What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-12-22 compared with 2020-12-17 · 255 added, 377 removed, 346 unchanged (65% of the section changed)

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Unless otherwise indicated, all information in the MD&A and references to years are based on our fiscal year, which ends on October 31.

Effective November 1, 2019, we adopted ASU 2016-02, Leases (Topic 842) and related amendments, using a modified retrospective approach;

prior period Financial Statements were not adjusted.

Refer to Note 2, “Basis of Presentation and Significant Accounting Policies,” and Note 4, “Leases,” in the Financial Statements for additional information regarding the impact of adoption.

Business Overview

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Strategic Growth

We remain focused on long-term, profitable growth related to both new and existing clients within our industry groups and across our many service lines.

We remain focused on long-term, profitable growth by delivering valued service offerings to both new and existing clients within our industry groups and across our many service lines.

Our revenue growth strategy is predicated on pursuing new sales and targeting a favorable retention rate among existing contracts.

Cross-selling and up-selling projects and services is also an integral part of our strategy.

We believe operational leverage from our strategic growth initiatives, coupled with our continued focus on efficiency, will increase profitability.

Systems and Technology Transformation

We have initiated many technology-based modernization efforts that we believe will enable us to operate more efficiently and provide us with greater data and insights to enhance our business management capabilities.

We believe these new tools and systems will equip us for long-term success and position us for an even stronger and more prosperous future.

Human Resources and Labor Management

During 2019 we launched our new cloud-based human capital management system.

This investment will create an HR structure that centralizes and standardizes hiring and training practices to help us make more informed decisions and ultimately manage certain costs.

We have also introduced new tools to help our operators manage labor more efficiently, and we continue to invest in attracting, developing, and retaining talent.

Enterprise Resource Planning

During 2019 and the first quarter of 2020 we also made progress with the multi-phased deployment of our new ERP system, and in the future we anticipate having a unified system where we can integrate our legacy ABM and our legacy GCA finance environments for the first time.

This newly combined system will streamline the operational and financial execution of our business and lead to more effective decision making in the future.

Due to the Pandemic-related disruptions, the implementation of the new ERP system was temporarily suspended in the second and third quarters of 2020.

In the fourth quarter of 2020, we re-engaged the implementation.

We believe our strategic growth initiatives, coupled with our continued focus on marketing, capital, and sales resources, will increase profitability.

ELEVATE Transformation

Through our ELEVATE strategy, as described in Item 1., “Business.,” we plan to primarily focus our efforts on:

• the client experience, by enhancing service delivery through the development of a new workforce management platform with modern timekeeping, scheduling, and forecasting modules to create a digital connection with our workforce;

• the team member experience, by investing in development programs, talent acquisition tools, and training;

• the use of technology and data in our systems, tools, business processes, and operating models.

We believe that our technology and data investments will enable:

the development and deployment of client-facing technology to improve service delivery to our clients;

the use of advanced data analytics for sales targeting, team member retention, and recruiting;

and the upgrade of our Enterprise Resource Planning and payroll systems.

Developments and Trends

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COVID-19 has resulted in a worldwide health Pandemic.

To date, COVID-19 has surfaced in nearly all regions around the world and resulted in business slowdowns and shutdowns, as well as global travel restrictions.

To date, COVID-19 has surfaced in regions all around the world and resulted in business slowdowns and shutdowns, as well as global travel restrictions.

We, along with many of our clients, have been impacted by recommendations and/or mandates from federal, state, and local authorities to practice social distancing, to refrain from gathering in groups, and, in some areas, to refrain from non-essential movements outside of homes.

The Pandemic has also created unanticipated circumstances and uncertainty, disruption, and significant volatility in the broader economy.

These factors have led to lower demand for some of our services in certain end-markets, particularly in our Aviation segment.

Refer to “Consolidated Results of Operations” and “Results of Operations by Segment” for additional information related to the impact of the Pandemic on our financial results.

Given the unprecedented and uncertain nature and potential duration of this situation, we cannot reasonably estimate the full extent of the impact the Pandemic will have on our financial condition, results of operations, or cash flows.

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

The ultimate extent of the effects of the Pandemic on our company is highly uncertain and will depend on future developments, and we may continue to experience adverse effects on our business, consolidated results of operations, financial position, and cash flows resulting from a recessionary economic environment that may persist.

Our priority has been and continues to be the health, safety, and support of our employees, our clients, and the communities that we serve.

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Over the past few years, we have focused on consolidating purchasing activities to leverage our scale and identify preferred suppliers.

While we have seen a reduction in the availability of supplies and an increase in costs, our procurement efforts have helped create a positive supply chain for our company and clients during the Pandemic, particularly as city and state mandates on PPE for employees have arisen.

We will continue to monitor our supply chain for potential impacts as future developments unfold.

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.

We are also developing new cleaning initiatives in accordance with various protocols issued by global experts, including deep cleaning services, special project cleaning services, and other work orders.

We developed new cleaning initiatives in accordance with various protocols issued by global experts, including deep cleaning services, special project cleaning services, and other work orders.

In April 2020, we announced our EnhancedClean TM Program (“EnhancedClean”), an innovative solution that helps provide clients with healthy spaces.

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hygiene and safety protocols, utilization of disinfecting procedures and products for high-touch surfaces, employment of PPE, and communication and training protocols.

Expense Management

As we adapted to the changing demand environment resulting from the Pandemic, during 2020 we implemented numerous cost cutting actions, such as:

• Various human capital management actions, including:

temporary pay reductions for executives, certain employees, and our Board of Directors, with full pay reinstated as of August 1, 2020;

temporary furloughs or reduced working hours for certain staff and management employees, most of whom returned to work effective August 1, 2020;

and the temporary suspension of certain benefits, including our 401(k) match, which will be reinstated effective January 1, 2021;

• Actively managing direct labor and related personnel costs, including furloughs or reduced hours for certain service employees in markets significantly impacted by business slowdowns and shutdowns;

• Reducing our planned capital expenditures and operating expenditures for 2020, including the postponement of various technology initiatives (such as implementing our ERP system) that were deemed non-critical to our operations, some of which we re-engaged during the fourth quarter;

and limiting travel and entertainment expenses;

• Reducing our sales expenses and discretionary spending projects across the Company.

Management of Direct Labor

As we adapt to the changing demand environment resulting from the Pandemic, we continue to actively manage direct labor and related personnel costs, including furloughs or reduced hours for certain frontline employees in markets significantly impacted by business slowdowns and shutdowns.

Liquidity, Cash Flows, and Financial Position

As of October 31, 2020, we had $394.2 million of cash and cash equivalents, and we had net cash provided by operating activities of $457.5 million during th e year ended October 31, 2020.

We have taken and continue to take actions to help preserve cash, increase liquidity, and strengthen our financial position, including:

• Borrowing approximately $300 million under our line of credit in March 2020, which represented all remaining amounts then available under our Credit Facility, as a precautionary measure to provide increased liquidity and preserve financial flexibility due to uncertainty resulting from the Pandemic (refer to “Liquidity and Capital Resources” for more information).

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

We have not borrowed additionally in the fourth quarter of 2020;

• Amending our Credit Facility on May 28, 2020, to further enhance our financial flexibility as a precautionary measure in response to uncertainty arising from the Pandemic (refer to “Liquidity and Capital Resources” for more information);

• Amending our credit facility on June 28, 2021, to increase our borrowing capacity and further enhance our financial flexibility (refer to “Liquidity and Capital Resources” for more information);

• Focusing on collection of client receivables and monitoring the adequacy of our reserves;

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• Utilizing certain governmental relief efforts (as further described below).

• Suspending share repurchases under our share repurchase program.

As a result of the actions taken above, we were able to strengthen our cash flow in fiscal 2020, allowing us to pay down our line of credit borrowings.

As of October 31, 2020, this resulted in a borrowing capacity of $596.6 million, reflecting covenant restrictions.

In addition, we had $394.2 million of cash and cash equivalents, as noted above.

In response to the Pandemic, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) on March 27, 2020.

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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.

We evaluated the impact of business tax provisions in the CARES Act and determined the impact of the income tax provisions is not material.

The impact of the payroll tax provisions was the deferral of approximately $132 million of payroll tax as of October 31, 2021.

Additionally, we received grants under the United Kingdom’s job retention scheme to reimburse us for a portion of certain furloughed employees’ salaries.

The Pandemic is an unprecedented situation and is continuously evolving.

Since we cannot predict the duration or scope of the Pandemic, we cannot fully anticipate or reasonably estimate all the ways in which the current global health crisis and financial market conditions could adversely impact our business in 2021 or in the future.

Even after the Pandemic has moderated and the business and social distancing restrictions have eased, we may continue to experience adverse effects on our business, consolidated results of operations, financial position, and cash flows resulting from a recessionary economic environment that may persist.

The Pandemic has had a profoundly negative impact on the public health and safety of the global and American public.

As a result, the global and U.S.

economies continue to experience significant uncertainty.

Gross domestic product has demonstrated considerable volatility since the onset of the Pandemic, contracting to a historic and sudden low during 2020.

The unemployment rate has more than doubled, as well, given the struggling macroeconomic environment.

These factors have led to lower demand for some of our services in certain end-markets.

To date, the Pandemic has impacted and is expected to continue impacting global communities and commerce for the foreseeable future.

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.

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.

(in millions) October 31, 2020 Cumulative

Employee severance $ 0.3 $ 18.3

Other project fees 3.2 15.5

External support fees 1.4 4.9

Lease exit costs 2.7 3.4

Total $ 7.6 $ 42.2

Additionally, we received grants under the United Kingdom’s job retention scheme to reimburse us for a portion of certain furloughed employees’ salaries from March 2020 through September 2021.

As a result of the actions taken above, we were able to strengthen our cash flow in fiscal 2021.

As of October 31, 2021, these actions resulted in a borrowing capacity of $875.0 million.

Insurance Reserves

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

With the assistance of third-party actuaries, we review our estimate of ultimate losses for IBNR Claims on a quarterly basis 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.

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Furthermore, we continue to adjust our reserves consistent with known fact patterns.

Based on the results of the actuarial reviews performed, 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.

Based on the results of the actuarial reviews performed, we decreased our total reserves related to prior years for known claims as well as our estimate of the loss amounts associated with IBNR claims during 2021 by $36.0 million.

In 2020, we decreased our total reserves related to prior year claims by $30.2 million.

Key Financial Highlights

• Revenues decreased by $511.0 million, or 7.9%, during 2020, as compared to 2019, primarily due to the impact of Pandemic-related disruptions across our businesses.

Revenues were also impacted by the loss of certain accounts, primarily in our Aviation business and our U.S.

B&I business.

However, this decrease was partially offset by the expansion of certain accounts and new business within B&I, T&M, and Technical Solutions (primarily before Pandemic-related disruptions), as well as by a significant increase in work orders and new services, including EnhancedClean, primarily relating to the Pandemic.

• Operating profit decreased by $112.6 million, or 54.0%, during 2020, as compared to 2019.

The decrease in operating profit is primarily attributable to impairment charges recorded on goodwill and intangible assets totaling $172.8 million due to the adverse impact of market and business conditions resulting from the Pandemic.

The decrease was also driven by account compression resulting from:

Pandemic-related disruptions in certain markets;

a reserve on notes receivable related to a unique, entertainment-related project within Technical Solutions, mainly associated with increasing credit risk resulting from the Pandemic;

an increase in bad debt expense primarily due to specific reserves established for client receivables associated with increasing credit risk in certain industries (including for clients with deteriorating credit ratings and resulting bankruptcies) arising from the Pandemic;

and investments in EnhancedClean, other Pandemic-related projects, and certain corporate initiatives.

These factors were partially offset by:

the management of direct labor and related personnel costs during the Pandemic;

higher margins on work orders and new services, including EnhancedClean, relating to the Pandemic (particularly within B&I and T&M);

the loss of certain lower margin accounts within B&I and Aviation;

a decrease in self-insurance reserves related to adjustments for prior years;

and various human capital management cost reduction measures.

• Our effective tax rate on income from continuing operations was 99.6% for 2020, as compared to 20.4% during 2019, with the increase primarily due to the impairment of non-deductible goodwill during 2020.

• Revenues increased by $241.0 million, or 4.0%, during 2021, as compared to 2020, primarily driven by a $101.1 million revenue increase due to the Able Acquisition in the fourth quarter of 2021, an increase in work orders (primarily as a result of the Pandemic), new business within B&I, T&M, and Technical Solutions, and the recovery of volume in Education and Technical Solutions as Pandemic-related disruptions eased in the last half of fiscal year 2021.

• Operating profit increased by $110.6 million during 2021, as compared to 2020.

The increase in operating profit was attributable to:

◦ the absence of prior year impairment charges recorded on goodwill and intangible assets totaling $172.8 million due to the adverse impact of market and business conditions resulting from the Pandemic;

◦ higher margins on work orders as a result of the Pandemic;

◦ a decrease in bad debt expense, primarily associated with higher reserves established for client receivables in the prior year, due to increasing credit risk resulting from the Pandemic;

◦ the absence of a reserve on notes receivable related to a unique, entertainment-related project within Technical Solutions, mainly associated with increasing credit risk resulting from the Pandemic.

The increase was partially offset by:

◦ the accrual of a legal settlement for the Bucio case;

◦ increased expenditures for certain technology projects and other enterprise initiatives (including ELEVATE );

◦ the absence of management and staff furloughs that occurred in the prior year in response to the Pandemic;

◦ acquisition and integration costs related to the Able Acquisition.

• Our effective tax rate on income from continuing operations was 29.8% for 2021, as compared to 99.6% during 2020, with the decrease primarily due to the impairment of non-deductible goodwill during 2020 and not recurring in 2021.

• Net cash provided by operating activities of continuing operations was $314.3 million during 2021.

• Dividends of $51.0 million were paid to shareholders, and dividends totaling $0.760 per common share were declared during 2021.

• At October 31, 2020, total outstanding borrowings under our credit facility were $725.3 million, and we had up to $596.6 million of borrowing capacity, reflecting covenant restrictions.

• At October 31, 2021, total outstanding borrowings under our credit facility were $888.8 million, and we had up to $875.0 million of borrowing capacity.

Results of Operations

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Selling, general and administrative expenses 719.2 506.1 452.9 213.1 42.1%

Restructuring and related expenses 7.6 11.2 25.7 (3.6) (32.2)%

Restructuring and related expenses — 7.6 11.2 (7.6) NM*

Amortization of intangible assets 45.0 48.4 58.5 (3.4) (7.1)%

Impairment loss 172.8 — 26.5 172.8 NM*

Operating profit 95.7 208.3 138.6 (112.6) (54.0)%

Impairment loss of goodwill and other intangibles — 172.8 — (172.8) NM*

Operating profit 206.3 95.7 208.3 110.6 NM*

Income from unconsolidated affiliates 2.1 2.2 3.0 (0.1) (3.9)%

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Income from continuing operations before

income taxes 53.3 160.2 87.7 (106.9) (66.7)%

Income tax (provision) benefit (53.1) (32.7) 8.2 20.4 62.5%

Income from continuing operations 0.2 127.5 95.9 (127.3) (99.8)%

income taxes 179.8 53.3 160.2 126.5 NM*

Income tax provision (53.5) (53.1) (32.7) 0.4 (0.8)%

Income from continuing operations 126.3 0.2 127.5 126.1 NM*

Income (loss) from discontinued operations,

net of taxes — 0.1 (0.1) (0.1) NM*

Net income 0.3 127.4 97.8 (127.1) (99.8)%

Other comprehensive (loss) income

Interest rate swaps (7.6) (22.4) 21.9 14.8 66.1%

Net income 126.3 0.3 127.4 126.0 NM*

Other comprehensive income (loss)

Interest rate swaps 4.5 (7.6) (22.4) 12.1 NM*

Foreign currency translation and other 5.3 (1.8) 1.6 7.1 NM*

Income tax benefit (provision) 2.4 5.9 (5.9) (3.5) (58.9)%

Comprehensive (loss) income $ (6.6) $ 112.5 $ 109.0 $ (119.1) NM*

Income tax (provision) benefit (1.5) 2.4 5.9 (3.9) NM*

Comprehensive income (loss) $ 134.5 $ (6.6) $ 112.5 $ 141.1 NM*

*Not meaningful

The Year Ended October 31, 2021 Compared with the Year Ended October 31, 2020

Revenues decreased by $511.0 million, or 7.9%, during 2020, as compared to 2019.

The decrease in revenues was primarily due to the impact of Pandemic-related disruptions across our businesses.

Revenues were also impacted by the loss of certain accounts, primarily in our Aviation business and our U.S.

B&I business.

However, this decrease was partially offset by the expansion of certain accounts and new business within B&I, T&M, and Technical Solutions (primarily before Pandemic-related disruptions), as well as a significant increase in work orders and new services, including EnhancedClean, primarily relating to the Pandemic.

Revenues increased by $241.0 million, or 4.0%, during 2021, as compared to 2020.

The increase in revenues was primarily driven by a $101.1 million revenue increase due to the Able Acquisition in the fourth quarter of 2021, an increase in work orders (primarily as a result of the Pandemic), new business within B&I, T&M, and Technical Solutions, and the recovery of volume in Education and Technical Solutions as Pandemic-related disruptions eased in the last half of fiscal year 2021.

Operating Expenses

Operating expenses decreased by $610.5 million, or 10.6%, during 2020, as compared to 2019.

Operating expenses increased by $101.2 million, or 2.0%, during 2021, as compared to 2020.

Gross margin increased by 171 bps to 15.6% in 2021 from 13.9% in 2020.

The increase in gross margin was primarily associated with the management of direct labor and related personnel costs during the Pandemic;

higher margins on work orders and new services, including EnhancedClean, relating to the Pandemic (primarily within B&I and T&M);

the loss of certain lower margin accounts within B&I and Aviation;

and a decrease in self-insurance reserves related to adjustments for prior years.

The increase in gross margin was primarily associated with higher margins on new business within B&I and Aviation and an increase in work orders with higher margins as a result of the Pandemic (primarily within B&I).

The increase in gross margin was also driven by lower self-insurance expense, due to decreased claim frequency as a result of our safety and claims management program and reduced workplace occupancy as a result of the Pandemic.

Selling, General and Administrative Expenses

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The increase in selling, general and administrative expenses was primarily attributable to:

• a $17.6 million reserve on notes receivable related to a unique, entertainment-related project within Technical Solutions, mainly associated with increasing credit risk resulting from the Pandemic;

• a $13.1 million increase related to investments in EnhancedClean, other Pandemic-related projects, and certain corporate initiatives;

• a $12.9 million increase in bad debt expense primarily due to specific reserves established for client receivables associated with increasing credit risk in certain industries (including for clients with deteriorating credit ratings and resulting bankruptcies) arising from the Pandemic;

• an $11.6 million increase in legal costs and settlements;

• a $4.6 million increase in medical and dental insurance expense as a result of actuarial evaluations performed in the year ended October 31, 2020.

• a $144.2 million increase in legal costs and settlements, primarily attributed to the accrual of a legal settlement for the Bucio case;

• a $43.2 million increase in certain technology projects and other enterprise initiatives (including ELEVATE ), in addition to marketing events;

• a $38.8 million increase in compensation and related expenses, primarily driven by corporate and staff labor reductions that occurred in the prior period due to the Pandemic, including wage reductions, employee furloughs, and the suspension of certain benefits such as 401(k) matching.

The increase was also due to updated assessments regarding financial performance target achievements in connection with certain performance share awards and cash incentive plans;

• a $21.9 million increase in acquisition and integration costs attributable to the Able Acquisition;

• a $9.1 million non-cash impairment charge for previously capitalized internal-use software related to our ERP system implementation as we determined that certain components developed will no longer be incorporated into the new ERP system;

This increase was partially offset by:

• the absence of a $3.9 million reserve for an anticipated union pension settlement in the prior year;

• a $3.5 million decrease in compensation and related expenses mainly due to management and staff labor reductions, including wage reductions, employee furloughs, and the suspension of certain benefits such as 401(k) matching, and also due to a decrease in travel and entertainment expenses, partially offset by additional share-based compensation expense.

• a $19.0 million decrease in bad debt expense, primarily associated with higher reserves established for client receivables in the prior year, due to increasing credit risk resulting from the Pandemic;

• the absence of a $17.6 million reserve on notes receivable related to a unique, entertainment-related project within Technical Solutions, mainly associated with increasing credit risk resulting from the Pandemic;

• an $11.7 million decrease in prior year medical and dental self-insurance reserves as a result of actuarial evaluations completed in fiscal year 2021.

Restructuring and Related Expenses

Restructuring and related expenses decreased by $3.6 million, or 32.2%, during 2020, as compared to 2019.

The decrease was primarily due to a decline in severance, other expenses incurred in the prior year related to the GCA integration, and expenses related to our ongoing technology initiatives.

The majority of these initiatives have been temporarily suspended since the second quarter of 2020 due to the Pandemic.

Restructuring and related expenses decreased by $7.6 million during 2021, as compared to 2020.

We substantially completed the restructuring program by the end of fiscal year 2020.

Amortization of Intangible Assets

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During the second quarter of 2020, these businesses were adversely impacted by the market and business conditions resulting from the Pandemic.

During 2019, we did not record any impairment charges.

During 2021, we did not record any impairment charges to goodwill or intangible assets.

Interest Expense

Interest expense decreased by $6.5 million, or 12.8%, during 2020, as compared to 2019, primarily due to lower relative interest rates and lower outstanding borrowing under our credit facility.

Interest expense decreased by $16.0 million, or 35.9%, during 2021, as compared to 2020, primarily attributable to lower relative interest rates as the result of amending our credit facility in 2021 and lower average outstanding borrowings under our credit facility throughout the year.

Income Taxes from Continuing Operations

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 a provision for tax of $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%.

During 2021 and 2020, we had effective tax rates of 29.8% and 99.6%, respectively, resulting in a provision for tax of $53.5 million and $53.1 million, respectively.

Our effective tax rate for 2021 was also impacted by the following discrete items:

a $3.0 million provision for nondeductible transaction costs;

a $2.6 million provision for change in tax reserves;

a $1.4 million provision for true-ups;

and a $1.2 million benefit for energy efficiency incentives.

Our effective tax rate for 2020 was impacted by the following discrete items:

a $5.7 million benefit from true-ups;

a $2.3 million provision related to the Work Opportunity Tax Credit (“WOTC”);

a $2.1 million benefit from energy efficiency incentives;

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.

The effective tax rate for the year ended October 31, 2020, excluding a nondeductible impairment loss of $163.8 million, was 24.4%.

Interest Rate Swaps

The unrealized loss on interest rate swaps decreased by $14.8 million, or 66.1%, during the year ended October 31, 2020, as compared to the year ended October 31, 2019, primarily due to underlying changes in the fair value of our interest rate swaps.

We had a gain of $4.5 million on interest rate swaps during the year ended October 31, 2021, as compared to a loss of $7.6 million during the year ended October 31, 2020, primarily due to underlying changes in the fair value of our interest rate swaps.

Foreign Currency Translation and Other

We had a foreign currency translation loss of $1.8 million during the year ended October 31, 2020 as compared to a foreign currency translation gain of $1.6 million during the year ended October 31, 2019.

We had a foreign currency translation gain of $5.3 million during the year ended October 31, 2021, as compared to a foreign currency translation loss of $1.8 million during the year ended October 31, 2020.

This change was due to fluctuations in the exchange rate between the U.S.

Dollar (“USD”) and the Great Britain Pound (“GBP”).

Dollar (“USD”) and the British pound sterling (“GBP”).

Future gains and losses on foreign currency translation will be dependent upon changes in the relative value of foreign currencies to the USD and the extent of our foreign assets and liabilities.

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Education 60.5 (41.1) 39.0 101.6 NM*

Operating profit margin (5.1) % 4.6 % 5.1 % (969) bps

Operating margin 7.2 % (5.1) % 4.6 % NM*

Aviation 32.5 (59.6) 21.1 92.1 NM*

Operating profit margin (8.7) % 2.1 % 2.2 % NM*

Technical Solutions 9.5 55.4 21.8 (45.9) (82.9)%

Operating margin 4.9 % (8.7) % 2.1 % NM*

Technical Solutions 49.8 9.5 55.4 40.3 NM*

Operating profit margin 9.3 % 1.9 % 9.3 % 745 bps

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Operating profit margin NM* NM* NM* NM*

Corporate (146.9) (159.0) (168.8) 12.1 7.6%

Corporate (374.6) (146.9) (159.0) (227.7) NM*

Adjustment for income from unconsolidated

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efficient government buildings, included in

Technical Solutions (2.1) 0.1 (2.8) (2.2) NM*

$ 95.7 $ 208.3 $ 138.6 $ (112.6) (54.0)%

Technical Solutions (1.2) (2.1) 0.1 0.9 44.2%

$ 206.3 $ 95.7 $ 208.3 $ 110.6 NM*

*Not meaningful

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Years Ended October 31,

($ in millions) 2020 2019 (Decrease) / Increase

($ in millions) 2021 2020 Increase

Revenues $ 3,346.5 $ 3,157.8 $ 188.7 6.0%

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Operating profit margin 10.1 % 8.0 % 206 bps

B&I revenues decreased by $93.6 million, or 2.9%, during 2020, as compared to 2019.

The decrease was primarily attributable to account compression resulting from Pandemic-related disruptions in certain markets within both our U.S.

businesses and the loss of certain accounts in our U.S.

business, including the exit from certain lower margin or underperforming accounts that occurred primarily towards the end of the prior year.

The decrease was partially offset by:

the targeted expansion of certain key clients and new business within our U.S.

an increase in work orders and other services, including EnhancedClean (primarily relating to the Pandemic);

and net new business in our U.K.

B&I revenues increased by $188.7 million, or 6.0%, during 2021, as compared to 2020.

The increase was primarily driven by a $101.1 million revenue increase due to the Able Acquisition in the fourth quarter of 2021.

The remaining increase was due to an increase in work orders (as a result of the Pandemic) and net new business in our U.K.

Management reimbursement revenues for this segment totaled $185.8 million and $221.4 million during 2021 and 2020, respectively.

1 unchanged sentence

Operating profit margin increased by 206 bps to 10.1% in 2021 from 8.0% in 2020.

The increase in operating profit margin was primarily associated with higher margins on work orders and higher margins on certain accounts in both our U.S.

businesses, driven by the management of direct labor and related personnel costs during the Pandemic.

The increase was also driven by the exit from certain lower margin or underperforming accounts in our U.S.

The increase was partially offset by account compression resulting from Pandemic-related disruptions in certain markets and higher reserves established for client receivables mainly associated with increasing credit risk in certain industries resulting from the Pandemic.

The increase in operating profit margin was primarily associated with higher margins on certain accounts in both our U.S.

businesses and an increase in work orders, which have higher margins.

Operating margin was also positively impacted by lower insurance expense related to our self-insurance program and a decrease in bad debt expense as higher reserves were recorded in the prior year, mainly associated with increasing credit risk resulting from the Pandemic.

Technology & Manufacturing

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T&M revenues increased by $31.1 million, or 3.3%, during 2021, as compared to 2020.

The increase was primarily attributable to:

an increase in work orders and other services, including EnhancedClean (primarily relating to the Pandemic);

new business;

and the expansion of certain accounts.

The increase was partially offset by the loss of certain accounts.

The increase was primarily attributable to net new business and an increase in work orders (primarily as a result of the Pandemic).

Operating profit increased by $19.4 million, or 22.9%, during 2021, as compared to 2020.

Operating profit margin increased by 168 bps to 10.5% in 2021 from 8.8% in 2020.

The increase in operating profit margin was primarily attributable to higher margins on work orders and lower amortization of intangible assets, all partially offset by higher reserves established for client receivables mainly associated with increasing credit risk resulting from the Pandemic and by the loss of certain higher margin accounts that occurred in the prior year.

The increase in operating profit margin was primarily attributable to a decrease in bad debt expense, as higher reserves were recorded in the prior year mainly associated with increasing credit risk resulting from the Pandemic, and higher margins on work orders.

Years Ended October 31,

($ in millions) 2020 2019 Decrease

($ in millions) 2021 2020 Increase

Revenues $ 836.4 $ 808.8 $ 27.6 3.4%

Operating (loss) profit (41.1) 39.0 (80.1) NM*

Operating margin (5.1) % 4.6 % (969) bps

Education revenues decreased by $38.6 million, or 4.6%, during 2020, as compared to 2019.

The decrease was attributable to compression of certain accounts, mainly resulting from Pandemic-related school closures.

Education had an operating loss of $41.1 million during 2020, as compared to an operating profit of $39.0 million during 2019.

Operating margin decreased by 969 bps to (5.1)% in 2020 from 4.6% in 2019.

The decrease in operating profit margin was primarily attributable to goodwill impairment charges of $99.3 million due to the adverse

impact of market and business conditions resulting from the Pandemic and to higher reserves established for client receivables mainly associated with increasing credit risk resulting from the Pandemic.

The decrease was partially offset by the management of direct labor and related personnel costs during Pandemic-related school closures, lower amortization of intangible assets, and higher margins on work orders relating to the Pandemic.

Operating profit (loss) 60.5 (41.1) 101.6 NM*

Operating margin 7.2 % (5.1) % NM*

*Not meaningful

Education revenues increased by $27.6 million, or 3.4%, during 2021, as compared to 2020.

The increase was primarily attributable to an increase in work orders as a result of Pandemic-related demands and recovery in the volume of our business as schools gradually reopened.

The increase was partially offset by the loss of certain accounts during the year.

Education had an operating profit of $60.5 million during 2021, as compared to an operating loss of $41.1 million during 2020.

Operating margin increased to 7.2% in 2021 from (5.1)% in 2020.

The increase in operating profit margin was primarily attributable to the absence of prior year goodwill impairment charges of $99.3 million.

Additionally, operating margin was positively impacted by higher margin work orders, a decrease in bad debt expense, driven by net recoveries of certain previously reserved receivables, and lower amortization of intangible assets.

The increase in operating margin, excluding the impact of prior year impairment, was mostly offset by the increase in direct labor and related costs as schools reopened.

Years Ended October 31,

($ in millions) 2020 2019 Decrease

($ in millions) 2021 2020 Increase / (Decrease)

Revenues $ 668.8 $ 680.9 $ (12.1) (1.8)%

Operating (loss) profit (59.6) 21.1 (80.7) NM*

Operating profit (loss) 32.5 (59.6) 92.1 NM*

Operating margin 4.9 % (8.7) % NM*

*Not meaningful

Aviation revenues decreased by $12.1 million, or 1.8%, during 2021, as compared to 2020.

The decrease was primarily attributable to travel restrictions and a dramatic decline in passenger demand resulting from the Pandemic.

Significant volume reductions impacted cabin cleaning, parking, janitorial, passenger services, transportation, and catering accounts.

In addition, we lost certain cabin cleaning and passenger services accounts primarily in the prior year.

The decrease was partially offset by Pandemic-related cleaning services.

The decrease was primarily attributable to travel restrictions and a decline in passenger demand resulting from the Pandemic.

While demand and revenue improved during the third and fourth quarter of 2021, Pandemic-related volume reductions continued to impact parking, janitorial, passenger services, transportation, and catering accounts.

The decrease was partially offset by Pandemic-related cleaning services and new parking-related services.

Management reimbursement revenues for this segment totaled $54.5 million and $74.3 million during 2021 and 2020, respectively.

Aviation had an operating loss of $59.6 million during 2020, as compared to an operating profit of $21.1 million during 2019.

Operating margin decreased to (8.7)% during 2020, from 2.1% during 2019.

This decrease in operating profit margin was primarily attributable to impairment charges of $55.5 million on goodwill and $5.6 million on customer relationships due to the adverse impact of market and business conditions resulting from the Pandemic.

Operating margin was also negatively impacted by Pandemic-related volume reductions and higher reserves established for client receivables mainly associated with increasing credit risk resulting from the Pandemic.

Operating margin was positively impacted by the management of direct labor and related personnel costs during the Pandemic, higher margins on work orders, and the loss of lower margin cabin cleaning and passenger service accounts in the prior year.

Aviation had an operating profit of $32.5 million during 2021, as compared to an operating loss of $59.6 million during 2020.

Operating margin increased to 4.9% during 2021, from (8.7)% during 2020.

This increase in operating profit margin was primarily attributable to the absence of prior year impairment charges of $55.5 million on goodwill and $5.6 million on customer relationships.

Additionally, operating margin increased as the result of management of direct labor and related personnel costs during the Pandemic, higher margins on Pandemic-related cleaning services, and a strategic shift toward securing higher margin contracts with airports and related facilities.

Technical Solutions

Years Ended October 31,

($ in millions) 2020 2019 Decrease

($ in millions) 2021 2020 Increase

Revenues $ 534.0 $ 506.6 $ 27.4 5.4%

Operating profit 9.5 55.4 (45.9) (82.9)

Operating profit 49.8 9.5 40.3 NM*

Operating profit margin 9.3 % 1.9 % 745 bps

Technical Solutions revenues decreased by $86.6 million, or 14.6%, during 2020, as compared to 2019.

The decrease was primarily attributable to a lower volume of projects in both our U.S.

businesses due to Pandemic-related disruptions beginning in the second quarter of 2020 as well as to the loss of certain accounts in our U.K.

business that primarily occurred during the prior year.

The decrease was partially offset by growth in our U.S.

business related to bundled energy solutions projects and power projects prior to Pandemic-related disruptions.

Operating profit decreased by $45.9 million during 2020, as compared to 2019.

Operating profit margin decreased by 747 bps to 1.9% in 2020 from 9.3% in 2019.

The decrease in operating profit margin was primarily attributable to a $17.6 million reserve on notes receivable related to a unique, entertainment-related project, mainly associated with increasing credit risk resulting from the Pandemic.

In addition, the decrease was due to impairment charges of $9.0 million on goodwill and $3.4 million on customer relationships related to our U.K.

business due to the adverse impact of market and business conditions resulting from the Pandemic.

In addition, during the current year we were negatively impacted by:

revenue compression resulting from Pandemic-related disruptions;

higher commissions expense due to the amortization of commissions that were capitalized in the prior year;

and the loss of certain higher margin contracts in our U.K.

The decrease was partially offset by the management of project related expenses, management and staff employee furloughs, and lower amortization of intangible assets.

*Not meaningful

Technical Solutions revenues increased by $27.4 million, or 5.4%, during 2021, as compared to 2020.

The increase was primarily attributable to an increase in the volume of our U.S.

businesses due to the easing of Pandemic-related lockdowns, which provided access to facilities that were previously restricted.

In addition, the revenue increase was driven by growth in electric vehicle charging station installation sales.

Operating profit increased by $40.3 million during 2021, as compared to 2020.

Operating profit margin increased by 745 bps to 9.3% in 2021 from 1.9% in 2020.

The increase in operating profit margin was primarily attributable to the absence of a prior year $17.6 million reserve on notes receivable related to a unique, entertainment-related project, mainly associated with increasing credit risk resulting from the Pandemic.

The increase was also due to the absence of prior year impairment charges of $9.0 million on goodwill and $3.4 million on customer relationships related to our U.K.

Years Ended October 31,

($ in millions) 2020 2019 Decrease

Corporate expenses $ 146.9 $ 159.0 $ (12.1) (7.6)%

Corporate expenses decreased by $12.1 million, or 7.6%, during 2020, as compared to 2019.

The decrease in corporate expenses was primarily related to:

• a $26.8 million decrease in self-insurance reserve adjustments, related to prior years, as a result of actuarial evaluations completed in the year ended October 31, 2020;

• the absence of a $3.9 million reserve for an anticipated union pension settlement in the prior year;

• a $3.6 million decrease in restructuring and related expenses due to a decline in severance, other expenses incurred in the prior year related to the GCA integration, and a decrease in expenses related to our ongoing technology initiatives.

The majority of these initiatives have been temporarily suspended since the second quarter of 2020 due to the Pandemic.

This decrease was partially offset by:

• a $9.1 million increase in legal costs and settlements;

• an $8.5 million increase related to investments in EnhancedClean, other Pandemic-related projects, and certain corporate initiatives;

• a $4.6 million increase in medical and dental insurance expenses as a result of actuarial evaluations performed in the current year.

($ in millions) 2021 2020 Increase

Corporate expenses $ (374.6) $ (146.9) $ (227.7) NM*

*Not meaningful

Corporate expenses increased by $227.7 million during 2021, as compared to 2020.

The increase in corporate expenses was primarily related to:

• a $145.8 million increase in legal costs and settlements, primarily attributed to the accrual of a legal settlement for the Bucio case;

• a $43.2 million increase in certain technology projects and other enterprise initiatives (including ELEVATE ), in addition to marketing events;

• a $33.4 million increase in compensation and related expenses, primarily driven by corporate and staff labor reductions that occurred in the prior period due to the Pandemic, including wage reductions, employee furloughs, and the suspension of certain benefits such as 401(k) matching.

The increase was also due to updated assessments regarding financial performance target achievements in connection with certain performance share awards and cash incentive plans;

• a $21.9 million increase in acquisition and integration costs attributable to the Able Acquisition;

This increase was partially offset by:

• a $17.4 million decrease in insurance expense as the result of favorable self-insurance reserve adjustments from actuarial evaluations completed in fiscal year 2021 as compared to 2020;

• a $7.6 million decrease in restructuring and related expenses due to the completion of our restructuring program in fiscal year 2020.

The Year Ended October 31, 2020 Compared with the Year Ended October 31, 2019

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As such, we project our anticipated cash requirements as well as cash flows generated from operating activities to meet those needs.

In addition to normal working capital requirements, we anticipate that our short- and long-term cash requirements will include funding legal settlements, insurance claims, dividend payments, capital expenditures, share repurchases, and continued systems and technology transformation initiatives.

In addition to normal working capital requirements, we anticipate that our short- and long-term cash requirements will include funding legal settlements, insurance claims, dividend payments, capital expenditures, share repurchases, mandatory loan repayments, and systems and technology transformation initiatives under our ELEVATE strategy.

We anticipate long-term cash uses may also include strategic acquisitions.

On a long-term basis, we will continue to rely on our credit facility for any long-term funding not provided by operating cash flows.

We believe that the Pandemic has had, and will likely continue to have, an adverse impact on our consolidated financial position, results of operations, and cash flows.

We believe that the Pandemic has had, and will likely continue to have, an impact on our consolidated financial position, results of operations, and cash flows.

It is also possible that our accounts receivable cash collections will be adversely impacted by our clients’ Pandemic-related challenges.

We have taken and continue to take certain steps to preserve liquidity, including:

temporary pay reductions with full pay reinstated as of August 1, 2020;

temporary furloughs or working hour reductions for certain staff and management employees, most of whom returned to work effective August 1, 2020;

and the temporary suspension of certain benefits.

We have also actively managed direct labor and related personnel costs, including:

imposing furloughs or reduced hours for certain service employees in markets significantly impacted by business slowdowns and shutdowns;

reducing our planned capital and operating expenditures and management of other expenses;

managing our operating expenditures and certain selling, general and administrative expenses;

amending our credit facility, as further described under “Credit Facility” below;

and suspending share repurchases under our share repurchase program.

In addition, we continue focusing on collection of customer receivables, monitoring the adequacy of our reserves, and extending vendor payment terms where possible.

We evaluated the business tax provisions of the CARES Act and have deferred remittance of approximately $101 million of payroll tax as of October 31, 2020.

In addition, we are taking certain steps to ensure adequate access to liquidity.

In late March 2020, we borrowed approximately $300 million under our revolving line of credit, which represented all amounts then available under the Credit Facility, as a precautionary measure to provide increased liquidity and preserve financial flexibility due to uncertainty resulting from the Pandemic.

On May 28, 2020, we amended our Credit Facility (the “Amendment”) in order to enhance our financial flexibility, as further described under “Credit Facility” below.

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

We believe that our operating cash flows and borrowing capacity under our Credit Facility are sufficient to fund our cash requirements for the next twelve months.

We also evaluated the business tax provisions of the CARES Act and have deferred remittance of approximately $132 million of payroll tax through December 31, 2020, which the CARES Act requires to be remitted by December 31, 2021, and December 31, 2022, in equal parts.

We believe that our operating cash flows and borrowing capacity under our credit facility are sufficient to fund our cash requirements for the next 12 months.

In the event that our plans change or our cash requirements are greater than we anticipate, we may need to access the capital markets to finance future cash requirements.

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Credit Facility

On September 1, 2017, we refinanced and replaced our then-existing $800.0 million credit facility with a new senior, secured five-year syndicated credit facility (the “Credit Facility”), consisting of a $900.0 million revolving line of credit and an $800.0 million amortizing term loan, 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, we repaid substantially all of these amounts borrowed under the revolving line of credit without penalty.

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 (allowing for up to $100 million in cash and cash equivalents to be excluded from the calculation of total indebtedness) that varies on a quarterly basis and

adjusted to 6.50 to 1.00 by the quarter ending October 31, 2020, and will adjust 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 to 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.

On May 28, 2020, we amended and restated our Credit Facility (“the First Amendment”) to further enhance our financial flexibility as a precautionary measure in response to uncertainty arising from the Pandemic.

The First Amendment modified certain financial covenants, the interest rate, interest margins, and commitment fees applicable to loans and commitments under the Credit Facility.

The First 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.

On June 28, 2021, the Company amended and restated the Credit Facility (the “Second Amendment,” and the Credit Facility as amended, the “Amended Credit Facility”), extending the maturity date to June 28, 2026, and increasing the capacity of the revolving credit facility from $800.0 million to $1.3 billion and the then-remaining term loan outstanding from $620.0 million to $650.0 million.

The Second Amendment also removed the anti-cash hoarding mandatory prepayment requirement as well as other restrictions that limited our ability to make acquisitions, share repurchases, and other defined restricted payments under the First Amendment.

Additionally, the Second Amendment modified certain financial covenants, terms, interest rates, interest margins, and commitment fees applicable to loans and commitments under the prior Credit Facility.

The Amended Credit Facility provides for the issuance of up to $350.0 million for standby letters of credit and the issuance of up to $75.0 million in swingline advances.

The obligations under the Amended Credit Facility are secured on a first-priority basis by a lien on

substantially all of our assets and properties, subject to certain exceptions.

We may repay amounts borrowed under the Amended Credit Facility at any time without penalty.

Under the Amended Credit Facility, the term loan and U.S.-dollar-denominated borrowings under the revolver bear interest at a rate equal to one-month LIBOR plus a spread based upon our leverage ratio.

Euro- and sterling-denominated borrowings under the revolver bear at the interest rate of the Euro Interbank Offered Rate (EURIBOR) and the daily Sterling Overnight Index Average (SONIA) reference rate, respectively, plus a spread that is based upon our leverage ratio.

The spread ranges from 1.375% to 2.250% for Eurocurrency loans and 0.375% to 1.250% for base rate loans.

At October 31, 2021, the weighted average interest rate on our outstanding borrowings was 1.59%.

We also pay a commitment fee, based on our leverage ratio and payable quarterly in arrears, ranging from 0.20% to 0.40% on the average daily unused portion of the line of credit.

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

The Amended Credit Facility contains certain covenants, including a maximum total net leverage ratio of 5.00 to 1.00, a maximum secured net leverage ratio of 4.00 to 1.00, and a minimum interest coverage ratio of 1.50 to 1.00, as well as other financial and non-financial covenants.

In the event of a material acquisition, as defined in the Amended Credit Facility, we may elect to increase the maximum total net leverage ratio to 5.50 to 1.00 for a total of four fiscal quarters and increase the maximum secured net leverage ratio to 4.50 to 1.00 for a total of four fiscal quarters.

We did not make this election for the Able Acquisition.

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

At October 31, 2021, we were in compliance with these covenants and expect to be in compliance in the foreseeable future.

During 2021, we made $76.3 million of principal payments under the term loan.

At October 31, 2020, the total outstanding borrowings under our Credit Facility in the form of cash borrowings and standby letters of credit were $725.3 million and $153.1 million, respectively.

At October 31, 2020, we had up to $596.6 million of borrowing capacity, reflecting covenant restrictions.

In July 2017, the U.K.

Financial Conduct Authority, the regulator of LIBOR, indicated that it will no longer require banks to submit rates to the LIBOR administrator after 2021.

This announcement signaled that the calculation of LIBOR and its continued use could not be guaranteed after 2021.

A change away from LIBOR after 2021 may impact our Credit Facility and interest rate swaps.

At October 31, 2021, the total outstanding borrowings under our Amended Credit Facility in the form of cash borrowings and standby letters of credit were $888.8 million and $167.7 million, respectively.

At October 31, 2021, we had up to $875.0 million of borrowing capacity.

On March 5, 2021, the United Kingdom’s Financial Conduct Authority, the regulator of LIBOR, announced that the USD LIBOR rates will no longer be published after June 30, 2023.

While we expect LIBOR to be available in substantially its current form until at least the end of June 30, 2023, it is possible that LIBOR will become unavailable prior to that point, which may impact our Amended Credit Facility and interest rate swaps.

Our current credit agreement as well as our International Swaps and Derivatives Association, Inc.

agreement provide for any changes away from LIBOR to a successor rate to be based on prevailing or equivalent standards.

We continue to monitor developments related to the LIBOR transition and/or identification of an alternative, market-accepted rate.

The impact related to any changes cannot be predicted at this time.

Additionally, our interest rate swaps mature before June 30, 2023.

As such, we do not anticipate a material impact related to the LIBOR transition and will continue to monitor developments related to the LIBOR transition and/or identification of an alternative, market-accepted rate.

Reinvestment of Foreign Earnings

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federal tax expense has been recognized as a result of the Tax Cuts and Jobs Act of 2017, no deferred tax liabilities with respect to federal and state income taxes or foreign withholding taxes have been recognized.

We believe that our cash on hand in the United States, along with our Credit Facility and future domestic cash flows, are sufficient to satisfy our domestic liquidity requirements.

IFM Insurance Company

IFM Assurance Company (“IFM”) is a wholly-owned captive insurance company that we formed in 2015.

IFM is part of our enterprise-wide, multi-year insurance strategy that is intended to better position our risk and safety programs and provide us with increased flexibility in the end-to-end management of our insurance programs.

IFM began providing coverage to us as of January 1, 2015.

We had accelerated cash tax savings related to coverage provided by IFM of approximately $8 million in 2020, $6 million in 2019, and $7 million in 2018.

We believe that our cash on hand in the United States, along with our Amended Credit Facility and future domestic cash flows, are sufficient to satisfy our domestic liquidity requirements.

Share Repurchases

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.

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.

We repurchased shares under the 2019 Share Repurchase Program during the second quarter of 2020.

However, due to the market and business conditions arising from the Pandemic, we suspended further repurchases of our common stock in March 2020 and did not repurchase any shares of our outstanding common stock during fiscal year 2021.

At October 31, 2021, authorization for $144.9 million of repurchases remained under the 2019 Share Repurchase Program.

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

Years Ended October 31,

(in millions, except per share amounts) 2021 2020

Total number of shares purchased — 0.2

Average price paid per share $ 36.16

Average price paid per share N/A $ 36.16

Total cash paid for share repurchases $ — $ 5.1

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In addition to revenues and operating profit, our management views operating cash flows as a good indicator of financial performance, because strong operating cash flows provide opportunities for growth both organically and through acquisitions.

Net cash provided by operating activities of continuing operations was $457.4 million, which includes the deferral of approximately $101 million of payroll tax under the CARES Act, during 2020.

Operating cash flows primarily depend on:

10 unchanged sentences

Net cash used in investing activities (740.0) (27.5) (58.3)

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

Net cash provided by (used in) financing activities 92.4 (94.1) (184.8)

Operating Activities of Continuing Operations

Net cash provided by operating activities of continuing operations decreased by $143.1 million during 2021, as compared to 2020.

The decrease was primarily related to the timing of working capital changes, partially offset by deferred remittance of payroll taxes under the CARES Act.

Net cash provided by operating activities of continuing operations increased by $194.6 million during 2020, as compared to 2019.

The increase was primarily related to the timing of client receivable collections and deferred remittance of approximately $101 million of payroll taxes under the CARES Act, partially offset by the timing of vendor payments.

Net cash provided by operating activities of continuing operations decreased by $36.9 million during 2019, as compared to 2018.

The decrease was primarily related to the timing of client receivable collections, including a one-time settlement payment received from a client in 2018, and the absence of proceeds from the termination of interest rate swaps in 2018, partially offset by the timing of vendor payments.

Operating Activities of Discontinued Operations

Net cash provided by operating activities of discontinued operations was $0.1 million during 2020, as compared to net cash used in operating activities of discontinued operations of $0.1 million during 2019, a change of $0.2 million.

Net cash used in operating activities of discontinued operations was $0.1 million during 2019, as compared to net cash provided by operating activities of discontinued operations of $21.2 million during 2018, a change of $21.3 million, primarily attributable to an income tax refund received on a legal settlement during 2018.

Investing Activities

Net cash used in investing activities increased by $712.5 million during 2021, as compared to 2020.

The increase was primarily related to the Able Acquisition during the fourth quarter of 2021.

Net cash used in investing activities decreased by $30.8 million during 2020, as compared to 2019.

1 unchanged sentence

Additionally, the implementation of the new ERP system was temporarily suspended during 2020 due to the Pandemic.

Net cash used in investing activities increased by $10.2 million during 2019, as compared to 2018.

The increase was primarily related to higher additions to property, plant and equipment in 2019.

Financing Activities

Net cash used in financing activities decreased by $90.7 million during 2020, as compared to 2019, primarily due to lower repayments of our borrowings in 2020.

Net cash provided by financing activities was $92.4 million in 2021, as compared to net cash used in financing activities of $94.1 million in 2020, primarily due to higher net borrowings to partially fund the purchase price of the Able Acquisition.

Net cash used in financing activities decreased by $90.7 million during 2020, as compared to 2019, primarily due to lower repayments of our borrowings in 2020.

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We paid total annual dividends of $51.0 million, $49.3 million, and $47.7 million during 2021, 2020, and 2019, respectively.

Contractual Obligations

(in millions) Commitments Due By Period

Contractual Obligations 2021 2022-2023 2024-2025 Thereafter Total

Borrowings under term loan (1)

$ 120.0 $ 560.0 $ — $ — $ 680.0

Borrowings under line of credit (1)

— 45.3 — — 45.3

Fixed interest related to interest rate swaps (2)

11.2 5.0 — — 16.2

Operating leases and other similar commitments (3)

41.3 63.5 42.3 43.3 190.4

Service concession arrangements (4)

21.2 30.9 30.9 9.0 92.0

Finance leases (3)

3.3 2.6 — — 5.9

Information technology service agreements (5)

36.5 31.1 1.0 — 68.6

Benefit obligations (6)

4.7 6.3 5.1 12.1 28.2

Total $ 238.2 $ 744.7 $ 79.3 $ 64.4 $ 1,126.6

(1) Borrowings under our term loan and line of credit are presented at face value.

(2) Our estimates of future interest payments are calculated based on our hedged borrowings under our Credit Facility, using the fixed rates under our interest rate swap agreements for the applicable notional amounts.

See Note 11, “Credit Facility,” in the Financial Statements for additional disclosure related to our interest rate swaps.

We exclude interest payments on our remaining borrowings from this table because the cash outlay for the interest is unknown.

The interest payments on the borrowings under the Credit Facility will be determined based upon the average outstanding balance of our borrowings and the prevailing interest rate during that time.

(3) Reflects our contractual obligations to make future payments under non-cancelable operating leases, finance lease agreements, and other similar commitments for various facilities, vehicles, and other equipment.

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

(4) Represents leased location parking arrangements that meet the definition of service concession arrangements under Topic 853.

(5) Reflects our contractual obligations to make future payments for outsourced services and licensing costs pursuant to our information technology agreements.

(6) Reflects future expected payments relating to our defined benefit, postretirement, and deferred compensation plans.

Material Cash Requirements from Contractual and Other Obligations

As of October 31, 2021, our material cash requirements for our known contractual and other obligations were as follows:

• Debt Obligations and Interest Payments – Outstanding payments on our Amended Credit Facility were $888.8 million, with $32.5 million payable within 12 months.

Additionally, we had future interest payments based on our hedged borrowings under our Amended Credit Facility of $5.0 million, which is payable within 12 months.

The interest payments on our remaining borrowings under the Amended Credit Facility will be determined based upon the average outstanding balance of our borrowings and the prevailing interest rate during that time.

See Note 11, “Credit Facility,” in the Financial Statements for further detail of our debt and the timing of expected future principal and interest payments.

• Operating and Finance Leases – We enter into various noncancelable l ease agreements for office space, parking facilities, warehouses, vehicles, and equipment used in the normal course of business.

Operating and finance lease obligations were $170.6 million, with $38.9 million payable within 12 months.

See Note 5, “Leases,” in the Financial Statements for further detail of our obligations and the timing of expected future payments.

• Service Concession Arrangements – As defined under Topic 853, Service Concession Arrangements , our leased location parking arrangements are represented as service concession arrangements.

We had contractual payments for these arrangements of $89.9 million, with $24.9 million payable within 12 months.

• Information Technology Service Agreements – Information technology service agreements represent outsourced services and licensing costs pursuant to our information technology agreements.

We had contractual payments for these agreements of $79.9 million, with $44.9 million payable within 12 months.

• Benefit Obligations – Expected future payments relating to our defined benefit, postretirement, and deferred compensation plans were $45.8 million, with $4.5 million payable in 12 months.

These amounts are based on expected future service and were calculated using the same assumptions used to measure our benefit obligation at October 31, 2021.

In addition to our company sponsored plans, we participate in certain multiemployer pension and other postretirement plans.

• Litigation Settlements – A litigation settlement of $142.9 million related to the Bucio case is payable in 12 months.

See Note 13, “Commitments and Contingencies,” in the Financial Statements for further details.

• CARES Act Tax Obligations – We deferred approximately $132 million of payroll tax provisions under the CARES Act with $66 million payable in 12 months.

See Note 16, “Income Taxes,” in the Financial Statements for further details.

In addition, our material cash requirements for other obligations, for which we cannot reasonably estimate future payments, include the following:

• Multiemployer Benefit Plans – In addition to our company sponsored benefit plans, we participate in certain multiemployer pension and other postretirement plans.

The cost of these plans is equal to the annual required contributions determined in accordance with the provisions of negotiated collective bargaining arrangements.

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however, our future contributions to the multiemployer plans are dependent upon a number of factors, including the funded status of the plans, the ability of other participating companies to meet ongoing funding obligations, and the level of our ongoing participation in these plans.

As the amount of future contributions that we would be contractually obligated to make pursuant to these plans cannot be reasonably estimated, such amounts have been excluded from the above table.

Amounts of future contributions that we would be contractually obligated to make pursuant to these plans cannot be reasonably estimated.

See Note 12, “Employee Benefit Plans,” in the Financial Statements for more information.

At October 31, 2020, our total liability for unrecognized tax benefits was $10.1 million.

The resolution or settlement of these tax positions with the taxing authorities is subject to significant uncertainty, and therefore we are unable to make a reliable estimate of the amount or timing of cash that may be required to settle these matters.

In addition, certain of these matters may not require cash settlements due to the exercise of credits and net operating loss carryforwards as well as other offsets, including the indirect benefit from other taxing jurisdictions that may be available.

Excluded from the contractual obligations table are payments we may make for exposures for which we are self-insured, including workers’ compensation, general liability, automobile liability, property damage, and other insurable risks.

• Self-Insurance Obligations – We may make payments for exposures for which we are self-insured, including workers’ compensation, general liability, automobile liability, property damage, and other insurable risks.

At October 31, 2021, our self-insurance reserves, net of recoverables, were $508.3 million.

general, these amounts are recorded on an undiscounted basis and are classified on the Consolidated Balance Sheets as current or long-term based on the expected settlement date.

As these obligations do not have scheduled maturities, we are unable to make a reliable estimate of the amount or timing of cash that may be required to settle these matters.

See Note 10, “Insurance,” in the Financial Statements for further detail.

• Unrecognized Tax Benefits – At October 31, 2021, our total liability for unrecognized tax benefits was $12.5 million.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements other than unrecorded standby letters of credit and surety bonds.

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Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions

Customer Relationships

When we acquire a company, we determine the fair value on the acquisition date of assets acquired and liabilities assumed.

We anticipate that for most acquisitions, we will exercise significant judgment in estimating the fair value of intangible assets.

In a typical acquisition, customer relationships are our most significant definite-lived intangible asset.

In valuing these relationships, we engage a third-party valuation expert to fair value these assets using a version of the income approach known as the “excess earnings method.”

This method uses a discounted cash flow approach that is derived from historical information, future revenue and operating profit margins, contributory asset charges, and the selection of an appropriate discount rate.

We consider this approach the most appropriate valuation technique because the inherent value of these assets is their ability to generate current and future income.

Future revenue growth, future operating performance margin as a percentage of revenues, customer attrition rate, and discount rate applied are the significant estimates used in the excess earnings method to determine the fair value of customer relationships.

These estimates are influenced by many factors, including historical financial information, estimated retention rates, and management's expectations for future customer growth as a combined company.

Another estimate that impacts the valuation is the contributory charge for the acquired workforce, which involves management assumptions based on historical experience, including interview time and new hire productivity.

The estimated life is determined by calculating the number of years necessary to obtain 90% of the value of the discounted cash flows of the relationships and is directly tied to the accuracy of the above assumptions.

We have not made any changes in the accounting methodology used to determine the fair value of customer relationships during the last three years.

If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop the values of the identifiable intangible assets, then we could record material impairment losses.

With other assumptions held constant, a 10% increase in the calculated fair value of the Able customer relationships would increase the annual amortization expense by $2.8 million in 2022.

See the “Valuation of Long-Lived Assets” critical accounting policy for information about impairment evaluations.

Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions

Valuation of Long-Lived Assets

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Additionally, we have not made any changes in the accounting methodology used to evaluate impairment of goodwill during the last three years.

At October 31, 2021, we had $2.2 billion of goodwill.

Our goodwill is included in the following segments:

$1.1 billion — B&I (includes $554.0 million related to the Able Acquisition on September 30, 2021)

$407.2 million — T&M

$459.3 million — Education

$69.9 million — Aviation

$162.7 million — Technical Solutions

A goodwill impairment analysis was performed for each of our reporting units on August 1, 2021.

Based on these studies, the implied fair value of each of our reporting units was substantially in excess of its carrying value.

Therefore, we concluded there were no indicators of impairment.

A 10% decrease in the estimated fair value of any of our reporting units would not have resulted in a different conclusion.

During the third quarter of 2021, we recognized a non-cash impairment charge totaling $9.1 million in our Corporate segment for previously capitalized internal-use software related to our ERP system implementation.

The Company determined that certain components that were previously developed would no longer be integrated into the new ERP system.

The impairment charge reduced the carrying value to zero for those components.

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.

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As a result of the qualitative analysis, we concluded that there were no further impairments.

During the third quarter of 2019, in connection with the reorganization of our Healthcare business, a goodwill impairment analysis was performed on the underlying reporting unit immediately before the reorganization, and we concluded that the estimated fair value of the underlying reporting unit substantially exceeded its carrying value immediately before the reorganization and that no further evaluation of impairment was necessary.

Additionally, we performed our annual goodwill impairment analysis on August 1, 2019, and concluded that the implied fair value of each of our reporting units was substantially in excess of its carrying value and that no further evaluation of impairment was necessary.

A 10% decrease in the estimated fair value of any of our reporting units would not have resulted in a different conclusion.

During 2018 we performed a qualitative goodwill impairment analysis for each of our reporting units on November 1, 2017, when we reorganized our reportable segments and reporting units following the integration of GCA into our industry group model.

We concluded that goodwill related to those reporting units was not impaired and further quantitative testing was not required.

In connection with our annual goodwill impairment analysis performed on August 1, 2018, we recorded an impairment charge of $20.3 million on goodwill and $6.2 million on customer relationships for one of our reporting units within the Technical Solutions segment.

This reporting unit’s performance declined during 2018 primarily due to the adverse impact of Brexit and the resulting impact on microeconomic conditions in the U.K.

retail sector, as well as the anticipated loss of a significant customer contract.

In performing our annual goodwill impairment analysis, we determined there was a revised future outlook for this business, including reduced expectations of future sales, operating margins, and cash flows.

In analyzing our other goodwill reporting units, we concluded that goodwill related to these other reporting units was not impaired.

Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions

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We have not made any changes in the accounting methodology used to establish our self-insurance liabilities during the past three years.

After analyzing recent loss development patterns, comparing the loss development patterns against benchmarks, and applying actuarial projection methods to estimate the ultimate losses, 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.

During 2019 and 2018, we decreased such reserves by $3.4 million and increased such reserves by $10.2 million, respectively.

After analyzing recent loss development patterns, comparing the loss development patterns against benchmarks, and applying actuarial projection methods to estimate the ultimate losses, we decreased our total reserves related to prior years known claims as well as our estimate of the loss amounts associated with IBNR claims during 2021 by $36.0 million.

In 2020, we decreased our total reserves related to prior years claims by $30.2 million.

It is possible that actual results could differ from recorded self-insurance liabilities.

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Recent Accounting Pronouncements

Accounting Standard Update(s) Topic Summary Effective Date/

Accounting Standard Updates Topic Summary Effective Date/

Method of Adoption

2021-01 Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting This ASU, issued in March 2020, provides optional expedients to assist with the discontinuance of the London Interbank Offered Rate (“LIBOR”).

Scope This Accounting Standard Update (“ASU”), issued in January 2021, clarifies that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions under Topic 848.

While we are currently evaluating the impact of implementing this guidance on our financial statements, we do not expect adoption to have a material impact.

This update was effective upon issuance and can be applied to hedging relationships retrospectively or prospectively through December 31, 2022.

2020-04 Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting This ASU, issued in March 2020, provides optional expedients to assist with the discontinuance of LIBOR.

The expedients allow companies to ease the potential accounting burden when modifying contracts and hedging relationships that use LIBOR as a reference rate, if certain criteria are met.

We are currently evaluating the impact of implementing this guidance on our financial statements.

This update can be adopted prospectively no later than December 1, 2022, with early adoption permitted.

2020-03 Codification Improvements to Financial Instruments This ASU, issued in March 2020, makes narrow-scope improvements to various financial instruments topics, including the new credit losses standard.

Certain amendments contained within this update were effective upon issuance and had no material impact on our financial statements.

The amendments related to ASU 2019-04 and ASU 2016-13 will be adopted in conjunction with ASU 2016-13, as described below.

While we are currently evaluating the impact of implementing this guidance on our financial statements, we do not expect adoption to have a material impact.

This update was effective upon issuance and can be applied prospectively to contract modifications made and hedging relationships entered into or evaluated through December 31, 2022.

2020-01 Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815):

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The amendments have differing adoption methods, including retrospectively, prospectively, and/or on a modified retrospective basis.

2019-04 Codification Improvements to Topic 326:

Instruments—Credit Losses;

Derivatives and Hedging;

and Topic 825:

Financial Instruments This ASU, issued in April 2019, provides narrow-scope amendments designed to assist in the application of the following updates and the related accounting standards:

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

Measurement of Credit Losses on Financial Instruments;

(2) ASU 2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities;

(3) ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities.

We are currently evaluating the impact of implementing the guidance related to (1) and (3) on our financial statements.

We do not expect the adoptions to have a material impact.

(1) The amendments related to ASU 2016-13 will be adopted in conjunction with that ASU, as further described below.

(2) We adopted this guidance effective November 1, 2019, on a prospective basis with no significant impact on our consolidated financial statements.

(3) Since we already adopted ASU 2016-01, the related amendments will be effective for us on November 1, 2020, and will be applied using a modified retrospective adoption approach with a cumulative-effect adjustment to retained earnings.

Accounting Standard Update(s) Topic Summary Effective Date/Method of Adoption

2018-18 Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 This ASU, issued in November 2018, provides guidance on whether certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606.

It specifically addresses when the participant is a customer in the context of a unit of account, adds unit of account guidance in Topic 808 to align with guidance in Topic 606, and precludes presenting the collaborative arrangement transaction together with revenue recognized under Topic 606 if the collaborative arrangement participant is not a customer.

We do not expect adoption to have a material impact.

November 1, 2020

This update will be applied retrospectively.

2018-17 Consolidation (Topic 810):

Targeted Improvements to Related Party Guidance for Variable Interest Entities This ASU, issued in October 2018, provides that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interest.

We do not expect adoption to have a material impact.

November 1, 2020

This update will be applied retrospectively.

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 ASU, issued in August 2018, 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.

We do not expect adoption to have a material impact.

November 1, 2020

This update will be applied prospectively to all implementation costs incurred after the date of adoption.

2018-14 Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20):

Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans This ASU, issued in August 2018, modifies the disclosure requirements on company-sponsored defined benefit plans.

We do not expect adoption to have a material impact.

November 1, 2020

This update will be applied retrospectively.

2018-13 Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement This ASU, issued in August 2018, modifies the disclosure requirements on fair value measurements by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty, and adding new disclosure requirements.

We do not expect adoption to have a material impact.

November 1, 2020

The amendments related to disclosure requirements within this update will be applied prospectively and the other amendments will be applied retrospectively.

Accounting Standard Update(s) Topic Summary Effective Date/Method of Adoption

2019-05 Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments ASU 2016-13, issued in June 2016, replaces the existing guidance surrounding measurement and recognition of credit losses on financial assets measured at amortized cost, including trade receivables and investments in certain debt securities, by requiring recognition of an allowance for credit losses expected to be incurred over an asset’s life based on relevant information about past events, current conditions, and supportable forecasts impacting its ultimate collectibility.

This “expected loss” model will result in earlier recognition of credit losses than the current “as incurred” model, under which losses are recognized only upon occurrence of an event that gives rise to the incurrence of a probable loss.

ASU 2018-19 was issued in November 2018 and clarifies that receivables arising from operating leases are should be accounted for in accordance with Topic 842, Leases.

ASU 2019-11 was issued in November 2019 to clarify, improve, and amend certain aspects of ASU 2016-13, such as disclosures related to accrued interest receivables and the estimation of credit losses associated with financial assets secured by collateral.

ASU 2019-05 was issued in May 2019 to provide targeted transition relief allowing entities to make an irrevocable one-time election upon adoption of the new credit losses standard to measure financial assets previously measured at amortized cost (except held-to-maturity securities) using the fair value option.

We do not expect adoption to have a material impact.

November 1, 2020

This guidance will be applied using a modified retrospective adoption approach with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption, except for certain provisions that are required to be applied prospectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis