What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2020-12-17 compared with 2019-12-20 · 654 added, 586 removed, 990 unchanged (56% of the section changed)

4 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of ABM Industries Incorporated and subsidiaries (the Company) as of October 31, 2019 and 2018 , the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three‑year period ended October 31, 2019 , and the related notes and financial statement Schedule II (collectively, the consolidated financial statements).

We have audited the accompanying consolidated balance sheets of ABM Industries Incorporated and subsidiaries (the Company) as of October 31, 2020 and 2019, the related consolidated statements of comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years in the three‑year period ended October 31, 2020, and the related notes and financial statement Schedule II (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended October 31, 2020, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of October 31, 2019 , based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated December 20, 2019 expressed an unqualified opinion of the effectiveness of the Company’s internal control over financial reporting.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of October 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated December 17, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

9 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of self-insurance liabilities

As discussed in Notes 2 and 10 to the consolidated financial statements, the Company uses a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks.

The balance of insurance reserves, net of recoverables, as of October 31, 2019 amounted to $443.3 million .

The Company engages actuaries to estimate its self-insurance liabilities at least annually.

The balance of casualty program insurance reserves, net of recoverables, as of October 31, 2020 amount ed to $434.8 million.

The C ompany engages actuaries to estimate its self-insurance liabilities at least annually.

We identified the evaluation of the self-insurance liabilities as a critical audit matter because it involves a high degree of judgment and actuarial expertise to:

(1) assess the actuarial models used and (2) estimate incurred but not reported claims based on application of loss development factors to historical claims experience.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s self-insurance reserve process to (1) evaluate claims information sent to the actuary, (2) estimate incurred but not reported claims based on the application of loss development factors to historical claims experience, and (3) evaluate the actuarial report and the external actuarial expert’s qualifications, competency, and objectivity.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s self-insurance reserve process, including controls related to (1) evaluate claims information sent to the actuary, (2) estimate incurred but not reported claims based on the application of loss development factors to historical claims experience, and (3) evaluate the actuarial report and the external actuarial expert’s qualifications, competency, and objectivity.

We evaluated the Company’s historical ability to estimate self-insurance liabilities by comparing the prior year recorded amounts to the subsequent claim development.

3 unchanged sentences

• Development of an independent actuarial estimate of self-insurance liabilities based on the Company’s underlying historical paid and incurred loss data.

Evaluation of the goodwill impairment charge for the Aviation and Education reporting units

As discussed in Notes 2 and 9 to the consolidated financial statements, the Company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances indicate that the fair value of a reporting unit has declined below its carrying value.

The Company estimates the fair value of a reporting unit using a weighting of fair values derived from an income approach and a market approach.

The goodwill balance as of October 31, 2020 was $1,671.4 million, of which $69.5 million related to the Aviation reporting unit and $459.3 million related to the Education reporting unit.

The Company determined that the carrying value of the Aviation and Education reporting units exceeded the fair value of each of those reporting units, resulting in an impairment charge of $154.8 million.

We identified the evaluation of the goodwill impairment charge for the Aviation and Education reporting units as a critical audit matter.

A high degree of subjective auditor judgment was required to evaluate the reporting units’ forecasted revenue growth rates, operating margins, and discount rate assumptions used in the income approach.

Changes to these assumptions could have a substantial impact on the estimated fair value of the Aviation and Education reporting units.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of an internal control over the Company’s goodwill impairment process including the evaluation of the forecasted revenue growth rates, operating margins, and discount rate assumptions used to estimate the fair value of the reporting units.

We performed sensitivity analyses over the forecasted revenue growth rates, operating margins, and discount rate assumptions to assess the impact of the changes in those assumptions on the impairment charge.

We evaluated the Company’s forecasted revenue growth rates and operating margins for the Aviation and Education reporting units by comparing them to underlying business strategies and growth plans and to relevant industry information, including trends and analytics.

We also involved valuation professionals with specialized skills and knowledge, who assisted in:

• Evaluating the Company’s discount rate, by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities

• Developing an estimate of the Aviation and Education reporting units’ fair values using the reporting units’ cash flow forecast and an independently developed discount rate, and comparing the results to the Company’s fair value estimates.

We have served as the Company’s auditor since 1980.

7 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of October 31, 2019 and 2018, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three‑year period ended October 31, 2019 , and the related notes and financial statement Schedule II (collectively, the consolidated financial statements), and our report dated December 20, 2019 expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of October 31, 2020 and 2019, the related consolidated statements of comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years in the three‑year period ended October 31, 2020, and the related notes and financial statement Schedule II (collectively, the consolidated financial statements), and our report dated December 17, 2020 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

14 unchanged sentences

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may

become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

New York, New York

7 unchanged sentences

at October 31, 2020 and 2019, respectively

854.2 1,013.2

Costs incurred in excess of amounts billed 52.2 72.6

3 unchanged sentences

Other investments 11.1 14.0

Property, plant and equipment, net of accumulated depreciation of $199.5 and $153.9 at October 31, 2019 and 2018, respectively

Property, plant and equipment, net of accumulated depreciation of $ 241.3 and

$ 199.5 at October 31, 2020 and 2019, respectively

Right-of-use assets 143.1 —

Other intangible assets, net of accumulated amortization of $ 343.8 and $ 309.0 at October 31, 2020 and 2019, respectively

Goodwill 1,671.4 1,835.4

Other noncurrent assets 136.1 120.3

Total assets $ 3,776.9 $ 3,692.6

LIABILITIES AND STOCKHOLDERS’ EQUITY

6 unchanged sentences

Income taxes payable 6.2 3.5

Current portion of lease liabilities 35.0 —

Other accrued liabilities 167.3 158.2

1 unchanged sentence

Long-term debt, net 603.0 744.2

Long-term lease liabilities 131.4 —

Deferred income tax liability, net 10.8 47.7

18 unchanged sentences

ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Years Ended October 31,

(in millions, except per share amounts) 2020 2019 2018

Revenues $ 5,987.6 $ 6,498.6 $ 6,442.2

Operating expenses 5,157.0 5,767.5 5,747.4

2 unchanged sentences

Amortization of intangible assets 48.4 58.5 66.0

Impairment loss (recovery)

Impairment loss 172.8 — 26.5

Operating profit 95.7 208.3 138.6

4 unchanged sentences

Income from continuing operations 0.2 127.5 95.9

(Loss) income from discontinued operations, net of taxes

Other comprehensive income (loss)

Interest rate swaps and other

Foreign currency translation

Income (loss) from discontinued operations, net of taxes 0.1 ( 0.1 ) 1.8

Net income 0.3 127.4 97.8

Other comprehensive (loss) income

Interest rate swaps ( 7.6 ) ( 22.4 ) 21.9

Foreign currency translation and other ( 1.8 ) 1.6 ( 4.7 )

Income tax benefit (provision) 2.4 5.9 ( 5.9 )

Comprehensive income

Comprehensive (loss) income $ ( 6.6 ) $ 112.5 $ 109.0

Net income per common share — Basic

Income from continuing operations $ 0.00 $ 1.92 $ 1.45

Income (loss) from discontinued operations

Income from discontinued operations — — 0.03

Net income $ 0.00 $ 1.91 $ 1.48

Net income per common share — Diluted

Income from continuing operations $ 0.00 $ 1.91 $ 1.45

Income (loss) from discontinued operations

Income from discontinued operations — — 0.03

Net income $ 0.00 $ 1.90 $ 1.47

Weighted-average common and common

equivalent shares outstanding

Basic 66.9 66.6 66.1

Diluted 67.3 66.9 66.4

See accompanying notes to consolidated financial statements.

2 unchanged sentences

Years Ended October 31,

(in millions)

2020 2019 2018

(in millions, except per share amounts) Shares Amount Shares Amount Shares Amount

Balance, beginning of year 66.6 $ 0.7 66.0 $ 0.7 65.5 $ 0.7

Stock issued under employee stock purchase and share-based compensation plans

Stock issued in GCA acquisition, net of shares withheld for taxes

Stock issued under employee stock purchase and share-based

compensation plans 0.3 — 0.6 — 0.5 —

Repurchase of common stock ( 0.2 ) — — — — —

3 unchanged sentences

Taxes withheld under employee stock purchase and share-based compensation plans, net

— ( 0.3 ) ( 0.4 )

Share-based compensation expense 20.3 17.5 17.0

Stock issued in GCA acquisition, net of shares withheld for taxes

Repurchase of common stock ( 5.1 ) — —

6 unchanged sentences

Balance, beginning of year 856.3 771.2 720.1

Net income 0.3 127.4 97.8

Common stock ($ 0.740 , $ 0.720 , and $ 0.700 per share)

( 49.3 ) ( 47.7 ) ( 46.0 )

Stock issued under share-based compensation plans ( 0.9 ) ( 1.0 ) ( 0.6 )

Cumulative effect adjustment for adoption of Accounting Standards Update 2014-09

Cumulative effect adjustment for adoption of ASU 2014-09

Balance, end of year 806.4 856.3 771.2

6 unchanged sentences

Cash flows from operating activities

Loss (income) from discontinued operations, net of taxes

Net income $ 0.3 $ 127.4 $ 97.8

(Income) loss from discontinued operations, net of taxes ( 0.1 ) 0.1 ( 1.8 )

Income from continuing operations 0.2 127.5 95.9

Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations

Adjustments to reconcile income from continuing operations to net cash provided by

operating activities of continuing operations

Depreciation and amortization 96.4 107.4 112.5

Proceeds from termination of interest rate swaps — — 25.9

Impairment loss (recovery)

Impairment loss 172.8 — 26.5

Deferred income taxes ( 36.6 ) 9.7 ( 23.7 )

1 unchanged sentence

Provision for bad debt 19.6 6.7 6.4

Amortization of accumulated other comprehensive gain on interest rate swaps ( 6.7 ) ( 5.7 ) ( 2.5 )

Discount accretion on insurance claims 0.8 0.8 0.8

(Gain) loss on sale of assets

Loss (gain) on sale of assets 2.1 ( 0.6 ) 0.5

Reserves on other assets 17.6 — —

Income from unconsolidated affiliates ( 2.2 ) ( 3.0 ) ( 3.2 )

3 unchanged sentences

Prepaid expenses and other current assets ( 15.5 ) ( 13.2 ) 2.4

Right-of-use assets 24.4 — —

Other noncurrent assets ( 10.4 ) 4.5 11.3

Trade accounts payable and other accrued liabilities ( 53.5 ) 85.8 ( 1.5 )

Long-term lease liabilities ( 22.9 ) — —

Insurance claims 5.7 3.9 13.9

3 unchanged sentences

Net cash provided by operating activities of continuing operations 457.4 262.8 299.7

Net cash (used in) provided by operating activities of discontinued operations

Net cash provided by (used in) operating activities of discontinued operations 0.1 ( 0.1 ) 21.2

Net cash provided by operating activities 457.5 262.7 320.9

2 unchanged sentences

Proceeds from sale of assets 5.5 1.3 2.3

(Adjustments to) and proceeds from sale of business

Purchase of businesses, net of cash acquired

Adjustments to sale of business — — ( 1.9 )

Proceeds from redemption of auction rate security 5.0 — 2.9

10 unchanged sentences

Financing of energy savings performance contracts 11.1 8.1 5.4

Repayment of capital lease obligations

Payment of contingent consideration

Net cash (used in) provided by financing activities

Repayment of finance lease obligations ( 3.4 ) ( 3.1 ) ( 3.3 )

Net cash used in financing activities ( 94.1 ) ( 184.8 ) ( 295.8 )

Effect of exchange rate changes on cash and cash equivalents ( 0.2 ) ( 0.2 ) ( 0.7 )

9 unchanged sentences

Interest paid on credit facility 32.9 39.9 49.6

Non-cash investing and financing activities

Stock issued in GCA acquisition, net of shares withheld for taxes

See accompanying notes to consolidated financial statements.

2 unchanged sentences

THE COMPANY AND NATURE OF OPERATIONS

ABM Industries Incorporated, which operates through its subsidiaries (collectively referred to as “ABM,” “we,” “us,” “our,” or the “Company”), is a leading provider of integrated facility services with a mission to make a difference, every person, every day .

ABM is a leading provider of integrated facility services with a mission to make a difference, every person, every day .

We are organized into four industry groups and one Technical Solutions segment:

2 unchanged sentences

Basis of Presentation and Principles of Consolidation

The consolidated financial statements and accompanying notes (the “Financial Statements”) have been prepared in accordance with United States generally accepted accounting principles (“U.S.

GAAP”) and with the rules and regulations of the Securities and Exchange Commission (“SEC”), specifically Regulation S-X and the instructions to Form 10-K.

The Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“U.S.

GAAP”) and with the rules and regulations of the SEC, specifically Regulation S-X and the instructions to Form 10-K.

Unless otherwise indicated, all references to years are to our fiscal year, which ends on October 31.

1 unchanged sentence

We account for ABM’s investments in unconsolidated affiliates under the equity method of accounting.

We include the results of acquired businesses in the consolidated statements of comprehensive income from their respective acquisition dates.

We include the results of acquired businesses in the Consolidated Statements of Comprehensive (Loss) Income from their respective acquisition dates.

All intercompany accounts and transactions have been eliminated in consolidation.

The preparation of consolidated financial statements in accordance with U.S.

GAAP requires our management to make certain estimates that affect the reported amounts.

GAAP requires our management to make certain estimates that affect reported amounts.

We base our estimates on historical experience, known or expected trends, independent valuations, and various other assumptions that we believe to be reasonable under the circumstances.

2 unchanged sentences

Thus, certain amounts may not foot, crossfoot, or recalculate based on reported numbers due to rounding.

Acquisition of GCA Services Group

On September 1, 2017 (the “Acquisition Date”), we completed the acquisition of GCA Services Group (“GCA”).

Accordingly, our consolidated statements of comprehensive income and statements of cash flows include GCA’s results of operations in 2019 and 2018, but exclude GCA’s results of operations in 2017 prior to the Acquisition Date.

See Note 4 , “Acquisitions,” for further information on the acquisition of GCA.

Government Services

At October 31, 2016, the assets and liabilities of our former Government Services business were classified as held for sale, at which time we wrote down goodwill and long-lived assets of this business by $ 22.5 million to reflect our best estimate of fair value less costs to sell, using all information available at that time.

During the second quarter of 2017, we received an offer from a strategic buyer to purchase this business for approximately $ 35.0 million , which was higher than our previous estimate of fair value less costs to sell.

As a result, we recorded a $ 17.4 million impairment recovery to adjust the fair value of certain previously impaired assets to the valuation of the assets as implied by the agreed-upon sales price, less estimated costs to sell.

We sold this business on May 31, 2017 for $ 35.5 million and recorded a pre-tax gain of $ 1.2 million .

The impairment charges, subsequent recovery, and gain on sale are reflected in impairment loss (recovery) in the accompanying consolidated statements of comprehensive income.

The reported results for this business are through the date of sale and future results could include run-off costs.

Prior Year Reclassifications

Effective November 1, 2018, we have modified the presentation of inter-segment revenues, which are recorded at cost with no associated intercompany profit or loss and are eliminated in consolidation.

Additionally, during the third quarter of 2019, we made changes to our operating structure to better align the services and expertise of our Healthcare business with our other industry groups, allowing us to leverage our existing branch network to support the long-term growth of this business.

As a result, our former Healthcare portfolio is now included primarily in our Business & Industry segment.

Our prior period segment data in Note 19 , “Segment and Geographic Information,” has been reclassified to conform with our current period presentation.

These changes had no impact on our previously reported consolidated financial statements.

Impact of the Pandemic

A novel strain of COVID-19 has resulted in a worldwide health Pandemic.

To date, the Pandemic has surfaced in nearly all regions around the world and resulted in business slowdowns and shutdowns, as well as global travel restrictions.

In these Financial Statements and related disclosures we have assessed the current impact of the Pandemic on our financial condition, results of operations, and cash flows as well as on our estimates, forecasts, and accounting policies.

We have made additional disclosures of these assessments as necessary.

Given the unprecedented nature of this situation, we cannot reasonably estimate the full impact the Pandemic will have on our financial condition, results of operations, or cash flows in the foreseeable future.

The ultimate impact of the Pandemic on our company is highly uncertain and will depend on future developments, and such impacts could exist for an extended period of time, even after the Pandemic subsides.

The Pandemic continues to create a dynamic client environment, and we are working diligently to ensure our clients’ changing staffing and service needs are met while actively managing direct labor and related personnel

costs, including furloughs or reduced hours for certain service employees in markets significantly impacted by business slowdowns and shutdowns.

In addition, during the second and third quarters of 2020, we took several human capital management actions to align our organization operationally and help mitigate the financial impact of the Pandemic on our business, one of which included temporary furloughs for certain staff and management employees.

To continue supporting furloughed staff and management employees during the Pandemic, we paid 100 % of health insurance premiums during the furlough period for those enrolled in health benefit plans.

Most of the furloughed staff and management employees returned to work effective August 1, 2020, and we have no t accrued any additional expenses associated with these employees as of October 31, 2020.

In response to the Pandemic, Congress enacted the CARES Act on March 27, 2020.

The CARES Act provides various stimulus measures, including several income tax and payroll tax provisions.

Among the payroll tax provisions is the creation of a refundable credit for employee retention and the deferral of certain payroll tax remittances through December 31, 2020, to future years (with 50% of the deferred amount due by December 31, 2021, and the remaining 50% due by December 31, 2022).

We evaluated the impact of business tax provisions in the CARES Act.

The impact of the income tax provisions was not material.

The impact of the payroll tax provisions was the deferral of approximately $ 101 million of payroll tax as of October 31, 2020.

Refer to additional discussion regarding the Pandemic and the impact on our business throughout this document, including Note 7, “Fair Value of Financial Instruments,” Note 9, “Goodwill and Other Intangible Assets,” and Note 11, “Credit Facility.”

Cash and Cash Equivalents

9 unchanged sentences

The schedules for such billings usually do not precisely match the schedule on which costs are incurred.

As a result, revenues generally differ from amounts that can billed or invoices to the client at any point during the contract.

As a result, revenues generally differ from amounts that can be billed or invoiced to the client at any point during the contract.

Allowance for Doubtful Accounts

8 unchanged sentences

Other Investments

At October 31, 2019 and 2018 , other investments primarily consisted of investments in unconsolidated affiliates and in auction rate securities.

At October 31, 2020 and 2019, other investments primarily consisted of investments in unconsolidated affiliates, as well as auction rate securities at October 31, 2019.

Investments in Unconsolidated Affiliates

7 unchanged sentences

Our investments in auction rate securities are classified as available-for-sale.

Accordingly, auction rate securities are presented at fair value with unrealized gains and losses recorded in accumulated other comprehensive income (loss), net of taxes (“AOCI”).

Accordingly, auction rate securities are presented at fair value with unrealized gains and losses recorded in accumulated other comprehensive (loss) income, net of tax es (“AOCL”).

On a quarterly basis, we analyze all auction rate securities that have unrealized losses for impairment consideration and assess the intent to sell such securities.

2 unchanged sentences

If these securities are considered impaired, we assess whether the amortized costs of the securities can be recovered by reviewing several factors, including credit risks associated with the issuer.

If we do not expect to recover the entire amortized cost of the security, we consider the security to be other-than-temporarily impaired, and record the difference between the security’s amortized costs and its recoverable amount in earnings and the difference between the security’s amortized cost and fair value in AOCI.

If we do not expect to recover the entire amortized cost of the security, we consider the security to be other-than-temporarily impaired and record the difference between the security’s amortized costs and its recoverable amount in earnings and the difference between the security’s amortized cost and fair value in AOCL .

During the first quarter of 2020, our last remaining auction rate security was called by the issuer, and we received proceeds for the fair value of the debt instrument of $ 5.0 million.

As of October 31, 2020, we had no investments in auction rate securities.

Property, Plant and Equipment

3 unchanged sentences

We determine depreciation for financial reporting purposes using the straight-line method over the following estimated useful lives:

Category Years

Computer equipment and software 3 – 5

1 unchanged sentence

Transportation equipment 1.5 – 10

Buildings 10 – 40

Furniture and fixtures 5

In addition, we depreciate assets under capital leases and leasehold improvements over the shorter of their estimated useful lives or the remaining lease term.

In addition, we depreciate assets under finance leases and leasehold improvements over the shorter of their estimated useful lives or the remaining lease term.

Upon retirement or sale of an asset, we remove the cost and accumulated depreciation from our Consolidated Balance Sheets.

When applicable, we record corresponding gains or losses within the accompanying consolidated statements of comprehensive income.

We enter into various noncancelable lease agreements for premises and equipment used in the normal course of business.

We evaluate the lease agreement at the inception of the lease to determine whether the lease is an operating lease or capital lease.

We account for rent expense under noncancelable operating leases with escalation clauses on a straight-line basis over the initial lease term.

A deferred liability is recorded for the amount of the excess of straight-line rent expense over scheduled payments.

We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease inception.

We may also be required to make additional payments to reimburse the lessors for operating expenses such as real estate taxes, maintenance, utilities, and insurance, which are expensed as incurred.

We enter into leases of parking lots and garages that contain contingent payment provisions.

Under these provisions, we pay contingent amounts in addition to base rent, primarily based on percentages of the gross receipts or other financial parameters attributable to the related facilities.

When applicable, we record corresponding gains or losses within the accompanying Consolidated Statements of Comprehensive (Loss) Income.

We enter into various noncancelable lease agreements for office space, parking facilities, warehouses, vehicles, and equipment used in the normal course of business.

We determine if an arrangement is a lease at inception and begin recording lease activity at the commencement date, which is generally the date in which we take possession of or control the physical use of the asset.

Right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of lease payments over the lease term with lease expense recognized on a straight-line basis.

We use our incremental borrowing rate to determine the present value of future lease payments unless the implicit rate in a lease is readily determinable.

Our incremental borrowing rate is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment.

This incremental borrowing rate is applied to the minimum lease payments within each lease agreement to determine the amounts of our ROU assets and lease liabilities.

Our incremental borrowing rate as of November 1, 2019, was utilized for the initial measurement of operating lease liabilities upon adoption of Topic 842, as described below in “Recently Adopted Accounting Standards.”

Our lease terms range from 1 to 30 years.

Some leases include one or more options to renew, with renewal terms that can extend the lease term.

We typically include options to extend the lease in a lease term when it is reasonably certain that we will exercise that option and when doing so is at our sole discretion.

Certain equipment and vehicle leases may also include options to purchase the leased property.

The depreciable life of assets and leasehold improvements are limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise.

Typically, if we decide to cancel or terminate a lease before the end of its term, we would owe the lessor the remaining lease payments under the term of such lease.

Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

We may rent or sublease certain real estate assets that we no longer use to third parties.

Lease agreements may contain rent escalation clauses, rent holidays, or certain landlord incentives, including tenant improvement allowances.

Prior to November 1, 2019, we recognized lease expense related to operating leases on a straight-line basis over the terms of the leases and, accordingly, recorded the difference between cash rent payments and recognition of rent expense as a deferred rent liability or prepaid rent.

Landlord-funded leasehold improvements were also recorded as deferred rent liabilities and were amortized as a reduction of rent expense over the noncancelable term of the related operating lease.

The ROU assets recognized upon adoption of Topic 842 include:

cumulative prepaid or accrued rent on the adoption date, unamortized lease incentives, and unamortized initial direct costs initially recognized prior to adoption of Topic 842.

Following adoption of Topic 842, ROU assets include amounts for scheduled rent increases and are reduced by lease incentive amounts.

Certain of our lease agreements include variable rent payments, consisting primarily of rental payments adjusted periodically for inflation and amounts paid to the lessor based on cost or consumption, such as maintenance and utilities .

These costs are expensed as incurred.

Certain of our parking arrangements also contain variable rent payments that are a percentage of parking services revenue based on contractual levels.

We record contingent rent as it becomes probable that specified targets will be met.

We record each capital lease as an asset and an obligation at an amount that is equal to the present value of the minimum lease payments over the lease term.

Vari able rent lease components are not included in the lease liability.

Service concession arrangements within the scope of ASU No.

2017-10, Service Concession Arrangements (Topic 853) :

Determining the Customer of the Operation Services , are excluded from the scope of Topic 842.

Lease costs associated with these arrangements are recorded as a reduction of revenues.

See Note 3, “Revenues,” for further discussion.

Goodwill and Other Intangible Assets

4 unchanged sentences

The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

We may elect not to perform the qualitative assessment for some or all reporting units and perform a quantitative test instead, under which fair value is determined based on discounted cash flow analyses.

The discounted estimates of future cash flows include significant management assumptions, such as revenue growth rates, operating margins, weighted average cost of capital, and future economic and market conditions.

In 2017, we adopted Accounting Standards Update (“ASU”) 2017-04, Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment , which allows us to test goodwill for impairment by comparing the fair value of a reporting unit to its carrying amount.

If the fair value of a reporting unit is less than its carrying value, an impairment charge will be recorded for the difference between the fair value and carrying value, but it is limited to the carrying value of the reporting unit’s goodwill.

We may elect not to perform the qualitative assessment for some or all reporting units and instead perform a quantitative test under which we estimate the fair value using a weighting of fair values derived from an income approach and a market approach.

The discounted estimates of future cash flows include significant management

assumptions, such as revenue growth rates, operating margins, weighted average cost of capital, and future economic and market conditions.

Other intangible assets primarily consist of acquired customer contracts and relationships that are amortized using the sum-of-the-years’-digits method over their useful lives, consistent with the estimated useful life considerations used in the determination of their fair values.

7 unchanged sentences

Other Noncurrent Assets

At October 31, 2019 and 2018 , other noncurrent assets primarily consisted of long-term insurance recoverables, deferred charges, insurance and other long-term deposits, federal energy savings performance contract receivables, capitalized commissions, and prepayments to carriers for future insurance claims.

At October 31, 2020 and 2019, other noncurrent assets primarily consisted of long-term insurance recoverables, deferred charges, insurance and other long-term deposits, ESPC receivables, capitalized commissions, and prepayments to carriers for future insurance claims.

Federal Energy Savings Performance Contract Receivables

As part of our Technical Solutions business, we enter into energy savings performance contracts (“ESPCs”) with the federal government pursuant to which we agree to develop, design, engineer, and construct a project and to guarantee that the project will satisfy agreed-upon performance standards.

As part of our Technical Solutions business, we enter into ESPCs with the federal government pursuant to which we agree to develop, design, engineer, and construct a project and to guarantee that the project will satisfy agreed-upon performance standards.

ESPC receivables represent the amount to be paid by various federal government agencies for work we have satisfactorily performed under specific ESPCs.

5 unchanged sentences

Fair value is the price we would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date.

In the absence of active markets for the identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date.

In the absence of active markets for identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions.

9 unchanged sentences

See Note 7, “Fair Value of Financial Instruments,” for the fair value hierarchy table and for details on how we measure fair value for our assets and liabilities.

We expense acquisition-related costs as incurred.

On the date of the acquisition, we allocate the purchase price to the assets acquired and liabilities assumed at their estimated fair values.

Goodwill on the acquisition date is measured as the excess of the purchase price over the fair values of assets acquired and liabilities assumed.

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are subject to refinement.

As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with corresponding adjustments to goodwill.

We recognize subsequent changes in the estimate of the amount to be paid under contingent consideration arrangements in the accompanying consolidated statements of comprehensive income.

Discontinued Operations

In order to be reported within discontinued operations, our disposal of a component or a group of components must represent a strategic shift that will have a major effect on our operations and financial results.

We aggregate the results of operations for discontinued operations within a single line item on the income statement.

General corporate overhead is not allocated to discontinued operations.

We disclose any gain or loss that is recognized upon the disposition of a discontinued operation.

Prior to disposition, we aggregate the assets and liabilities of discontinued operations and report the amounts on separate line items within the balance sheet.

Assets and Liabilities Held for Sale

Upon a business being classified as held for sale, we cease all depreciation and amortization related to the assets of the business and record them at the lower of their carrying amount or fair value less estimated costs to sell.

The assets and related liabilities of the business are separately presented on the consolidated balance sheets.

We review all assets held for sale each reporting period to determine whether the existing carrying amounts are fully recoverable in comparison to estimated fair values.

Insurance Reserves

2 unchanged sentences

We retain a substantial portion of the risk related to certain workers’ compensation and medical claims.

Liabilities associated with these losses include estimates of both filed claims and incurred but not reported claims (“IBNR Claims”).

Liabilities associated with these losses include estimates of both filed claims and IBNR Claims.

With the assistance of third-party actuaries, we periodically review our estimate of ultimate losses for IBNR Claims and adjust our required self-insurance reserves as appropriate.

7 unchanged sentences

We classify claims as current or long-term based on the expected settlement date.

Estimated insurance recoveries related to recorded liabilities are reflected as assets in our consolidated balance sheets when we believe that the receipt of such amounts is probable.

Estimated insurance recoveries related to recorded liabilities are reflected as assets in our Consolidated Balance Sheets when we believe the receipt of such amounts is probable.

Other Accrued Liabilities

At October 31, 2019 and 2018 , other accrued liabilities primarily consisted of employee benefits, contract liabilities (which include deferred revenue and progress billings in excess of costs), legal fees and settlements, dividends payable, current capital leases, interest, insurance claims, severance, rent payable, and other accrued expenses.

At October 31, 2020 and 2019, other accrued liabilities primarily consisted of notes payable, other accrued expenses, legal fees and settlements, contract liabilities (which include deferred revenue and progress billings in excess of costs), employee benefits, unclaimed property, severance, insurance claims, rent payable, interest, and current finance leases.

Other Noncurrent Liabilities

At October 31, 2019 and 2018 , other noncurrent liabilities primarily consisted of ESPC liabilities, deferred rent, retirement plan liabilities, deferred compensation, and long-term capital leases.

Other noncurrent liabilities at October 31, 2019 also includes our interest rate swaps.

At October 31, 2020 and 2019, other noncurrent liabilities primarily consisted of deferred payroll taxes, deferred rent, warranty reserves, ESPC liabilities, retirement plan liabilities, deferred compensation, and long-term finance leases.

Revenue Recognition

2 unchanged sentences

Prior period amounts have not been restated and continue to be reported in accordance with our historical accounting policies.

Our revenue recognition policies under Topic 606 and Topic 853 are described in the following paragraphs and references to prior period policies are included below where they are substantially different.

See Note 3 , “Revenues,” for further information on our revenues, including the impact of adopting Topic 606 and Topic 853 on our consolidated financial statements.

Our revenue recognition policies under Topic 606 and Topic 853 are described in the following paragraphs, and references to our prior period policies are included below where they are substantially different.

See Note 3, “Revenues,” for further information on our revenues.

Contracts with Customers

1 unchanged sentence

Once a contract is identified, we evaluate whether it is a combined or single contract and whether it should be accounted for as more than one performance obligation.

Generally, most of our contracts are cancelable by either

party without a substantive penalty, and the majority of our contracts have a notification period of 30 to 60 days.

Generally, most of our contracts are cancelable by either party without a substantive penalty, and the majority of our contracts have a notification period of 30 to 60 days.

If a contract includes a cancellation clause, the remaining contract term is limited to the required termination notice period.

19 unchanged sentences

We consider contract modifications to exist when the modification either changes the consideration, creates new performance obligations, or changes the existing scope of the contract and related performance obligations.

Historically, contract modifications have been for services that are not distinct from the existing contract, since we are providing a bundle of services that are highly inter-related, and are therefore treated as if they were part of that existing contract.

Historically, contract modifications have been for services that are not distinct from the existing contract, since we are providing a bundle of services that are highly interrelated, and are therefore treated as if they were part of that existing contract.

Such modifications are generally accounted for prospectively as part of the existing contract.

4 unchanged sentences

We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual amount over time because the customer simultaneously receives and consumes the benefits of the services as they are performed.

Monthly square-foot arrangements are contracts in which the client agrees to pay a fixed fee every month based on the actual square footage serviced over a specified contract term.

Square-foot arrangements are contracts in which the client agrees to pay a fixed fee every month based on the actual square footage serviced over a specified contract term.

1 unchanged sentence

Tag services (work orders) generally consist of supplemental services requested by clients outside of the standard service specification and include cleanup after tenant moves, construction cleanup, flood cleanup, and snow removal.

Because the nature of these short-term contracts involves performing one-off type services, revenue is recognized at the agreed-upon contractual amount over time as the services are provided, because the customer simultaneously receives and consumes the benefits of the services as they are performed.

Work orders generally consist of supplemental services requested by clients outside of the standard service specification and include cleanup after tenant moves, construction cleanup, flood cleanup, and snow removal.

The nature of these short-term contracts involves performing one-off type services, and revenue is recognized at the agreed-upon contractual amount over time as the services are provided because the customer simultaneously receives and consumes the benefits of the services as they are performed.

Transaction-Price

20 unchanged sentences

Additionally, as part of bundled energy solutions arrangements, we guarantee the project will satisfy agreed-upon performance standards.

We use the cost-to-cost method, which compares the actual costs incurred to date with the current estimate of total costs to complete, to measure the satisfaction of the performance obligation and recognize revenue as work progresses and we incur costs on our contracts;

progresses and we incur costs on our contracts;

we believe this method best reflects the transfer of control to the customer.

28 unchanged sentences

If a contract includes a cancellation clause that allows for the termination of the contract by either party without a substantive penalty, the contract term is limited to the termination notice period.

Contract assets consist of billed trade receivables, unbilled trade receivables, and costs incurred in excess of amounts billed.

Contract assets primarily consist of billed trade receivables, unbilled trade receivables, and costs incurred in excess of amounts billed.

Billed and unbilled trade receivables represent amounts from work completed in which we have an unconditional right to bill our customer.

Costs incurred in excess of amounts billed typically arise when the revenue recognized on projects exceeds the amount billed to the customer.

These amounts are transferred to billed trade receivables when the rights become unconditional.

These amounts are transferred to billed

trade receivables when the rights become unconditional.

Contract assets also include the capitalization of incremental costs of obtaining a contract with a customer, primarily commissions.

Contract liabilities consist of deferred revenue and advance payments and billings in excess of revenue recognized.

5 unchanged sentences

Business & Industry $ 221.4 $ 283.1 $ 276.6

Aviation 74.3 95.5 99.9

Total $ 295.6 $ 378.7 $ 376.4

Restructuring and Related Expenses

4 unchanged sentences

For employees with employment agreements, we accrue for these severance liabilities when it is probable that the impacted employee will be entitled to the benefits and the amount can be reasonably estimated.

Noncancelable Leases and Contractual Obligations

We record liabilities when we terminate a contract in accordance with the contract terms or when we exit the leased space.

The expense for noncancelable leases is determined based on the fair value of remaining lease payments reduced by the fair value of estimated sublease income that could reasonably be obtained for the property, estimated using a present value technique.

For other costs associated with exit and disposal activities, we recognize an expense at fair value in the period in which the liability is incurred.

24 unchanged sentences

A valuation allowance is recorded to reduce the carrying amount of a deferred tax asset to its realizable value unless it is more likely than not that such asset will be realized.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense in our consolidated statements of comprehensive income.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense in our Consolidated Statements of Comprehensive (Loss) Income.

Recently Adopted Accounting Standards

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , and subsequently issued several ASUs further updating Topic 606.

Additionally, in May 2017, the FASB issued ASU 2017-10 , Service Concession Arrangements (Topic 853):

Determining the Customer of the Operation Services , to clarify how operating entities should determine the customer of operation services for transactions within the scope of this guidance, which U.S.

GAAP did not address prior to this ASU.

The amendment eliminates diversity in practice by clarifying that the grantor is the customer of the operation services in all cases for those arrangements.

We determined that revenue we generate from service concession arrangements, primarily from certain parking arrangements, will be accounted for under this guidance.

We adopted the amendments in this update in conjunction with the adoption of Topic 606, as discussed below.

Collectively these ASUs introduce a new principles-based framework for revenue recognition and disclosure.

The core principle of the standard is when an entity transfers goods or services to customers it will recognize revenue in an amount that reflects the consideration it expects to be entitled to for those goods or services.

The standard also

expands the required disclosures to include the disaggregation of revenue from contracts with customers into categories that depict how the nature, timing, and uncertainty of revenue and cash flows are affected by economic factors.

We adopted Topic 606 and Topic 853 on November 1, 2018 using a modified retrospective approach with a cumulative-effect adjustment to retained earnings as of the beginning of 2019;

prior period financial statements were not adjusted.

We applied the standards to contracts that had not been completed at November 1, 2018 and did not apply them to contracts that were modified before the beginning of the earliest reporting period presented.

See Note 3 , “Revenues,” for additional details regarding the impact of adopting Topic 606 and Topic 853 on our consolidated financial statements.

Other Recently Adopted Accounting Standards

During the first quarter of 2019, we also adopted the following ASUs with no material impact on our consolidated financial statements:

Method of Adoption

Financial Instruments

Modified retrospective

Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments

Retrospective

Income Taxes — Intra-Entity Transfers of Assets Other Than Inventory

Modified retrospective

Statement of Cash Flows — Restricted Cash

Retrospective

Compensation — Retirement Benefits

Retrospective

Compensation — Stock Compensation

Income Statement — Reporting Comprehensive Income:

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

Early adopted;

we elected not to reclassify any stranded tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) due to the insignificance of the amount remaining in AOCI.

Investments — Debt Securities

Adopted in conjunction with ASU 2016-01

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) .

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842) .

Since the release of ASU 2016-02, the FASB issued the following additional ASUs further updating Topic 842:

5 unchanged sentences

Codification Improvements

Topic 842 replaces existing lease accounting guidance and is intended to provide enhanced transparency and comparability by requiring lessees to record most leases on the balance sheet.

Under Topic 842, lessees are required to record on the balance sheet right-of-use (“ROU”) assets, which represent the right to use an underlying asset for the lease term, and the corresponding lease liabilities, which represent the obligation to make lease payments arising from the lease.

The new guidance requires us to continue classifying leases as either operating or financing, with classification affecting the pattern of expense recognition in the statements of comprehensive income.

In addition, the new standard requires enhanced disclosures surrounding the amount, timing, and uncertainty of cash flows arising from leasing arrangements.

We will adopt Topic 842 effective November 1, 2019 on a modified retrospective basis using the optional transition method permitted under ASU 2018-11, and we will recognize a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of 2020.

Comparative prior period financial statements will not be restated.

We expect to elect certain practical expedients upon adoption for existing leases as of the effective date.

We will elect the package of practical expedients that allows us to carry forward prior conclusions related to:

Topic 842 replaced existing lease accounting guidance and was intended to provide enhanced transparency and comparability by requiring lessees to record most leases on the balance sheet.

Under Topic 842, lessees are required to record on the balance sheet ROU assets (the right to use an underlying asset for the lease term) and the corresponding lease liabilities (the obligation to make lease payments arising from the lease).

This guidance requires us to continue classifying leases as either operating or financing, with classification affecting the pattern of expense recognition in the Consolidated Statements of Comprehensive (Loss) Income.

In addition, this new standard requires enhanced disclosures surrounding the amount, timing, and uncertainty of cash flows arising from leasing arrangements.

We adopted Topic 842 on November 1, 2019 on a modified retrospective basis using the optional transition method permitted under ASU 2018-11 and have used this effective date as the initial application date.

Comparative prior period Financial Statements have not been restated and continue to be reported under the accounting standards in effect for those prior periods presented.

Upon adoption, we elected the package of transition practical expedients that allowed us to carry forward prior conclusions related to:

(i) whether any expired or existing contracts are or contain leases;

1 unchanged sentence

and (iii) initial direct costs for existing leases.

Additionally, we will elect the practical expedient of not separating lease components from non-lease components for all asset classes.

We will make an accounting policy election to not record ROU assets or lease liabilities for leases with an initial term of 12 months or less and will recognize payments for such leases in the consolidated statements of comprehensive income on a straight-line basis over the lease term.

We will not elect the use of hindsight for determining the reasonably certain lease term.

We have substantially completed our plan for the adoption and implementation of this new accounting standard, including assessing our lease arrangements and implementing software to meet the reporting and disclosure requirements of this standard.

We continue to finalize our implementation efforts and currently estimate that the adoption of this standard will result in the recognition of approximately $ 130 million to $ 200 million of ROU assets and approximately $ 152 million to $ 222 million of lease liabilities, subject to the completion of our assessment.

We do not believe the new standard will have a material impact on our consolidated statements of comprehensive income or consolidated statements of cash flows, our liquidity, or our compliance with the various covenants contained within our credit facility, as further described in Note 13 , “Credit Facility.”

No other recently issued accounting standards are expected to have a significant impact on our fiscal 2020 consolidated financial statements.

Impact of Adopting Topic 606 and Topic 853 on the Consolidated Financial Statements

On November 1, 2018, we recorded a pre-tax increase of $ 9.1 million to our opening retained earnings as a result of adopting Topic 606.

These changes primarily related to:

(i) the capitalization of certain commission costs that were previously expensed as incurred;

(ii) the deferral of revenue, and the associated margin, on uninstalled materials associated with certain project type contracts that will now be recognized when installation is substantially complete;

and (iii) the deferral of initial franchise license fees that were previously recognized when the franchise license term began but will now be recognized over the term of the initial franchise arrangement.

Changes to our consolidated balance sheets include the separate presentation of costs incurred in excess of amounts billed, which were previously included in trade accounts receivable, net.

Additionally, in accordance with Topic 853, rent expense related to service concession arrangements, which was previously classified as an operating expense, is now classified as a reduction of revenues.

(in millions)

Balance at October 31, 2018

Adjustments Due to Adoption of Topic 606

Balance at November 1, 2018

Current assets

Trade accounts receivable, net

Costs incurred in excess of amounts billed

Other current assets

Other noncurrent assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Other accrued liabilities

Deferred income tax liability, net

Retained earnings

The impact of adopting Topic 606 on our consolidated balance sheet as of October 31, 2019 was as follows:

As of October 31, 2019

(in millions)

Under Historical Guidance

Effect of Adoption

Current assets

Other current assets

Other noncurrent assets

Additionally, we elected the practical expedient of not separating lease components from non-lease components for all asset classes.

We also made an accounting policy election to not record ROU assets or lease liabilities for leases with an

initial term of 12 months or less and will recognize payments for such leases in our Consolidated Statements of Comprehensive (Loss) Income on a straight-line basis over the lease term.

We did not elect the use of hindsight for determining the reasonably certain lease term.

The adoption of Topic 842 had a significant impact on our Consolidated Balance Sheet, but did not have a significant impact on our Consolidated Statement of Comprehensive (Loss) Income, our Consolidated Statement of Stockholders’ Equity, our Consolidated Statement of Cash Flows, our liquidity, or our compliance with the various covenants contained within our credit facility, as further described in Note 11, “Credit Facility.” The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while our accounting for finance leases remained substantially unchanged.

See Note 4, “Leases,” for additional information on our lease arrangements.

The impact of adoption of Topic 842 on our Consolidated Balance Sheet was as follows:

(in millions) Balance at

October 31, 2019 Adjustments Due

to Adoption of

Topic 842 Balance at

November 1, 2019

Right-of-use assets (1)

$ — $ 167.5 $ 167.5

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Current portion of lease liabilities (2)

$ — $ 36.3 $ 36.3

Other accrued liabilities (3)

Deferred income tax liability, net

Retained earnings

The impact of adopting Topic 606 and Topic 853 on our consolidated statements of comprehensive income for the year ended October 31, 2019 was as follows:

Year Ended October 31, 2019

(in millions, except per share amounts)

Under Historical Guidance

Effect of Adoption

Operating expenses

Selling, general and administrative expenses

Income tax provision

Net income per common share — Basic

Net income per common share — Diluted

There were no significant impacts on our consolidated statements of cash flows other than offsetting shifts in net cash provided by operating activities between net income and various changes in working capital line items.

158.2 ( 3.0 ) 155.2

Long-term lease liabilities (4)

— 154.2 154.2

Other noncurrent liabilities (5)

78.8 ( 20.0 ) 58.8

(1) Represents capitalization of operating lease assets and reclassification of prepaid rent, deferred rent, lease exit impairment liabilities, and lease incentives and tenant improvements on operating leases.

(2) Represents the recognition of short-term operating lease liabilities.

(3) Represents short-term deferred rent reclassified to ROU assets.

(4) Represents the recognition of long-term operating lease liabilities.

(5) Represents long-term deferred rent, lease incentives and tenant improvements, and lease exit impairment liabilities reclassified to ROU assets.

In April 2020, the FASB issued a question and answer document focused on the application of lease accounting guidance to lease concessions provided relating to the Pandemic (the “Lease Modification Q&A”).

The Lease Modification Q&A provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease when the total cash flows resulting from the modified lease are substantially similar to the cash flows in the original lease.

We have elected this practical expedient for Pandemic-related rent concessions, primarily rent deferrals or rent abatements, and we have elected not to remeasure the related lease liability and ROU asset for those leases.

These concessions will be recognized as a reduction of rent expense in the month they occur.

This election will continue while these concessions are in effect.

Pandemic-related lease concessions were not material for the year ended October 31, 2020.

Recently Issued Accounting Standards

Measurement of Credit Losses of Financial Instruments

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

Since the release of ASU 2016-13, the FASB issued the following additional ASUs further updating Topic 326:

• In November 2018, ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses

• In April 2019, ASU 2019-04, Codification Improvements to Topic 326:

Financial Instruments—Credit Losses;

Derivatives and Hedging;

and Topic 825:

Financial Instruments

• In May 2019, ASU 2019-05, Financial Instruments—Credit Losses (Topic 326):

Targeted Transition Relief

• In November 2019, ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses

• In March 2020, ASU 2020-03, Codification Improvements to Financial Instruments

Topic 326 replaces the existing incurred loss impairment model with a methodology that incorporates all expected credit loss estimates, resulting in more timely recognition of losses.

Under Topic 326, an organization is required to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported financial assets.

It also requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses.

We will adopt this standard effective November 1, 2020 on a modified retrospective basis.

The adoption of the standard is not expected to have a material impact on the consolidated financial statements.

Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

In August 2018, the FASB issued ASU No.

2018-15, Intangibles—Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract .

This accounting update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The guidance also specifies that the balance sheet, income statement, and statement of cash flows presentation of capitalized implementation costs and the related amortization should align with the presentation of the hosting (service) element of the arrangement.

We will adopt this standard effective November 1, 2020 on a prospective basis.

The adoption of the standard is not expected to have a material impact on the consolidated financial statements.

No other recently issued accounting standards are expected to have a significant impact on our fiscal 2021 consolidated financial statements.

Disaggregation of Revenues

We generate revenues under several types of contracts, which are further described in Note 2, “Basis of Presentation and Significant Accounting Policies.” Generally, the type of contract is determined by the nature of the services provided by each of our major service lines throughout our reportable segments;

therefore, we disaggregate revenue from contracts with customers into major service lines.

We have determined that disaggregating revenue into these categories best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

Our reportable segments are Business & Industry (“B&I”), Aviation, Technology and Manufacturing (“T&M”), Education, and Technical Solutions, as described in Note 19 , “Segment and Geographic Information.”

therefore, we disaggregate revenues from contracts with customers into major service lines.

We have determined that disaggregating revenues into these categories best depicts how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors.

Our reportable segments are B&I, T&M, Education, Aviation, and Technical Solutions, as described in Note 17, “Segment and Geographic Information.”

Year Ended October 31, 2020

(in millions)

Technical Solutions

(in millions) B&I T&M Education Aviation Technical Solutions Total

Major Service Line

Janitorial (1)

$ 2,420.4 $ 770.9 $ 716.5 $ 121.2 $ — $ 4,029.0

362.8 33.5 1.8 255.9 — 654.0

Facility Services (3)

374.1 151.6 90.5 31.6 — 647.9

Building & Energy Solutions (4)

— — — — 506.6 506.6

Airline Services (5)

0.4 — — 272.2 — 272.6

$ 3,157.8 $ 956.0 $ 808.8 $ 680.9 $ 506.6 $ 6,110.0

Elimination of inter-segment revenues

Total $ 5,987.6

Year Ended October 31, 2019

(in millions) B&I T&M Education Aviation Technical Solutions Total

Major Service Line

Janitorial (1)

$ 2,316.1 $ 739.7 $ 756.3 $ 125.8 $ — $ 3,937.9

511.5 25.9 3.1 335.3 — 875.8

Facility Services (3)

423.1 151.4 88.0 72.1 — 734.6

Building & Energy Solutions (4)

— — — — 593.2 593.2

Airline Services (5)

0.6 0.1 — 484.1 — 484.8

$ 3,251.4 $ 917.0 $ 847.4 $ 1,017.3 $ 593.2 $ 6,626.3

Elimination of inter-segment revenues

Total $ 6,498.6

(1) Janitorial arrangements provide a wide range of essential cleaning services for commercial office buildings, airports and other transportation centers, educational institutions, government buildings, health facilities, industrial buildings, retail stores, and stadiums and arenas.

These arrangements are often structured as monthly fixed-price, square-foot, cost-plus, and tag services contracts.

These arrangements are often structured as monthly fixed-price, square-foot, cost-plus, and work order contracts.

(2) Parking arrangements provide parking and transportation services for clients at various locations, including airports and other transportation centers, commercial office buildings, educational institutions, health facilities, hotels, and stadiums and arenas.

Certain of our management reimbursement, leased location, and allowance arrangements are considered service concession agreements and are accounted for under the guidance of Topic 853.

For the year ended October 31, 2019 , rent expense related to service concession arrangements, previously recorded within operating expenses, has been recorded as a reduction of the related parking service revenues.

These arrangements are structured as management reimbursement, leased location, and allowance contracts.

Certain of these arrangements are considered service concession agreements and are accounted for under the guidance of Topic 853;

accordingly, rent expense related to these arrangements is recorded as a reduction of the related parking service revenues.

(3) Facility Services arrangements provide onsite mechanical engineering and technical services and solutions relating to a broad range of facilities and infrastructure systems that are designed to extend the useful life of facility fixed assets, improve equipment operating efficiencies, reduce energy consumption, lower overall operational costs for clients, and enhance the sustainability of client locations.

These arrangements are generally structured as monthly fixed-price, cost-plus, and tag services contracts.

These arrangements are generally structured as monthly fixed-price, cost-plus, and work order contracts.

(4) Building & Energy Solutions arrangements provide custom energy solutions, electrical, HVAC, lighting, and other general maintenance and repair services for clients in the public and private sectors and are generally structured as Energy Savings and Fixed-Price Repair and Refurbishment contracts.

4 unchanged sentences

At October 31, 2020, performance obligations that were unsatisfied or partially unsatisfied for which we expect to recognize revenue totaled $ 266.3 million.

We expect to recognize revenue on approximately 79 % of the remaining performance obligations over the next 12 months , with the remainder recognized thereafter.

We expect to recognize revenue on approximately 61 % of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter, based on our estimates of project timing.

These amounts exclude variable consideration primarily related to:

5 unchanged sentences

The following tables present the balances in our contract assets and contract liabilities:

(in millions)

October 31, 2019

November 1, 2018

(in millions) October 31, 2020 October 31, 2019

Contract assets

Billed trade receivables (1)

$ 835.8 $ 978.7

Unbilled trade receivables (1)

2 unchanged sentences

(1) Included in trade accounts receivable, net, on the Consolidated Balance Sheets.

The fluctuation correlates directly to the execution of new customer contracts and to invoicing and collections from customers in the normal course of business.

(2) Increase is primarily due to the timing of payments on our contracts measured using the cost-to-cost method of revenue recognition.

The fluctuations correlate directly to the execution of new customer contracts and to invoicing and collections from customers in the normal course of business.

(2) Fluctuation is primarily due to the timing of payments on our contracts measured using the cost-to-cost method of revenue recognition.

(3) Included in other current assets and other noncurrent assets on the Consolidated Balance Sheets.

1 unchanged sentence

There was no impairment loss recorded on the costs capitalized.

(in millions)

(in millions) Year Ended

October 31, 2020

5 unchanged sentences

(1) Included in other accrued liabilities on the Consolidated Balance Sheets.

Acquisition of GCA during 2017

On September 1, 2017, we acquired all of the outstanding stock of GCA, a provider of integrated facility services to educational institutions and commercial facilities, for a purchase price of approximately $ 1.3 billion .

As a result of the acquisition, we are now a leading facilities services provider in the education market.

Consideration Transferred

(in millions, except per share data)

Shares of ABM common stock, net of shares withheld for taxes

ABM common stock closing market price at acquisition date

Fair value of ABM common stock at closing

Cash consideration (1)

Total consideration transferred

(1) Revised during the second quarter of 2018 to reflect a post-closing purchase price adjustment related to a net working capital settlement.

Purchase Price Allocation

As reported at

The components of lease assets and liabilities and their classification on our Consolidated Balance Sheets as of October 31, 2020 were as follows:

(in millions) Classification October 31, 2020

Operating leases Right-of-use assets $ 143.1

Finance leases Property, plant and equipment, net (1)

Total lease assets $ 149.2

Lease liabilities

Current liabilities

Operating leases Current portion of lease liabilities $ 35.0

Finance leases Other accrued liabilities 2.3

Noncurrent liabilities

Operating leases Long-term lease liabilities 131.4

Finance leases Other noncurrent liabilities 2.8

Total lease liabilities $ 171.4

(1) Finance lease assets are recorded net of accumulated amortization of $ 13.6 million as of October 31, 2020.

Total lease costs for the year ended October 31, 2020 were $ 100.4 million, including operating leases of $ 96.4 million and finance leases of $ 4.0 million.

The components of lease costs and classification within the Consolidated Statements of Comprehensive (Loss) Income were as follows:

(in millions) Year Ended

October 31, 2020

(in millions)

Cash and cash equivalents

Trade accounts receivable (1)

Prepaid expenses and other current assets

Property, plant and equipment

Customer relationships (2)

Trade names (2)

Trade accounts payable

Insurance reserves

Income taxes payable

Accrued liabilities

Deferred income tax liability, net

Other liabilities

Net assets acquired

(1) The gross amount of trade accounts receivable was $ 121.9 million , of which $ 5.6 million was deemed uncollectible at October 31, 2018.

(2) The amortization periods for the acquired intangible assets are 15 years for customer relationships and 2 years for trade names.

(3) Goodwill is largely attributable to value we expect to obtain from long-term business growth, the established workforce, and buyer-specific synergies.

This goodwill is not deductible for income tax purposes.

Financial Information

The following table presents our unaudited pro forma results for the year ended October 31, 2017 as though the GCA acquisition occurred on November 1, 2015.

These results include adjustments for the estimated amortization of intangible assets, interest expense, and the income tax impact of the pro forma adjustments at the statutory rate of 41 % .

These results were adjusted to exclude $ 24.2 million of acquisition-related costs incurred during 2017, which are included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income.

In addition, they do not reflect the cost of integration activities or benefits from expected revenue enhancements and synergies.

Accordingly, the unaudited pro forma information is not necessarily indicative of the results that would have been achieved if the acquisition had been effective on November 1, 2015.

(in millions)

Operating lease costs:

Operating expenses (1)(2)

Selling, general and administrative expenses (3)

Finance lease costs:

Operating expenses (4)

Interest expense (5)

Total lease costs $ 100.4

(1) Related to certain parking arrangements.

(2) Includes short-term lease costs and variable lease costs.

(3) Includes short-term lease costs.

(4) Represents amortization of leased assets.

(5) Interest on lease liabilities.

The following table presents information on short-term and variable lease costs:

(in millions) Year Ended

October 31, 2020

Pro forma revenue

Pro forma income from continuing operations

Other 2017 Acquisitions

Effective December 1, 2016, we acquired all of the outstanding stock of Mechanical Solutions, Inc.

(“MSI”), a provider of specialized HVAC, chiller, and plumbing services, for a purchase price of $ 12.6 million .

The purchase price included up to $ 1.0 million of undiscounted contingent consideration that was based on the expected achievement of certain pre-established revenue goals.

Based on the metrics of these revenue goals, this contingent consideration was reduced to a nominal value at October 31, 2018.

As of December 1, 2016, the operations of MSI are included in our Technical Solutions segment.

Effective December 1, 2016, we also acquired all of the outstanding stock of OFJ Connections Ltd (“OFJ”), a provider of airport transportation services in the United Kingdom, for a purchase price of $ 6.3 million .

As of December 1, 2016, the operations of OFJ are included in our Aviation segment.

Pro Forma and Other Financial Information

Except for GCA, we do not present pro forma and other financial information for our other acquisitions, as they are not considered material business combinations individually or on a combined basis.

Short-term lease costs $ 47.0

Variable lease costs 3.5

Total short-term and variable lease costs $ 50.5

Sublease income generated during the year ended October 31, 2020 was immaterial.

We continue to monitor the impact of the Pandemic on our subleases;

however, we do not expect a significant impact.

The amounts of future undiscounted cash flows related to the lease payments over the lease terms and the reconciliation to the present value of the lease liabilities as recorded on our Consolidated Balance Sheets as of October 31, 2020 are as follows:

(in millions) Operating

Lease Liabilities Finance

Lease Liabilities Total

Fiscal 2021 $ 41.3 $ 3.3 $ 44.6

Fiscal 2022 34.3 1.7 36.0

Fiscal 2023 29.2 0.9 30.1

Fiscal 2024 24.1 — 24.1

Fiscal 2025 18.2 — 18.2

Thereafter 43.3 — 43.3

Total lease payments 190.4 5.9 196.3

imputed interest 24.0 0.8 24.9

Present value of lease liabilities $ 166.4 $ 5.1 $ 171.4

Future sublease rental income was excluded for the periods shown above as the amounts are immaterial.

We have entered into operating lease arrangements as of October 31, 2020 that are effective for future periods.

The total amount of ROU assets and lease liabilities related to these arrangements is immaterial.

The following table includes the weighted-average remaining lease terms, in years, and the weighted-average discount rate used to calculate the present value of operating lease liabilities:

October 31, 2020

Weighted-average remaining lease term (years)

Operating leases 6.1

Finance leases 2.0

Weighted-average discount rate

Operating leases 4.14 %

Finance leases 4.55 %

The following table includes supplemental cash and non-cash information related to operating leases:

(in millions) Year Ended

October 31, 2020

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases $ 44.8

Operating cash flows from finance leases 0.5

Financing cash flows from finance leases 3.4

Lease assets obtained in exchange for new operating lease liabilities (1)

(1) Excludes the amount initially capitalized in conjunction with the adoption of Topic 842.

The amounts of minimum future commitments under non-cancelable operating and capital leases as of October 31, 2019, in accordance with Topic 840 were as follows:

(in millions) Operating and Other (1)

Capital Total

Fiscal 2020 $ 42.8 $ 3.1 $ 45.9

Fiscal 2021 35.5 2.5 38.0

Fiscal 2022 30.3 1.3 31.6

Fiscal 2023 25.6 0.6 26.2

Fiscal 2024 20.5 — 20.5

Thereafter 51.8 — 51.8

$ 206.5 $ 7.5 $ 214.0

(1) Includes total estimated sublease rental income of $ 15.8 million.

(2) Total undiscounted future minimum payments.

RESTRUCTURING AND RELATED COSTS

2 unchanged sentences

Recently, our significant restructuring activities have been primarily associated with integrating our acquisition of GCA and implementing our 2020 Vision initiative, as described below.

GCA and Other Restructuring

During the first quarter of 2018, we initiated a restructuring program to achieve cost synergies following the acquisition of GCA.

We incurred the majority of our severance expense associated with this restructuring program in the first half of 2018.

During 2019, our restructuring activities primarily related to the continued integration of GCA and other initiatives, including standardizing our financial systems and streamlining our operations by migrating and upgrading several key management platforms, such as our human resources information systems, enterprise resource planning system, and labor management system.

We also continue consolidating our real estate leases.

Severance and other expenses associated with our Healthcare reorganization during 2019 were immaterial.

We expect to incur additional restructuring charges, primarily related to some of our technology initiatives and other project fees, as we continue to consolidate our operational and financial processes.

GCA Restructuring and Other Initiatives

Following the acquisition of GCA, during the first quarter of 2018 we initiated a restructuring program to achieve cost synergies and subsequently incurred expenses primarily related to employee severance, the migration and upgrade of several key technology platforms, and the consolidation of certain real estate leases.

Additionally, during 2019 we reorganized our former Healthcare business and incurred immaterial severance expense.

In early 2020 we continued our technology-based modernization efforts, including standardizing our financial systems.

However, due to the Pandemic, the majority of these projects have been temporarily suspended since the second quarter of 2020.

2020 Vision Restructuring

During the fourth quarter of 2015, our Board of Directors approved a comprehensive strategy intended to have a positive transformative effect on ABM (the “ 2020 Vision ”).

As part of the 2020 Vision , we identified key priorities to differentiate ABM in the marketplace, accelerate revenue growth for certain industry groups, and improve our margin profile.

We do not expect to incur significant 2020 Vision restructuring and related expenses in the future.

During the fourth quarter of 2015, we initiated a restructuring plan as part of a comprehensive strategy intended to have a positive transformative effect on ABM.

These actions were substantially completed by the end of fiscal 2019 at a cumulative cost of $ 66.5 million.

Rollforward of Restructuring and Related Liabilities

(in millions)

External Support Fees

Employee Severance

Other Project Fees

Lease Exit Costs

Asset Impairment

Balance, October 31, 2014

Costs recognized (1)

Non-cash items

(in millions) External Support Fees Employee Severance Other Project Fees Lease Exit Costs Asset Impairment Total

Balance, October 31, 2017 $ 2.5 $ 2.7 $ 0.4 $ 2.8 $ — $ 8.4

Costs recognized (1)

4.0 11.0 8.2 2.0 0.6 25.7

Payments ( 6.5 ) ( 9.9 ) ( 6.7 ) ( 1.5 ) — ( 24.7 )

Non-cash items — — — ( 0.2 ) ( 0.6 ) ( 0.7 )

1 unchanged sentence

Costs recognized (1)

Non-cash items

1.5 4.6 4.5 0.7 — 11.2

Payments ( 1.0 ) ( 5.3 ) ( 5.6 ) ( 1.1 ) — ( 12.9 )

Balance, October 31, 2019 $ 0.5 $ 3.0 $ 0.7 $ 2.7 $ — $ 7.0

Costs recognized (1)

1.4 0.3 3.2 2.7 — 7.6

Payments ( 1.9 ) ( 2.0 ) ( 3.7 ) ( 0.2 ) — ( 7.9 )

Non-cash items — — ( 0.2 ) ( 5.3 ) — ( 5.4 )

Balance, October 31, 2020 $ — $ 1.3 $ — $ — $ — $ 1.3

Costs recognized (1)

Balance, October 31, 2019

(1) We include these costs within corporate expenses.

Cumulative Restructuring and Related Charges

(in millions)

External Support Fees

Employee Severance

Other Project Fees

Lease Exit Costs

Asset Impairment

(in millions) External Support Fees Employee Severance Other Project Fees Lease Exit Costs Asset Impairment Total

GCA and Other $ 4.9 $ 18.3 $ 15.5 $ 3.4 $ — $ 42.2

DISCONTINUED OPERATIONS

On October 26, 2015, in connection with our 2020 Vision , we sold substantially all of the assets of our Security business for cash proceeds of $ 131.0 million and recorded a pre-tax gain on sale of $ 23.6 million , which was subsequently reduced by a $ 3.1 million working capital adjustment in 2016.

Following the sale, we record all costs associated with this former business in discontinued operations.

Such costs generally relate to litigation we retained and insurance reserves.

In 2017, we incurred a net loss from discontinued operations of $ 74.3 million (a pre-tax loss of $ 123.7 million ) primarily due to legal settlements.

In 2018 , we had net income from discontinued operations of $ 1.8 million (pre-tax income of $ 2.6 million ) due to an insurance reimbursement on a legal settlement and collection of previously written off receivables, partially offset by union audit settlements.

In 2019 , net loss from discontinued operations was de minimis .

30.0 13.0 10.7 7.7 5.2 66.5

Total $ 34.9 $ 31.3 $ 26.2 $ 11.1 $ 5.2 $ 108.7

NET INCOME PER COMMON SHARE

3 unchanged sentences

Income from continuing operations $ 0.2 $ 127.5 $ 95.9

(Loss) income from discontinued operations, net of taxes

Weighted-average common and common equivalent shares outstanding — Basic

Income (loss) from discontinued operations, net of taxes 0.1 ( 0.1 ) 1.8

Net income $ 0.3 $ 127.4 $ 97.8

Weighted-average common and common equivalent

shares outstanding — Basic 66.9 66.6 66.1

Effect of dilutive securities

RSUs 0.1 0.2 0.1

Stock options 0.1 0.1 0.1

Performance shares 0.1 0.1 —

Weighted-average common and common equivalent shares outstanding — Diluted

Weighted-average common and common equivalent

shares outstanding — Diluted 67.3 66.9 66.4

Net income per common share — Basic

Income from continuing operations $ 0.00 $ 1.92 $ 1.45

Income (loss) from discontinued operations

Income from discontinued operations — — 0.03

Net income $ 0.00 $ 1.91 $ 1.48

Net income per common share — Diluted

Income from continuing operations $ 0.00 $ 1.91 $ 1.45

Income (loss) from discontinued operations

Income from discontinued operations — — 0.03

Net income $ 0.00 $ 1.90 $ 1.47

Anti-Dilutive Outstanding Stock Awards Issued Under Share-Based Compensation Plans

6 unchanged sentences

As of October 31,

(in millions)

Fair Value Hierarchy

(in millions) Fair Value Hierarchy 2020 2019

Cash and cash equivalents (1)

1 $ 394.2 $ 58.5

Insurance deposits (2)

1 unchanged sentence

Credit facility (4)

Interest rate swap (liabilities) assets (5)

2 725.3 808.4

Interest rate swap liabilities (5)

Investments in auction rate securities (6)

11 unchanged sentences

The fair values of the interest rate swaps are estimated based on the present value of the difference between expected cash flows calculated at the contracted interest rates and the expected cash flows at current market interest rates using observable benchmarks for the London Interbank Offered Rate (“LIBOR”) forward rates at the end of the period.

At October 31, 2019 and 2018 , our interest rate swaps are included in “Other noncurrent liabilities” and “Other noncurrent assets,” respectively, on the accompanying consolidated balance sheets.

At October 31, 2020 and 2019, our interest rate swaps are included in “Other noncurrent liabilities” on the accompanying Consolidated Balance Sheets.

See Note 11, “Credit Facility,” for further information.

(6) The fair value of investments in auction rate securities is based on discounted cash flow valuation models, primarily utilizing unobservable inputs, including assumptions about the underlying collateral, credit risks associated with the issuer, credit enhancements associated with financial insurance guarantees, and the possibility of the security being re-financed by the issuer or having a successful auction.

These amounts are included in “Other investments” on the accompanying consolidated balance sheets.

See Note 9 , “Auction Rate Securities,” for further information.

(6) The fair value of investments in auction rate securities is based on discounted cash flow valuation models, primarily utilizing unobservable inputs, including assumptions about the underlying collateral, credit risks associated with the issuer, credit enhancements associated with financial insurance guarantees, and the possibility of the security being refinanced by the issuer or having a successful auction.

At October 31, 2019, we held an investment in one auction rate security that had an original principal amount, amortized cost, and fair value of $ 5.0 million that was included in “Other investments” on the accompanying Consolidated Balance Sheets.

During the first quarter of 2020, this auction rate security was called by the issuer, and we received proceeds for the fair value of this debt instrument of $ 5.0 million.

There were no unrealized gains or losses on this auction rate security included in AOCL.

At October 31, 2020, we had no investments in auction rate securities.

During 2020 and 2019, we had no transfers of assets or liabilities between any of the above hierarchy levels.

Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis

In addition to assets and liabilities that are measured at fair value on a recurring basis, we are also required to measure certain non-financial assets at fair value on a non-recurring basis that are subject to fair value adjustments in specific circumstances.

In addition to assets and liabilities that are measured at fair value on a recurring basis, we are also required to measure certain items at fair value on a non-recurring basis.

These assets can include:

1 unchanged sentence

property, plant and equipment;

lease-related ROU assets;

and long-lived assets that have been reduced to fair value when they are held for sale.

We estimate the fair value of these assets using primarily unobservable Level 3 inputs.

If certain triggering events occur, or if an annual impairment test is required, we would evaluate these non-financial assets for impairment.

If an impairment were to occur, the asset would be recorded at the estimated fair value, using primarily unobservable Level 3 inputs.

During the second quarter of 2020, given the general deterioration in economic and market conditions arising from the Pandemic, we identified a triggering event indicating possible impairment of goodwill and intangible assets, and we recorded impairment charges on goodwill and customer relationships.

The fair value of these items was determined based on unobservable Level 3 inputs.

The fair value of goodwill was determined using a weighting of fair values derived from an income approach and a market approach.

The fair value of customer relationships was determined based on discounted cash flows associated with the customer relationships that include significant management assumptions, including expected proceeds.

See Note 9, “Goodwill and Other Intangible Assets,” for further information.

We did not identify impairment of our property, plant and equipment, lease-related ROU assets, or long-lived assets.

In connection with the reorganization of our Healthcare business, in the third quarter of 2019 we performed a goodwill impairment test on the underlying reporting unit immediately before the reorganization.

1 unchanged sentence

This analysis required the exercise of significant judgments, including the identification of reporting units as well as the evaluation of recent indicators of market activity, future cash flow estimates, discount rates, and other factors.

As a result of this analysis, we concluded that the estimated fair value of the Healthcare reporting unit substantially

exceeded its carrying value immediately before the reorganization and that no further evaluation of impairment was necessary.

During 2018, we recorded impairment charges on goodwill and customer relationships in connection with our annual assessment of goodwill.

See Note 11 , “Goodwill and Other Intangible Assets,” for further information.

The fair value of these items was determined based on unobservable Level 3 inputs.

The fair value of goodwill was determined based on discounted cash flow analyses that include significant management assumptions, such as revenue growth rates, operating margins, weighted average cost of capital, and future economic and market conditions.

AUCTION RATE SECURITIES

At October 31, 2019 and 2018 , we held an investment in one auction rate security that had an aggregate original principal amount, amortized cost, and fair value of $ 5.0 million .

This auction rate security is a debt instrument with a stated maturity in 2050 .

The interest rate for this security is designed to be reset through Dutch auctions approximately every thirty days ;

however, auctions for this security have not occurred since August 2007 .

At October 31, 2019 and 2018 , there were no unrealized gains or losses on our auction rate security included in AOCI.

Significant Assumptions Used to Determine the Fair Value of Our Auction Rate Security

October 31, 2019

October 31, 2018

Discount rates

Average expected lives

L – One Month LIBOR

As a result of this analysis, we concluded that the estimated fair value of the Healthcare reporting unit substantially exceeded its carrying value immediately before the reorganization and that no further evaluation of impairment was necessary.

PROPERTY, PLANT AND EQUIPMENT

4 unchanged sentences

Computer equipment and software 101.2 91.7

Leasehold improvements

Transportation equipment 57.7 57.4

Leasehold improvements 57.1 59.5

Furniture and fixtures 13.7 13.1

Buildings 7.6 8.2

Accumulated depreciation (1)

Total $ 133.7 $ 150.3

(1) For 2020, 2019, and 2018, depreciation expense was $ 48.0 million, $ 48.9 million, and $ 46.5 million, respectively.

Capital Leases Included in Property, Plant and Equipment

Finance Leases Included in Property, Plant and Equipment

As of October 31,

1 unchanged sentence

Transportation equipment $ 19.4 $ 20.0

Machinery and other equipment

Furniture and fixtures 0.2 0.2

Machinery and other equipment — 0.3

Computer equipment and software — 0.1

Accumulated depreciation 13.6 10.7

Total $ 6.1 $ 9.9

GOODWILL AND OTHER INTANGIBLE ASSETS

(in millions)

Business & Industry

Technology & Manufacturing

Technical Solutions

During the second quarter of 2020, given the general deterioration in economic and market conditions arising from the Pandemic, we identified a triggering event which resulted in impairment of goodwill and intangible assets.

(in millions) Business & Industry Technology & Manufacturing Education Aviation Technical Solutions Healthcare Total

Balance at October 31, 2018 $ 527.9 $ 407.2 $ 557.4 $ 124.9 $ 158.7 $ 58.7 $ 1,834.8

Purchase price adjustments

Reallocation (1)

45.7 — 1.2 — 11.8 ( 58.7 ) —

Foreign currency translation

Impairment loss (1)

0.3 — — 0.1 0.3 — 0.6

Balance at October 31, 2019 $ 573.9 $ 407.2 $ 558.6 $ 125.0 $ 170.7 $ — $ 1,835.4

Reallocation (2)

Foreign currency translation

0.1 — — — ( 0.3 ) — ( 0.2 )

Impairment loss (2)

— — ( 99.3 ) ( 55.5 ) ( 9.0 ) ( 163.8 )

Balance at October 31, 2020 $ 574.0 $ 407.2 $ 459.3 $ 69.5 $ 161.5 $ — $ 1,671.4

(1) Represents accumulated impairment charges at October 31, 2019 .

(1) Goodwill associated with our Healthcare business was reallocated in connection with the reorganization of this business during the third quarter of 2019.

During the fourth quarter of 2018, as part of our annual assessment of goodwill, we recorded a goodwill impairment charge of $ 20.3 million for one of our reporting units within the Technical Solutions segment.

In 2018, this reporting unit’s performance primarily reflected the adverse impact of Brexit and the resulting impact on microeconomic conditions in the U.K.

retail sector and the anticipated loss of a significant customer contract.

The impairment was also attributable to a decline in profitability in the second half of 2018 and a revised future outlook for the business, including reduced expectations of future sales, operating margins, and cash flows.

We did no t record goodwill impairment charges during 2019 or 2017.

(2) The impairment charge is included in “Impairment loss” on our Consolidated Statements of Comprehensive (Loss) Income for the year ended October 31, 2020, and is not tax deductible.

Due to the triggering event identified above arising from the impact of the Pandemic, we first performed a qualitative assessment of goodwill to determine whether it was more likely than not that impairment occurred within our goodwill reporting units in the second quarter of 2020.

Based on this qualitative assessment, we determined that goodwill impairment was not more likely than not in our goodwill reporting units, except in Education, Aviation, and our U.K.

Technical Solutions business.

As a result, we performed an interim quantitative impairment test as of March 31, 2020, on these three goodwill reporting units.

For the three goodwill reporting units tested quantitatively, we estimated the fair value using a weighting of fair values derived from an income approach and a market approach.

The income approach incorporates the use of a discounted cash flow method in which the estimated future cash flows and terminal value are calculated for each reporting unit and then discounted to present value using an appropriate discount rate.

The discount rates utilized in the income approach valuation method are summarized in the table below.

Education 10.0 %

Aviation 10.5 %

Technical Solutions 11.0 %

The market approach estimates the fair value of a reporting unit by using market comparables for reasonably similar public companies and a control premium of 15.0 %.

The valuation of our reporting units requires significant judgment in evaluating recent indicators of market activity and estimated future cash flows, discount rates, and other factors.

Our impairment analyses contain inherent uncertainties due to uncontrollable events that could positively or negatively impact anticipated future economic and operating conditions.

In making these estimates, the weighted-average cost of capital is utilized to calculate the present value of future cash flows and terminal value.

Many variables go into estimating future cash flows, including estimates of our future revenue growth and operating results.

When estimating our projected revenue growth and future operating results, we consider industry trends, economic data, and our competitive advantage.

If future cash flows or future growth rates vary from what is expected, including those assumptions relating to the duration and severity of the Pandemic, this may reduce the underlying cash flows used to estimate fair values and result in a further decline in fair value, which may trigger future impairment charges.

Other Intangible Assets

October 31, 2019

October 31, 2018

(in millions)

Gross Carrying Amount

Accumulated Amortization

Gross Carrying Amount

Accumulated Amortization

October 31, 2020 October 31, 2019

(in millions) Gross Carrying Amount Accumulated Amortization Total Gross Carrying Amount Accumulated Amortization Total

Customer contracts and relationships (1)

$ 573.1 $ ( 333.6 ) $ 239.6 $ 595.9 $ ( 298.9 ) $ 297.0

Trademarks and trade names 9.8 ( 9.8 ) — 9.8 ( 9.8 ) 0.1

Contract rights and other 0.5 ( 0.4 ) 0.1 0.5 ( 0.4 ) 0.1

(1) Reflects a net impairment charge of $ 6.2 million recorded in 2018, consisting of a $ 10.5 million reduction in the gross carrying amount of the underlying customer relationships less $ 4.3 million of accumulated amortization.

$ 583.5 $ ( 343.8 ) $ 239.7 $ 606.2 $ ( 309.0 ) $ 297.2

(1) Reflects a net impairment charge of $ 9.0 million recorded in 2020 as a result of the triggering event described above.

We recognized net impairment charges of $ 5.6 million related to Aviation (consisting of a $ 13.8 million reduction in the gross carrying amount of the underlying customer relationships less $ 8.2 million of accumulated amortization) and $ 3.4 million related to our U.K.

Technical Solutions business (consisting of an $ 8.7 million reduction in the gross carrying amount of the underlying customer relationships less $ 5.3 million of accumulated amortization).

These impairment charges are included in “Impairment loss” on our Consolidated Statements of Comprehensive (Loss) Income for the year ended October 31, 2020.

We did no t record impairment charges on other intangible assets during 2019.

(2) These intangible assets are being amortized over the expected period of benefit, with a weighted average life of approximately 11 years.

2 unchanged sentences

Estimated amortization expense (1)

$ 42.1 $ 36.8 $ 32.2 $ 28.0 $ 23.9

(1) These amounts could vary as acquisitions of additional intangible assets occur in the future.

During 2018, we recorded an impairment charge of $ 6.2 million on customer relationships in the same reporting unit within the Technical Solutions segment due to the same factors discussed above.

We did no t record impairment charges on other intangible assets during 2019 or 2017.

The estimates of future cash flows used in determining the fair value of goodwill and other intangible assets involve significant management judgment and are based upon assumptions about expected future operating performance, economic conditions, market conditions, and cost of capital.

2 unchanged sentences

We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks.

For the majority of these insurance programs, we retain the initial $ 1.0 million of exposure on a per-occurrence basis, either through deductibles or self-insured retentions.

For the majority of these insurance programs, we retain the initial $ 1.0 million to $ 1.5 million of exposure on a per-occurrence basis, either through deductibles or self-insured retentions.

Beyond the retained exposures, we have varying primary policy limits ranging between $ 1.0 million and $ 5.0 million per occurrence.

4 unchanged sentences

We maintain stop-loss insurance for our self-insured medical plan under which we retain up to $ 0.5 million of exposure on a per-participant, per-year basis with respect to claims.

The adequacy of our reserves for workers’ compensation, general liability, automobile liability, and property damage insurance claims is based upon known trends and events and the actuarial estimates of required reserves considering the most recently completed actuarial reports.

We maintain our reserves for workers’ compensation, general liability, automobile liability, and property damage insurance claims based upon known trends and events and the actuarial estimates of required reserves considering the most recently completed actuarial reports.

We use all available information to develop our best estimate of insurance claims reserves as information is obtained.

5 unchanged sentences

As we obtain additional information that affects the assumptions and estimates used in our reserve liability calculations, we adjust our self-insurance rates and reserves for future periods and, if appropriate, adjust our reserves for claims incurred in prior accounting periods.

During the first and third quarters of 2019, we performed comprehensive actuarial reviews of the majority of our casualty insurance programs, which evaluated all changes made to claims reserves and claims payment activity for the periods of May 1, 2018 through October 31, 2018 and November 1, 2018 through April 30, 2019, respectively (the “ Actuarial Reviews ”).

During the first and third quarters of 2020, we performed comprehensive actuarial reviews of the majority of our casualty insurance programs to evaluate changes made to claims reserves and claims payment activity for the periods of May 1, 2019, through October 31, 2019, and November 1, 2019, through April 30, 2020, respectively (the “Actuarial Reviews”).

The Actuarial Reviews were comprehensive in nature and were based on loss development patterns, trend assumptions, and underlying expected loss costs during the periods analyzed.

During the second and fourth quarters of 2020, we performed interim actuarial updates of the majority of our casualty insurance programs that considered changes in claims development and claims payment activity for the respective periods analyzed (the “Interim Updates”).

These Interim Updates were abbreviated in nature based on

actual versus expected development during the periods analyzed and relied on the key assumptions in the Actuarial Reviews (most notably loss development patterns, trend assumptions, and underlying expected loss costs).

Based on the results of the Actuarial Reviews and Interim Updates, we decreased our total reserves for known claims as well as our estimate of the loss amounts associated with IBNR Claims for prior periods by $ 3.4 million during 2019.

In 2018, we increased our total reserves related to prior year claims by $ 10.2 million .

These Interim Updates were abbreviated in nature based on actual versus expected development during the periods analyzed and relied on the key assumptions in the Actuarial Reviews (most notably loss development patterns, trend assumptions, and underlying expected loss costs).

In 2019, we decreased our total reserves related to prior year claims by $ 3.4 million.

Insurance Related Balances and Activity

(in millions)

October 31, 2019

October 31, 2018

(in millions) October 31, 2020 October 31, 2019

Insurance claim reserves, excluding medical and dental $ 504.9 $ 507.8

7 unchanged sentences

Change in case reserves plus IBNR Claims — current year

128.5 137.9 131.4

Change in case reserves plus IBNR Claims — prior years

( 30.2 ) ( 3.4 ) 10.2

Claims paid ( 106.8 ) ( 119.1 ) ( 126.5 )

GCA acquisition 0.2 — 0.1

Net balance, October 31 (1)

434.8 443.3 427.7

Recoverables 70.1 64.5 73.7

Gross balance, October 31 $ 504.9 $ 507.8 $ 501.4

4 unchanged sentences

Standby letters of credit $ 143.6 $ 141.0

Surety bonds 82.6 90.8

Restricted insurance deposits 0.7 0.8

Total $ 226.9 $ 232.6

CREDIT FACILITY

On September 1, 2017, we refinanced and replaced our then-existing $ 800.0 million credit facility with a new senior, secured five-year syndicated credit facility (the “ Credit Facility ”), consisting of a $ 900.0 million revolving line of credit and an $ 800.0 million amortizing term loan, scheduled to mature on September 1, 2022.

In accordance with the terms of the Credit Facility, the line of credit was reduced to $ 800.0 million on September 1, 2018.

On September 1, 2017, we refinanced and replaced our then-existing $ 800.0 million credit facility with a new senior, secured five-year syndicated credit facility, consisting of a $ 900.0 million revolving line of credit and an $ 800.0 million amortizing term loan, both of which are scheduled to mature on September 1, 2022.

In accordance with the terms of the Credit Facility, the revolving line of credit was reduced to $ 800.0 million on September 1, 2018.

In late March 2020, we borrowed approximately $ 300 million as a precautionary measure to provide increased liquidity and preserve financial flexibility in response to uncertainty resulting from the Pandemic.

This represented all remaining amounts then available under the revolving line of credit.

During the quarter ended July 31, 2020, the Company repaid substantially all of these amounts borrowed under the revolving line of credit without penalty.

The Credit Facility also provides for the issuance of up to $ 300.0 million for standby letters of credit and the issuance of up to $ 75.0 million in swingline advances.

The obligations under the Credit Facility are secured on a first-priority basis by a lien on substantially all of our assets and properties, subject to certain exceptions.

Borrowings under the Credit Facility bear interest at a rate equal to 1-month LIBOR plus a spread that is based upon our leverage ratio.

The spread ranges from 1.00 % to 2.25 % for Eurocurrency loans and 0.00 % to 1.25 % for base rate loans.

At October 31, 2019 , the weighted average interest rate on our outstanding borrowings was 4.05 % .

We also pay a commitment fee, based on our leverage ratio, ranging from 0.200 % to 0.350 % on the average daily unused portion of the line of credit that is paid quarterly in arrears.

For purposes of this calculation, irrevocable standby letters of credit, which are issued primarily in conjunction with our insurance programs, and cash borrowings are included as outstanding under the line of credit.

The Credit Facility , as amended, contains certain covenants, including a current maximum leverage ratio of 4.00 to 1.0 that steps down by 25 basis points annually each July to 3.50 to 1.0 by July 2021 and a minimum fixed charge coverage ratio of 1.50 to 1.0 , as well as other financial and non-financial covenants.

In the event of a material acquisition, as defined in the Credit Facility , we may elect to increase the leverage ratio to 3.75 to 1.0 for a total of four fiscal quarters, provided the leverage ratio had already been reduced to 3.50 to 1.0.

Our borrowing capacity is subject to, and limited by, compliance with the covenants described above.

To further enhance our financial flexibility as a precautionary measure in response to uncertainty arising from the Pandemic, we amended our Credit Facility on May 28, 2020, as further described below.

The Amendment modified the financial covenants under the Credit Facility, including:

(i) replacing a maximum total leverage ratio with a maximum total net leverage ratio that varies on a quarterly basis and adjusted to 6.50 to 1.00 by the quarter ending October 31, 2020, and back to 4.00 to 1.00 by the quarter ending October 31, 2022;

(ii) modifying the minimum fixed charge coverage ratio on a quarterly basis, which adjusts to 1.25 to 1.00 as of the quarter ending April 30, 2022;

and (iii) adding a minimum liquidity (defined in the Amendment as domestic cash plus available revolving loans) of $ 250.0 million.

These financial covenants were effective with the quarter ended April 30, 2020.

Our borrowing capacity is subject to, and limited by, compliance with these covenants.

The Amendment changed the interest rate, interest margins, and commitment fees applicable to loans and commitments under the Credit Facility.

It also added a new anti-cash hoarding mandatory prepayment that requires us to repay outstanding revolving loans or swingline loans if at any time we have in excess of $ 250 million of cash and cash equivalents on our balance sheet.

The Amendment made certain additional changes to the negative covenants restrictions under the Credit Facility, including, subject to certain exceptions, restrictions on our ability to make acquisitions, share repurchases, and other defined restricted payments, depending on our total net leverage ratio.

The anti-cash hoarding provision and certain of these restrictions were terminated from the Credit Facility in the fourth quarter of 2020 due to our favorable cash flow position and leverage ratios.

At October 31, 2020, we were in compliance with these covenants.

The Credit Facility also includes customary events of default, including failure to pay principal, interest, or fees when due, failure to comply with covenants, the occurrence of certain material judgments, or a change in control of the Company.

Prior to the Amendment, borrowings under the Credit Facility bore interest at a rate equal to 1-month LIBOR plus a spread that was based upon our leverage ratio.

The spread ranged from 1.00 % to 2.25 % for Eurocurrency loans and 0.00 % to 1.25 % for base rate loans.

We were also charged a commitment fee, which was paid quarterly in arrears and was based on our leverage ratio, that ranged from 0.200 % to 0.350 % on the average daily unused portion of the revolving line of credit.

For purposes of this calculation, irrevocable standby letters of credit, which are issued primarily in conjunction with our insurance programs, and cash borrowings were included as outstanding under the line of credit.

Subsequent to the Amendment, borrowings under the Credit Facility bear interest at a rate equal to 1-month LIBOR plus a spread that is based upon our total leverage ratio.

The spread ranges from 1.00 % to 2.75 % for revolving Eurocurrency loans and 0.00 % to 1.75 % for revolving base rate loans.

At October 31, 2020, the weighted average interest rate on our outstanding borrowings was 2.45 %.

We are also charged a commitment fee, which is paid quarterly in arrears and is based on our total leverage ratio, that ranges from 0.200 % to 0.450 % on the average daily unused portion of the revolving line of credit.

For purposes of this calculation, irrevocable standby

letters of credit, which are issued primarily in conjunction with our insurance programs, and cash borrowings are included as outstanding under the revolving line of credit.

The Credit Facility also includes customary events of default, such as:

failure to pay principal, interest, or fees when due;

failure to comply with covenants;

the occurrence of certain material judgments and a change in control of the Company.

If certain events of default occur, including certain cross-defaults, insolvency, change in control, or violation of specific covenants, the lenders can terminate or suspend our access to the Credit Facility, declare all amounts outstanding (including all accrued interest and unpaid fees) to be immediately due and payable, and require that we cash collateralize the outstanding standby letters of credit.

Total deferred financing costs related to the Credit Facility were $ 18.7 million , consisting of $ 13.4 million related to the term loan and $ 5.2 million related to the line of credit, which are being amortized to interest expense over the term of the Credit Facility .

Total deferred financing costs related to the Credit Facility of $ 18.7 million, consisting of $ 13.4 million related to the term loan and $ 5.2 million related to the line of credit, are being amortized to interest expense over the term of the Credit Facility.

We incurred total fees of $ 4.6 million in conjunction with the Amendment, the majority of which we capitalized in the quarter ended July 31, 2020, and are amortizing over the remaining term of the Credit Facility.

Credit Facility Information

(in millions)

October 31, 2019

October 31, 2018

(in millions) October 31, 2020 October 31, 2019

Current portion of long-term debt

6 unchanged sentences

Total noncurrent portion of term loan 557.7 675.9

Line of credit (1)(2)

Revolving line of credit (1)(2)

Long-term debt $ 603.0 $ 744.2

(1) Standby letters of credit amounted to $ 153.1 million at October 31, 2020.

(2) At October 31, 2019 , we had borrowing capacity of $ 574.2 million ;

however, covenant restrictions limited our borrowing capacity to $ 406.6 million .

(2) At October 31, 2020, we had borrowing capacity of $ 596.6 million, reflecting covenant restrictions.

Term Loan Maturities

6 unchanged sentences

Under these arrangements, we typically pay a fixed interest rate in exchange for LIBOR-based variable interest throughout the life of the agreement.

We initially report the mark-to-market gain or loss on a derivative as a component of AOCI and subsequently reclassify the gain or loss into earnings when the hedged transactions occur and affect earnings.

We initially report the mark-to-market gain or loss on a derivative as a component of AOCL and subsequently reclassify the gain or loss into earnings when the hedged transactions occur and affect earnings.

Interest payables and receivables under the swap agreements are accrued and recorded as adjustments to interest expense.

1 unchanged sentence

See Note 7, “Fair Value of Financial Instruments,” regarding the valuation of our interest rate swaps.

In April 2018, we elected to terminate our interest rate swaps then in effect and received cash proceeds of $ 25.9 million from the swap counterparties upon termination.

We subsequently entered into new forward-starting interest rate swaps, as summarized below.

Notional Amount

Fixed Interest Rate

Effective Date

Maturity Date

$ 90.0 million

November 1, 2018

April 30, 2021

$ 90.0 million

November 1, 2018

October 31, 2021

$ 130.0 million

November 1, 2018

April 30, 2022

$ 130.0 million

November 1, 2018

September 1, 2022

At October 31, 2019 and 2018 , amounts recorded in AOCI for interest rate swaps were $ 2.2 million , net of taxes of $ 1.2 million , and $ 17.8 million , net of taxes of $ 7.1 million , respectively.

Notional Amount Fixed Interest Rate Effective Date Maturity Date

$ 90.0 million 2.83 % November 1, 2018 April 30, 2021

$ 90.0 million 2.84 % November 1, 2018 October 31, 2021

$ 130.0 million 2.86 % November 1, 2018 April 30, 2022

$ 130.0 million 2.84 % November 1, 2018 September 1, 2022

At October 31, 2020 and 2019, amounts recorded in AOCL for interest rate swaps were a loss of $ 3.3 million, net of taxes of $ 0.9 million, and a gain of $ 2.2 million, net of taxes of $ 1.2 million, respectively.

These amounts included the gain associated with the interest rate swaps we terminated in 2018, which is being amortized to interest expense as interest payments are made over the term of our Credit Facility.

During 2020, we amortized $ 4.9 million, net of taxes of $ 1.8 million, of that gain and we amortized $ 4.1 million, net of taxes of $ 1.5 million, during 2019.

At October 31, 2019 , the total amount expected to be reclassified from AOCI to earnings during the next twelve months was $ 0.2 million , net of taxes of $ 0.2 million .

At October 31, 2020, the total amount expected to be reclassified from AOCL to earnings during the next twelve months was $ 4.0 million, net of a tax benefit of $ 1.4 million.

EMPLOYEE BENEFIT PLANS

9 unchanged sentences

Fair value of assets 7.4 7.8

At October 31, 2019 , assets of the Plans were invested 49 % in equities, 49 % in fixed income, and 2 % in cash.

At October 31, 2020, assets of the Plans were investe d 48 % in equities, 51 % in fixed income, and 1 % in cash.

The expected return on assets was $ 0.4 million during each of 2020, 2019, and 2018 .

The aggregate net periodic benefit cost for all Plans was $ 0.6 million for 2019 and $ 0.2 million during each of 2018 and 2017 .

The aggregate net periodic benefit cost for all Plans was $ 0.2 million, $ 0.6 million, and $ 0.2 million for 2020, 2019, and 2018, respectively.

Future benefit payments in the aggregate are expected to be $ 14.4 million .

5 unchanged sentences

At October 31, 2020 and 2019, the fair value of these assets was $ 2.6 million and $ 2.5 million, respectively, and these amounts are included in “Other noncurrent assets” on the accompanying Consolidated Balance Sheets.

Aggregate expense recognized under these deferred compensation plans was $ 0.3 million for 2019 and $ 0.4 million for each of 2018 and 2017 .

Aggregate expense recognized under these deferred compensation plans wa s $ 0.2 million, $ 0.3 million, and $ 0.4 million for 2020, 2019, and 2018, respectively.

Defined Contribution Plans

9 unchanged sentences

Key Information for Individually Significant Multiemployer Defined Benefit Pension Plans (1)

($ in millions)

Pension Protection Act

($ in millions) Pension Protection Act

Zone Status (3)

Contributions by ABM

Contributions by ABM Surcharge

Expiration Dates of Collective Bargaining Agreements

Pension Fund EIN/PN (2)

2020 2019 Pending/

Implemented 2020 2019 2018

Building Service 32BJ Pension Fund 13-1879376 / 001

Central Pension Fund of the IUOE & Participating Employers

Implemented $ 16.8 $ 19.3 $ 19.9 No 10/15/2023 – 12/31/2023

National Industry Pension Fund 52-6148540 /

Implemented 11.1 10.6 8.7 Yes 6/30/2021 –

Central Pension Fund of the IUOE & Participating Employers 36-6052390 /

N/A* 7.1 11.7 11.0 N/A* 4/30/2021 –

SEIU Local 1 & Participating Employers Pension Trust 36-6486542 /

N/A* 4.3 5.1 5.8 N/A* 4/4/2021

IUOE Stationary Engineers Local 39 Pension Plan 94-6118939 /

Local 68 Engineers Union Pension Plan

N/A* 4.3 4.6 5.2 N/A* 11/15/2020 –

Western Conference of Teamsters Pension Plan 91-6145047 /

N/A* 2.5 3.1 3.1 N/A* 6/30/2021 –

All Other Plans:

9.5 12.2 11.5

Total Contributions $ 55.5 $ 66.6 $ 65.3

1 unchanged sentence

(1) To determine individually significant plans, we evaluated several factors, including our total contributions to the plan, our significance to the plan in terms of participating employees and contributions, and the funded status of the plan.

(2) The “EIN/PN” column provides the Employer Identification Number and the three-digit plan number assigned to the plan by the Internal Revenue Service (“IRS”).

(2) The “EIN/PN” column provides the Employer Identification Number and the three-digit plan number assigned to the plan by the IRS.

(3) The Pension Protection Act Zone Status columns provide the two most recently available Pension Protection Act zone statuses from each plan.

4 unchanged sentences

Multiemployer Pension Plans for which ABM is a Significant Contributor

Contributions to the plan exceeded more than 5% of total contributions per most currently available Forms 5500

Pension Fund Contributions to the plan exceeded more than 5% of total contributions per most currently available Forms 5500

(as of the plan’s year end)

Arizona Sheet Metal Pension Trust Fund*

6/30/2018, 6/30/2016

Building Service 32BJ Pension Fund

6/30/2018, 6/30/2017, and 6/30/2016

Building Service Pension Plan*

4/30/2018, 4/30/2017, and 4/30/2016

Contract Cleaners Service Employees’ Pension Plan*

12/31/2018, 12/31/2017, and 12/31/2016

Firemen & Oilers Pension Plan of SEIU Local 1*

7/31/2018 and 7/31/2017

SEIU Local 1 & Participating Employers Pension Trust

9/30/2018, 9/30/2017, and 9/30/2016

Massachusetts Service Employees Pension Plan*

12/31/2018, 12/31/2017, and 12/31/2016

National Industry Pension Fund

12/31/2018, 12/31/2017, and 12/31/2016

Service Employees International Union Local 1 Cleveland Pension Plan*

12/31/2018, 12/31/2017, and 12/31/2016

Service Employees International Union Local 32BJ, District 36 Building Operators Pension Trust Fund*

12/31/2018, 12/31/2017, and 12/31/2016

Teamsters Local 617 Pension Fund*

2/28/2019, 2/28/2018, and 2/28/2017

Arizona Sheet Metal Pension Trust Fund* 6/30/2019 and 6/30/2018

Building Service 32BJ Pension Fund 6/30/2019, 6/30/2018, and 6/30/2017

Building Service Pension Plan* 4/30/2019, 4/30/2018, and 4/30/2017

Contract Cleaners Service Employees’ Pension Plan* 12/31/19, 12/31/2018, and 12/31/2017

Firemen & Oilers Pension Plan of SEIU Local 1* 7/31/2019, 7/31/2018, and 7/31/2017

Massachusetts Service Employees Pension Plan* 12/31/2019, 12/31/2018, and 12/31/2017

SEIU Local 1 & Participating Employers Pension Trust 9/30/2019, 9/30/2018, and 9/30/2017

National Industry Pension Fund 12/31/2019, 12/31/2018, and 12/31/2017

Service Employees International Union Local 1 Cleveland Pension Plan* 12/31/2019, 12/31/2018, and 12/31/2017

Service Employees International Union Local 32BJ, District 36 Building Operators Pension Trust Fund* 12/31/2019, 12/31/2018, and 12/31/2017

Teamsters Local 617 Pension Fund* 2/29/2020, 2/28/2019, and 2/28/2018

Teamsters Local Union No.

727 Pension Plan*

2/28/2019, 2/28/2018, and 2/28/2017

727 Pension Plan* 2/29/2020, 2/28/2019, and 2/28/2018

* These plans are not separately listed in our multiemployer table as they represent an insignificant portion of our total multiemployer pension plan contributions.

8 unchanged sentences

However, since we are unable to separate contribution amounts to postretirement benefit plans from contribution amounts paid to benefit active employees, we categorize all such amounts as contributions to postretirement benefit plans.

During 2019 , 2018 , and 2017 , our contributions to such plans were $ 269.8 million , $ 263.4 million , and $ 247.9 million , respectively.

During 2020, 2019, and 2018, our contributions to such plans wer e $ 264.8 million , $ 269.8 million, and $ 263.4 million, respectively.

There have been no significant changes that affect the comparability of total contributions for any of the periods presented.

COMMITMENTS AND CONTINGENCIES

Lease and Other Similar Commitments

Future Minimum Payments

(in millions)

Operating and Other (1)

Service Concession Arrangements

October 31, 2020

October 31, 2021

October 31, 2022

October 31, 2023

October 31, 2024

(1) Includes total estimated sublease rental income of $ 15.8 million .

Rental and Other Expense

Years Ended October 31,

(in millions)

Minimum rental and other

Contingent rental and other

(1) 2018 and 2017 include $ 47.8 million and $ 48.0 million , respectively, related to service concession arrangements.

In 2019, following the adoption of Topic 853, rent expense related to service concession arrangements is now recorded as a reduction of revenues.

Letters of Credit and Surety Bonds

2 unchanged sentences

In some instances, we offer clients guaranteed energy savings under certain energy savings contracts.

At October 31, 2019 and 2018 , total guarantees were $ 174.8 million and $ 171.7 million , respectively, and these guarantees extend through 2038 for both periods.

At October 31, 2020 and 2019, total guarantees were $ 182.8 million and $ 174.8 million, respectively, and these guarantees extend through 2039 and 2038, respectively.

We accrue for the estimated cost of guarantees when it is probable that a liability has been incurred and the amount can be reasonably estimated.

7 unchanged sentences

Pursuant to these arrangements, we may agree to indemnify, hold harmless, and reimburse the indemnified parties for losses suffered or incurred by the indemnified party, generally our clients, in connection with any claims arising out of the services that we provide.

We also incur costs to defend lawsuits or settle claims related

to these indemnification arrangements, and in most cases these costs are paid from our insurance program.

We also incur costs to defend lawsuits or settle claims related to these indemnification arrangements, and in most cases these costs are paid from our insurance program.

Although we attempt to place limits on such indemnification arrangements related to the size of the contract, the maximum obligation may not be explicitly stated and, as a result, we are unable to determine the maximum potential amount of future payments we could be required to make under these arrangements.

9 unchanged sentences

Sales tax laws and regulations enacted by the various states are subject to interpretation, and our compliance with such laws is routinely subject to audit and review by such states.

Audit risk is concentrated in several states, and these states are conducting ongoing audits.

Audit risk is concentrated in several states that are conducting ongoing audits.

The outcomes of ongoing and any future audits and changes in the states’ interpretation of the sales tax laws and regulations could materially adversely impact our results of operations.

2 unchanged sentences

Some of these actions may be brought as class actions on behalf of a class or purported class of employees.

At October 31, 2019 , the total amount accrued for all probable litigation losses where a reasonable estimate of the loss could be made was $ 6.5 million .

Litigation outcomes are difficult to predict and the estimation of probable losses requires the analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties.

If one or more matters are resolved in a particular period in an amount in excess of, or in a manner different than, what we anticipated, this could have a material adverse effect on our financial position, results of operations, or cash flows.

At October 31, 2020, the total amount accrued for probable litigation losses where a reasonable estimate of the loss could be made was $ 14.7 million.

We do not accrue for contingent losses that, in our judgment, are considered to be reasonably possible but not probable.

The estimation of reasonably possible losses also requires the analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties.

Our management currently estimates the range of loss for all reasonably possible losses for which a reasonable estimate of the loss can be made is between zero and $ 6 million .

Our management currently estimates the range of loss for reasonably possible losses for which a reasonable estimate of the loss can be made is between zero and $ 4 million.

Factors underlying this estimated range of loss may change from time to time, and actual results may vary significantly from this estimate.

The amounts above do not include any accrual or loss estimates with respect to the Bucio case described below.

In some cases, although a loss is probable or reasonably possible, we cannot reasonably estimate the maximum potential losses for probable matters or the range of losses for reasonably possible matters.

Therefore, our accrual for probable losses and our estimated range of loss for reasonably possible losses do not represent our maximum possible exposure.

While the results of these lawsuits, claims, and proceedings cannot be predicted with any certainty, our management believes that the final outcome of these matters will not have a material adverse effect on our financial position, results of operations, or cash flows.

Certain Legal Proceedings

Certain lawsuits to which we are a party are discussed below.

In determining whether to include any particular lawsuit or other proceeding, we consider both quantitative and qualitative factors.

In determining whether to include any particular lawsuit or other proceeding in our disclosure below, we consider both quantitative and qualitative factors.

These factors include, but are not limited to:

20 unchanged sentences

On October 17, 2019, the plaintiffs filed a motion asking the trial court to certify additional classes based on an alleged failure to maintain time records, an alleged failure to provide accurate wage statements, and an alleged practice of combining meal and rest breaks.

Our response to this motion was filed on November 4, 2019, and the trial court heard the matter on December 10, 2019.

This matter is currently set for trial on May 26, 2020.

Prior to trial, we will have the opportunity to move for summary judgment, seek decertification of the classes, or engage in further mediation, if we deem such actions appropriate.

We expect to engage in one or more such activities in upcoming quarters.

Castro and Marmolejo v.

ABM Industries, Inc., et al., filed on October 24, 2014, pending in the United States District Court for the Northern District of California (the “Castro case”)

On October 24, 2014, Plaintiff Marley Castro filed a class action lawsuit alleging that ABM did not reimburse janitorial employees in California for using their personal cell phones for work-related purposes, in violation of California Labor Code section 2802.

On January 23, 2015, Plaintiff Lucia Marmolejo was added to the case as a named plaintiff.

On October 27, 2017, plaintiffs moved for class certification seeking to represent a class of all employees who were, are, or will be employed by ABM in the State of California with the Employee Master Job Description Code “Cleaner” (hereafter referred to as “Cleaner Employees”) beginning from October 24, 2010.

ABM filed its opposition to class certification on November 27, 2017.

On January 26, 2018, the district court granted plaintiffs’ motion for class certification.

The court rejected plaintiffs’ proposed class, instead certifying three classes that the court formulated on its own:

(1) all employees who were, are, or will be employed by ABM in the State of California as Cleaner Employees who used a personal cell phone to punch in and out of the EPAY system and who (a) worked at an ABM facility that did not provide a biometric clock and (b) were not offered an ABM-provided cell phone during the period beginning on January 1, 2012, through the date of notice to the Class Members that a class has been certified in this action;

(2) all employees who were, are, or will be employed by ABM in the State of California as Cleaner Employees who used a personal cell phone to report unusual or suspicious circumstances to supervisors and were not offered (a) an ABM-provided cell phone or (b) a two-way radio during the period beginning four years prior to the filing of the original complaint, October 24, 2014, through the date of notice to the Class Members that a class has been certified in this action;

and (3) all employees who were, are, or will be employed by ABM in the State of California as Cleaner Employees who used a personal cell phone to respond to communications from supervisors and were not offered (a) an ABM-provided cell phone or (b) a two-way radio during the period beginning four years prior to the filing of the

original complaint, October 24, 2014, through the date of notice to the Class Members that a class has been certified in this action.

On February 9, 2018, ABM filed a petition for permission to appeal the district court’s order granting class certification with the United States Court of Appeals for the Ninth Circuit, which was denied on April 30, 2018.

On March 20, 2018, ABM moved to compel arbitration of the claims of certain class members pursuant to the terms of three collective bargaining agreements.

In response to that motion, on May 14, 2018, the district court modified the class definition to exclude all claims arising after the operative date(s) of the applicable collective bargaining agreements (which is June 1, 2016 for one agreement and May 1, 2016 for the other two agreements).

However, the district court denied the motion to compel arbitration as to claims that arose prior to the operative date(s) of the applicable collective bargaining agreements.

ABM appealed to the Ninth Circuit the district court’s order denying the motion to compel arbitration with respect to the periods preceding the operative dates of the collective bargaining agreements.

After a court-ordered mediation held on October 15, 2018, the parties agreed to a class action settlement of $ 5.4 million , subject to court approval.

The plaintiffs’ motion for preliminary approval of the settlement was filed on January 4, 2019, and the court held a hearing on the motion on February 12, 2019.

On February 14, 2019, the court granted preliminary approval of the settlement.

The court granted final approval of the settlement on September 3, 2019, and the settlement was funded on September 23, 2019.

In connection with the settlement, we modified our existing written policies for California to expressly confirm that ABM service workers are not required to use personal cell phones for work purposes and began centralizing the process and implementing technology for such employees to request reimbursement for personal cell phone use due to work.

Because the settlement was finally approved, on October 31, 2019, ABM dismissed its Ninth Circuit appeal regarding the district court’s order denying the motion to compel arbitration.

The trial court denied the plaintiffs’ motion

to certify additional classes on December 26, 2019.

The case was re-assigned to a new judge on January 6, 2020.

ABM filed motions for summary adjudication as to certain of Plaintiffs’ class claims, and the trial court denied those motions in November 2020.

Plaintiffs filed motions for summary adjudication and/or summary judgment on some claims in December 2020, and a hearing on these motions is currently set for February 24, 2021.

The trial court has ordered that the parties complete another mediation by February 19, 2021.

The parties are currently engaged in substantive briefing and will begin expert discovery.

The class action claims accruing prior to April 30, 2013 are set for trial on July 12, 2021.

Prior to trial, we will have the opportunity to, among other things, seek decertification of the classes, seek interlocutory appellate review, or engage in further mediation if we deem such actions appropriate.

We may engage in one or more such activities before the trial.

While we believe we have valid defenses to the claims in this proceeding and will continue to vigorously defend ourselves, there can be no assurance that the final resolution of this matter will not have a material adverse effect on our business, financial condition, results of operations, or cash flows.

PREFERRED AND COMMON STOCK

2 unchanged sentences

None of these preferred shares are issued.

On September 2, 2015, our Board of Directors authorized a program to repurchase up to $ 200.0 million of our common stock (the “2015 Share Repurchase Program”).

At October 31, 2019 , authorization fo r $ 134.1 million of repurchases remained under our 2015 Share Repurchase Program.

Effective December 18, 2019, our Board of Directors replaced the 2015 Share Repurchase Program with a new share repurchase program under which we may repurchase up to $ 150.0 million of our common stock.

Effective December 18, 2019, our Board of Directors replaced our then-existing share repurchase program with a new share repurchase program under which we may repurchase up to $ 150.0 million of our common stock.

These purchases may take place on the open market or otherwise, and all or part of the repurchases may be made pursuant to Rule 10b5-1 plans or in privately negotiated transactions.

3 unchanged sentences

Repurchase Activity

We repurchased shares under the 2019 Share Repurchase Program during the second quarter of 2020, as summarized below.

However, due to the market and business conditions arising from the Pandemic, in March 2020 we suspended further repurchases of our common stock.

At October 31, 2020, authorization for $ 144.9 million of repurchases remained under the 2019 Share Repurchase Program.

There were no share repurchases during 2019 or 2018.

During 2017, we repurchased 0.2 million shares at an average price paid per share of $ 40.07 for total cash paid of $ 7.9 million .

(in millions, except per share amounts) October 31, 2020

Total number of shares purchased 0.2

Average price paid per share $ 36.16

Total cash paid for share repurchases $ 5.1

SHARE-BASED COMPENSATION PLANS

We use various share-based compensation plans to provide incentives for our key employees and directors.

Currently, these incentives primarily consist of RSUs, performance shares, and stock options.

Currently, these incentives primarily consist of RSUs and performance shares.

On May 2, 2006, our stockholders approved the 2006 Equity Incentive Plan (the “2006 Equity Plan”).

14 unchanged sentences

(in millions) 2020 2019 2018

RSUs $ 11.5 $ 9.5 $ 9.3

Performance shares 8.8 8.0 7.7

4 unchanged sentences

We award RSUs to eligible employees and our directors (each, a “Grantee”) that entitle the Grantee to receive shares of our common stock as the units vest.

RSUs granted to eligible employees generally vest with respect to 50 % of the underlying award on the second and fourth anniversary of the award.

RSUs granted to eligible employees in 2020 generally vest ratably over three years .

RSUs granted to eligible employees prior to 2020 generally vest with respect to 50 % of the underlying award on the second and fourth anniversary of the award.

RSUs granted to directors vest over three years .

1 unchanged sentence

RSUs are credited with dividend equivalent rights that are converted to RSUs at the fair market value of our common stock on the dates the dividend payments are made and are subject to the same terms and conditions as the underlying award.

Number of Shares (in millions)

Weighted-Average Grant Date Fair Value per Share

(in millions) Weighted-Average

Fair Value per Share

Outstanding at October 31, 2019 0.7 $ 36.92

Granted 0.7 36.11

Vested (including 0.1 shares withheld for income taxes)

( 0.2 ) 37.24

Forfeited ( 0.1 ) 37.63

Outstanding at October 31, 2020 1.1 $ 36.32

6 unchanged sentences

For certain performance share awards, the number of performance shares that will vest is based on pre-established internal financial performance targets and typically a three-year service and performance period.

The number of TSR awards and TSR-modified awards that will vest over the respective three-year performance period is based on our total shareholder return relative to the S&P 600 Small Cap Index for awards that were granted in 2016, 2017, or 2018, and is based on the S&P 1500 Commercial Services & Supplies Index for awards that were granted in 2019.

The number of TSR awards and TSR-modified awards that will vest over the respective three-year performance period is based on our total shareholder return relative to the S&P 600 Small Cap Index for awards that were granted in 2018 and is based on the S&P 1500 Commercial Services & Supplies Index for awards that were granted in 2019 or 2020.

Vesting of 0 % to 150 % of the awards originally granted may occur depending on the respective performance metrics under both award types.

Performance Share Activity

Number of Shares (in millions)

Weighted-Average Grant Date Fair Value per Share

Number of Shares

(in millions) Weighted-Average

Outstanding at October 31, 2019 0.8 $ 38.06

Granted 0.4 35.92

Vested (including 0.1 shares withheld for income taxes)

( 0.2 ) 37.72

Performance adjustments ( 0.1 ) 36.85

Forfeited ( 0.1 ) 36.58

Outstanding at October 31, 2020 0.8 $ 37.35

6 unchanged sentences

Monte Carlo Assumptions

2020 2019 2018

Expected life (1)

2.81 years 2.81 years 2.81 years

Expected stock price volatility (2)

28.7 % 27.7 % 21.6 %

Risk-free interest rate (3)

1.5 % 2.5 % 2.0 %

Stock price (4)

$ 37.99 $ 34.92 $ 39.02

(1) The expected life represents the remaining performance period of the awards.

4 unchanged sentences

(4) The stock price is the closing price of our common stock on the valuation date.

Stock Options

Typically, stock options vest and become exercisable at a rate of 25 % per year beginning one year after the date of grant.

However, terms of stock options can vary, and certain stock options granted on January 10, 2011 vested on the fifth anniversary of the award.

We have not granted stock options since 2013.

All option grants provide for an option exercise price equal to the closing market value of the common stock on the date of grant.

Options typically expire 7 years after the date of grant.

Stock Option Activity

Number of Shares

(in millions)

Weighted-Average Exercise Price per Share

Weighted-Average Remaining Contractual Term (in years) (1)

Aggregate Intrinsic Value (in millions) (2)

Outstanding at October 31, 2018

Forfeited or expired

Outstanding at October 31, 2019

Exercisable at October 31, 2019

(1) Excludes contractual terms associated with plans prior to the 2006 Equity Plan due to the uncertainty of expiration.

(2) Amount by which the current market price of our common stock on October 31, 2019 exceeds the exercise price.

At October 31, 2019 , we had no unrecognized compensation cost related to stock option grants.

For 2019 , 2018 , and 2017 , the total intrinsic value of stock options exercised was $ 1.4 million , $ 0.6 million , and $ 2.6 million , respectively.

In 2019 and 2018 no stock options vested.

In 2017 , the total grant date fair value of stock options vested was $ 0.2 million .

Employee Stock Purchase Plan

9 unchanged sentences

United States $ 45.2 $ 137.1 $ 94.8

Foreign 8.1 23.1 ( 7.1 )

Income from continuing operations before income taxes $ 53.3 $ 160.2 $ 87.7

2 unchanged sentences

(in millions) 2020 2019 2018

Federal $ ( 59.3 ) $ ( 6.4 ) $ ( 4.3 )

State ( 28.6 ) ( 10.7 ) ( 7.3 )

Foreign ( 1.7 ) ( 5.9 ) ( 3.9 )

Federal 23.2 ( 8.5 ) 21.8

State 12.5 ( 1.6 ) 0.2

Foreign 0.9 0.4 1.7

Income tax (provision) benefit $ ( 53.1 ) $ ( 32.7 ) $ 8.2

2 unchanged sentences

Years Ended October 31,

2020 2019 2018

statutory rate 21.0 % 21.0 % 23.3 %

4 unchanged sentences

Incremental tax benefit from share-based compensation awards ( 1.6 ) ( 0.7 ) ( 3.9 )

Tax credits for energy efficient government buildings

Energy efficiency incentives ( 3.8 ) — ( 3.2 )

Impact from goodwill impairment 81.7 — 4.4

3 unchanged sentences

Nondeductible expenses 4.4 2.1 2.4

Other, net 3.9 ( 0.8 ) 0.3

Effective tax rate 99.6 % 20.4 % ( 9.4 ) %

5 unchanged sentences

As a result, we recorded a one-time tax benefit of $ 29.6 million from the remeasurement of certain deferred tax assets and liabilities based on the new tax rates at which they are expected to reverse in the future.

In addition, we recorded an expense of $ 4.5 million for the one-time transition tax on the deemed repatriation of indefinitely reinvested earnings of our international

subsidiaries.

In addition, we recorded an expense of $ 4.5 million for the one-time transition tax on the deemed repatriation of indefinitely reinvested earnings of our international subsidiaries.

Upon finalizing our tax filings, the impact of the transition tax was ultimately an expense of $ 2.7 million , which resulted in a benefit of $ 1.8 million that was recorded in the fourth quarter of 2019.

We plan to reinvest our foreign earnings to fund future non-U.S.

We continue planning to reinvest our foreign earnings to fund future non-U.S.

growth and expansion, and we do not anticipate remitting such earnings to the United States.

federal tax expense has been recognized as a result of the Tax Act, no deferred tax liabilities with respect to federal and state income taxes or foreign withholding taxes have been recognized.

During 2019 and 2018 , we had effective tax rates of 20.4 % and ( 9.4 )% , respectively, resulting in a provision for tax of $ 32.7 million and a benefit from tax of $ 8.2 million , respectively.

During 2020 and 2019, we had effective tax rates of 99.6 % and 20.4 %, respectively, resulting in a provision for tax of $ 53.1 million and $ 32.7 million, respectively.

The effective tax rate for the year ended October 31, 2020, excluding a nondeductible impairment loss of $ 163.8 million, was 24.4 %.

Our effective tax rate for 2020 was also impacted by the following discrete items:

a $ 5.7 million benefit from true-ups;

a $ 2.3 million provision related to WOTC;

a $ 2.1 million benefit from energy efficiency incentives;

and a $ 1.1 million benefit from change of tax reserves.

Our effective tax rate for 2019 was impacted by the following discrete items:

2 unchanged sentences

a $ 1.6 million benefit from federal true-ups;

a $ 1.3 million provision related to the Work Opportunity Tax Credit (“WOTC”);

a $ 1.3 million provision related to WOTC;

a $ 1.3 million benefit from expiring statutes of limitations;

1 unchanged sentence

and a $ 0.9 million benefit from research and development credits.

Our effective tax rate for 2018 was impacted by the following discrete items:

a $ 23.2 million benefit related to the Tax Act enactment;

a $ 5.8 million benefit from expiring statutes of limitations;

a $ 3.4 million benefit from the vesting of share-based compensation awards;

a $ 2.8 million benefit for energy efficient government buildings;

and a $ 1.0 million provision for certain tax credits, including WOTC.

Components of Deferred Tax Assets and Liabilities

8 unchanged sentences

Other comprehensive income 2.7 0.5

State taxes 1.4 0.4

State net operating loss carryforwards 5.9 11.2

Federal net operating loss carryforwards

Tax credits 3.7 6.3

Unrecognized tax benefits 3.2 3.0

Deferred payroll taxes 26.9 —

Operating lease liabilities 38.2 —

Gross deferred tax assets 200.6 141.2

4 unchanged sentences

Goodwill and other acquired intangibles ( 159.4 ) ( 170.6 )

Right-of-use assets ( 38.2 ) —

Other ( 8.5 ) ( 5.2 )

Total deferred tax liabilities ( 207.3 ) ( 180.6 )

12 unchanged sentences

GCA acquisition — — 2.4

Other, net ( 4.3 ) ( 3.6 ) 1.8

Valuation allowance at end of year $ 4.1 $ 8.4 $ 12.0

3 unchanged sentences

At October 31, 2020 and 2019, accrued interest and penalties were $ 1.5 million and $ 1.2 million, respectively.

For interest and penalties, we recognized an expense of $ 0.2 million in 2019 and benefits of $ 1.0 million and $ 0.5 million in 2018 and 2017 , respectively.

For interest and penalties, we recognized an expense of $ 0.4 million and $ 0.2 million in 2020 and 2019, respectively, and a benefit of $ 1.0 million in 2018.

Reconciliation of Total Unrecognized Tax Benefits

6 unchanged sentences

Reductions for lapse of statute of limitations ( 3.0 ) ( 3.9 ) ( 8.7 )

Settlements ( 0.5 ) ( 0.3 ) ( 0.1 )

Balance at end of year $ 35.5 $ 35.3 $ 35.8

5 unchanged sentences

Generally, for the majority of state and foreign jurisdictions where we do business, periods prior to fiscal 2016 are no longer subject to examination.

We are currently being examined by the IRS and state tax authorities of California, Illinois, Massachusetts, and Wisconsin.

We are currently being examined by the IRS and tax authorities of California, New York City, and Wisconsin.

SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

Our current reportable segments consist of B&I, Aviation, T&M, Education, and Technical Solutions, as further described below.

Refer to Note 2 , “Basis of Presentation and Significant Accounting Policies,” for information related to the modification in our presentation of inter-segment revenues and the reorganization of our Healthcare business into our other industry groups, primarily B&I, during 2019, as well as information related to our former Government Services business that we sold during 2017.

Our current reportable segments consist of B&I, T&M, Education, Aviation, and Technical Solutions, as further described below.

REPORTABLE SEGMENTS AND DESCRIPTIONS

B&I, our largest reportable segment, encompasses janitorial, facilities services, and parking services for commercial real estate properties, sports and entertainment venues, and traditional hospitals and non-acute healthcare facilities.

B&I B&I, our largest reportable segment, encompasses janitorial, facilities services, and parking services for commercial real estate properties, sports and entertainment venues, and traditional hospitals and non-acute healthcare facilities.

B&I also provides vehicle maintenance and other services to rental car providers.

Aviation supports airlines and airports with services ranging from parking and janitorial to passenger assistance, catering logistics, air cabin maintenance, and transportation.

T&M provides janitorial, facilities services, and parking services to industrial and high-tech manufacturing facilities.

Education delivers janitorial, custodial, landscaping and grounds, facilities engineering, and parking services for public school districts, private schools, colleges, and universities.

Technical Solutions

Technical Solutions specializes in mechanical and electrical services.

T&M T&M provides janitorial, facilities services, and parking services to industrial and high-tech manufacturing facilities.

Education Education delivers janitorial, custodial, landscaping and grounds, facilities engineering, and parking services for public school districts, private schools, colleges, and universities.

Aviation Aviation supports airlines and airports with services ranging from parking and janitorial to passenger assistance, catering logistics, air cabin maintenance, and transportation.

Technical Solutions Technical Solutions specializes in mechanical and electrical services.

These services can also be leveraged for cross-selling across all of our industry groups, both domestically and internationally.

7 unchanged sentences

Technology & Manufacturing 956.0 917.0 925.4

Education 808.8 847.4 856.7

Aviation 680.9 1,017.3 1,038.7

Technical Solutions 506.6 593.2 500.1

Government Services

Elimination of inter-segment revenues ( 122.4 ) ( 127.7 ) ( 147.1 )

$ 5,987.6 $ 6,498.6 $ 6,442.2

Operating profit (loss)

1 unchanged sentence

Technology & Manufacturing 84.4 72.5 67.4

Education (1)

( 41.1 ) 39.0 44.1

( 59.6 ) 21.1 23.2

Technical Solutions (3)

9.5 55.4 21.8

Government Services ( 0.1 ) ( 0.1 ) ( 0.8 )

Adjustment for income from unconsolidated affiliates, included in Aviation and Government Services

Adjustment for tax deductions for energy efficient government buildings, included in Technical Solutions

Corporate ( 146.9 ) ( 159.0 ) ( 168.8 )

Adjustment for income from unconsolidated affiliates, included in Aviation ( 2.2 ) ( 3.0 ) ( 3.2 )

Adjustment for tax deductions for energy efficient government

buildings, included in Technical Solutions ( 2.1 ) 0.1 ( 2.8 )

95.7 208.3 138.6

Income from unconsolidated affiliates 2.2 3.0 3.2

4 unchanged sentences

Technology & Manufacturing 12.5 14.3 15.6

Education 33.8 37.3 37.5

Aviation 10.6 11.9 13.1

Technical Solutions 7.2 8.6 10.2

(1) Excludes amortization related to income from unconsolidated affiliates.

Corporate 13.5 13.9 12.4

$ 96.4 $ 107.4 $ 112.5

(1) Reflects impairment charges totaling $ 99.3 million on goodwill during the year ended October 31, 2020.

(2) Reflects impairment charges totaling $ 61.1 million on goodwill and intangible assets during the year ended October 31, 2020.

(3) Reflects impairment charges totaling $ 12.4 million on goodwill and intangible assets during the year ended October 31, 2020.

Geographic Information Based on the Country in Which the Sale Originated (1)

3 unchanged sentences

All other countries 362.5 473.3 444.8

$ 5,987.6 $ 6,498.6 $ 6,442.2

(1) Substantially all of our long-lived assets are related to United States operations.

1 unchanged sentence

Fiscal Quarter

(in millions, except per share amounts)

(in millions, except per share amounts) First Second Third Fourth

Year Ended October 31, 2020

Income from continuing operations

(Loss) income from discontinued operations, net of taxes

Net income per common share — Basic

Income from continuing operations

Revenues $ 1,612.9 $ 1,496.0 $ 1,394.1 $ 1,484.6

Gross profit 179.2 189.9 219.2 242.4

Income (loss) from continuing operations 27.9 ( 136.8 ) 56.0 53.1

Income from discontinued operations, net of taxes 0.1 — — —

Net income (loss) $ 28.0 $ ( 136.8 ) (1)

$ 56.0 $ 53.1

Net income (loss) per common share — Basic

Income (loss) from continuing operations $ 0.42 $ ( 2.05 ) $ 0.84 $ 0.79

Income from discontinued operations — — — —

Net income per common share — Diluted

Income from continuing operations

Net income (loss) $ 0.42 $ ( 2.05 ) $ 0.84 $ 0.79

Net income (loss) per common share — Diluted

Income (loss) from continuing operations $ 0.41 $ ( 2.05 ) $ 0.83 $ 0.78

Income from discontinued operations — — — —

Net income (loss) $ 0.42 $ ( 2.05 ) (1)

$ 0.83 $ 0.78

Year ended October 31, 2019

Revenues $ 1,607.9 $ 1,594.7 $ 1,647.9 $ 1,648.0

Gross profit 162.0 180.5 193.9 194.7

Income from continuing operations 13.0 29.9 36.5 48.1

(Loss) income from discontinued operations, net of taxes ( 0.1 ) ( 0.2 ) 0.2 ( 0.1 )

Net income $ 13.0 $ 29.7 $ 36.8 $ 47.9

Net income per common share — Basic

1 unchanged sentence

Income from discontinued operations — — — —

Net income $ 0.20 $ 0.45 $ 0.55 $ 0.72

Net income per common share — Diluted

1 unchanged sentence

Income from discontinued operations — — — —

(1) Includes a one-time net tax benefit of $ 22.6 million , or $ 0.34 per diluted share, related to the Tax Act.

(2) Includes goodwill and asset impairment charges of $ 26.5 million , or $ 0.40 per diluted share.

Net income $ 0.19 $ 0.45 $ 0.55 $ 0.71

(1) Includes goodwill and asset impairment charges of $ 172.8 million, $ 170.6 million after tax, or $ 2.54 per diluted share.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data