are impacted by changes in vacancy rates. The Parking division principally has two types of arrangements, leased-lot or managed-lot. Under leased-lot arrangements, the Company leases the parking facility from the owner and is responsible for all expenses incurred, retains all revenues from monthly and transient parkers and pays rent to the owner per the terms and conditions of the lease. Under the management contracts, the Company manages the parking facility for the owner in exchange for a management fee, which may be a fixed fee, a performance-based fee, such as a percentage of gross or net revenues, or a combination of both.
The majority of the Company's contracts are for one to three year periods, but are subject to termination by either party after 30 to 90 days' written notice. Upon renewal of a contract, the Company may renegotiate the price, although competitive pressures and customers' price sensitivities could inhibit the Company's ability to pass on cost increases. Such cost increases include, but are not limited to, labor costs, workers' compensation and other insurance costs, any applicable payroll taxes and fuel costs. However, for some renewals, the Company is able to restructure the scope and terms of the contract to maintain or increase profit margin.
Revenues have historically been the major source of cash for the Company, while payroll expenses, which are substantially related to revenues, have been the largest use of cash. Accordingly, operating cash flows primarily depend on the revenues level and timing of collections, as well as the quality of the related receivables. The Company's trade accounts receivable, net, balance was $500.1 million at January 31, 2009. Trade accounts receivable that were over 90 days past due were $50.5 million and $51.0 million at January 31, 2009 and October 31, 2008, respectively. The timing and level of 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. Cash flows from total operating activities, including cash flows from discontinued operating activities, increased $51.0 million for the three months ended January 31, 2009, compared to the three months ended January 31, 2008.
The Company self-insures certain insurable risks such as general liability, automobile, property damage, and workers' compensation. The Company periodically evaluates its estimated claim costs and liabilities and accrues self-insurance reserves to its best estimate three times during the fiscal year. Management also monitors new claims and claim development to assess appropriate levels of insurance reserves. The estimated future charge is intended to reflect recent experience and trends. The trend analysis is complex and highly subjective. The interpretation of trends requires knowledge of many factors that may or may not be reflective of adverse or favorable developments (e.g., changes in regulatory requirements and changes in reserving methodology). Trends may also be impacted by changes in safety programs or claims handling practices. If the trends suggest that the frequency or severity of claims incurred has changed, the Company might be required to record increases or decreases in expenses for self-insurance liabilities. There was no actuarial evaluation performed during the three months ended January 31, 2009. As a result, there were no changes to the self-insurance reserve for ultimate losses relating to prior years. Accordingly, the Company's self-insurance expense for the three months ended January 31, 2009 is based upon actuarial assumptions developed in 2008.
Due to the weak economic climate, the Company continues to experience pricing pressures on its customer base. Despite the weak economic climate, operating profit increased in all the business divisions during the three months ended January 31, 2009 compared to the three months ended January 31, 2008. In general, this increase was attributable to the Company's ability to maintain acceptable gross profit margins and operating profit, which included the realization of synergies from the OneSource acquisition. Achieving the desired levels of revenues and profitability in the future will depend on the Company's ability to retain and attract, at acceptable profit margins, more customers than it loses, to pass on cost increases to customers, and to keep overall costs low to remain competitive, particularly against privately-owned facility services companies that typically have a lower cost advantage.

Liquidity and Capital Resources

                                       January 31,      October 31,
          (in thousands)                   2009             2008          Change

          Cash and cash equivalents    $    11,962      $       710     $ 11,252
          Working capital              $   279,523      $   273,980     $  5,543



                                                              Three Months Ended January 31,
(in thousands)                                                 2009                   2008                  Change

Net cash provided by (used in) operating activities       $     26,079          $       (24,941 )        $   51,020
Net cash used in investing activities                     $     (5,649 )        $      (419,282 )        $ (413,633 )
Net cash provided by (used in) financing activities       $     (9,178 )        $       311,264          $ (320,442 )

Cash provided by operations and financing activities have historically been used for meeting working capital requirements, financing capital expenditures and acquisitions, and paying cash dividends. As of January 31, 2009 and October 31, 2008, the Company's cash and cash equivalents totaled $12.0 million and $0.7 million, respectively. The increase in cash of $11.3 million is principally due to the timing of net borrowings under the Company's line of credit.
The Company believes that the current cash and cash equivalents, cash generated from operations and amounts available under its $450.0 million line of credit will be sufficient to meet the Company's cash requirements for the long-term, except to the extent cash is required for significant acquisitions, if any.
Working Capital. Working capital increased by $5.5 million to $279.5 million at January 31, 2009 from $274.0 million at October 31, 2008. The increase was primarily due to the $11.3 million increase in cash and cash equivalents and the $26.8 million increase in trade accounts receivable, net, offset by the timing of trade accounts payable and accrued liability payments and the collection of accounts receivable from discontinued operations. Trade accounts receivable that were over 90 days past due were $50.5 million and $51.0 million at January 31, 2009 and October 31, 2008, respectively.
Cash Flows from Operating Activities. Net cash provided by operating activities was $26.1 million for the three months ended January 31, 2009, compared to net cash used of $24.9 million for the three months ended January 31, 2008. The increase in cash flows from operating activities of $51.0 million is due to an increase in net income of $7.9 million in the three months ended January 31, 2009 as compared to the three months ended January 31, 2008, a $20.1 million net decrease in changes in continuing operating assets and liabilities and a $18.2 million decrease in discontinued trade accounts receivables, net, primarily due to collections during the three months ended January 31, 2009. The net changes in operating assets and liabilities were principally related to changes in trade accounts receivable, net, the payment of funds held in escrow of $7.2 million to the shareholder of Southern Management and the timing of payments for accounts payable and other accrued liabilities. Net cash provided by discontinued operating activities was $12.6 million for the three months ended January 31, 2009 compared to $1.9 million used for the three months ended January 31, 2008.
Cash Flows from Investing Activities. Net cash used in investing activities for the three months ended January 31, 2009 was $5.6 million, compared to $419.3 million for the three months ended January 31, 2008. The decrease was primarily due to the $390.5 million and $24.4 million paid for OneSource and the remaining 50% of the equity of Southern Management, respectively, in the three months ended January 31, 2008. No significant cash flows were provided by discontinued investing activities for the three months ended January 31, 2009 and 2008.
Cash Flows from Financing Activities. Net cash used in financing activities was $9.2 million for the three months ended January 31, 2009, compared to net cash provided by of $311.3 million for the

three months ended January 31, 2008. In the three months ended January 31, 2008, the Company's net borrowings of $316.0 million from the Company's line of credit was primarily due to the acquisition of OneSource and purchase of the remaining 50% of the equity of Southern Management Company. No cash flows were provided by discontinued financing activities for the three months ended January 31, 2009 and 2008.
Line of Credit. In connection with the acquisition of OneSource, ABM entered into a $450.0 million five year syndicated line of credit that is scheduled to expire on November 14, 2012 (the "Facility"). The line of credit is available for working capital, the issuance of standby letters of credit, the financing of capital expenditures, and other general corporate purposes.
As of January 31, 2009, the total outstanding amounts under the Facility in the form of cash borrowings and standby letters of credit were $227.0 million and $118.4 million, respectively. Available credit under the line of credit was $104.6 million as of January 31, 2009.
The Facility includes covenants limiting liens, dispositions, fundamental changes, investments, indebtedness and certain transactions and payments. In addition, the Facility also requires that ABM maintain the following three financial covenants which are described in the Financial Statements set forth in the Company's Annual Report on Form 10-K/A, as defined: (1) a fixed charge coverage ratio, (2) a leverage ratio and (3) a combined net worth. The Company was in compliance with all covenants as of January 31, 2009 and expects to be in compliance for the foreseeable future.
Subsequent to January 31, 2009, the Company entered into a two-year interest rate swap agreement with a notional amount of $100.0 million, involving the exchange of floating- for fixed-rate interest payments. The Company will receive floating-rate interest payments that offset the LIBOR component of the interest due on $100 million of the Company's floating-rate debt and make fixed-rate interest payments of 1.47% over the life of the interest rate swap. The Company will assess the effectiveness of the Company's hedging strategy using the method described in Derivatives Implementation Group Statement 133 Implementation Issue No. G9, "Cash Flow Hedges: Assuming No Ineffectiveness When Critical Terms of the Hedging Instrument and the Hedged Transaction Match in a Cash Flow Hedge." Accordingly, changes in fair value of the interest rate swap agreement are expected to be offset by changes in the fair value of the underlying debt. Commitments and Contingencies
Commitments
On January 20, 2009, ABM and International Business Machines Corporation ("IBM"), entered into a binding Memorandum of Understanding (the "MOU") pursuant to which ABM and IBM agreed to: (1) terminate certain services currently provided by IBM to ABM under the Master Professional Services Agreement dated October 1, 2006 (the "Agreement"); (2) transition the terminated services to ABM and/or its designee; (3) resolve certain other disputes arising under the Agreement; and (4) modify certain terms

applicable to services that IBM will continue to provide to ABM. In connection with the execution of the MOU, ABM delivered to IBM a formal notice terminating for convenience certain information technology and support services effective immediately (the "Termination"). Notwithstanding the Termination, the MOU contemplated (1) that IBM would assist ABM with the transition of the terminated services to ABM or its designee pursuant to an agreement (the "Transition Agreement") to be executed by ABM and IBM and (2) the continued provision by IBM of certain data center services. On February 24, 2009, ABM and IBM entered into an amended and restated Agreement, which amends the agreement (the "Amended Agreement"), and the Transition Agreement, which memorializes the termination-related provisions of the MOU as well as other terms related to the transition services. Under the Amended Agreement, the base fee for the provision of the defined data center services is $18.8 million payable over the service term (March 2009 through December 2013) as follows: 2009 - $3.6 million; 2010 - $4.4 million; 2011 - $4.0 million ; 2012 - $3.3 million; 2013 - $3.0 million and 2014 - $0.5 million.
In connection with the Termination, ABM has agreed to: (1) reimburse IBM for certain actual employee severance costs, up to a maximum of $0.7 million, provided ABM extends comparable offers of employment to a minimum number of IBM employees; (2) reimburse IBM for certain early termination costs, as defined, including third party termination fees and/or wind down costs totaling approximately $0.4 million associated with software, equipment and/or third party contracts used by IBM in performing the terminated services, and (3) pay IBM fees and expenses for requested transition assistance which are estimated to be approximately $0.4 million.
Contingencies
The Company is subject to various legal and arbitration proceedings and other contingencies that have arisen in the ordinary course of business. In accordance with SFAS No. 5, "Accounting for Contingencies", the Company accrues the amount of probable and estimable losses related to such matters. At January 31, 2009, the total amount of probable and estimable losses accrued for legal and other contingencies was $7.0 million. However, the ultimate resolution of legal and arbitration proceedings and other contingencies is always uncertain. If actual losses materially exceed the estimates accrued, the Company's financial condition and results of operations could be materially adversely affected.
In November 2008, the Company and its former third party administrator of workers' compensation claims settled a claim in arbitration for net proceeds of $9.6 million, after legal expenses, related to poor claims management, which amount was received by the Company during January 2009 and was classified as reduction in operating expense in the accompanying condensed consolidated statement of income for the three months ended January 31, 2009. Off-Balance Sheet Arrangements
The Company is party to a variety of agreements under which it may be obligated to indemnify the other party for certain matters. Primarily, these agreements are standard indemnification arrangements entered into 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 parties, 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 included in its insurance program. The term of these indemnification arrangements is generally perpetual with respect to claims arising during the service period. Although the Company attempts to place limits on this indemnification reasonably related to the size of the contract, the maximum obligation may not be 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, which has a deductible of up to $1.0 million. Results of Continuing Operations
Three Months Ended January 31, 2009 vs. Three Months Ended January 31, 2008

                                   Three Months                             Three Months                            Increase          Increase
                                       Ended                % of                Ended                % of          (Decrease)        (Decrease)
($ in thousands)                 January 31, 2009         Revenues        January 31, 2008         Revenues            $                  %


Revenues                          $       887,472          100.0 %         $       887,792          100.0 %        $    (320 )             0.0 %
Expenses
Operating                                 787,268           88.7 %                 803,953           90.6 %          (16,685 )            -2.1 %
Selling, general and
administrative                             71,387            8.0 %                  66,442            7.5 %            4,945               7.4 %
Amortization of intangible
assets                                      2,823            0.3 %                   2,381            0.3 %              442              18.6 %

Total expense                             861,478           97.1 %                 872,776           98.3 %          (11,298 )            -1.3 %

Operating profit                           25,994            2.9 %                  15,016            1.7 %           10,978              73.1 %
Interest expense                            1,668            0.2 %                   4,610            0.5 %           (2,942 )           -63.8 %

Income from continuing
operations before income
taxes                                      24,326            2.7 %                  10,406            1.2 %           13,920             133.8 %
Provision for income taxes                  9,571            1.1 %                   4,139            0.5 %            5,432             131.2 %

Income from continuing
operations                                 14,755            1.7 %                   6,267            0.7 %            8,488             135.4 %
Discontinued Operations
Income (loss) from
discontinued operations,
net of taxes                                 (538 )           NM *                      97             NM *             (635 )              NM *

Net income                        $        14,217            1.6 %         $         6,364            0.7 %        $   7,853             123.4 %

* Not meaningful

Net Income. Net income in the three months ended January 31, 2009 increased by $7.9 million, or 123.4%, to $14.2 million ($0.28 per diluted share) from $6.4 million ($0.13 per diluted share) in the three months ended January 31, 2008. Net income included a loss of $0.5 million ($0.01 per diluted share) and income of $0.1 million ($0.00 per diluted share) from discontinued operations in the three months ended January 31, 2009 and 2008, respectively.
Income from continuing operations in the three months ended January 31, 2009 increased by $8.5 million, or 135.4%, to $14.8 million ($0.29 per diluted share) from $6.3 million ($0.13 per diluted share) in the three months ended January 31, 2008. The increase was primarily a result of : (a) $13.2 million increase in divisional operating profit primarily resulting from realized synergies during the three months ended January 31, 2009 from the continuing integration of OneSource and lower labor expenses resulting from one less working day in the three months ended January 31, 2009 compared to the three months ended January 31, 2008, (b) a $9.6 million net legal settlement received in January 2009 from the Company's former third party administrator of workers' compensation claims related to poor claims management, and (c) $2.9 million decrease in interest expense as a result of a lower average outstanding balance under the Facility and a lower average interest rate relating to borrowings under the Facility in the three months ended January 31, 2009 compared to the three months ended January 31, 2008. The favorable impact of these items was partially offset by the following: (a) $6.0 million increase in information technology costs related to the upgrade of the payroll, human resources and accounting systems, combined with higher depreciation costs, (b) $5.4 million increase in income taxes, (c) $1.3

million increase is professional fees, (d) $1.1 million increase in expenses associated with the integration of OneSource's operations, (e) $0.8 million increase in costs associated with the rollout of the Shared Services Center in Atlanta, and (f) $0.4 million increase in share-based compensation expenses.
Revenues. Revenues in the three months ended January 31, 2009 of $887.5 million were relatively flat compared to $887.8 million in the three months ended January 31, 2008. The increase in revenues at the Security and Janitorial divisions of $4.6 million and $2.4 million, respectively, is offset by decreases in Engineering and Parking revenues of $4.6 million and $2.3 million, respectively. The increase in Security revenues is primarily due to new customers and expansion of services to existing customers. The increase in Janitorial revenues was primarily due to the acquisition of OneSource on November 14, 2007 offset by pressures on its customer base. The decrease in Engineering revenues was primarily due to the loss of low margin revenues and the effects of one less work day in the three months ended January 31, 2009 compared to the three months ended January 31, 2008. The decrease in Parking revenues was primarily related to reductions in management reimbursement revenues which has a nominal impact on operating profit.
Operating Expenses. As a percentage of revenues, gross margin was 11.3% and 9.4% in the three months ended January 31, 2009 and 2008, respectively. The increase in gross margin percentage was primarily the result of the net legal settlement received for $9.6 million in January 2009 from the Company's former third party administrator related to poor claims management.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $4.9 million, or 7.4%, in the three months ended January 31, 2009 compared to the three months ended January 31, 2008. The increase primarily relates to a $6.0 million increase in information technology costs related to the upgrade of the payroll, human resources and accounting . . .