ABM INDUSTRIES INC /DE/ 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors ABM Industries Incorporated: 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, 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, 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 These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 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. 45 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 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 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. We tested a sample of the claims data utilized by the Company’s actuaries by comparing to underlying claims details; and involved an actuarial professional with specialized skills and knowledge who assisted in the: • Assessment of the actuarial models used by the Company for consistency with generally accepted actuarial standards, and • 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 46 • 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. /s/ KPMG LLP We have served as the Company’s auditor since 1980. New York, New York December 17, 2020 47 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors ABM Industries Incorporated: Opinion on Internal Control Over Financial Reporting We have audited ABM Industries Incorporated and subsidiaries’ (the Company) 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. 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, 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 The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 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 48 become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP New York, New York December 17, 2020 49 ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS October 31, (in millions, except share and per share amounts) 2020 2019 ASSETS Current assets Cash and cash equivalents $ 394.2 $ 58.5 Trade accounts receivable, net of allowances of $ 35.5 and $ 22.4 at October 31, 2020 and 2019, respectively 854.2 1,013.2 Costs incurred in excess of amounts billed 52.2 72.6 Prepaid expenses 85.4 75.7 Other current assets 55.9 55.5 Total current assets 1,441.9 1,275.4 Other investments 11.1 14.0 Property, plant and equipment, net of accumulated depreciation of $ 241.3 and $ 199.5 at October 31, 2020 and 2019, respectively 133.7 150.3 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 239.7 297.2 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 Current liabilities Current portion of long-term debt, net $ 116.7 $ 57.2 Trade accounts payable 273.3 280.7 Accrued compensation 187.6 189.3 Accrued taxes—other than income 45.5 63.6 Insurance claims 155.2 149.8 Income taxes payable 6.2 3.5 Current portion of lease liabilities 35.0 — Other accrued liabilities 167.3 158.2 Total current liabilities 986.9 902.4 Long-term debt, net 603.0 744.2 Long-term lease liabilities 131.4 — Deferred income tax liability, net 10.8 47.7 Noncurrent insurance claims 366.3 365.2 Other noncurrent liabilities 168.1 78.8 Noncurrent income taxes payable 10.1 12.2 Total liabilities 2,276.6 2,150.6 Commitments and contingencies Stockholders’ Equity Preferred stock, $ 0.01 par value; 500,000 shares authorized; none issued — — Common stock, $ 0.01 par value; 100,000,000 shares authorized; 66,748,157 and 66,571,427 shares issued and outstanding at October 31, 2020 and 2019, respectively 0.7 0.7 Additional paid-in capital 724.1 708.9 Accumulated other comprehensive loss, net of taxes ( 30.8 ) ( 23.9 ) Retained earnings 806.4 856.3 Total stockholders’ equity 1,500.3 1,542.0 Total liabilities and stockholders’ equity $ 3,776.9 $ 3,692.6 See accompanying notes to consolidated financial statements. 50 ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES 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 Selling, general and administrative expenses 506.1 452.9 438.0 Restructuring and related expenses 7.6 11.2 25.7 Amortization of intangible assets 48.4 58.5 66.0 Impairment loss 172.8 — 26.5 Operating profit 95.7 208.3 138.6 Income from unconsolidated affiliates 2.2 3.0 3.2 Interest expense ( 44.6 ) ( 51.1 ) ( 54.1 ) Income from continuing operations before income taxes 53.3 160.2 87.7 Income tax (provision) benefit ( 53.1 ) ( 32.7 ) 8.2 Income from continuing operations 0.2 127.5 95.9 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 (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 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 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. 51 ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Years Ended October 31, 2020 2019 2018 (in millions, except per share amounts) Shares Amount Shares Amount Shares Amount Common Stock 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 0.3 — 0.6 — 0.5 — Repurchase of common stock ( 0.2 ) — — — — — Balance, end of year 66.7 0.7 66.6 0.7 66.0 0.7 Additional Paid-in Capital Balance, beginning of year 708.9 691.8 675.2 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 Repurchase of common stock ( 5.1 ) — — Balance, end of year 724.1 708.9 691.8 Accumulated Other Comprehensive Loss, Net of Taxes Balance, beginning of year ( 23.9 ) ( 9.0 ) ( 20.3 ) Other comprehensive (loss) income ( 6.9 ) ( 14.9 ) 11.3 Balance, end of year ( 30.8 ) ( 23.9 ) ( 9.0 ) Retained Earnings Balance, beginning of year 856.3 771.2 720.1 Net income 0.3 127.4 97.8 Dividends 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 ASU 2014-09 — 6.5 — Balance, end of year 806.4 856.3 771.2 Total Stockholders’ Equity $ 1,500.3 $ 1,542.0 $ 1,454.6 See accompanying notes to consolidated financial statements. 52 ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended October 31, (in millions) 2020 2019 2018 Cash flows from operating activities 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 Depreciation and amortization 96.4 107.4 112.5 Proceeds from termination of interest rate swaps — — 25.9 Impairment loss 172.8 — 26.5 Deferred income taxes ( 36.6 ) 9.7 ( 23.7 ) Share-based compensation expense 20.3 17.5 17.0 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 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 ) Distributions from unconsolidated affiliates 0.1 5.4 1.9 Changes in operating assets and liabilities, net of effects of acquisitions Trade accounts receivable and costs incurred in excess of amounts billed 141.4 ( 78.3 ) 16.0 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 Income taxes payable 7.6 3.2 0.7 Other noncurrent liabilities 96.2 ( 8.7 ) ( 1.2 ) Total adjustments 457.2 135.3 203.7 Net cash provided by operating activities of continuing operations 457.4 262.8 299.7 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 Cash flows from investing activities Additions to property, plant and equipment ( 38.0 ) ( 59.6 ) ( 50.9 ) Proceeds from sale of assets 5.5 1.3 2.3 Adjustments to sale of business — — ( 1.9 ) Proceeds from redemption of auction rate security 5.0 — 2.9 Investments in unconsolidated affiliates — — ( 0.4 ) Net cash used in investing activities ( 27.5 ) ( 58.3 ) ( 48.1 ) Cash flows from financing activities Taxes withheld from issuance of share-based compensation awards, net ( 0.9 ) ( 1.3 ) ( 1.0 ) Repurchases of common stock ( 5.1 ) — — Dividends paid ( 49.3 ) ( 47.7 ) ( 46.0 ) Deferred financing costs paid ( 4.4 ) — ( 0.1 ) Borrowings from credit facility 1,058.5 1,755.9 1,184.2 Repayment of borrowings from credit facility ( 1,141.6 ) ( 1,896.5 ) ( 1,426.4 ) Changes in book cash overdrafts 41.2 ( 0.2 ) ( 8.5 ) Financing of energy savings performance contracts 11.1 8.1 5.4 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 ) Net increase (decrease) in cash and cash equivalents 335.7 19.4 ( 23.7 ) Cash and cash equivalents at beginning of year 58.5 39.1 62.8 Cash and cash equivalents at end of year $ 394.2 $ 58.5 $ 39.1 53 ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) Years Ended October 31, (in millions) 2020 2019 2018 Supplemental cash flow information Income tax payments (refunds), net $ 82.2 $ 20.6 $ ( 1.0 ) Interest paid on credit facility 32.9 39.9 49.6 See accompanying notes to consolidated financial statements. 54 ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY AND NATURE OF OPERATIONS 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: Through these groups, we offer janitorial, facilities engineering, parking, and specialized mechanical and electrical technical solutions, on a standalone basis or in combination with other services. 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation 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. The Financial Statements include the accounts of ABM and all of our consolidated subsidiaries. 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 (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 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. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. We round amounts in the Financial Statements to millions and calculate all percentages and per-share data from the underlying whole-dollar amounts. Thus, certain amounts may not foot, crossfoot, or recalculate based on reported numbers due to rounding. 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 55 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 We consider all highly liquid securities with an original maturity of three months or less to be cash and cash equivalents. As part of our cash management system, we use “zero balance” accounts to fund our disbursements. Under this system, at the end of each day the bank balance is zero, while the book balance is usually a negative amount due to reconciling items, such as outstanding checks. We report the changes in these book cash overdrafts as cash flows from financing activities. Trade Accounts Receivable and Costs Incurred in Excess of Amounts Billed Trade accounts receivable arise from services provided to our clients and are usually due and payable on varying terms from receipt of the invoice to net ninety days, with the exception of certain Technical Solutions project receivables that may have longer collection periods. These receivables are recorded at the invoiced amount and normally do not bear interest. In addition, our trade accounts receivable include unbilled receivables, such as invoices for services that have been provided but are not yet billed. Costs incurred in excess of amounts billed arise from Technical Solutions project contracts that typically provide for a schedule of billings or invoices to the client based on our performance to date of specific tasks inherent in the fulfillment of our performance obligation(s). 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 be billed or invoiced to the client at any point during the contract. Allowance for Doubtful Accounts We determine the allowance for doubtful accounts based on historical write-offs, known or expected trends, and the identification of specific balances deemed uncollectible. For the specifically identified balances, we establish the reserve upon the earlier of a client’s inability to meet its financial obligations or after a period of twelve months, unless our management believes such amounts will ultimately be collectible. Sales Allowance In connection with our service contracts, we periodically issue credit memos to our clients that are recorded as a reduction in revenues and an increase to the allowance for billing adjustments. These credits can result from client vacancy discounts, job cancellations, property damage, and other items. We estimate our potential future losses on these client receivables based on an analysis of the historical rate of sales adjustments (credit memos, net of re-bills) and known or expected trends. 56 Other Current Assets At October 31, 2020 and 2019, other current assets primarily consisted of other receivables, short-term insurance recoverables, and capitalized commissions. Other Investments 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 We own non-controlling interests (generally 20 % to 50 %) in certain affiliated entities that predominantly provide facility solutions to governmental and commercial clients, primarily in the United States and the Middle East. We account for such investments under the equity method of accounting. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. An impairment loss is recognized to the extent that the estimated fair value of the investment is less than its carrying amount and we determine that the impairment is other-than-temporary. At October 31, 2020, 2019, and 2018, our investments in unconsolidated affiliates were $ 11.0 million, $ 8.9 million, and $ 11.3 million, respectively. We did not recognize any impairment charges on these investments in 2020, 2019, or 2018. Investments in Auction Rate Securities 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 (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. If such intent exists, impaired securities are considered other-than-temporarily impaired and we recognize the entire difference between the auction rate security’s amortized cost and its fair value in earnings. We also consider if we may be required to sell the securities prior to the recovery of amortized cost, which may trigger an impairment charge. 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 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 We record property, plant and equipment at cost. Repairs and maintenance expenditures are expensed as incurred. In contrast, we capitalize major renewals or replacements that substantially extend the useful life of an asset. 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 Machinery and other equipment 3 – 5 Transportation equipment 1.5 – 10 Buildings 10 – 40 Furniture and fixtures 5 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 (Loss) Income. 57 Leases 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. 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 Goodwill represents the excess purchase price of acquired businesses over the fair value of the assets acquired and liabilities assumed. We have elected to make the first day of our fourth quarter, August 1st, the annual impairment assessment date for goodwill. However, we could be required to evaluate the recoverability of goodwill more often if impairment indicators exist. Goodwill is tested for impairment at a “reporting unit” level by performing either a qualitative evaluation or a quantitative test. 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 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 58 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. This accelerated method of amortization reflects the pattern in which the economic benefits from the intangible assets of customer contracts and relationships are expected to be realized. We amortize other non-customer acquired intangibles using a straight-line method of amortization. We evaluate other intangible assets, as well as our long-lived assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. When this occurs, a recoverability test is performed that compares the projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying amount. If the projected undiscounted cash flows are less than the carrying amount, we calculate an impairment loss. The impairment loss calculation compares the fair value, which is based on projected discounted cash flows, to the carrying value. See Note 9, “Goodwill and Other Intangible Assets,” for further information on goodwill, other intangible assets, and impairment charges. Other Noncurrent Assets 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 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. We assign certain of our rights to receive those payments to unaffiliated third parties that provide construction financing, which we record as a liability, for such contracts. This construction financing is recorded as cash flows from financing activities, while the use of the cash received to pay project costs under these arrangements is classified as operating cash flows. The ESPC receivable is recognized as revenue as each project is constructed. Upon completion and acceptance of the project by the government and upon satisfaction of true sale criteria, the assigned ESPC receivable from the government and corresponding ESPC liability are eliminated from our consolidated financial statements. Fair Value of Financial Instruments 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 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. Preference is given to observable inputs. These two types of inputs create the following fair value hierarchy: Level 1 – Quoted prices for identical instruments in active markets; Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable; and Level 3 – Significant inputs to the valuation model are unobservable. We evaluate assets and liabilities subject to fair value measurements on a recurring and non-recurring basis to determine the appropriate level at which to classify them for each reporting period. Some non-financial assets are measured at fair value on a non-recurring basis only in certain circumstances, including the event of impairment. 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. 59 Insurance Reserves We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. Insurance claim liabilities represent our estimate of retained risks without regard to insurance coverage. 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 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. As part of this evaluation, we review the status of existing and new claim reserves as established by third-party claims administrators. The third-party claims administrators establish the case reserves based upon known factors related to the type and severity of the claims, demographic factors, legislative matters, and case law, as appropriate. We compare actual trends to expected trends and monitor claims developments. The specific case reserves estimated by the third-party administrators are provided to an actuary who assists us in projecting an actuarial estimate of the overall ultimate losses for our self-insured or high deductible programs, which includes the case reserves plus an actuarial estimate of reserves required for additional developments, such as IBNR Claims. We utilize the results of actuarial studies to estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years. In general, our insurance reserves are recorded on an undiscounted basis. We allocate current-year insurance expense to our operating segments based upon their underlying exposures, while actuarial adjustments related to prior year claims are recorded within Corporate expenses. 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 the receipt of such amounts is probable. Other Accrued Liabilities 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, 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 Beginning in fiscal 2019, we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , and ASU 2017-10, Service Concession Arrangements (Topic 853) : Determining the Customer of the Operation Services . 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 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 We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. 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. If a contract includes a cancellation clause, the remaining contract term is limited to the required termination notice period. At contract inception, we assess the services promised to our customers and identify a performance obligation for each promise to transfer to the customer a service, or a bundle of services, that is distinct. To identify the performance obligation, we consider all of our services promised in the contract, regardless of whether they are explicitly stated or are implied by customary business practices. 60 The majority of our contracts contain multiple promises that represent an integrated bundle of services comprised of activities that may vary over time; however, these activities fulfill a single integrated performance obligation since we perform a continuous service that is substantially the same and has the same pattern of transfer to the customer. Our performance obligations are primarily satisfied over time as we provide the related services. We allocate the contract transaction price to this single performance obligation and recognize revenue as the services are performed, as further described in “Contract Types” below. Certain arrangements involve variable consideration (primarily per transaction fees, reimbursable expenses, and sales-based royalties). We do not estimate the variable consideration for these arrangements; rather, we recognize these variable fees in the period they are earned. Some of our contracts, often related to Airline Services, may also include performance incentives based on variable performance measures that are ascertained exclusively by future performance and therefore cannot be estimated at contract inception and are recognized as revenue once known and mutually agreed upon. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current, and forecasted) that is reasonably available to us. We primarily account for our performance obligations under the series guidance, using the as-invoiced practical expedient when applicable. We apply the as-invoiced practical expedient to record revenue as the services are provided, given the nature of the services provided and the frequency of billing under the customer contracts. Under this practical expedient, we recognize revenue in an amount that corresponds directly with the value to the customer of our performance completed to date and for which we have the right to invoice the customer. We typically bill customers on a monthly basis and have the right to consideration from customers in an amount that corresponds directly with the performance obligation satisfied to date. The time between completion of the performance obligation and collection of cash is generally 30 to 60 days. Sales-based taxes are excluded from revenue. Contracts generally can be modified to account for changes in specifications and requirements. 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 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. Contract Types We have arrangements under various contract types, as described below. Monthly Fixed-Price Monthly fixed-price arrangements are contracts in which the client agrees to pay a fixed fee every month over a specified contract term. 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. Square-Foot 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. 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. Cost-Plus Cost-plus arrangements are contracts in which the clients reimburse us for the agreed-upon amount of wages and benefits, payroll taxes, insurance charges, and other expenses associated with the contracted work, plus a profit margin. 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. 61 Work Orders 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 Transaction-price contracts are arrangements in which customers are billed a fixed price for each transaction performed on a monthly basis (e.g., wheelchair passengers served, airplane cabins cleaned). 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. Hourly Hourly arrangements are contracts in which the client is billed a fixed hourly rate for each labor hour provided. 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. Management Reimbursement Under management reimbursement arrangements we manage a parking facility for a management fee and pass through the revenue and expenses associated with the facility to the owner. We measure progress toward satisfaction of the performance obligation over time as the services are provided. Under these contracts we recognize both revenues and expenses, in equal amounts, that are directly reimbursed from the property owner for operating expenses, as such expenses are incurred. Such revenues do not include gross customer collections at the managed locations because they belong to the property owners. We have determined we are the principal in these transactions, because the nature of our performance obligation is for us to provide the services on behalf of the customer and we have control of the promised services before they are transferred to the customer. Leased Location Under leased location parking arrangements we pay a fixed amount of rent, plus a percentage of revenues derived from monthly and transient parkers, to the property owner. We retain all revenues received and we are responsible for most operating expenses incurred. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized over time because the customer simultaneously receives and consumes the benefits of the services as they are performed. In accordance with Topic 853, rental expense and certain other expenses under contracts that meet the definition of service concession arrangements are now recorded as a reduction of revenue. Prior to November 1, 2018, such amounts were recorded as operating expenses. Allowance Under allowance parking arrangements we are paid a fixed amount or hourly rate to provide parking services, and we are responsible for certain operating expenses that are specified in the contract. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual rate over time because the customer simultaneously receives and consumes the benefits of the services as they are performed. Energy Savings Contracts and Fixed-Price Repair and Refurbishment Under energy savings contracts and fixed-price repair and refurbishment arrangements we agree to develop, design, engineer, and construct a project. 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 62 progresses and we incur costs on our contracts; we believe this method best reflects the transfer of control to the customer. This measurement and comparison process requires updates to the estimate of total costs to complete the contract, and these updates may include subjective assessments and judgments. Equipment purchased for these projects is project-specific and considered a value-added element to our work. Equipment costs are incurred when title is transferred to us, typically upon delivery to the work site. Revenue for uninstalled equipment is recognized at cost and the associated margin is deferred until installation is substantially complete. Prior to November 1, 2018, we recognized revenue and margin on uninstalled equipment consistent with other project costs under the percentage-of-completion method. We recognize revenue over time for all of our services as we perform them, because (i) control continuously transfers to the customer as work progresses or (ii) we have the right to bill the customer as costs are incurred. The customer typically controls the work in process as evidenced either by contractual termination clauses or by our rights to payment for work performed to date plus a reasonable profit to deliver products or services that do not have an alternative use to us. Certain project contracts include a schedule of billings or invoices to the customer based on our job-to-date percentage of completion of specific tasks inherent in the fulfillment of our performance obligation(s) or in accordance with a fixed billing schedule. Fixed billing schedules may not precisely match the actual costs incurred. Therefore, revenue recognized may differ from amounts that can be billed or invoiced to the customer at any point during the contract, resulting in balances that are considered revenue recognized in excess of cumulative billings or cumulative billings in excess of revenue recognized. Advanced payments from our customers generally do not represent a significant financing component as the payments are used to meet working capital demands that can be higher in the early stages of a contract, as well as to protect us from our customer failing to meet its obligations under the contract. Certain projects include service maintenance agreements under which existing systems are repaired and maintained for a specific period of time. We generally recognize revenue under these arrangements over time. Our service maintenance agreements are generally one-year renewable agreements. Franchise We franchise certain engineering services through individual and area franchises under the Linc Service and TEGG brands, which are part of ABM Technical Solutions. Initial franchise fees result from the sale of a franchise license and include the use of the name, trademarks, and proprietary methods. The franchise license is considered symbolic intellectual property, and revenue related to the sale of this right is recognized at the agreed-upon contractual amount over the term of the initial franchise agreement. Prior to November 1, 2018, initial fees from sales of franchise licenses were recognized in the year of sale. Royalty fee revenue consists of sales-based royalties received as part of the consideration for the franchise right, which is calculated as a percentage of the franchisees’ revenue. We recognize royalty fee revenue at the agreed-upon contractual rates over time as the customer revenue is generated by the franchisees. A receivable is recognized for an estimate of the unreported royalty fees, which are reported and remitted to us in arrears. Costs to Obtain a Contract With a Customer We capitalize the incremental costs of obtaining a contract with a customer, primarily commissions, as contract assets and recognize the expense on a straight-line basis over a weighted average expected customer relationship period. Capitalized commissions are classified as current or noncurrent based on the timing of when we expect to recognize the expense. Prior to November 1, 2018, such incremental costs were expensed as incurred. Contract Balances The timing of revenue recognition, billings, and cash collections results in contract assets and contract liabilities, as further explained below. The timing of revenue recognition may differ from the timing of invoicing to customers. 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 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 63 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. We generally classify contract liabilities as current since the related contracts are generally for a period of one year or less. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation. Management Reimbursement Revenue by Segment Years Ended October 31, (in millions) 2020 2019 2018 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 Restructuring and related expenses include employee severance, external support fees, lease exit costs, and other costs. Our methodology to record these costs is described below. Severance As we do not have a past history of consistently providing severance benefits, we recognize severance costs for employees who do not have formal employment agreements when management has committed to a restructuring plan and communicated those actions to impacted employees, such that the employee is able to determine the type and amount of benefits that they will receive upon termination. In addition, if the employees are required to render service beyond the minimum retention period until they are terminated in order to receive the benefits, a liability is recognized ratably over the future service period. 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. Other 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. Advertising Advertising costs are expensed as incurred. During 2020, 2019, and 2018, advertising expense was $ 1.8 million, $ 1.7 million, and $ 2.3 million, respectively. Share-Based Compensation Our current share-based awards principally consist of restricted stock units (“RSUs”) and various performance share awards. We recognize compensation costs associated with these awards in selling, general and administrative expenses. For RSUs and certain performance share awards, the amount of compensation cost is measured based on the grant-date fair value of the equity instruments issued. Since our total shareholder return (“TSR”) performance share awards are performance awards with a market condition, the compensation costs associated with these awards are determined using a Monte Carlo simulation valuation model. For RSUs and TSR awards, compensation cost is recognized over the period that an employee provides service in exchange for the award. We recognize compensation cost associated with other performance share awards over the requisite service period based on the probability of achievement of performance criteria. Taxes Collected from Clients and Remitted to Governmental Agencies We record taxes on client transactions due to governmental agencies as receivables and liabilities on the Consolidated Balance Sheets. 64 Net Income Per Common Share Basic net income per common share is net income divided by the weighted-average number of common shares outstanding during the period. Diluted net income per common share is based on the weighted-average number of common shares outstanding during the period, adjusted to include the potential dilution from the conversion of RSUs, vesting of performance shares, and exercise of stock options. Contingencies and Litigation We are a party to a number of lawsuits, claims, and proceedings incident to the operation of our business, including those pertaining to labor and employment, contracts, personal injury, and other matters, some of which allege substantial monetary damages. Some of these actions may be brought as class actions on behalf of a class or purported class of employees. We accrue for loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability. We recognize legal costs as an expense in the period incurred. Income Taxes We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered. Deferred tax assets are reviewed for recoverability on a quarterly basis. 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 (Loss) Income. Recently Adopted Accounting Standards Leases 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: • In January 2018, ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842 • In July 2018, ASU 2018-10, Codification Improvements to Topic 842 • In July 2018, ASU 2018-11, Leases (Topic 842): Targeted Improvements • In March 2019, ASU 2019-01, Leases (Topic 842): Codification Improvements 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; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for existing leases. 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 65 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 ASSETS Right-of-use assets (1) $ — $ 167.5 $ 167.5 LIABILITIES AND STOCKHOLDERS’ EQUITY Current portion of lease liabilities (2) $ — $ 36.3 $ 36.3 Other accrued liabilities (3) 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; Topic 815: Derivatives and Hedging; and Topic 825: Financial Instruments 66 • 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. 67 3. REVENUES 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 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) 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 Parking (2) 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 ( 122.4 ) 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 Parking (2) 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 ( 127.7 ) 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 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. 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 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. We also franchise certain operations under franchise agreements relating to our Linc Network and TEGG brands pursuant to franchise contracts. 68 (5) Airline Services arrangements support airlines and airports with services such as passenger assistance, catering logistics, and airplane cabin maintenance. These arrangements are often structured as monthly fixed-price, cost-plus, transaction price, and hourly contracts. Remaining Performance Obligations 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 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: (i) contracts where we have determined that the contract consists of a series of distinct service periods and revenues are based on future performance that cannot be estimated at contract inception; (ii) parking contracts where we and the customer share the gross revenues or operating profit for the location; and (iii) contracts where transaction prices include performance incentives that are based on future performance and therefore cannot be estimated at contract inception. We apply the practical expedient that permits exclusion of information about the remaining performance obligations with original expected durations of one year or less. Contract Balances The following tables present the balances in our contract assets and contract liabilities: (in millions) October 31, 2020 October 31, 2019 Contract assets Billed trade receivables (1) $ 835.8 $ 978.7 Unbilled trade receivables (1) 53.9 56.9 Costs incurred in excess of amounts billed (2) 52.2 72.6 Capitalized commissions (3) 25.2 21.8 (1) Included in trade accounts receivable, net, on the Consolidated Balance Sheets. 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. During the year ended October 31, 2020, we capitalized $ 16.4 million of new costs and amortized $ 13.0 million of previously capitalized costs. There was no impairment loss recorded on the costs capitalized. (in millions) Year Ended October 31, 2020 Contract liabilities (1) Balance at beginning of year $ 38.0 Additional contract liabilities 315.5 Recognition of deferred revenue ( 317.1 ) Balance at end of year $ 36.4 (1) Included in other accrued liabilities on the Consolidated Balance Sheets. 69 4. LEASES The components of lease assets and liabilities and their classification on our Consolidated Balance Sheets as of October 31, 2020 were as follows: Balance at (in millions) Classification October 31, 2020 Lease assets Operating leases Right-of-use assets $ 143.1 Finance leases Property, plant and equipment, net (1) 6.1 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 Operating lease costs: Operating expenses (1)(2) $ 67.9 Selling, general and administrative expenses (3) 28.5 Finance lease costs: Operating expenses (4) 3.5 Interest expense (5) 0.5 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 Short-term lease costs $ 47.0 Variable lease costs 3.5 Total short-term and variable lease costs $ 50.5 70 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 Less: 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: As of 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) 15.7 (1) Excludes the amount initially capitalized in conjunction with the adoption of Topic 842. 71 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 Total (2) $ 206.5 $ 7.5 $ 214.0 (1) Includes total estimated sublease rental income of $ 15.8 million. (2) Total undiscounted future minimum payments. 72 5. RESTRUCTURING AND RELATED COSTS We may periodically engage in various restructuring activities intended to drive long-term profitable growth and increase operational efficiency, which can include streamlining and realigning our overall organizational structure and reallocating resources. These activities may result in restructuring costs related to employee severance, other project fees, external support fees, lease exit costs, and asset impairment charges. 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 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, 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 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 ) Balance, October 31, 2018 $ — $ 3.8 $ 1.8 $ 3.1 $ — $ 8.6 Costs recognized (1) 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 (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 Total GCA and Other $ 4.9 $ 18.3 $ 15.5 $ 3.4 $ — $ 42.2 2020 Vision 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 73 6. NET INCOME PER COMMON SHARE Basic and Diluted Net Income Per Common Share Calculations Years Ended October 31, (in millions, except per share amounts) 2020 2019 2018 Income from continuing operations $ 0.2 $ 127.5 $ 95.9 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 67.3 66.9 66.4 Net income per common share — Basic Income from continuing operations $ 0.00 $ 1.92 $ 1.45 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 from discontinued operations — — 0.03 Net income $ 0.00 $ 1.90 $ 1.47 Anti-Dilutive Outstanding Stock Awards Issued Under Share-Based Compensation Plans Years Ended October 31, (in millions) 2020 2019 2018 Anti-dilutive 0.4 0.3 0.4 74 7. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair Value Hierarchy of Our Financial Instruments Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis As of October 31, (in millions) Fair Value Hierarchy 2020 2019 Cash and cash equivalents (1) 1 $ 394.2 $ 58.5 Insurance deposits (2) 1 0.7 0.8 Assets held in funded deferred compensation plan (3) 1 2.6 2.5 Credit facility (4) 2 725.3 808.4 Interest rate swap liabilities (5) 2 15.5 14.6 Investments in auction rate securities (6) 3 — 5.0 (1) Cash and cash equivalents are stated at nominal value, which equals fair value. (2) Represents restricted deposits that are used to collateralize our insurance obligations and are stated at nominal value, which equals fair value. These insurance deposits are included in “Other noncurrent assets” on the accompanying Consolidated Balance Sheets. See Note 10, “Insurance,” for further information. (3) Represents investments held in a Rabbi trust associated with one of our deferred compensation plans, which we include in “Other noncurrent assets” on the accompanying Consolidated Balance Sheets. The fair value of the assets held in the funded deferred compensation plan is based on quoted market prices. See Note 12, “Employee Benefit Plans,” for further information. (4) Represents gross outstanding borrowings under our syndicated line of credit and term loan. Due to variable interest rates, the carrying value of outstanding borrowings under our line of credit and term loan approximates the fair value. See Note 11, “Credit Facility,” for further information. (5) Represents interest rate swap derivatives designated as cash flow hedges. 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, 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 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 items at fair value on a non-recurring basis. These assets can include: goodwill; intangible assets; 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. 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. 75 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. We estimated the fair value of goodwill using the income and market approaches, which utilize expected cash flows using Level 3 inputs. 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. 8. PROPERTY, PLANT AND EQUIPMENT Property, Plant and Equipment As of October 31, (in millions) 2020 2019 Machinery and other equipment $ 137.0 $ 118.8 Computer equipment and software 101.2 91.7 Transportation equipment 57.7 57.4 Leasehold improvements 57.1 59.5 Furniture and fixtures 13.7 13.1 Buildings 7.6 8.2 Land 0.7 1.0 375.0 349.8 Less: Accumulated depreciation (1) 241.3 199.5 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. Finance Leases Included in Property, Plant and Equipment As of October 31, (in millions) 2020 2019 Transportation equipment $ 19.4 $ 20.0 Furniture and fixtures 0.2 0.2 Machinery and other equipment — 0.3 Computer equipment and software — 0.1 19.7 20.6 Less: Accumulated depreciation 13.6 10.7 Total $ 6.1 $ 9.9 76 9. GOODWILL AND OTHER INTANGIBLE ASSETS 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. Goodwill (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 Reallocation (1) 45.7 — 1.2 — 11.8 ( 58.7 ) — Foreign currency translation 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 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) Goodwill associated with our Healthcare business was reallocated in connection with the reorganization of this business during the third quarter of 2019. (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. Discount Rates 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. 77 Other Intangible Assets 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 Total (2) $ 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. Estimated Annual Amortization Expense For Each of the Next Five Years (in millions) 2021 2022 2023 2024 2025 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. 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. Inherent in estimating the future cash flows are uncertainties beyond our control, such as changes in capital markets. The actual cash flows could differ materially from management’s estimates due to changes in business conditions, operating performance, and economic conditions. 10. INSURANCE 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 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. To cover general liability and automobile liability losses above these primary limits, we maintain commercial umbrella insurance policies that provide aggregate limits of $ 200.0 million. Our insurance policies generally cover workers’ compensation losses to the full extent of statutory requirements. Additionally, to cover property damage risks above our retained limits, we maintain policies that provide per occurrence limits of $ 75.0 million. We are also self-insured for certain employee medical and dental plans. 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. 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. The results of actuarial reviews are used to estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years. 78 Insurance Reserve Adjustments Actuarial Reviews and Updates Performed During 2020 We review our self-insurance liabilities on a regular basis and adjust our accruals accordingly. Actual claims activity or development may vary from our assumptions and estimates, which may result in material losses or gains. 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 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 by $ 36.6 million, $ 30.2 million of which relates to prior years, during 2020 . 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, 2020 October 31, 2019 Insurance claim reserves, excluding medical and dental $ 504.9 $ 507.8 Medical and dental claim reserves 16.6 7.2 Insurance recoverables 70.1 64.5 At October 31, 2020 and 2019, insurance recoverables are included in both “Other current assets” and “Other noncurrent assets” on the accompanying Consolidated Balance Sheets. Casualty Program Insurance Reserves Rollforward Years Ended October 31, (in millions) 2020 2019 2018 Net balance at beginning of year $ 443.3 $ 427.7 $ 412.5 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 (1) Includes reserves related to discontinued operations of approximately $ 0.5 million for 2020, $ 1.0 million for 2019, and $ 3.0 million for 2018. 79 Instruments Used to Collateralize Our Insurance Obligations As of October 31, (in millions) 2020 2019 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 11. 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, 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. 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. 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 80 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 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, 2020 October 31, 2019 Current portion of long-term debt Gross term loan $ 120.0 $ 60.0 Unamortized deferred financing costs ( 3.3 ) ( 2.8 ) Current portion of term loan $ 116.7 $ 57.2 Long-term debt Gross term loan $ 560.0 $ 680.0 Unamortized deferred financing costs ( 2.3 ) ( 4.1 ) Total noncurrent portion of term loan 557.7 675.9 Revolving line of credit (1)(2) 45.3 68.4 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, 2020, we had borrowing capacity of $ 596.6 million, reflecting covenant restrictions. Term Loan Maturities During 2020, we made principal payments under the term loan of $ 60.0 million. As of October 31, 2020, the following principal payments are required under the term loan. (in millions) 2021 2022 Debt maturities $ 120.0 $ 560.0 Interest Rate Swaps We enter into interest rate swaps to manage the interest rate risk associated with our floating-rate, LIBOR-based borrowings. 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 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. All of our interest rate swaps have been designated and accounted for as cash flow hedges from inception. See Note 7, “Fair Value of Financial Instruments,” regarding the valuation of our interest rate swaps. 81 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, 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. 12. EMPLOYEE BENEFIT PLANS Defined Benefit Plans We provide benefits to certain employees under various defined benefit and postretirement benefit plans (collectively, the “Plans”). The Plans were previously amended to preclude new participants. All but one of the Plans are unfunded. Information for the Plans As of October 31, (in millions) 2020 2019 Net obligations $ 9.6 $ 8.4 Projected benefit obligations 17.0 16.1 Fair value of assets 7.4 7.8 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 $ 0.2 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 . Deferred Compensation Plans We maintain deferred compensation plans that permit eligible employees and directors to defer a portion of their compensation. At October 31, 2020 and 2019, the total liability of all deferred compensation was $ 13.6 million and $ 13.2 million, respectively, and these amounts are included in “Other accrued liabilities” and “Other noncurrent liabilities” on the accompanying Consolidated Balance Sheets. Under one of our deferred compensation plans, a Rabbi trust was created to fund the obligations, and we are required to contribute a portion of the deferred compensation contributions for eligible participants. The assets held in the Rabbi trust are not available for general corporate purposes. 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 wa s $ 0.2 million, $ 0.3 million, and $ 0.4 million for 2020, 2019, and 2018, respectively. Defined Contribution Plans We sponsor four defined contribution plans covering certain employees that are subject to the applicable provisions of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code (“IRC”). Certain plans permit a company match of a portion of the participant’s contributions or a discretionary contribution after the participant has met the eligibility requirements set forth in the plan. During 2020, 2019, and 2018, we made matching contributions required by the plans of $ 18.2 million, $ 24.3 million, and $ 21.6 million, respectively. 82 Multiemployer Pension and Postretirement Plans We participate in various multiemployer pension plans under union and industry-wide agreements that provide defined pension benefits to employees covered by collective bargaining agreements. Because of the nature of multiemployer plans, there are risks associated with participation in these plans that differ from single-employer plans. Assets contributed by an employer to a multiemployer plan are not segregated into a separate account and are not restricted to provide benefits only to employees of that contributing employer. In the event another participating employer in a multiemployer plan no longer contributes to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers, including us. In the event of the termination of a multiemployer pension plan or a withdrawal from a multiemployer pension plan, we could incur material liabilities under applicable law. Key Information for Individually Significant Multiemployer Defined Benefit Pension Plans (1) ($ in millions) Pension Protection Act Zone Status (3) FIP/RP Status (4) Contributions by ABM Surcharge Imposed (5) 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 Red 6/30/2019 Red 6/30/2018 Implemented $ 16.8 $ 19.3 $ 19.9 No 10/15/2023 – 12/31/2023 S.E.I.U. National Industry Pension Fund 52-6148540 / 001 Red 12/31/2019 Red 12/31/2018 Implemented 11.1 10.6 8.7 Yes 6/30/2021 – 10/31/2023 Central Pension Fund of the IUOE & Participating Employers 36-6052390 / 001 Green 1/31/2020 Green 1/31/2019 N/A* 7.1 11.7 11.0 N/A* 4/30/2021 – 12/31/2022 SEIU Local 1 & Participating Employers Pension Trust 36-6486542 / 001 Green 9/30/2019 Green 9/30/2018 N/A* 4.3 5.1 5.8 N/A* 4/4/2021 IUOE Stationary Engineers Local 39 Pension Plan 94-6118939 / 001 Green 12/31/2019 Green 12/31/2018 N/A* 4.3 4.6 5.2 N/A* 11/15/2020 – 10/31/2024 Western Conference of Teamsters Pension Plan 91-6145047 / 001 Green 12/31/2019 Green 12/31/2018 N/A* 2.5 3.1 3.1 N/A* 6/30/2021 – 11/30/2022 All Other Plans: 9.5 12.2 11.5 Total Contributions $ 55.5 $ 66.6 $ 65.3 *Not applicable (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 IRS. (3) The Pension Protection Act Zone Status columns provide the two most recently available Pension Protection Act zone statuses from each plan. The zone status is based on information provided to us and other participating employers and is certified by each plan’s actuary. Among other factors, plans in the red zone are generally less than 65 % funded, plans in the yellow zone are less than 80 % funded, and plans in the green zone are at least 80 % funded. (4) Indicates whether a Financial Improvement Plan (“FIP”) for yellow zone plans or a Rehabilitation Plan (“RP”) for red zone plans is pending or implemented. (5) Indicates whether our contribution in 2020 included an amount as imposed by a plan in the red zone in addition to the contribution rate specified in the applicable collective bargaining agreement. 83 Multiemployer Pension Plans for which ABM is a Significant Contributor 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* 6/30/2019 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 S.E.I.U. 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* 2/29/2020, 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. There have been no significant changes that affect the comparability of total contributions for any of the periods presented. Multiemployer Defined Contribution Plans In addition to contributions noted above, we also make contributions to multiemployer defined contribution plans. During 2020, 2019, and 2018, our contributions to the defined contribution plans were $ 15.5 million, $ 9.0 million, and $ 10.6 million, respectively. Other Multiemployer Benefit Plans We also contribute to several multiemployer postretirement health and welfare plans based on obligations arising under collective bargaining agreements covering union-represented employees. These plans may provide medical, pharmacy, dental, vision, mental health, and other benefits to employees as determined by the trustees of each plan. The majority of our contributions benefit active employees and, as such, may not constitute contributions to a postretirement benefit plan. 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 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. 84 13. COMMITMENTS AND CONTINGENCIES Letters of Credit and Surety Bonds We use letters of credit and surety bonds to secure certain commitments related to insurance programs and for other purposes. As of October 31, 2020, these letters of credit and surety bonds totaled $ 153.1 million and $ 632.9 million, respectively. Guarantees In some instances, we offer clients guaranteed energy savings under certain energy savings contracts. 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. Historically, we have not incurred any material losses in connection with these guarantees. In connection with an unconsolidated joint venture in which one of our subsidiaries has a 33 % ownership interest, that subsidiary and the other joint venture partners have each jointly and severally guaranteed the obligations of the joint venture to perform under certain contracts extending through 2024. Annual revenues relating to the underlying contracts are approximately $ 30 million. Should the joint venture be unable to perform under these contracts, the joint venture partners would be jointly and severally liable for any losses incurred by the client due to the failure to perform. Indemnifications We are party to a variety of agreements under which we may be obligated to indemnify the other party for certain matters. These agreements are primarily standard indemnification arrangements entered into in our ordinary course of business. 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. 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. Our certificate of incorporation and bylaws may require us to indemnify our directors and officers for certain liabilities that were incurred as a result of their status or service to ABM as a director or officer. The amount of these obligations cannot be reasonably estimated. Unclaimed Property Audits We routinely remit escheat payments to states in compliance with applicable escheat laws, and we are subject to unclaimed property audits by states in the ordinary course of business. The property subject to review in the audit process may include unclaimed wages, vendor payments, or customer refunds. State escheat laws generally require entities to report and remit abandoned or unclaimed property to the state, and failure to do so can result in assessments that could include interest and penalties in addition to the payment of the escheat liability. Sales Tax Audits We collect sales tax from clients and remit those collections to the applicable states. When clients fail to pay their invoices, including the amount of any sales tax that we paid on their behalf, in some cases we are entitled to seek a refund of that amount of sales tax from the applicable state. 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 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. 85 Legal Matters We are a party to a number of lawsuits, claims, and proceedings incident to the operation of our business, including those pertaining to labor and employment, contracts, personal injury, and other matters, some of which allege substantial monetary damages. Some of these actions may be brought as class actions on behalf of a class or purported class of employees. 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 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. 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. 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. Certain Legal Proceedings 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: the amount of damages and the nature of any other relief sought in the proceeding; if such damages and other relief are specified, our view of the merits of the claims; whether the action is or purports to be a class action, and our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; and the potential impact of the proceeding on our reputation. The Consolidated Cases of Bucio and Martinez v. ABM Janitorial Services filed on April 7, 2006, pending in the Superior Court of California, County of San Francisco (the “Bucio case”) The Bucio case is a class action pending in San Francisco Superior Court that alleges we failed to provide legally required meal periods and make additional premium payments for such meal periods, pay split shift premiums when owed, and reimburse janitors for travel expenses. There is also a claim for penalties under the California Labor Code Private Attorneys General Act (“PAGA”). On April 19, 2011, the trial court held a hearing on plaintiffs’ motion to certify the class. At the conclusion of that hearing, the trial court denied plaintiffs’ motion to certify the class. On May 11, 2011, the plaintiffs filed a motion to reconsider, which was denied. The plaintiffs appealed the class certification issues. The trial court stayed the underlying lawsuit pending the decision in the appeal. The Court of Appeal of the State of California, First Appellate District (the “Court of Appeal”), heard oral arguments on November 7, 2017. On December 11, 2017, the Court of Appeal reversed the trial court’s order denying class certification and remanded the matter for certification of a meal period, travel expense reimbursement, and split shift class. The case was remitted to the trial court for further proceedings on class certification, discovery, dispositive motions, and trial. On September 20, 2018, the trial court entered an order defining four certified subclasses of janitors who were employed by the legacy ABM janitorial companies in California at any time between April 7, 2002, and April 30, 2013, on claims based on alleged previous automatic deduction practices for meal breaks, unpaid meal premiums, unpaid split shift premiums, and unreimbursed business expenses, such as mileage reimbursement for use of personal vehicles to travel between worksites. On February 1, 2019, the trial court held that the discovery related to PAGA claims allegedly arising after April 30, 2013, would be stayed until after the class and PAGA claims accruing prior to April 30, 2013, had been tried. The parties engaged in mediation in July 2019, which did not result in settlement of the case. 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. The trial court denied the plaintiffs’ motion 86 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. 14. PREFERRED AND COMMON STOCK Preferred Stock We are authorized to issue 500,000 shares of preferred stock. None of these preferred shares are issued. 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. The timing of repurchases is at our discretion and will depend upon several factors, including market and business conditions, future cash flows, share price, share availability, and other factors at our discretion. Repurchased shares are retired and returned to an authorized but unissued status. The repurchase program may be suspended or discontinued at any time without prior notice. 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. Year Ended (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 15. 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 and performance shares. On May 2, 2006, our stockholders approved the 2006 Equity Incentive Plan (the “2006 Equity Plan”). The 2006 Equity Plan is an omnibus plan that provides for a variety of equity and equity-based award vehicles, including stock options, stock appreciation rights, RSUs, performance shares, and other share-based awards. Shares subject to awards that terminate without vesting or exercise are available for future awards under the 2006 Equity Plan. Certain of the awards under the 2006 Equity Plan may qualify as “performance-based” compensation under the IRC. 87 As amended, there are 13,475,265 total shares of common stock authorized for issuance under the 2006 Equity Plan, and at October 31, 2020, there were 2,086,078 shares of common stock available for grant for future equity-based compensation awards. In addition, there are certain plans under which we can no longer issue awards, although awards outstanding under these plans may still vest and be exercised. We also maintain an employee stock purchase plan, which our stockholders approved on March 9, 2004 (the “2004 Employee Stock Purchase Plan”). As amended, there are 4,000,000 total shares of common stock authorized for issuance under the 2004 Employee Stock Purchase Plan. Effective May 1, 2006, the 2004 Employee Stock Purchase Plan is no longer considered compensatory and the values of the awards are no longer treated as share-based compensation expense. Additionally, as of that date, the purchase price became 95 % of the fair value of our common stock price on the last trading day of the month. Employees may designate up to 10 % of their compensation for the purchase of stock, subject to a $ 25,000 annual limit. Employees are required to hold their shares for a minimum of six months from the date of purchase. At October 31, 2020, there were 599,159 remaining unissued shares under the 2004 Employee Stock Purchase Plan. Compensation Expense by Type of Award and Related Income Tax Benefit Years Ended October 31, (in millions) 2020 2019 2018 RSUs $ 11.5 $ 9.5 $ 9.3 Performance shares 8.8 8.0 7.7 Share-based compensation expense before income taxes 20.3 17.5 17.0 Income tax benefit ( 5.7 ) ( 4.9 ) ( 5.1 ) Share-based compensation expense, net of taxes $ 14.6 $ 12.5 $ 11.8 RSUs and Dividend Equivalent Rights 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 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 . In general, the receipt of RSUs is subject to the Grantee’s continuing employment or service as a director. 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. RSU Activity Number of Shares (in millions) Weighted-Average Grant Date 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 At October 31, 2020, total unrecognized compensation cost, net of estimated forfeitures, related to RSUs was $ 25.2 million, which is expected to be recognized ratably over a weighted-average vesting period of 1.9 years. In 2020, 2019, and 2018, the weighted-average grant date fair value per share of awards granted was $ 36.11 , $ 34.48 , and $ 37.98 , respectively. In 2020, 2019, and 2018, the total grant date fair value of RSUs vested and converted to shares of ABM common stock was $ 6.1 million, $ 10.7 million, and $ 7.4 million, respectively. 88 Performance Shares, Including TSR Performance Shares Performance shares consist of a contingent right to receive shares of our common stock based on performance targets adopted by our Compensation Committee. Performance shares are credited with dividend equivalent rights that will be converted to performance shares at the fair market value of our common stock beginning after the performance targets have been satisfied and are subject to the same terms and conditions as the underlying award. 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 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 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 At October 31, 2020, total unrecognized compensation cost related to performance share awards was $ 14.4 million, which is expected to be recognized ratably over a weighted-average vesting period of 1.9 years. Except for TSR performance shares, these costs are based on estimated achievement of performance targets and estimated costs are periodically reevaluated. For our TSR performance shares, these costs are based on the fair value of awards at the grant date and are recognized on a straight-line basis over the service period of three years . In 2020, 2019, and 2018, the weighted-average grant date fair value per share of awards granted was $ 35.92 , $ 35.44 , and $ 38.53 , respectively. In 2020, 2019, and 2018, the total grant date fair value of performance shares vested and converted to shares of ABM common stock was $ 6.1 million, $ 6.8 million, and $ 7.3 million, respectively. In 2020, 2019, and 2018, we used the Monte Carlo simulation valuation technique to estimate the fair value of TSR performance share grants, which used the assumptions in the table below. 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. (2) The expected volatility for each grant is determined based on the historical volatility of our common stock over a period equal to the remaining term of the performance period from the date of grant for all awards. (3) The risk-free interest rate is based on the continuous compounded yield on U.S. Treasury Constant Maturity Rates with varying remaining terms; the yield is determined over a time period commensurate with the performance period from the grant date. (4) The stock price is the closing price of our common stock on the valuation date. 89 Employee Stock Purchase Plan Years Ended October 31, (in millions, except per share amounts) 2020 2019 2018 Weighted-average fair value of granted purchase rights per share $ 1.75 $ 1.77 $ 1.70 Common stock issued 0.1 0.1 0.1 Fair value of common stock issued per share $ 33.18 $ 33.60 $ 32.34 Aggregate purchases $ 3.5 $ 4.1 $ 4.7 16. INCOME TAXES Geographic Sources of Income from Continuing Operations Before Income Taxes Years Ended October 31, (in millions) 2020 2019 2018 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 Components of Income Tax (Provision) Benefit Years Ended October 31, (in millions) 2020 2019 2018 Current: Federal $ ( 59.3 ) $ ( 6.4 ) $ ( 4.3 ) State ( 28.6 ) ( 10.7 ) ( 7.3 ) Foreign ( 1.7 ) ( 5.9 ) ( 3.9 ) Deferred: 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 Reconciliation of the U.S. Statutory Tax Rate to Annual Effective Tax Rate Years Ended October 31, 2020 2019 2018 U.S. statutory rate 21.0 % 21.0 % 23.3 % State and local income taxes, net of federal tax benefit ( 0.6 ) 5.9 6.9 Federal and state tax credits ( 4.7 ) ( 3.9 ) ( 7.8 ) Impact of foreign operations 1.3 ( 1.0 ) 1.3 Changes in uncertain tax positions ( 2.0 ) ( 0.8 ) ( 6.7 ) Incremental tax benefit from share-based compensation awards ( 1.6 ) ( 0.7 ) ( 3.9 ) Energy efficiency incentives ( 3.8 ) — ( 3.2 ) Impact from goodwill impairment 81.7 — 4.4 Transition tax on foreign earnings — ( 1.1 ) 5.1 Remeasurement of U.S. deferred taxes — ( 0.3 ) ( 31.5 ) 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 ) % 90 On December 22, 2017, the Tax Act was enacted into law. Among other provisions, it reduced the federal corporate income tax rate from 35% to 21% and required companies to pay a one-time transition tax on the deemed repatriation of indefinitely reinvested earnings of international subsidiaries. Our U.S. statutory federal tax rate for fiscal 2019 and future years was reduced to 21% from our blended rate of 23.3 % in fiscal 2018. Other provisions under the Tax Act became effective for us in fiscal 2019, including limitations on deductibility of interest and executive compensation, as well as a new minimum tax on Global Intangible Low-Taxed Income (“GILTI”), which we have elected to account for as a period cost. During 2018, we finalized our analysis of the transitional impacts of the Tax Act. 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. 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 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. While U.S. 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 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: a $ 1.8 million benefit from the transition tax (including foreign tax credits); a $ 1.7 million benefit from state true-ups; a $ 1.6 million benefit from federal true-ups; a $ 1.3 million provision related to WOTC; a $ 1.3 million benefit from expiring statutes of limitations; a $ 1.1 million benefit from the vesting of share-based compensation awards; and a $ 0.9 million benefit from research and development credits. 91 Components of Deferred Tax Assets and Liabilities As of October 31, (in millions) 2020 2019 Deferred tax assets attributable to: Self-insurance claims (net of recoverables) $ 74.7 $ 83.6 Deferred and other compensation 28.6 25.6 Accounts receivable allowances 8.8 5.6 Settlement liabilities 5.0 3.1 Other accruals 1.5 1.8 Other comprehensive income 2.7 0.5 State taxes 1.4 0.4 State net operating loss carryforwards 5.9 11.2 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 Valuation allowance ( 4.1 ) ( 8.4 ) Total deferred tax assets 196.5 132.8 Deferred tax liabilities attributable to: Property, plant and equipment ( 1.2 ) ( 4.8 ) 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 ) Net deferred tax liabilities $ ( 10.8 ) $ ( 47.7 ) Net Operating Loss Carryforwards and Credits State net operating loss carryforwards totaling $ 102.3 million at October 31, 2020, are being carried forward in several state jurisdictions where we are permitted to use net operating losses from prior periods to reduce future taxable income. These losses will expire between 2021 and 2040. Federal net operating loss carryforwards were fully utilized during 2020. Federal and state tax credit carryforwards totaling $ 4.4 million are available to reduce future cash taxes and will expire between 2021 and 2040. The valuation allowance represents the amount of tax benefits related to state net operating loss carryforwards that are not likely to be realized. We believe the remaining deferred tax assets are more likely than not to be realizable based on estimates of future taxable income. Changes to the Valuation Allowance Years Ended October 31, (in millions) 2020 2019 2018 Valuation allowance at beginning of year $ 8.4 $ 12.0 $ 7.7 GCA acquisition — — 2.4 Other, net ( 4.3 ) ( 3.6 ) 1.8 Valuation allowance at end of year $ 4.1 $ 8.4 $ 12.0 92 Unrecognized Tax Benefits At October 31, 2020, 2019, and 2018, there were $ 35.5 million, $ 35.3 million, and $ 35.8 million, respectively, of unrecognized tax benefits that if recognized in the future would impact our effective tax rate. We estimate that a decrease in unrecognized tax benefits of up to approximately $ 0.6 million is reasonably possible over the next twelve months due to lapses of applicable statutes of limitations. 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 $ 0.4 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 Years Ended October 31, (in millions) 2020 2019 2018 Balance at beginning of year $ 35.3 $ 35.8 $ 53.4 Additions for tax positions related to the current year 2.1 — 0.2 Additions for tax positions related to prior years 1.6 3.6 — Reductions for tax positions related to prior years — — ( 9.0 ) 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 Jurisdictions We conduct business in all 50 states, significantly in California, Texas, and New York, as well as in various foreign jurisdictions. Our most significant income tax jurisdiction is the United States. Due to expired statutes and closed audits, our federal income tax returns for years prior to fiscal 2016 are no longer subject to examination by the U.S. Internal Revenue Service. 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 tax authorities of California, New York City, and Wisconsin. 93 17. SEGMENT AND GEOGRAPHIC INFORMATION Segment Information 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 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. 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. The accounting policies for our segments are the same as those disclosed within our significant accounting policies in Note 2, “Basis of Presentation and Significant Accounting Policies.” Our management evaluates the performance of each reportable segment based on its respective operating profit results, which include the allocation of certain centrally incurred costs. Corporate expenses not allocated to segments include certain CEO and other finance and human resource departmental expenses, certain information technology costs, share-based compensation, certain legal costs and settlements, restructuring and related costs, certain actuarial adjustments to self-insurance reserves, and direct acquisition costs. Management does not review asset information by segment, therefore we do not present assets in this note. 94 Financial Information by Reportable Segment Years Ended October 31, (in millions) 2020 2019 2018 Revenues Business & Industry $ 3,157.8 $ 3,251.4 $ 3,268.4 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 Elimination of inter-segment revenues ( 122.4 ) ( 127.7 ) ( 147.1 ) $ 5,987.6 $ 6,498.6 $ 6,442.2 Operating profit (loss) Business & Industry $ 253.7 $ 182.3 $ 157.9 Technology & Manufacturing 84.4 72.5 67.4 Education (1) ( 41.1 ) 39.0 44.1 Aviation (2) ( 59.6 ) 21.1 23.2 Technical Solutions (3) 9.5 55.4 21.8 Government Services ( 0.1 ) ( 0.1 ) ( 0.8 ) 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 Interest expense ( 44.6 ) ( 51.1 ) ( 54.1 ) Income from continuing operations before income taxes $ 53.3 $ 160.2 $ 87.7 Depreciation and amortization Business & Industry $ 18.9 $ 21.3 $ 23.6 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 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) Years Ended October 31, (in millions) 2020 2019 2018 Revenues United States $ 5,625.1 $ 6,025.2 $ 5,997.4 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. 95 18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Fiscal Quarter (in millions, except per share amounts) First Second Third Fourth Year Ended October 31, 2020 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 (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 Income from continuing operations $ 0.20 $ 0.45 $ 0.55 $ 0.72 Income from discontinued operations — — — — Net income $ 0.20 $ 0.45 $ 0.55 $ 0.72 Net income per common share — Diluted Income from continuing operations $ 0.20 $ 0.45 $ 0.55 $ 0.71 Income from discontinued operations — — — — 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. 96 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.