		50,020		47,418



	Net Income Restatement Adjustments

																Cumulative
																Adjustment
	Total			Year Ended			Year Ended			Year Ended			Year Ended			as of
	Restatement			October 31,			October 31,			October 31,			October 31,			November 1,
	Adjustment			2003			2002			2001			2000			1999


	(In thousands)
Insurance	$	(22,337	)	$	(1,451	)	$	(1,176	)	$	(3,683	)	$	(1,263	)	$	(14,764	)
Intangible amortization		(899	)		(899	)		—			—			—			—
Vacation and sick leave		—			1,200			(1,200	)		—			—			—
Bad debt expense		(1,300	)		—			(1,300	)		—			—			—
Depreciation		(135	)		(135	)		—			—			—			—

Net decrease in income from continuing operations before income taxes		(24,671	)		(1,285	)		(3,676	)		(3,683	)		(1,263	)		(14,764	)
Income taxes		(9,421	)		(511	)		(1,302	)		(1,502	)		(422	)		(5,684	)

Net decrease in income from continuing operations		(15,250	)		(774	)		(2,374	)		(2,181	)		(841	)		(9,080	)
Net increase in gain on sale of Elevator, net of income taxes		1,236			1,236			—			—			—			—

Net (decrease) increase in net income	$	(14,014	)	$	462		$	(2,374	)	$	(2,181	)	$	(841	)	$	(9,080	)



		Balance Sheet Restatement Adjustments

		October 31,			October 31,			October 31,			October 31,
		2003			2002			2001			2000


		(In thousands)
ASSETS
	Trade accounts receivable — net	$	(1,300	)	$	(1,300	)	$	—		$	—
	Goodwill		(13,057	)		—			—			—
	Other intangibles		12,158			—			—			—
	Property, plant and equipment — net		1,865			—			—			—
	Deferred income taxes		8,657			8,910			7,608			6,106

Total assets adjustment		$	8,323		$	7,610		$	7,608		$	6,106


LIABILITIES AND STOCKHOLDERS’ EQUITY

	Accounts payable and other accrued liabilities	$	—		$	1,200		$	—		$	—
	Insurance claims		22,337			20,886			19,710			16,027
	Retained earnings		(14,014	)		(14,476	)		(12,102	)		(9,921	)

Total liabilities and stockholders’ equity adjustment		$	8,323		$	7,610		$	7,608		$	6,106


ITEM 7.	*MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS*



	Payments Due by Period

			Less Than		1-3		4-5		After 5
Contractual Obligations	Total		1 Year		Years		Years		Years


	(In thousands)
Operating leases	$	209,226	$	48,363	$	67,735	$	43,678	$	49,450



	Amounts of Commitment Expiration per Period

			Less Than		1-3		4-5		After 5
Commercial Commitments	Total		1 Year		Years		Years		Years


	(In thousands)
Standby letters of credit	$	96,503	$	96,503		—		—		—
Financial responsibility bonds		4,211		4,211		—		—		—

Total	$	100,714	$	100,714		—		—		—


																									Nine
	Fiscal 2003 Quarters												Year Ended			Fiscal 2004 Quarters									Months Ended
													October 31,												July 31,
	First			Second			Third			Fourth			2003			First			Second			Third			2004


	(In thousands)
Insurance	$	(312	)	$	(255	)	$	(629	)	$	(255	)	$	(1,451	)	$	(624	)	$	(434	)	$	(608	)	$	(1,666	)
Intangible amortization		—			(191	)		(246	)		(462	)		(899	)		(569	)		1,468			—			899
Vacation and sick leave		1,200			—			—			—			1,200			—			—			—			—
Depreciation		—			—			—			(135	)		(135	)		(135	)		(135	)		(135	)		(405	)

Net increase (decrease) in income from continuing operations before income taxes		888			(446	)		(875	)		(852	)		(1,285	)		(1,328	)		899			(743	)		(1,172	)
Income taxes		319			(170	)		(334	)		(326	)		(511	)		(507	)		343			(497	)		(661	)

Net increase (decrease) in income from continuing operations		569			(276	)		(541	)		(526	)		(774	)		(821	)		556			(246	)		(511	)
Net increase in gain on sale of Elevator, net of income taxes		—			—			—			1,236			1,236			—			—			—			—

Net increase (decrease) in net income	$	569		$	(276	)	$	(541	)	$	710		$	462		$	(821	)	$	556		$	(246	)	$	(511	)


ITEM 1.	*BUSINESS*


ITEM 2.	*PROPERTIES*


ITEM 3.	*LEGAL PROCEEDINGS*


ITEM 6.	*SELECTED FINANCIAL DATA*



							Restatement Adjustments
	As Reported			As Reported									As Restated			As Restated
	2003			2002			2003			2002			2003			2002


	(In thousands)
Operating profit:
Janitorial	$	53,487		$	54,337		$	412		$	(2,500	)	$	53,899		$	51,837
Parking		6,349			6,948			(111	)		—			6,238			6,948
Security		6,485			5,639			—			—			6,485			5,639
Engineering		9,925			10,033			—			—			9,925			10,033
Lighting		5,646			8,261			—			—			5,646			8,261
Other		1,337			(1,190	)		—			—			1,337			(1,190	)
Corporate expense		(27,619	)		(27,992	)		(1,586	)		(1,176	)		(29,205	)		(29,168	)

Operating profit		55,610			56,036			(1,285	)		(3,676	)		54,325			52,360
Gain on insurance claim					10,025			—			—			—			10,025
Interest expense		(758	)		(1,052	)		—			—			(758	)		(1,052	)

Income from continuing operations before income taxes	$	54,852		$	65,009		$	(1,285	)	$	(3,676	)	$	53,567		$	61,333


			% of					% of			Increase
	2004		Sales			2003		Sales			(Decrease)


	As Restated
	($ In thousands)
Revenues
Sales and other income	$	2,416,223		100.0	%	$	2,262,476		100.0	%		6.8	%
Expenses
Operating expenses and cost of goods sold		2,187,659		90.5	%		2,035,982		90.0	%		7.4	%
Selling, general and administrative		176,667		7.3	%		170,125		7.5	%		3.8	%
Interest		1,016		0.0	%		758		0.0	%		34.0	%
Intangible amortization		4,519		0.2	%		2,044		0.1	%		121.1	%

		2,369,861		98.1	%		2,208,909		97.6	%		7.3	%

Income from continuing operations before income taxes		46,362		1.9	%		53,567		2.4	%		(13.5	)%
Income taxes		15,889		0.7	%		17,943		0.8	%		(11.4	)%

Income from continuing operations	$	30,473		1.3	%	$	35,624		1.6	%		(14.5	)%


							Better
	2004			2003			(Worse)

				As Restated
				($ In thousands)
Sales and other income:
Janitorial	$	1,442,901		$	1,368,282			5.5	%
Parking		384,547			380,576			1.0	%
Security		224,715			159,670			40.7	%
Engineering		200,771			180,230			11.4	%
Lighting		112,074			127,539			(12.1	)%
Other		49,459			45,394			9.0	%
Corporate		1,756			785			123.7	%

	$	2,416,223		$	2,262,476			6.8	%

Operating profit:
Janitorial	$	60,574		$	53,899			12.4	%
Parking		9,514			6,238			52.5	%
Security		9,002			6,485			38.8	%
Engineering		11,976			9,925			20.7	%
Lighting		2,822			5,646			(50.0	)%
Other		1,486			1,337			11.1	%
Corporate expense		(47,996	)		(29,205	)		(64.3	)%

Operating profit		47,378			54,325			(12.8	)%
Interest expense		(1,016	)		(758	)		(34.0	)%

Income from continuing operations before income taxes	$	46,362		$	53,567			(13.5	)%