What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-12-21 compared with 2021-12-22 · 344 added, 345 removed, 1211 unchanged (36% of the section changed)

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

Fair value of customer relationship intangible asset from the acquisition of Able

As discussed in Note 4 to the consolidated financial statements, on September 30, 2021, the Company completed its acquisition of Crown Building Maintenance Co.

and Crown Energy Services, Inc.

(collectively,

Able) for $741.7 million.

As a result of the transaction, the Company acquired a customer relationship intangible asset representing future estimated income from Able’s existing customers.

The acquisition-date preliminary fair value determined for the customer relationship intangible asset was $220.0 million.

We identified the evaluation of the fair value of the customer relationship intangible asset from the acquisition of Able as a critical audit matter as a high degree of subjectivity was required to evaluate certain inputs in the discounted cash flow model used to determine the fair value of the asset.

Such inputs included expected future revenue growth, future operating performance margins, customer attrition rate, and discount rate applied.

Changes in these inputs could have a significant impact on the fair value of the customer relationship intangible asset.

Initial fair value measurement of the contingent consideration liability associated with the acquisition of RavenVolt

As discussed in Note 3 to the consolidated financial statements, on September 1, 2022, the Company acquired RavenVolt, Inc.

(RavenVolt) for cash of $170 million and contingent consideration up to $280 million, if the RavenVolt business achieves certain earnings before interest, taxes, depreciation, and amortization (EBITDA) targets in calendar

years 2023, 2024 and 2025 (the contingent consideration liability).

At the acquisition date, the Company recognized the contingent consideration liability at its estimated fair value.

The initial fair value of the contingent consideration liability related to the acquisition of RavenVolt was $59 million.

We identified the assessment of the initial fair value measurement of the contingent consideration liability as a critical audit matter.

A high degree of subjectivity was required to evaluate certain assumptions used to determine the fair value of the liability.

The key assumptions included the forecast of revenues and EBITDA margins for the RavenVolt business, the volatility associated with the EBITDA of the RavenVolt business, the risk-adjusted discount rate applied to forecasted EBITDA, and the credit-adjusted discount rate related to the payment of the contingent consideration.

Changes in these inputs could have a significant impact on the initial fair value of the contingent consideration liability.

Valuation professionals with specialized skills and knowledge were also required to assess the volatility, the risk-adjusted discount rate, and the credit-adjusted discount rate.

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

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls over the development of the above listed inputs used to value the customer relationship intangible asset.

We evaluated the future revenue growth and future operating performance margins by comparing these inputs to the historical performance of peer companies and to the pre-acquisition historical performance of both the Company and Able.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s initial fair value measurement process for the contingent consideration liability.

This included controls related to the development of the key assumptions.

We evaluated the forecasted revenues by comparing them to pre-acquisition historical audited financial statements and the current year unaudited results of the RavenVolt business, the customer backlog, and customer purchase orders.

We evaluated the forecasted EBITDA margins by comparing them to the pre-acquisition historical audited financial statements and current year unaudited results of the RavenVolt business.

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

• evaluating the estimated annual attrition rate by comparing the selected attrition rate against historical customer attrition of Able

• evaluating the Company’s discount rate by comparing the rate against a discount rate range that was independently developed

• developing a fair value estimate of the customer relationship intangible asset using the Company’s cash flow projections and independently developed range of discount rates and comparing it to the Company’s estimate.

• evaluating the risk-adjusted discount rate for consistency with the internal rate of return for the RavenVolt business and the period of the earnout

• evaluating the volatility by comparing it to the asset volatility of publicly traded guideline companies

• evaluating the credit-adjusted discount rate by comparing it to a credit-adjusted discount rate that was independently developed

• performing sensitivity analyses over the estimated fair value of the contingent consideration liability by considering reasonably possible changes to forecasted revenues and EBITDA margins and comparing the results to the Company’s estimate

• developing a fair value estimate of the contingent consideration liability using the Company’s forecasted EBITDA for the RavenVolt business, the risk-adjusted discount rate, the independently developed credit-adjusted discount rate, and a range of volatilities, and comparing it to the Company’s estimate.

Valuation of self-insurance liabilities

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

We identified the assessment of the valuation of self-insurance liabilities, other than those assumed in the acquisition of Able, as a critical audit matter.

A high degree of judgment and actuarial expertise was required to assess:

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

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

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

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

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of October 31, 2022 and 2021, the related consolidated statements of comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended October 31, 2022, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated December 21, 2022 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Crown Building Maintenance Co.

and Crown Energy Services, Inc.

(collectively, “Able”) on September 30, 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of October 31, 2021, Able’s internal control over financial reporting.

Able represented approximately 4.4% of the Company’s total consolidated assets (excluding goodwill and intangibles, which are included in the scope of the assessment) and 1.6% of total consolidated revenues as of and for the year ended October 31, 2021.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Able.

Basis for Opinion

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A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made

only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Current liabilities

Current portion of long-term debt, net $ 31.4 $ 116.7

Current portion of debt, net $ 181.5 $ 31.4

Trade accounts payable 315.5 289.4

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Income from continuing operations 230.4 126.3 0.2

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

Income from discontinued operations, net of taxes — — 0.1

Net income 230.4 126.3 0.3

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Net income $ 3.41 $ 1.86 $ 0.00

Weighted-average common and common

equivalent shares outstanding

Weighted-average common and common equivalent shares outstanding

Basic 67.1 67.4 66.9

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Stock issued under share-based compensation plans ( 1.5 ) ( 1.5 ) ( 0.9 )

Cumulative effect adjustment for adoption of ASU 2014-09

Balance, end of year 1,057.2 880.2 806.4

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Net income $ 230.4 $ 126.3 $ 0.3

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

Income from discontinued operations, net of taxes — — ( 0.1 )

Income from continuing operations 230.4 126.3 0.2

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Share-based compensation expense 30.5 33.5 20.3

Provision for bad debt 0.6 19.6 6.7

(Recovery of)/Provision for bad debt ( 7.7 ) 0.6 19.6

Amortization of accumulated other comprehensive gain on interest rate swaps ( 4.8 ) ( 6.4 ) ( 6.7 )

Discount accretion on insurance claims 0.1 0.1 0.8

Loss (gain) on sale of assets 0.2 2.1 ( 0.6 )

(Gain)/Loss on sale of assets ( 0.8 ) 0.2 2.1

Reserves on other assets — — 17.6

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Net cash provided by operating activities of continuing operations 20.4 314.3 457.4

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

Net cash provided by operating activities of discontinued operations — — 0.1

Net cash provided by operating activities 20.4 314.3 457.5

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Proceeds from redemption of auction rate security — — 5.0

Investments in equity securities ( 2.1 ) — —

Purchase of business, net of cash acquired ( 194.6 ) ( 710.2 ) —

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Deferred financing costs paid — ( 6.4 ) ( 4.4 )

Borrowings from credit facility 357.7 1,058.5 1,755.9

Repayment of borrowings from credit facility ( 194.2 ) ( 1,141.6 ) ( 1,896.5 )

Borrowings from debt 1,479.4 357.7 1,058.5

Repayment of borrowings from debt ( 1,096.9 ) ( 194.2 ) ( 1,141.6 )

Changes in book cash overdrafts 4.3 ( 17.9 ) 41.2

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Effect of exchange rate changes on cash and cash equivalents ( 4.2 ) 1.9 ( 0.2 )

Net (decrease) increase in cash and cash equivalents ( 331.4 ) 335.7 19.4

Net increase (decrease) in cash and cash equivalents 10.2 ( 331.4 ) 335.7

Cash and cash equivalents at beginning of year 62.8 394.2 58.5

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

Impact of the Pandemic

COVID-19 has resulted in a worldwide health Pandemic.

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

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

We have made additional disclosures of these assessments, as necessary.

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

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

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

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

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

Reorganization of Our Business

Effective November 1, 2021, the Manufacturing & Distribution (“M&D”) industry group replaced our Technology and Manufacturing (“T&M”) industry group as part of our strategic transformation initiative ELEVATE .

M&D retained our large manufacturing clients from T&M and added clients in the distribution sector from our Business and Industry (“B&I”) group.

Technology clients with commercial real estate properties serviced by T&M shifted into B&I.

Additionally, we have modified the presentation of segment revenues as inter-segment revenues are now allocated at the segment level.

Our prior period segment data in Note 4 , “Revenues,” and Note 12 , “Segment Information,” have been reclassified to conform with our current period presentation.

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

Cash and Cash Equivalents

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As part of our cash management system, we use “zero balance” accounts to fund our disbursements.

Under this system, at the end of each day the bank balance is zero, while the book balance is usually a negative amount due to reconciling items, such as outstanding checks.

Under this system, at the end of each day the bank balance is zero, while the book balance is usually a negative

amount due to reconciling items, such as outstanding checks.

We report the changes in these book cash overdrafts as cash flows from financing activities.

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An impairment loss is recognized to the extent that the estimated fair value of the investment is less than its carrying amount and we determine that the impairment is other than temporary.

At October 31, 2021, 2020, and 2019, our investments in unconsolidated affiliates were $ 11.7 million,

$ 11.0 million, and $ 8.9 million, respectively.

At October 31, 2022, 2021, and 2020, our investments in unconsolidated affiliates were $ 11.5 million, $ 11.7 million, and $ 11.0 million, respectively.

We did not recognize any impairment charges on these investments in 2021, 2020, or 2019.

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We adopted ASU 2016-02, Leases (Topic 842), and all related amendments on November 1, 2019, on a modified retrospective basis.

Comparative prior period Financial Statements for fiscal year 2019 have not been restated and continue to be reported under the accounting standards in effect for fiscal year 2019.

Topic 842 requires lessees to recognize substantially all leases on their balance sheet as a right-of-use (“ROU”) asset and a lease liability.

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

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

(ii) the lease classification for any expired or existing leases;

and (iii) initial direct costs for existing leases.

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

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

We also made an accounting policy election to not record ROU assets or lease liabilities for leases with an initial term of 12 months or less and will recognize payments for such leases in our Consolidated Statements of Comprehensive Income (Loss) on a straight-line basis over the lease term.

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

Our incremental borrowing rate as of November 1, 2019, was utilized for the initial measurement of operating lease liabilities upon adoption of Topic 842.

Our lease terms range from one to 30 years.

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

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

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

The ROU assets recognized upon adoption of Topic 842 included:

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

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

ROU assets include amounts for scheduled rent increases and are reduced by lease incentive amounts.

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

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Other Noncurrent Assets

At October 31, 2021 and 2020, other noncurrent assets primarily consisted of long-term insurance recoverables, deferred charges, capitalized commissions, ESPC receivables, insurance and other long-term deposits, and prepayments to carriers for future insurance claims.

At October 31, 2022 and 2021, other noncurrent assets primarily consisted of long-term insurance recoverables, interest rate swap assets, ESPC receivables, capitalized commissions, insurance and other long-term deposits, and prepayments to carriers for future insurance claims.

Federal Energy Savings Performance Contract Receivables

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We allocate current-year insurance expense to our operating segments based upon their underlying exposures, while actuarial adjustments related to prior year claims are recorded within Corporate expenses.

We classify claims as current or long-term

based on the expected settlement date.

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

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

Other Accrued Liabilities

At October 31, 2021 and 2020, other accrued liabilities primarily consisted of legal fees and settlements, other accrued expenses (which include the current portion of deferred payroll taxes), employee benefits, contract liabilities (which include deferred revenue and progress billings in excess of costs), unclaimed property, dividends payable, and insurance claims.

At October 31, 2022 and 2021, other accrued liabilities primarily consisted of employee benefits, contract liabilities (which include deferred revenue and progress billings in excess of costs), legal fees and settlements, unclaimed property, dividends payable, and ESPC liabilities.

Other Noncurrent Liabilities

At October 31, 2021 and 2020, other noncurrent liabilities primarily consisted of noncurrent deferred payroll taxes, deferred compensation, ESPC liabilities, retirement plan liabilities, long-term finance leases, and warranty reserves.

At October 31, 2022 and 2021, other noncurrent liabilities primarily consisted of contingent consideration liability, deferred compensation, ESPC liabilities, retirement plan liabilities, and long-term finance leases.

Contracts with Customers

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At contract inception, we assess the services promised to our customers and identify a performance obligation for each promise to transfer to the customer a service, or a bundle of services, that is distinct.

To identify the performance obligation, we consider all of our services promised in the contract, regardless of whether they are explicitly stated or are implied by customary business practices.

the performance obligation, we consider all of our services promised in the contract, regardless of whether they are explicitly stated or are implied by customary business practices.

The majority of our contracts contain multiple promises that represent an integrated bundle of services comprised of activities that may vary over time;

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Contracts generally can be modified to account for changes in specifications and requirements.

We consider contract modifications to exist when the modification either changes the consideration, creates new

performance obligations, or changes the existing scope of the contract and related performance obligations.

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

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

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

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

Contract Types

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

Cost-plus arrangements are contracts in which the clients reimburse us for the agreed-upon amount of wages and benefits, payroll taxes, insurance charges, and other expenses associated with the contracted work, plus a profit margin.

plus a profit margin.

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Such revenues do not include gross customer collections at the managed locations, because they belong to the property owners.

We have determined we are the principal in

these transactions, because the nature of our performance obligation is for us to provide the services on behalf of the customer and we have control of the promised services before they are transferred to the customer.

We have determined we are the principal in these transactions, because the nature of our performance obligation is for us to provide the services on behalf of the customer and we have control of the promised services before they are transferred to the customer.

Management reimbursement revenue was $ 280.6 million, $ 240.3 million, and $ 295.6 million during 2022, 2021, and 2020, respectively.

Leased Location

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Equipment purchased for these projects is project-specific and considered a value-added element to our work.

Equipment costs are incurred when title is transferred to us, typically upon delivery to the work site.

Equipment costs are incurred when the title is transferred to us, typically upon delivery to the work site.

Revenue for uninstalled equipment is recognized at cost and the associated margin is deferred until installation is substantially complete.

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Fixed billing schedules may not precisely match the actual costs incurred.

Therefore, revenue recognized may differ from amounts that can be billed or invoiced to the customer at any point during the contract, resulting in balances that are considered revenue recognized in excess of cumulative billings or cumulative billings in excess of revenue recognized.

Therefore, revenue recognized may differ from amounts that can be billed or invoiced to the customer at any point during the contract, resulting in balances that are considered revenue recognized in excess of amounts billed or amounts billed in excess of revenue recognized.

Advanced payments from our customers generally do not represent a significant financing component as the payments are used to meet working capital demands that can be higher in the early stages of a contract, as well as to protect us from our customer failing to meet its obligations under the contract.

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Initial franchise fees result from the sale of a franchise license and include the use of the name, trademarks, and proprietary methods.

The franchise license is

considered symbolic intellectual property, and revenue related to the sale of this right is recognized at the agreed-upon contractual amount over the term of the initial franchise agreement.

The franchise license is considered symbolic intellectual property, and revenue related to the sale of this right is recognized at the agreed-upon contractual amount over the term of the initial franchise agreement.

Royalty fee revenue consists of sales-based royalties received as part of the consideration for the franchise right, which is calculated as a percentage of the franchisees’ revenue.

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A receivable is recognized for an estimate of the unreported royalty fees, which are reported and remitted to us in arrears.

Microgrid Systems Installation

We provide electrical contracting services for energy related products such as the installation of solar solutions, battery storage, distributed generation, and other specialized electric trades.

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

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

This measurement and comparison process requires updates to the estimate of total costs to complete the contract, and these updates may include subjective assessments and judgments.

Costs to Obtain a Contract with a Customer

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Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation.

Management Reimbursement Revenue by Segment

Years Ended October 31,

(in millions) 2021 2020 2019

Business & Industry $ 185.8 $ 221.4 $ 283.1

Aviation 54.5 74.3 95.5

Total $ 240.3 $ 295.6 $ 378.7

Restructuring and Related Expenses

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.

Our most recent restructuring program was primarily associated with integrating our acquisition of GCA and reorganizing our healthcare business.

During 2020 and 2019, restructuring expenses were $ 7.6 million and $ 11.2 million, respectively.

By the end of 2020, we had substantially completed the restructuring program.

Restructuring and related expenses include employee severance, external support fees, lease exit costs, and other costs.

Our methodology to record these costs is described below.

As we do not have a history of consistently providing severance benefits, we recognize severance costs for employees who do not have formal employment agreements when management has committed to a restructuring plan and communicated those actions to impacted employees, such that the employee is able to determine the type and amount of benefits that they will receive upon termination.

In addition, if the employees are required to render service beyond the minimum retention period until they are terminated in order to receive the benefits, then a liability

is recognized ratably over the future service period.

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

Advertising costs are expensed as incurred.

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We recognize compensation costs associated with these awards in selling, general and administrative expenses.

For RSUs and certain performance share awards, the amount of compensation cost is measured based on the grant-date fair value of the equity instruments issued.

For RSUs and performance share awards, the amount of compensation cost is measured based on the grant-date fair value of the equity instruments issued.

Since our total shareholder return (“TSR”) performance share awards are performance awards with a market condition, the compensation costs associated with these awards are determined using a Monte Carlo simulation valuation model.

For RSUs and TSR awards, compensation cost is recognized over the period that an employee provides service in exchange for the award.

For RSUs and TSR performance share awards, compensation cost is recognized over the period that an employee provides service in exchange for the award.

We recognize compensation cost associated with other performance share awards over the requisite service period based on the probability of achievement of performance criteria.

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We accrue for loss contingencies when losses become probable and are reasonably estimable.

If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, then the minimum amount of the range is recorded as a liability.

If the reasonable estimate of the loss is a range and no amount within the range is a better

estimate, then the minimum amount of the range is recorded as a liability.

We recognize legal costs as an expense in the period incurred.

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Recently Adopted Accounting Standards

The Financial Accounting Standards Board (“FASB”) issued ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326) in June 2016 and subsequently issued these amendments to the initial guidance:

ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, and ASU 2020-03 (collectively, “Topic 326”).

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

Under Topic 326, an organization is required to measure all

expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported financial assets.

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

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

The asset and liability classes that we have identified to be in the scope of Topic 326 at the time of the adoption are trade accounts receivable, costs incurred in excess of amounts billed, guarantees, reinsurance recoverables, and notes receivable.

The adoption of this standard did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No.

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

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

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

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

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2019-12, Simplifying the Accounting for Income Taxes (Topic 740) .

This accounting update simplifies the accounting for income taxes and clarifies and amends existing income tax guidance.

Impacted areas include intraperiod tax allocations, interim period taxes, deferred tax liabilities with outside basis differences, franchise taxes, and transactions that result in the “step-up” of goodwill.

We adopted this standard, effective November 1, 2021, on a prospective basis.

The adoption of the standard did not have a material impact on our consolidated financial statements.

No other recently adopted accounting standards have had a significant impact on our fiscal 2021 consolidated financial statements

The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments–Equity Securities (Topic 321), Investments–Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) .

This accounting update clarifies the interaction between the accounting for investments in equity securities under Topic 321, investments accounted for under the equity method under Topic 323, and certain derivatives instruments under Topic 815.

We adopted this standard, effective November 1, 2021, on a prospective basis.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards

We do not expect any recently issued accounting pronouncements to have a material impact on our consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This ASU 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.

In January 2021, FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

This ASU clarifies that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions under Topic 848.

Effective November 1, 2023, we applied available practical expedients under ASC 848 to account for modifications, changes in critical terms, and updates to the designated hedged risks as qualifying changes have been made to applicable debt and derivative contracts as if they were not substantial.

We do not expect any other recently issued accounting pronouncements to have a material impact on our consolidated financial statements and related disclosures.

ACQUISITIONS AND DISPOSITIONS

Acquisition of RavenVolt

On September 1, 2022, we completed the acquisition of all of the equity interests of RavenVolt, Inc.

(“RavenVolt”), a nationwide provider of advanced turn-key microgrid systems utilized by diversified commercial and industrial customers, national retailers, utilities, and municipalities.

RavenVolt’s operations are included within our Technical Solutions segment.

The transaction met the definition of a business combination.

We applied the acquisition method of accounting.

The initial purchase price for the acquisition was approximately $ 170.0 million in cash at closing (subject to customary working capital and net debt adjustments) plus the potential of post-closing contingent consideration of up to $ 280.0 million.

The post closing contingent consideration is payable in cash in calendar years 2024, 2025, and 2026 if RavenVolt’s earnings before interest, taxes, depreciation, and amortization (EBITDA), as defined in the RavenVolt merger agreement, meets or exceeds certain defined targets.

The maximum contingent consideration that is payable in calendar years 2024, 2025, and 2026 is $ 75.0 million, $ 75.0 million, and $ 130.0 million, respectively.

If the EBITDA achieved for calendar years 2023 - 2025 cumulatively meets the defined EBITDA targets, the entire $ 280.0 million would be paid in calendar year 2026, minus any earn-out payments made in 2024 and 2025.

To estimate the fair value of the contingent consideration on the date of acquisition, we used the Real Options method.

The key assumptions used in our valuation were:

i) forecast of revenues and EBITDA margins, ii) the volatility associated with the EBITDA, iii) risk-adjusted discount rate applied to forecasted EBITDA, and (iv) the credit-adjusted discount rate related to the payment of the contingent consideration.

A simulation of one million scenarios was performed with the assistance of a third-party valuation specialist, resulting in a fair value for the cumulative contingent consideration for calendar years 2023 through 2025 totaling $ 59.0 million.

Subsequent changes in the estimates of the fair value and the actual payment of the contingent consideration in calendar 2024, 2025, and 2026 will be reflected as adjustments to the related liability and recognized within “Operating Expenses” in the Consolidated Statements of Comprehensive Income (Loss).

Preliminary Acquisition Accounting

The assets acquired and liabilities assumed were recognized at their acquisition date fair values.

The acquisition accounting is subject to change as the Company obtains additional information during the measurement period about the facts and circumstances that existed as of the acquisition date.

The final acquisition accounting may include changes to intangible assets, deferred taxes, and deferred revenue within the measurement period not to exceed one year from the acquisition date.

Goodwill arising from the RavenVolt Acquisition is not deductible for tax reporting purposes.

The following table summarizes the preliminary acquisition accounting based on currently available information:

(in millions)

Cash and cash equivalents $ 29.0

Trade accounts receivable 16.5

Other assets 3.9

Intangible assets 16.5

Goodwill 207.5

Trade accounts payable ( 5.2 )

Deferred revenue ( 31.6 )

Other accrued liabilities ( 3.2 )

Deferred income tax liability, net ( 4.4 )

Net assets acquired $ 229.0

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

The Consolidated Statements of Comprehensive Income (Loss) for the three and twelve months ended October 31, 2022, include revenues attributable to RavenVolt of $ 14.7 million, and operating loss of $ 0.2 million.

The operations of RavenVolt are included in our Technical Solutions segment.

Acquisition of Momentum

Effective April 7, 2022, we acquired Maybin Support Services Limited, Momentum Support Limited (UK), and Momentum Property Support Services Limited (collectively “Momentum”), a leading independent provider of facility services, primarily janitorial, across the Republic of Ireland and Northern Ireland, for a purchase price of approximately $ 54.8 million.

The transaction met the definition of a business combination.

The acquisition was accounted for under the acquisition method.

Accordingly, the assets acquired and liabilities assumed were recognized on the date of acquisition at their estimated fair values, with the excess of the purchase price recorded as goodwill, which is not deductible for income tax purposes.

At October 31, 2022, we recorded preliminary goodwill and intangibles of $ 41.6 million and $ 10.4 million, respectively.

The total assets acquired, excluding goodwill and intangibles, and liabilities assumed amounted to $ 20.3 million and $ 17.6 million, respectively.

The acquisition accounting is subject to adjustments within the measurement period not to exceed one year from the acquisition date.

The Consolidated Statements of Comprehensive Income (Loss) for the three and twelve months ended October 31, 2022, include revenues attributable to Momentum of $ 17.6 million and $ 40.4 million, respectively, and operating profit of $ 1.0 million and $ 2.4 million, respectively.

Acquisition of Able

On September 30, 2021, we completed the Able Acquisition for a net cash purchase price of $ 741.7 million.

Pursuant to the terms of the purchase agreement, approximately $ 12.1 million of the cash consideration was placed into escrow accounts, of which approximately $ 8.2 million was placed into escrow to satisfy any applicable indemnification claims for a period of 12 months.

To fund the cash purchase price, we used cash on hand and borrowed $ 325.0 million on September 30, 2021, at an average interest rate of 1.58 % from our revolving line of credit.

Final Acquisition Accounting

The following table summarizes the preliminary acquisition accounting on the date of acquisition as previously reported at October 31, 2021, and the final acquisition accounting.

(in millions) Preliminary Acquisition Accounting Adjustments Final Acquisition Accounting

Cash and cash equivalents $ 31.5 $ — $ 31.5

Trade accounts receivable (1)

159.3 ( 1.4 ) 157.9

Other assets 24.9 ( 5.7 ) 19.2

Customer relationships (2)

220.0 — 220.0

Trade names (2)

554.0 20.2 574.2

Trade accounts payable ( 27.0 ) ( 7.6 ) ( 34.6 )

Accrued compensation ( 38.2 ) ( 2.4 ) ( 40.6 )

Insurance claims ( 91.6 ) 13.8 ( 77.8 )

Other liabilities ( 41.7 ) ( 17.0 ) ( 58.7 )

Deferred income tax liability, net ( 59.5 ) 6.0 ( 53.5 )

Net assets acquired $ 741.7 $ 5.9 $ 747.6

(1) The gross amount of trade accounts receivable was $ 160.3 million, of which $ 2.5 million was deemed uncollectible.

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

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

This goodwill is not deductible for income tax purposes.

Financial Information

The Consolidated Statements of Comprehensive Income (Loss) for the fiscal year ended October 31, 2021, includes $ 101.1 million of revenue and $ 4.4 million of net income attributable to the operations of Able since the acquisition date.

The operations of Able are primarily included in our B&I segment.

The following table presents our unaudited pro forma results for 2021 and 2020 as though the Able Acquisition occurred on November 1, 2019.

These results include adjustments for the estimated amortization of intangible assets, interest expense, and the income tax impact of the pro forma adjustments at the statutory rate of 28 %.

These unaudited pro forma results do not reflect the cost of integration activities or benefits from expected revenue enhancements and synergies.

Years Ended October 31,

(in millions) 2021 2020

Pro forma revenue $ 7,223.2 $ 7,078.2

Pro forma income (loss) from continuing operations (1)

139.1 ( 7.9 )

( 1) These results were adjusted to exclude $ 17.3 million of acquisition-related costs incurred during 2021, which are included in selling, general and administrative expenses in the accompanying Consolidated Statements of Comprehensive Income (Loss).

Disposition of Assets

During 2022, we sold a group of customer contracts for healthcare technology management within our Technical Solutions segment for $ 8.5 million and recognized a gain of $ 7.6 million, which is included in “ Selling, general and administrative expenses ” in the accompanying Consolidated Statements of Comprehensive Income (Loss).

Disaggregation of Revenues

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

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

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

Year Ended October 31, 2022

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

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

Major Service Line

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— — — 344.2 — 344.2

$ 3,346.5 $ 987.1 $ 836.4 $ 668.8 $ 534.0 $ 6,372.9

Elimination of inter-segment revenues

Total $ 4,095.9 $ 1,445.2 $ 834.7 $ 804.0 $ 626.8 $ 7,806.6

Year Ended October 31, 2021

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

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

Major Service Line

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— — — 252.4 — 252.4

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

Elimination of inter-segment revenues

Total $ 2,853.8 $ 1,363.1 $ 830.8 $ 651.1 $ 529.8 $ 6,228.6

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

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

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

We also franchise certain operations under franchise agreements relating to our Linc Network and TEGG brands pursuant to franchise contracts.

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

(in millions) October 31, 2021 October 31, 2020

As of October 31,

(in millions) 2022 2021

Contract assets

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Balance at beginning of year $ 58.5

Acquisition additions (2)

Additional contract liabilities 213.9

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

Acquisition of Able

On September 30, 2021, we completed the Able Acquisition for a net cash purchase price of $ 741.7 million.

To fund the cash purchase price, we used cash on hand and borrowed $ 325.0 million on September 30, 2021, at an average interest rate of 1.58 % from our revolving line of credit.

Preliminary Acquisition Accounting

The assets acquired and liabilities assumed were recognized at their acquisition date fair values.

The acquisition accounting is subject to change as the Company obtains additional information during the measurement period about the facts and circumstances that existed as of the acquisition date.

The final acquisition accounting may include changes to customer relationships, goodwill, deferred taxes, legal matters, insurance claims reserves, and other liabilities.

Goodwill arising from the Able Acquisition is not deductible for tax reporting purposes.

The following table summarizes the preliminary acquisition accounting based on currently available information:

(in millions)

Cash and cash equivalents $ 31.5

Trade accounts receivable (1)

Other assets 24.9

Customer relationships (2)

Trade names (2)

Trade accounts payable ( 27.0 )

Accrued compensation ( 38.2 )

Insurance claims ( 91.6 )

Other liabilities ( 41.7 )

Deferred income tax liability, net ( 59.5 )

Net assets acquired $ 741.7

(1) The gross amount of trade accounts receivable was $ 160.6 million, of which $ 1.4 million was deemed uncollectible at October 31, 2021.

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

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

This goodwill is not deductible for income tax purposes.

Financial Information

The operations of Able are included in our B&I segment.

The following table presents our unaudited pro forma results for 2021 and 2020 as though the Able Acquisition occurred on November 1, 2019.

These results include adjustments for the estimated amortization of intangible assets, interest expense, and the income tax impact of the pro forma adjustments at the statutory rate of 28 %.

These unaudited pro forma results do not reflect the cost of integration activities or benefits from expected revenue enhancements and synergies.

Years Ended October 31,

(in millions) 2021 2020

Pro forma revenue $ 7,223.2 $ 7,078.2

Pro forma income (loss) from continuing operations (1)

139.1 ( 7.9 )

(2) Represents additions associated with the RavenVolt acquisition.

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

(in millions) Classification October 31, 2021 October 31, 2020

As of October 31,

(in millions) Classification 2022 2021

Operating leases Right-of-use assets $ 115.2 $ 126.5

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

(in millions) Year Ended

October 31, 2021 Years Ended

October 31, 2020

Years Ended October 31,

(in millions) 2022 2021

Operating lease costs:

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

(in millions) Year Ended

October 31, 2021 Year Ended

October 31, 2020

Years Ended October 31,

(in millions) 2022 2021

Short-term lease costs $ 43.3 $ 34.8

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Sublease income generated during the year ended October 31, 2022, was immaterial.

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

however, we do not expect a significant impact.

The amounts of future undiscounted cash flows related to the lease payments over the lease terms and the reconciliation to the present value of the lease liabilities as recorded on our Consolidated Balance Sheets as of October 31, 2022, are as follows:

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

October 31, 2021 Year Ended

October 31, 2020

Years Ended October 31,

Weighted-average remaining lease term (years)

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

(in millions) Year Ended

October 31, 2021 Year Ended

October 31, 2020

Years Ended October 31,

(in millions) 2022 2021

Cash paid for amounts included in the measurement of lease liabilities

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Lease assets obtained in exchange for new operating lease liabilities 23.1 20.6

(1) Excludes the amount initially capitalized in 2020 in conjunction with the adoption of Topic 842.

NET INCOME PER COMMON SHARE

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Income from continuing operations $ 230.4 $ 126.3 $ 0.2

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

Income from discontinued operations, net of taxes — — 0.1

Net income $ 230.4 $ 126.3 $ 0.3

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Assets held in funded deferred compensation plan (3)

Credit facility (4)

Debt facilities (4)

2 1,271.3 888.8

Interest rate swap assets (5)

Interest rate swap liabilities (5)

Preferred equity investment (6)

Contingent Consideration (7)

(1) Cash and cash equivalents are stated at nominal value, which equals fair value.

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Due to variable interest rates, the carrying value of outstanding borrowings under our line of credit and term loan approximates the fair value.

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

See Note 11, “Debt,” for further information.

(5) Represents interest rate swap derivatives designated as cash flow hedges.

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

At October 31, 2021 and 2020, our interest rate swaps are included in “Other accrued liabilities” and “Other noncurrent liabilities,” respectively, on the accompanying Consolidated Balance Sheets.

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

At October 31, 2021 and 2020, the Company had no financial assets or liabilities recorded at fair value using Level 3 inputs, and there were no transfers to or from Level 3 financial assets or liabilities during 2021 and one such transfer during 2020.

At October 31, 2022 and 2021, our interest rate swap assets and liabilities are included in “Other noncurrent assets” and “Other accrued liabilities,” respectively, on the accompanying Consolidated Balance Sheets.

See Note 11, “Debt,” for further information.

(6) We purchased $ 3.0 million in a preferred equity investment of a privately held company during the first quarter of 2022, which we include in “Other investments” on the accompanying Consolidated Balance Sheet.

Our investment does not have a readily determinable fair value;

therefore, we account for the investment using the measurement alternative under Topic 321 and measure the investment at initial cost less impairment, if any.

(7) At October 31, 2022, our contingent consideration payable related to RavenVolt acquisition is recorded at fair value as a liability on the acquisition date and is remeasured at each reporting date, based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

At September 1, 2022, we recorded the contingent consideration at fair value of $ 59.0 million.

After the acquisition date and until the contingency is resolved, the fair value of contingent consideration payable is adjusted each reporting period based primarily on the expected probability of achievement of the contingency targets which are subject to our estimate.

These changes in fair value are recognized within “Operating expenses” of the consolidated statements of comprehensive income (loss).

There was no change in the fair value of the contingent consideration payable between September 1, 2022 and October 31, 2022.

There were no transfers to or from Level 3 financial assets or liabilities during 2022 and 2021.

At October 31, 2021, the Company had no financial assets or liabilities recorded at fair value using Level 3 inputs.

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

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

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

If certain triggering events occur or if an annual impairment test is required,

we would evaluate these non-financial assets for impairment.

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

In connection with the reorganization of our T&M segment as discussed in Note 2, “Basis of Presentation and Significant Accounting Policies ,” we reallocated $ 95.0 million of goodwill from our B&I segment to our M&D segment using a relative fair value approach.

M&D’s goodwill balance was $ 502.2 million after the reorganization, which includes $ 407.2 million of previously recorded goodwill from our T&M segment.

In addition, we completed an assessment of any potential goodwill impairment for all reporting units immediately prior to and following the reallocation and determined that no impairment existed.

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 Enterprise Resource Planning (“ERP”) system implementation.

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The impairment charge reduced the carrying value to zero for those components and is recorded in “Selling, general and administrative expenses” on our Consolidated Statements of Comprehensive Income (Loss) for the year ended October 31, 2021.

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

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

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

The fair value of customer relationships

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

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

PROPERTY, PLANT AND EQUIPMENT

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(1) For 2022, 2021, and 2020, depreciation expense was $ 40.3 million, $ 45.0 million, and $ 48.0 million, respectively.

Finance Leases Included in Property, Plant and Equipment

As of October 31,

(in millions) 2021 2020

Transportation equipment $ 19.8 $ 19.4

Furniture and fixtures 0.2 0.2

Accumulated depreciation 16.3 13.6

Total $ 3.7 $ 6.1

GOODWILL AND OTHER INTANGIBLE ASSETS

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

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

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

Acquisition 554.0 — — — — —

Foreign currency translation

1.8 — — 0.4 1.2 3.4

Impairment (1)

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

Balance at October 31, 2021 $ 1,129.8 $ 407.2 $ 459.3 $ 69.9 $ 162.7 $ 2,228.9

Acquisition (2)

Acquisitions (1)

61.7 — — — 207.5 269.2

Reallocation (2)

( 95.0 ) 95.0 — — — —

Foreign currency translation ( 8.7 ) — — ( 1.1 ) ( 2.7 ) ( 12.6 )

Balance at October 31, 2022 $ 1,087.9 $ 502.2 $ 459.3 $ 68.7 $ 367.4 $ 2,485.6

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

(2) During 2021, goodwill increased as a result of the Able Acquisition.

See Note 4, “Acquisitions,” for additional information.

During the second quarter of 2020, we recognized a non-cash impairment charge totaling $ 163.8 million in three goodwill reporting units ($ 99.3 million related to Education, $ 55.5 million related to Aviation, and $ 9.0 million related to our U.K.

Technical Solutions business) as part of an interim impairment test performed as a result of a triggering event arising from the Pandemic.

The fair values of the goodwill reporting units were determined using a combination of the market approach and income approach.

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

The income approach estimates fair value of a reporting unit by using discounted cash flows that include significant management assumptions, such as revenue growth rates, operating margins, weighted average cost of capital, and future economic and operating conditions.

We did not record goodwill impairment charges during fiscal year 2021.

(1) During 2022, goodwill increased primarily as a result of the RavenVolt and Momentum acquisitions.

See Note 3, “Acquisitions and Dispositions,” for additional information.

(2) In connection with the reorganization of our T&M segment in Q1 2022 we reallocated $ 95.0 million of goodwill from our B&I segment to our M&D segment using a relative fair value approach.

We did not record goodwill impairment charges during fiscal years 2022 and 2021.

Other Intangible Assets

October 31, 2021 October 31, 2020

As of October 31,

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

Customer contracts and relationships $ 801.6 $ ( 442.1 ) $ 359.6 $ 793.8 $ ( 378.5 ) $ 415.3

$ 793.8 $ ( 378.5 ) $ 415.3 $ 573.1 $ ( 333.6 ) $ 239.6

Trademarks and trade names (1)

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15.3 ( 2.4 ) 12.9 0.5 ( 0.4 ) 0.1

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

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

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

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

We did no t record impairment charges on other intangible assets during fiscal year 2021.

(2) Reflects additions from the Able Acquisition in 2021.

See Note 4, “Acquisitions,” for additional information.

$ 838.4 $ ( 459.8 ) $ 378.5 $ 814.1 $ ( 389.3 ) $ 424.8

(1) Additions reflect the Momentum and RavenVolt acquisitions in 2022.

See Note 3, “Acquisitions and Dispositions,” for additional information.

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

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Insurance-Related Balances and Activity

(in millions) October 31, 2021 October 31, 2020

As of October 31,

(in millions) 2022 2021

Insurance claim reserves, excluding medical and dental $ 551.0 $ 574.8

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Acquisition (1)

( 8.2 ) 91.6 0.2

Net balance, October 31 (2)

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(1) During 2021, insurance reserves increased as a result of the Able Acquisition.

See Note 4, “Acquisitions,” for additional information.

See Note 3, “Acquisitions and Dispositions,” for additional information.

(2) Includes reserves related to discontinued operations of approximately $ 0.2 million for 2022, $ 0.3 million for 2021 and $ 0.5 million for 2020.

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Total $ 227.8 $ 242.3

CREDIT FACILITY

Components of Debt

As of October 31,

(in millions) 2022 2021

Current portion of long-term debt

Gross term loan $ 32.5 $ 32.5

Unamortized deferred financing costs ( 1.0 ) ( 1.1 )

Current portion of term loan $ 31.5 $ 31.4

Receivables facility 150.0 —

Current portion of debt $ 181.5 $ 31.4

Long-term debt

Gross term loan $ 568.8 $ 601.3

Unamortized deferred financing costs ( 2.4 ) ( 3.5 )

Total noncurrent portion of term loan 566.3 597.8

Revolving line of credit (1)(2)

Long-term debt $ 1,086.3 $ 852.8

(1) Standby letters of credit amounted to $ 158.3 million at October 31, 2022.

(2) At October 31, 2022, we had borrowing capacity of $ 612.9 million.

At October 31, 2022, the weighted average interest rate on our outstanding borrowings was 4.97 %.

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

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

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

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

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

On May 28, 2020, we amended our Credit Facility with 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 the financial covenants under the Credit Facility, including:

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

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

April 30, 2022;

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

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

The First 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 required 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 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.

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

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

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

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

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

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

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

On June 28, 2021, the Company amended and restated the Credit Facility with the Second Amendment, 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 under the First Amendment as well as other restrictions that limited our ability to make acquisitions, share repurchases, and other defined restricted payments.

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.

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Additionally, 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.

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 a rate equal to the EURIBOR and the SONIA reference rates, 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.

On November 1, 2022, we amended our Amended Credit Facility to replace the benchmark rate at which U.S.-dollar-denominated borrowings bear interest from LIBOR to the forward-looking SOFR term rate administered by CME Group Benchmark Administration Limited (“Term SOFR”).

As a result of these amendments, we can borrow at Term SOFR plus a credit spread adjustment of 0.10 % subject to a floor of zero , see Note 18, “Subsequent Events.”

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.

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and a change in control of the Company.

If certain events of default occur, including certain cross-defaults, insolvency, change in control, or violation of specific covenants, then the lenders can terminate or suspend our access to the

Amended Credit Facility, declare all amounts outstanding (including all accrued interest and unpaid fees) to be immediately due and payable, and require that we cash collateralize the outstanding standby letters of credit.

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

We incurred deferred financing costs of $ 6.4 million in conjunction with the Second Amendment and carried over $ 6.2 million of unamortized deferred financing from the initial execution, First Amendment, and previous amendments of the Credit Facility.

Total deferred financing costs of $ 12.6 million, consisting of $ 4.9 million related to the term loan and $ 7.7 million related to the revolver, are being amortized to interest expense over the term of the Amended Credit Facility.

Credit Facility Information

(in millions) October 31, 2021 October 31, 2020

Current portion of long-term debt

Gross term loan $ 32.5 $ 120.0

Unamortized deferred financing costs ( 1.1 ) ( 3.3 )

Current portion of term loan $ 31.4 $ 116.7

Long-term debt

Gross term loan $ 601.3 $ 560.0

Unamortized deferred financing costs ( 3.5 ) ( 2.3 )

Total noncurrent portion of term loan 597.8 557.7

Revolving line of credit (1)(2)

Long-term debt $ 852.8 $ 603.0

(1) Standby letters of credit amounted to $ 167.7 million at October 31, 2021.

(2) At October 31, 2021, we had borrowing capacity of $ 875.0 million.

Term Loan Maturities

On March 1, 2022, we entered into a new uncommitted receivable repurchase facility (the “Receivables Facility”) of up to $ 150 million, which expires on February 28, 2023.

The Receivables Facility allows the Company to sell a portfolio of available and eligible outstanding U.S.

trade accounts receivable to a participating institution and simultaneously agree to repurchase them generally on a monthly basis.

Under this arrangement, we make floating rate interest payments equal to the forward-looking term rate based on Secured Overnight Financing Rate (“SOFR”) plus 1.05 %.

These interest payments are payable monthly in arrears.

The repurchase price of the receivables in the facility is the original face value.

Outstanding receivables must be repurchased on a date agreed upon by both the buyer and seller, generally on a monthly basis, and on the termination date of the repurchase facility.

This facility is considered a secured borrowing and provides the buyer with customary rights of termination upon the occurrence of certain events of default.

We have guaranteed all of the sellers’ obligations under the facility.

We account for the sale of receivables under the Receivables Facility as short-term debt and continue to carry the receivables on the Consolidated Balance Sheets, primarily as a result of the requirement to repurchase receivables sold.

As of October 31, 2022, there were $ 150.0 million in borrowings on receivables pledged as collateral under the Receivables Facility.

Long-Term Loan Maturities

During 2022, we made principal payments under the term loan of $ 32.5 million.

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Notional Amount Fixed Interest Rate Effective Date Maturity Date

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

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

At October 31, 2021 and 2020, amounts recorded in AOCL for interest rate swaps were a loss of $ 0.2 million, net of taxes of $ 0.3 million, and a loss of $ 3.3 million, net of taxes of $ 0.9 million, respectively.

$ 100.0 million 1.78 % February 9, 2022 June 28, 2026

$ 150.0 million 1.92 % February 25, 2022 June 28, 2026

$ 100.0 million 2.98 % May 4, 2022 June 28, 2026

$ 129.4 million (1)

2.89 % July 7, 2022 June 28, 2026

$ 170.6 million (1)

2.86 % July 18, 2022 June 28, 2026

(1) In July 2022, we entered into interest rate swap agreements with notional values totaling $ 300.0 million at inception.

The notional amount reduces to $ 250.0 million in April 2024, $ 175.0 million in October 2024, and $ 100.0 million in October 2025 before maturing on June 28, 2026

At October 31, 2022 and 2021, amounts recorded in AOCL for interest rate swaps were a gain of $ 26.8 million, net of taxes of $ 10.1 million, and a loss of $ 0.2 million, net of taxes of $ 0.3 million, respectively.

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

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At October 31, 2022, the total amount expected to be reclassified from AOCL to earnings during the next 12 months was $ 7.3 million, net of a taxes of $ 2.7 million.

At November 1, 2022, we amended our Amended Credit Facility to replace LIBOR with Term SOFR and transitioned our interest rate swaps to a SOFR-based rate.

We also entered into a new interest rate swap agreement with a notional value of $ 170.0 million, a fixed interest rate of 3.81 %, and a maturity date of June 28, 2026, see Not e 18 , “Subsequent Events.”

EMPLOYEE BENEFIT PLANS

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Fair value of assets 6.2 8.4

(1) At October 31, 2021, total projected benefit obligations related to unfunded plans was $ 8.2 million.

At October 31, 2020, all plans were either unfunded or underfunded.

(1) At October 31, 2022 and 2021, total projected benefit obligations related to unfunded plans were $ 12.2 million and $ 8.2 million, respectively.

At October 31, 2022, assets of the Plans were invested 31 % in equities and 69 % in fixed income.

The expected return on assets was $ 0.3 million in 2021 and $ 0.4 million in 2020 and 2019.

The expected return on assets was $ 0.4 million in 2022, $ 0.3 million in 2021, and $ 0.4 million in 2020.

The aggregate net periodic benefit cost for all Plans was $ 0.1 million, $ 0.3 million, and $ 0.2 million for 2022, 2021, and 2020, respectively.

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We maintain deferred compensation plans that permit eligible employees and directors to defer a portion of their compensation.

At October 31, 2021 and 2020, the total liability of all deferred compensation was $ 32.1 million (including $ 18.0 million assumed from the Able Acquisition) and $ 13.6 million, respectively, and these amounts are included in “Other accrued liabilities” and “Other noncurrent liabilities” on the accompanying Consolidated Balance Sheets.

At October 31, 2022 and 2021, the total liability of all deferred compensation was $ 27.5 million and $ 32.1 million, respectively (including $ 14.2 million and $ 18.0 million assumed from the Able Acquisition, respectively), and these amounts are included in “Other accrued liabilities” and “Other noncurrent liabilities” on the accompanying Consolidated Balance Sheets.

Under one of our deferred compensation plans, a Rabbi trust was created to fund the obligations, and we are required to contribute a portion of the deferred compensation contributions for eligible participants.

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4.4 6.6 4.3 N/A*

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

Green 1/31/2020

5.3 7.1 11.7 N/A*

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

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5.8 3.9 4.3 N/A*

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

12.8 5.3 7.1 N/A*

Western Conference of Teamsters Pension Plan 91-6145047 /

Green 12/31/2019

2.2 2.0 2.5 N/A*

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Total Contributions $ 73.8 $ 56.8 $ 55.5

$ 56.8 $ 55.5 $ 66.6

*Not applicable

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(5) Indicates whether our contribution in 2022 included an amount as imposed by a plan in the red zone in addition to the contribution rate specified in the applicable collective bargaining agreement.

(6) The total contributions for fiscal year 2021 includes $ 4.6 million contributed by Able since the acquisition .

Multiemployer Pension Plans for which ABM is a Significant Contributor

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(as of the plan’s year end)

Apartment Employees Trust Fund 12/31/2021, 12/31/2020, and 12/31/2019

Arizona Sheet Metal Pension Trust Fund* 6/30/2021, 6/30/2020 and 6/30/2019

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Contract Cleaners Service Employees’ Pension Plan* 12/31/2021, 12/31/2020, and 12/31/2019

Firemen & Oilers Pension Plan of SEIU Local 1* 7/31/2020, 7/31/2019, and 7/31/2018

IUOE Stationary Engineers Local 39 Pension Trust Fund 12/31/2020, 12/13/2019, and 12/31/2018

Massachusetts Service Employees Pension Plan* 12/31/2021, 12/31/2020, and 12/31/2019

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727 Pension Plan* 2/28/2021, 2/29/2020, and 2/28/2019

Teamsters Local 210 Pension Fund, Local 210 Annuity Fund 12/31/2021, 12/31/2020, and 12/31/2019

Local 74 Welfare Fund 12/31/2021, 12/31/2020, and 12/31/2019

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

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

At October 31, 2021, the total amount accrued for probable litigation losses where a reasonable estimate of the loss could be made was $ 18.5 million.

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

At October 31, 2022, the total amount accrued for probable litigation losses where a reasonable estimate of the loss could be made was $ 29.7 million, including probable litigation losses of $ 19.2 million related to the Able Acquisition as described in Note 3, “Acquisition and Dispositions.” We do not accrue for contingent losses that, in our judgment, are considered to be reasonably possible but not probable.

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

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

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

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

Our management currently estimates the range of loss for reasonably possible losses for which a reasonable estimate of the loss can be made is between zero and $ 3 million, including $ 1.0 million related to the Able Acquisition as described in Note 3, “Acquisition and Dispositions.” Factors underlying this estimated range of loss may change from time to time, and actual results may vary significantly from this estimate.

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

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ABM Janitorial Services filed on April 7, 2006, pending in the Superior Court of California, County of San Francisco (the “Bucio case”)

The Bucio case is a class action pending in San Francisco Superior Court that alleges we failed to provide legally required meal periods and make additional premium payments for such meal periods, pay split shift premiums when owed, and reimburse janitors for travel expenses.

There is also a claim for penalties under the California Labor Code Private Attorneys General Act (“PAGA”).

On April 19, 2011, the trial court held a hearing on plaintiffs’ motion to certify the class.

The Bucio case was a class action lawsuit pending in San Francisco Superior Court that alleged we failed to provide legally required meal periods and make additional premium payments for such meal periods, pay split shift premiums when owed, and reimburse janitors for travel expenses.

There is also a claim for penalties under the California Labor Code Private Attorneys General Act (“PAGA”).On April 19, 2011, the trial court held a hearing on plaintiffs’ motion to certify the class.

At the conclusion of that hearing, the trial court denied plaintiffs’ motion to certify the class.

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On July 7, 2021, the Company entered into a class action settlement and release agreement to settle the Bucio case for $ 140 million and to obtain a release of the certified class claims that were asserted in the Bucio case.

The settlement will also resolve the PAGA claim.

The settlement also resolved the PAGA claim.

The release of the certified class claims covers the time period from April 7, 2002, through April 30, 2013.

The release of the PAGA claim covers the time period from November 15, 2005, through July 18, 2021.

Any attorneys’ fees awarded by the trial court and all costs of notice and claims

administration will be paid from the $ 140 million settlement fund.

Employees who will be a part of the settlement will receive payments based on the number of pay periods they worked.

The settlement agreement is contingent upon the approval of the trial court.

On August 11, 2021, the plaintiffs filed the motion for preliminary approval of class action settlement with the trial court.

On December 7, 2021, the trial court issued its order granting preliminary approval of the class action settlement.

Members of the class will receive notice of the settlement, and there will be an opportunity for them to object to the settlement before the trial court grants final approval of the settlement.

The final approval hearing with the trial court is currently scheduled to take place on March 16, 2022.

No payments will be made to employees until after the settlement is finally approved by the trial court.

The Company has recorded a $ 142.9 million settlement accrual, which includes an accrual of $ 2.9 million of related payroll taxes, for the Bucio case within “Other current liabilities” on the unaudited Consolidated Balance Sheets as of October 31, 2021, and $ 142.9 million of related expense in “Selling, general and administrative expenses” in our unaudited Consolidated Statements of Comprehensive Income (Loss) for the year ended October 31, 2021.

The release of the PAGA claim covers the time period from November 15,

2005, through July 18, 2021.

Final approval of the class settlement, approval of Plaintiffs’ counsels’ request for attorneys’ fees, and judgment was entered by the court on April 7, 2022.

On April 20, 2022, we paid to a third-party settlement administrator $ 143.8 million for the Bucio settlement, of which $ 142.9 million was previously recorded within other current liabilities, and recorded $ 0.9 million of related expense in “Selling, general and administrative expenses” in our Consolidated Statements of Comprehensive Income (Loss) for the year ended October 31, 2022.

We recorded $ 142.9 million of related expense in “Selling, general and administrative expenses” in our Consolidated Statements of Comprehensive Income (Loss) during the year ended October 31, 2021.

On April 29, 2022, employees who are a part of the settlement were mailed payments by the third-party settlement administrator based on the number of pay periods they worked.

In addition, a payment to California’s Labor Workforce and Development Agency to resolve the PAGA claims was sent on April 29, 2022.

PREFERRED AND COMMON STOCK

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

The timing of repurchases is at our discretion and will depend upon several factors, including market and business conditions, future cash flows, share price, share availability, and other factors at our discretion.

The timing of repurchases is at our discretion and will depend upon several factors, including market and business conditions, future cash flows, share price, share availability, and other factors.

Repurchased shares are retired and returned to an authorized but unissued status.

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Repurchase Activity

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

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

We repurchased shares under the Share Repurchase Program during 2022, as summarized below.

At October 31, 2022, authorization for $ 47.4 million of repurchases remained under the Share Repurchase Program.

Effective December 9, 2022, our Board of Directors expanded the Share Repurchase Program by an additional $ 150.0 million.

There were no share repurchases during 2021.

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SHARE-BASED COMPENSATION PLANS

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

We use various share-based compensation plans to provide incentives for our key employees and non-employee members of our Board of Directors.

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

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On March 24, 2021, our stockholders approved the 2021 Equity and Incentive Compensation Plan (the “2021 Equity Plan”).

The 2021 Equity Plan is an omnibus plan that provides for a variety of equity and equity-based award vehicles, including stock options, stock appreciation rights, RSUs, performance shares, and other share-based awards.

based awards.

Shares subject to awards that terminate without vesting or exercise are available for future awards under the 2021 Equity Plan.

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RSUs and Dividend Equivalent Rights

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

RSUs granted to eligible employees in 2020 and 2021 generally vest ratably over three years .

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

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

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

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At October 31, 2022, total unrecognized compensation cost, net of estimated forfeitures, related to RSUs was $ 18.5 million, which is expected to be recognized ratably over a weighted-average vesting period of 1.7 years.

In 2021, 2020, and 2019, the weighted-average grant date fair value per share of awards granted was $ 40.22 , $ 36.11 , and $ 34.48 , respectively.

In 2022, 2021, and 2020, the weighted-average grant date fair value per share of awards granted was $ 41.63 ,

$ 40.22 , and $ 36.11 , respectively.

In 2022, 2021, and 2020, the total grant date fair value of RSUs vested and converted to shares of ABM common stock was $ 16.4 million, $ 16.9 million, and $ 6.1 million, respectively.

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Impact from goodwill impairment — — 81.7

Transition tax on foreign earnings — — ( 1.1 )

Remeasurement of U.S.

deferred taxes — — ( 0.3 )

Nondeductible expenses 1.7 2.9 4.4

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Effective tax rate 25.7 % 29.8 % 99.6 %

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Act”) was enacted into law.

Among other provisions, it reduced the federal corporate income tax rate from 35% to 21% and required companies to pay a one-time transition tax on the deemed repatriation of indefinitely reinvested earnings of international subsidiaries.

statutory federal tax rate for fiscal 2019 and future years was reduced to 21%.

Other provisions under the Tax Act became effective for us in fiscal 2019, including limitations on deductibility of interest and executive compensation, as well as a new minimum tax on Global Intangible Low-Taxed Income (“GILTI”), which we have elected to account for as a period cost.

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

During 2022 and 2021, we had effective tax rates of 25.7 % and 29.8 %, respectively, resulting in a provision for tax of $ 79.6 million and $ 53.5 million, respectively.

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

Our effective tax rate for 2022 was impacted by the following items:

a $ 8.1 million benefit for uncertain tax positions with expiring statutes;

a $ 1.4 million benefit for share-based compensation;

and a $ 1.3 million provision for true-ups.

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

a $ 3.0 million provision for nondeductible transaction costs;

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and a $ 1.2 million benefit for energy efficiency incentives.

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

a $ 5.7 million benefit from true-ups;

a $ 2.3 million provision related to WOTC;

a $ 2.1 million benefit from energy efficiency incentives;

and a $ 1.1 million benefit from change of tax reserves.

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

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

The CARES Act provides various tax provisions, including payroll tax provisions, which we have evaluated for applicability.

Through December 31, 2020, we deferred approximately $ 132 million of payroll tax, which the CARES Act requires to be remitted in equal parts by December 31, 2021, and December 31, 2022.

In response to the pandemic, Congress enacted the CARES Act in March 2020.

The CARES Act provides various tax provisions, including payroll tax provisions.

Through December 31, 2020, we deferred approximately $ 132 million of payroll tax.

The deferred payroll tax has been remitted in full:

$ 66 million was paid in December 2021 and the remaining $ 66 million was paid in December 2022.

The CARES Act did not have a material impact on our income tax provision.

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Tax accounting method change ( 17.1 ) ( 15.8 )

Other comprehensive Income ( 9.0 ) —

Other ( 11.8 ) ( 10.6 )

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At October 31, 2022 and 2021, accrued interest and penalties were $ 0.7 million and $ 1.6 million, respectively.

For interest and penalties, we recognized an expense of $ 0.1 million and $ 0.4 million in 2021 and 2020, respectively, and a benefit of $ 0.2 million in 2019.

For interest and penalties, we recognized a $ 0.9 million benefit, a $ 0.1 million expense, and a $ 0.4 million benefit in 2022, 2021, and 2020, respectively.

Reconciliation of Total Unrecognized Tax Benefits

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Generally, for the majority of state and foreign jurisdictions where we do business, periods prior to fiscal 2019 are no longer subject to examination.

We are currently being examined by the IRS and tax authorities of California, New York City, and Montana.

We are currently being examined by the tax authorities of California, New York City, Montana, and Massachusetts.

SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

Our current reportable segments consist of B&I, T&M, Education, Aviation, and Technical Solutions, as further described below.

The newly acquired Able is integrated within our B&I reportable segment.

Our current reportable segments consist of B&I, M&D, Education, Aviation, and Technical Solutions, as further described below.

The recently acquired Momentum is integrated within our B&I reportable segment, and RavenVolt is positioned within Technical Solutions.

REPORTABLE SEGMENTS AND DESCRIPTIONS

B&I B&I, our largest reportable segment, encompasses janitorial, facilities services, and parking services for commercial real estate properties, sports and entertainment venues, and traditional hospitals and non-acute healthcare facilities.

B&I B&I, our largest reportable segment, encompasses janitorial, facilities engineering, and parking services for commercial real estate properties (including corporate offices for high tech clients), sports and entertainment venues, and traditional hospitals and non-acute healthcare facilities.

B&I also provides vehicle maintenance and other services to rental car providers.

T&M T&M provides janitorial, facilities services, and parking services to industrial and high-tech manufacturing facilities.

M&D M&D provides integrated facility services, engineering, janitorial, and other specialized services in different types of manufacturing, distribution, and data center facilities.

Manufacturing facilities include traditional motor vehicles, electric vehicles, batteries, pharmaceuticals, steel, semiconductors, chemicals, and many others.

Distribution facilities include e-commerce, cold storage, logistics, general warehousing, and others.

Education Education delivers janitorial, custodial, landscaping and grounds, facilities engineering, and parking services for public school districts, private schools, colleges, and universities.

Aviation Aviation supports airlines and airports with services ranging from parking and janitorial to passenger assistance, catering logistics, air cabin maintenance, and transportation.

Technical Solutions Technical Solutions specializes in mechanical and electrical services.

Technical Solutions Technical Solutions specializes in facility infrastructure, mechanical and electrical services, including EV power design, installation and maintenance, as well as microgrid systems installations.

These services can also be leveraged for cross-selling across all of our industry groups, both domestically and internationally.

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Business & Industry $ 4,095.9 $ 2,853.8 $ 2,856.4

Technology & Manufacturing 987.1 956.0 917.0

Manufacturing & Distribution 1,445.2 1,363.1 1,151.4

Education 834.7 830.8 805.1

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Technical Solutions 626.8 529.8 504.0

Elimination of inter-segment revenues ( 144.2 ) ( 122.4 ) ( 127.7 )

Government Services — — —

$ 7,806.6 $ 6,228.6 $ 5,987.6

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Business & Industry $ 334.9 $ 285.9 $ 229.2

Technology & Manufacturing 103.8 84.4 72.5

Manufacturing & Distribution 161.8 155.5 108.0

Education (1)

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Adjustment for income from unconsolidated affiliates, included in Aviation ( 2.4 ) ( 2.1 ) ( 2.2 )

Adjustment for tax deductions for energy efficient government

buildings, included in Technical Solutions ( 1.2 ) ( 2.1 ) 0.1

Adjustment for tax deductions for energy efficient government buildings, included in Technical Solutions

( 0.9 ) ( 1.2 ) ( 2.1 )

348.8 206.3 95.7

Income from unconsolidated affiliates 2.4 2.1 2.2

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Business & Industry $ 47.1 $ 18.4 $ 17.3

Technology & Manufacturing 11.3 12.5 14.3

Manufacturing & Distribution 13.4 13.4 14.1

Education 25.4 30.5 33.7

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$ 7,806.6 $ 6,228.6 $ 5,987.6

(1) Substantially all of our long-lived assets are related to United States operations.

(1) Substantially all of our long-lived assets are related to U.S.

SUBSEQUENT EVENTS

Our strategic transformation under ELEVATE will result in changes to our reportable segments in fiscal year 2022.

To align the Company’s operations with the new strategic initiative, the Manufacturing & Distribution (“M&D”) industry group will be created, replacing T&M.

As part of our focus to better serve our manufacturing and distribution clients, M&D will maintain our large manufacturing clients and add clients in the distribution sector from B&I.

In addition, technology clients served by T&M will shift into B&I.

This organizational structure change was effective as of November 1, 2021.

We will begin reporting our results under the new reportable segment of M&D beginning in the first quarter of fiscal year 2022.

Transition to SOFR

At November 1, 2022, we amended our Amended Credit Facility pursuant to the LIBOR Transition Amendment and the Fifth Amendment to replace the benchmark rate at which U.S.-dollar-denominated borrowings bear interest from LIBOR to the forward-looking SOFR term rate administered by CME Group Benchmark Administration Limited.

As a result of these amendments, we can borrow at Term SOFR plus a credit spread adjustment of 0.10 % subject to a floor of zero .

In addition, we entered into a new interest rate swap agreement with a notional value of $ 170.0 million, a fixed interest rate of 3.81 %, and a maturity date of June 28, 2026.

We also transitioned all our interest rate swaps to a SOFR-based rate.

We applied available practical expedients under ASC 848 to account for these modifications, changes in critical terms, and updates to the designated hedged risks as qualifying changes have been made to applicable debt and derivative contracts as if they were not substantial.

These modifications are not expected to have a significant impact on our financial statements.

Share Repurchase Program

In 2019, our Board of Directors authorized a program to repurchase up to $ 150.0 million of our common stock.

Effective December 9, 2022, authorization for $ 47.4 million of repurchases remained under our Share Repurchase Program, and our Board of Directors expanded the Share Repurchase Program by an additional $ 150.0 million.

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

The timing of repurchases is at our discretion and will depend upon several factors, including market and business conditions, future cash flows, share price, and share availability.

Repurchased shares are retired and returned to an authorized but unissued status.

The Share Repurchase Program may be suspended or discontinued at any time without prior notice.

At December 9, 2022, authorization for $ 197.4 million of repurchases remained under the Share Repurchase Program.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data