SecProbe.io

CORRESP
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Correspondence

    551 Fifth Avenue • Suite 300

New York, NY 10176

Telephone: 212-297-9871

Facsimile: 866.422.0963

e-mail: jim.lusk@abm.com

James S. Lusk

Executive Vice President

and Chief Financial Officer

January 15, 2010

VIA EDGAR

Division of Corporation Finance

Securities and Exchange Commission

100 F. Street, N.E.

Washington, D.C. 20549

Attention: Jessica Barberish, Assistant Chief Accountant

    RE:

    ABM Industries Incorporated

    Form 10-K for the year ended October 31, 2008

    Filed on December 22, 2008

    File No. 001-08929

Ladies and Gentlemen:

On behalf of ABM Industries Incorporated (the “Company”, “ABM”, “we” or “our”), this letter
responds to comments raised by the staff (the “Staff”) of the Securities and Exchange Commission in
a letter dated December 3, 2009 with respect to the above-referenced filing. All references to
years made in the responses are based on the Company’s fiscal year that ends on October 31 and all
references to the Company’s Form 10-K refer to the Company’s Annual Report on Form 10-K for the
fiscal year ended October 31, 2008, filed on December 22, 2008. For your convenience, our responses
are keyed to the comments in the Staff’s letter.

FORM 10-K FOR THE YEAR ENDED OCTOBER 31, 2008

Financial Statements and Notes

Note 1 — Basis of Presentation and Summary of Significant Accounting Policies, page 43

Allowance For Doubtful Accounts, page 44

    1.

    Your response to comment two indicates that the $6.1 million increase in your
allowance for doubtful accounts relates to the receivable balance associated with the
OneSource acquisition. However we further note that only 48.7% of the increase in
receivables greater than 90 days past due was related to services provided by
OneSource. Given that an additional $12 million in gross accounts receivable over 90
days past due was attributed to new business and expansion to existing customers,
please tell us how you determined the adequacy of your allowance for doubtful accounts.

Response:

The adequacy of our allowance for doubtful accounts as of October 31, 2008 was
determined by applying our normal process and controls in connection with our analysis
of the recoverability of our accounts receivable portfolio. Our analysis of significant
delinquent accounts (including accounts associated with customers in bankruptcy)
resulted in our assessment of reserve requirements of $3.8 million. Our reserve
requirements related to bad debts and sales allowances for the remainder of our
receivable portfolio were $8.7 million, approximating 1.5% of our accounts receivable.
The bad debt and sales allowance reserves were determined based upon (i) the application
of historical average loss rates, and (ii) consideration of known or expected trends
(including post-balance sheet experience). Our consideration of known or expected trends
did not indicate that future losses would be significantly in excess of historical
averages. We did not believe that the increase in accounts receivable older than 90 days
was an indication that historical rates of credit losses were no longer reflective of
expected future credit losses, since it is not uncommon for our clients to pay us later
than 90 days. Further, we believe that our allowance for doubtful accounts as of October
31, 2008 was adequate because: (i) the percentage of accounts receivable over 180 days
past due remained consistent (3% and 2% as of October 31, 2008 and 2007, respectively);
(ii) our reserves as a percentage of receivables older than 90 days remained consistent
(26% and 27% as of October 31, 2008 and 2007, respectively); and (iii) days sales
outstanding remained relatively consistent (49 days and 47 days as of October 31, 2008
and 2007, respectively). We further inform the staff that our actual bad debt and sales allowance experience in
2009 was consistent with our expected trends.

Note 2 — Insurance, page 48

    2.

    We considered your response to comment three. Additionally, we note in your
Form 10-Q for the nine months ended July 31, 2009, that your insurance reserve
increased by $3.5 million. Please clarify the circumstances that resulted in an
increase in your insurance reserve in 2009 which were not present during fiscal year
2008 and expand your discussion of the reason for the change in the trend in future
filings.

Response:

During 2008, favorable developments in the claims management process as well as the
effects of favorable legislation enacted before 2008 in certain states continued to be
observed. Specifically, the Company also continued to experience the favorable impact of
prior workers’ compensation reforms in California. Prior to the reforms of 2003 and
2004, the California workers’ compensation system was characterized by high insurance
rates to employers and variability in benefits to injured workers. To address rising
costs, a series of reforms was passed by the California Legislature. The reforms focused
on, among other things, revising medical fee schedules, improving quality of care,
encouraging medical utilization review, capping temporary disability benefits, and
reducing the number and size of permanent disability awards. Following the
implementation of reforms, from 2004 to 2008, the industry workers’ compensation claims
cost benchmark was reduced by 65%. The reforms not only favorably affected claims
incurred after 2004, but

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also
favorably affected certain claims open at the time the reforms were enacted. Accordingly, as benefits of the
reforms became more readily evident in the Company’s paid and reported loss experience
during 2008, estimates of the cost of settling these older claims were reduced in 2008.
Reduced claim costs, which the Company believes were driven by the continuing effects of
California workers’ compensation reform and internal loss control efforts, were observed
during 2008 in both the Company’s general liability and workers’ compensation program
claims in 2008. The Company also observed reduced claim costs in its general liability
program due to internal loss control efforts and better-than-expected loss emergence.
After analyzing the historical loss development patterns, comparing the loss development
against benchmarks, and applying actuarial projection methods, in 2008 the Company
lowered its expected losses for prior year claims, which resulted in a reduction in the
related self-insurance reserves of $22.8 million.

During the nine months ended July 31, 2009, the favorable trends observed during 2008
were no longer continuing and the Company observed unfavorable loss experience in
several of its programs. Specifically, the Company noticed the effects of (i)
unfavorable developments (primarily affecting workers compensation in California and
other states where we have a significant presence), (ii) certain case law decisions
during 2009 resulting in a more favorable atmosphere for injured workers regarding their
disability rating (allowing for the rebuttal of permanent disability ratings) in
California, and (iii) existing claims in California being revised to add additional
medical conditions to the original claims, resulting in additional discovery costs and
likely higher medical and indemnity costs. We understand from discussions with our
third-party administrator that these trends also affected other companies with
concentrations similar to ours. Further, during 2009, certain general liability claims
related to older policy years experienced losses significantly higher than were
previously estimated. After analyzing the historical loss development patterns,
comparing the loss development against benchmarks, and applying actuarial projection
methods, the Company increased the expected losses for prior year claims, which resulted
in an increase in the related self-insurance reserves of $3.5 million being recorded in
Q3 2009.

We have expanded our disclosure regarding the factors that resulted in the change in
trends between 2008 and 2009 in our Form 10-K for the year ended October 31, 2009 (filed
December 22, 2009). In future filings, we will continue to expand our discussion of
significant changes in self insurance trends and the resulting impact on our self
insurance reserves.

Note 8 — Other Commitments, pages 53-54

    3.

    We considered your response to comment four. Specifically we note your
references to ASC 605-25 and ASC 840-20-25-1 related to multiple-element revenue
arrangements and operating leases, respectively, and we question the applicability of
those references to your accounting for these costs. We have the following additional
comments:

    •

    We note your reference to paragraph 31 of CON 6 which states that rights
to receive services in future periods can be assets. Describe how you
determined that the transition costs represent rights to receive future
services as it appears that the transition services were performed at the
beginning of the contract period. In this regard, also tell us how you
considered paragraph 147 of CON 6 related to expense recognition.

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    •

    Tell us what portion of your total deferred expense relates to
transition services as of October 31, 2007.

    •

    Please advise us of how the cancelled services will be executed going
forward.

Response:

We determined that the transition costs represented rights to receive future services
because the Company’s legally-enforceable rights under a firmly—committed executory
contract obligated IBM to provide the related outsourced IT services in the future.
Although the transition services were performed at the beginning of the contract period,
those services were expected to benefit the Company throughout the contract period
because the continuing services could not have been received without the up-front
transition services.

We believe that our deferral of the transition costs is supported by paragraph 147 of
CON 6 since “...expenses...can be related to a period on the basis of transactions or
events occurring in that period or by allocation” and the deferral was necessary to
achieve a “systematic and rational allocation” of the transition costs over the time pattern
of expected benefits. We do not believe that
expensing the transition costs on a cash basis was representative of the expected period
of benefit.

The total deferred expense relating to transition services as of October 31, 2007 was
$4.1 million.

The cancelled services will be executed internally by the Company’s IT department
personnel on a go forward basis.

Note 13 — Discontinued Operations, pages 61-62

    4.

    We note in your response to comment six that you did not place any weight on
the informal offer and other discussions with third parties concerning the potential
sale of the Lighting reporting unit when estimating fair value as of October 31, 2007.
We also note that you sold the reporting unit in 2008 for less than the carrying value.
Please tell us the amount of the informal offer relative to the carrying value of the
reporting unit. To the extent that your informal offer was less than the carrying value
of the reporting unit, explain why this offer was not considered when estimating the
fair value. Tell us how your assessment of the potential buyer’s ability to raise an
appropriate amount of financing impacts your consideration of this offer when
estimating fair value.

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Response:

During the fourth quarter of 2007, we received one informal offer for the substantial sale of our
Lighting reporting unit, which indicated that the value implied from the offer would equal the carrying value.
Certain preliminary correspondence from the counterparty related to the offer implied a fair value of
the Lighting reporting unit of $78.6 million (more than 95% of Lighting’s carrying value
at the impairment test date). We believe that the counterparty based its preliminary
offer on the assumption that the carrying value of the Lighting reporting unit was $78.6
million (based upon a balance sheet given to them prior to October 31, 2007).

The counterparty operated a much smaller lighting business and wished to expand its
footprint into a national platform. The non-binding offer was contingent upon its
ability to raise significant equity and to secure debt to finance the acquisition.
Additionally, the offer assumed that ABM would retain a 20% ownership interest in the
Lighting reporting unit. Since we did not believe that the counterparty would be able to
secure adequate financing to close the transaction, we did not believe it was a credible
offer by a market participant. Accordingly, we did not believe that the informal offer
was a reliable indication of fair value and we did not place any weight on the informal
offer when estimating the fair value of the Lighting reporting unit as of October 31,
2007.

We do not believe that the goodwill related to our Lighting reporting unit was impaired
as of October 31, 2007. However, after considering the Staff’s comments, if the fair
value of a reporting unit as of the date of our most recent impairment test is not
substantially in excess of its carrying amount in the future, we will provide such
enhanced disclosures in future filings.

    5.

    We further note in your response to comment six that you estimated the fair
value of the Lighting reporting unit as of October 31, 2007 using a discounted cash
flow model. We have the following follow up comments related to the assumptions used in
the model:

    •

    Provide your basis for assuming an increase in revenue growth from (0.2)% in
2008 to 7% in 2009 through 2018, particularly given a history of declining
revenues. Address your consideration of the informal offer received and the
current economic conditions.

    •

    Describe your basis for assuming that Cost of Goods Sold, Selling and
Marketing and G&A expenses as a percentage of revenues will decrease from 2008
despite an assumed increase in revenues. Tell us the main drivers of your
expense reductions as a percentage of revenues and how you intend to sustain
them.

    •

    Tell us your basis for assuming a 4% terminal year growth factor in order to
normalize your debt-free cash flow into perpetuity.

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Response:

Revenue

For the period from 2004 to 2005 revenues increased 3.7% from $112.1 million to $116.2
million. Thereafter, revenues decreased 1.5% to $114.5 million in 2006 and decreased
further by 0.2% to $114 million in 2007. Sales for the historical periods
mentioned decreased primarily due to decreased project-based business and lost service
contracts, partially attributable to the effect of the National Energy Act, enacted in
August 2005. The National Energy Act contained certain provisions, including an
allowance for certain energy improvements completed by commercial customers during 2006
and 2007, which were eligible for certain tax deductions. As a result, potential
customers re-evaluated their lighting services in light of the new National Energy Act,
which the Company believes resulted in a longer than normal decision making process that
temporarily delayed purchases.

Revenue was estimated to increase from $114.0 million in 2008 to $224.3 million in 2018.
On a year-over-year basis, revenue growth was expected to decline (0.2)% in 2008 and
increase 7.0% annually for the period from 2009 through 2018. As of October 31, 2007, it
was expected that the Lighting reporting unit would continue to diversify its
traditional retrofitting business into the higher margin project-based business by
marketing its lighting solutions to customers based on cost savings that can be realized
through energy efficient fixtures. It was expected that resulting energy savings
realized by the customer from the installation of energy efficient fixtures would
partially or entirely offset the amounts paid for such services. This expectation was
based upon the then-current energy crisis in the U.S., especially in California. It was
estimated t