ABM INDUSTRIES INC /DE/ 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors ABM Industries Incorporated: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of ABM Industries Incorporated and subsidiaries (the Company) as of October 31, 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). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended October 31, 2022, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of October 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated December 21, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 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 44 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 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 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 As discussed in Notes 2 and 10 to the consolidated financial statements, the Company uses a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. The balance of casualty program insurance reserves, net of recoverables, as of October 31, 2022 amounted to $479.9 million. The Company engages actuaries to estimate its self-insurance liabilities at least annually. 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. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s self-insurance liability process, including controls related to (1) evaluation of claims information sent to the actuary, (2) estimation of incurred but not reported claims based on the application of loss development factors to historical claims experience, and (3) evaluation of the actuarial report and the external actuarial specialist’s qualifications and competency. We evaluated the Company’s historical ability to estimate self-insurance liabilities by comparing the prior year recorded amounts to the subsequent claim development. We tested a sample of the claims data utilized by the Company’s actuaries by comparing it to underlying claims details; and involved an actuarial professional with specialized skills and knowledge who assisted in the: • assessment of the actuarial models used by the Company for consistency with generally accepted actuarial standards and 45 • development of an actuarial estimate of self-insurance liabilities based on the Company’s underlying historical paid and incurred loss data for comparison with the liabilities recorded by the Company /s/ KPMG LLP We have served as the Company’s auditor since 1980. New York, New York December 21, 2022 46 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors ABM Industries Incorporated: Opinion on Internal Control Over Financial Reporting We have audited ABM Industries Incorporated and subsidiaries' (the Company) internal control over financial reporting as of October 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of October 31, 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. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP 47 New York, New York December 21, 2022 48 ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS October 31, (in millions, except share and per share amounts) 2022 2021 ASSETS Current assets Cash and cash equivalents $ 73.0 $ 62.8 Trade accounts receivable, net of allowances of $ 22.6 and $ 32.7 at October 31, 2022 and 2021, respectively 1,278.7 1,137.1 Costs incurred in excess of amounts billed 75.8 52.5 Prepaid expenses 82.1 88.7 Other current assets 51.6 60.0 Total current assets 1,561.2 1,401.2 Other investments 14.5 11.8 Property, plant and equipment, net of accumulated depreciation of $ 296.9 and $ 274.7 at October 31, 2022 and 2021, respectively 125.4 111.9 Right-of-use assets 115.2 126.5 Other intangible assets, net of accumulated amortization of $ 459.8 and $ 389.3 at October 31, 2022 and 2021, respectively 378.5 424.8 Goodwill 2,485.6 2,228.9 Other noncurrent assets 188.5 131.2 Total assets $ 4,868.9 $ 4,436.2 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Current portion of debt, net $ 181.5 $ 31.4 Trade accounts payable 315.5 289.4 Accrued compensation 246.6 238.0 Accrued taxes—other than income 124.7 124.9 Insurance claims 171.4 171.4 Income taxes payable 6.6 11.4 Current portion of lease liabilities 30.3 31.8 Other accrued liabilities 276.5 387.4 Total current liabilities 1,353.2 1,285.8 Long-term debt, net 1,086.3 852.8 Long-term lease liabilities 104.5 116.6 Deferred income tax liability, net 89.7 22.5 Noncurrent insurance claims 387.7 413.3 Other noncurrent liabilities 126.0 123.5 Noncurrent income taxes payable 4.2 12.5 Total liabilities 3,151.7 2,827.0 Commitments and contingencies Stockholders’ Equity Preferred stock, $ 0.01 par value; 500,000 shares authorized; none issued — — Common stock, $ 0.01 par value; 100,000,000 shares authorized; 65,587,894 and 67,302,449 shares issued and outstanding at October 31, 2022 and 2021, respectively 0.7 0.7 Additional paid-in capital 675.5 750.9 Accumulated other comprehensive loss, net of taxes ( 16.2 ) ( 22.5 ) Retained earnings 1,057.2 880.2 Total stockholders’ equity 1,717.2 1,609.2 Total liabilities and stockholders’ equity $ 4,868.9 $ 4,436.2 See accompanying notes to consolidated financial statements. 49 ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Years Ended October 31, (in millions, except per share amounts) 2022 2021 2020 Revenues $ 7,806.6 $ 6,228.6 $ 5,987.6 Operating expenses 6,757.5 5,258.2 5,157.0 Selling, general and administrative expenses 628.3 719.2 506.1 Restructuring and related expenses — — 7.6 Amortization of intangible assets 72.1 45.0 48.4 Impairment loss of goodwill and other intangibles — — 172.8 Operating profit 348.8 206.3 95.7 Income from unconsolidated affiliates 2.4 2.1 2.2 Interest expense ( 41.1 ) ( 28.6 ) ( 44.6 ) Income from continuing operations before income taxes 310.0 179.8 53.3 Income tax provision ( 79.6 ) ( 53.5 ) ( 53.1 ) Income from continuing operations 230.4 126.3 0.2 Income from discontinued operations, net of taxes — — 0.1 Net income 230.4 126.3 0.3 Other comprehensive income (loss) Interest rate swaps 36.7 4.5 ( 7.6 ) Foreign currency translation and other ( 19.8 ) 5.3 ( 1.8 ) Income tax (provision) benefit ( 10.5 ) ( 1.5 ) 2.4 Comprehensive income (loss) $ 236.9 $ 134.5 $ ( 6.6 ) Net income per common share — Basic Income from continuing operations $ 3.44 $ 1.87 $ 0.00 Income from discontinued operations — — — Net income $ 3.44 $ 1.87 $ 0.00 Net income per common share — Diluted Income from continuing operations $ 3.41 $ 1.86 $ 0.00 Income from discontinued operations — — — Net income $ 3.41 $ 1.86 $ 0.00 Weighted-average common and common equivalent shares outstanding Basic 67.1 67.4 66.9 Diluted 67.5 68.0 67.3 See accompanying notes to consolidated financial statements. 50 ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Years Ended October 31, 2022 2021 2020 (in millions, except per share amounts) Shares Amount Shares Amount Shares Amount Common Stock Balance, beginning of year 67.3 $ 0.7 66.7 $ 0.7 66.6 $ 0.7 Stock issued under employee stock purchase and share-based compensation plans 0.6 — 0.6 — 0.3 — Repurchase of common stock ( 2.3 ) — — — ( 0.2 ) — Balance, end of year 65.5 0.7 67.3 0.7 66.7 0.7 Additional Paid-in Capital Balance, beginning of year 750.9 724.1 708.9 Taxes withheld under employee stock purchase and share-based compensation plans, net ( 8.4 ) ( 6.7 ) — Share-based compensation expense 30.5 33.5 20.3 Repurchase of common stock ( 97.5 ) — ( 5.1 ) Balance, end of year 675.5 750.9 724.1 Accumulated Other Comprehensive Loss, Net of Taxes Balance, beginning of year ( 22.5 ) ( 30.8 ) ( 23.9 ) Other comprehensive income (loss) 6.3 8.2 ( 6.9 ) Balance, end of year ( 16.2 ) ( 22.5 ) ( 30.8 ) Retained Earnings Balance, beginning of year 880.2 806.4 856.3 Net income 230.4 126.3 0.3 Dividends Common stock ($ 0.78 , $ 0.76 , and $ 0.74 per share) ( 51.9 ) ( 51.0 ) ( 49.3 ) Stock issued under share-based compensation plans ( 1.5 ) ( 1.5 ) ( 0.9 ) Balance, end of year 1,057.2 880.2 806.4 Total Stockholders’ Equity $ 1,717.2 $ 1,609.2 $ 1,500.3 See accompanying notes to consolidated financial statements. 51 ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended October 31, (in millions) 2022 2021 2020 Cash flows from operating activities Net income $ 230.4 $ 126.3 $ 0.3 Income from discontinued operations, net of taxes — — ( 0.1 ) Income from continuing operations 230.4 126.3 0.2 Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations Depreciation and amortization 112.4 89.9 96.4 Impairment loss on goodwill and other intangibles — — 172.8 Impairment loss on fixed assets — 9.1 — Deferred income taxes 67.7 ( 48.0 ) ( 36.6 ) Share-based compensation expense 30.5 33.5 20.3 (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 (Gain)/Loss on sale of assets ( 0.8 ) 0.2 2.1 Reserves on other assets — — 17.6 Income from unconsolidated affiliates ( 2.4 ) ( 2.1 ) ( 2.2 ) Distributions from unconsolidated affiliates 1.9 1.9 0.1 Changes in operating assets and liabilities, net of effects of acquisitions Trade accounts receivable and costs incurred in excess of amounts billed ( 143.8 ) ( 124.5 ) 141.4 Prepaid expenses and other current assets 19.7 6.8 ( 15.5 ) Right-of-use assets 14.7 19.3 24.4 Other noncurrent assets ( 21.2 ) 13.8 ( 10.4 ) Trade accounts payable and other accrued liabilities ( 143.0 ) 265.7 ( 53.5 ) Long-term lease liabilities ( 15.2 ) ( 16.3 ) ( 22.9 ) Insurance claims ( 17.4 ) ( 28.4 ) 5.7 Income taxes payable ( 31.8 ) 8.3 7.6 Other noncurrent liabilities ( 69.0 ) ( 35.4 ) 96.2 Total adjustments ( 210.0 ) 188.0 457.2 Net cash provided by operating activities of continuing operations 20.4 314.3 457.4 Net cash provided by operating activities of discontinued operations — — 0.1 Net cash provided by operating activities 20.4 314.3 457.5 Cash flows from investing activities Additions to property, plant and equipment ( 50.8 ) ( 34.3 ) ( 38.0 ) Proceeds from sale of assets 6.0 4.4 5.5 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 ) — Net cash used in investing activities ( 241.5 ) ( 740.0 ) ( 27.5 ) Cash flows from financing activities Taxes withheld from issuance of share-based compensation awards, net ( 9.9 ) ( 8.1 ) ( 0.9 ) Repurchases of common stock ( 97.5 ) — ( 5.1 ) Dividends paid ( 51.9 ) ( 51.0 ) ( 49.3 ) Deferred financing costs paid — ( 6.4 ) ( 4.4 ) 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 Financing of energy savings performance contracts 9.9 15.1 11.1 Repayment of finance lease obligations ( 1.9 ) ( 2.8 ) ( 3.4 ) Net cash provided by (used in) financing activities 235.5 92.4 ( 94.1 ) Effect of exchange rate changes on cash and cash equivalents ( 4.2 ) 1.9 ( 0.2 ) 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 Cash and cash equivalents at end of year $ 73.0 $ 62.8 $ 394.2 52 ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) Years Ended October 31, (in millions) 2022 2021 2020 Supplemental cash flow information Income tax payments, net $ 46.4 $ 93.5 $ 82.2 Interest paid on credit facility 28.9 14.3 32.9 See accompanying notes to consolidated financial statements. 53 ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY AND NATURE OF OPERATIONS ABM is a leading provider of integrated facility services with a mission to make a difference, every person, every day . We are organized into four industry groups and one Technical Solutions segment: Through these groups, we offer janitorial, facilities engineering, parking, and specialized mechanical and electrical technical solutions, on a standalone basis or in combination with other services. 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and with the rules and regulations of the SEC, specifically Regulation S-X and the instructions to Form 10-K. Unless otherwise indicated, all references to years are to our fiscal year, which ends on October 31. The Financial Statements include the accounts of ABM and all of our consolidated subsidiaries. We account for ABM’s investments in unconsolidated affiliates under the equity method of accounting. We include the results of acquired businesses in the Consolidated Statements of Comprehensive Income (Loss) from their respective acquisition dates. All intercompany accounts and transactions have been eliminated in consolidation. The preparation of consolidated financial statements in accordance with U.S. GAAP requires our management to make certain estimates that affect reported amounts. We base our estimates on historical experience, known or expected trends, independent valuations, and various other assumptions that we believe to be reasonable under the circumstances. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. We round amounts in the Financial Statements to millions and calculate all percentages and per-share data from the underlying whole-dollar amounts. Thus, certain amounts may not foot, crossfoot, or recalculate based on reported numbers due to rounding. 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 We consider all highly liquid securities with an original maturity of three months or less to be cash and cash equivalents. As part of our cash management system, we use “zero balance” accounts to fund our disbursements. Under this system, at the end of each day the bank balance is zero, while the book balance is usually a negative 54 amount due to reconciling items, such as outstanding checks. We report the changes in these book cash overdrafts as cash flows from financing activities. Trade Accounts Receivable and Costs Incurred in Excess of Amounts Billed Trade accounts receivable arise from services provided to our clients and are usually due and payable on varying terms from receipt of the invoice to net 90 days, with the exception of certain Technical Solutions project receivables that may have longer collection periods. These receivables are recorded at the invoiced amount and normally do not bear interest. In addition, our trade accounts receivable include unbilled receivables, such as invoices for services that have been provided but are not yet billed. Costs incurred in excess of amounts billed arise from Technical Solutions project contracts that typically provide for a schedule of billings or invoices to the client based on our performance to date of specific tasks inherent in the fulfillment of our performance obligation(s). The schedules for such billings usually do not precisely match the schedule on which costs are incurred. As a result, revenues generally differ from amounts that can be billed or invoiced to the client at any point during the contract. Allowance for Doubtful Accounts We determine the allowance for doubtful accounts based on historical write-offs, known or expected trends, and the identification of specific balances deemed uncollectible. For the specifically identified balances, we establish the reserve upon the earlier of a client’s inability to meet its financial obligations or after a period of 12 months, unless our management believes such amounts will ultimately be collectible. Sales Allowance In connection with our service contracts, we periodically issue credit memos to our clients that are recorded as a reduction in revenues and an increase to the allowance for billing adjustments. These credits can result from client vacancy discounts, job cancellations, property damage, and other items. We estimate our potential future losses on these client receivables based on an analysis of the historical rate of sales adjustments (credit memos, net of re-bills) and known or expected trends. Other Current Assets At October 31, 2022 and 2021, other current assets primarily consisted of other receivables, short-term insurance recoverables, and capitalized commissions. Other Investments At October 31, 2022 and 2021, other investments primarily consisted of investments in unconsolidated affiliates. Investments in Unconsolidated Affiliates We own non-controlling interests (generally 20 % to 50 %) in certain affiliated entities that predominantly provide facility solutions to governmental and commercial clients, primarily in the United States and the Middle East. We account for such investments under the equity method of accounting. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. An impairment loss is recognized to the extent that the estimated fair value of the investment is less than its carrying amount and we determine that the impairment is other than temporary. At October 31, 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. Property, Plant and Equipment We record property, plant and equipment at cost. Repairs and maintenance expenditures are expensed as incurred. In contrast, we capitalize major renewals or replacements that substantially extend the useful life of an asset. We determine depreciation for financial reporting purposes using the straight-line method over the following estimated useful lives: 55 Category Years Computer equipment and software 3 – 5 Machinery and other equipment 3 – 5 Transportation equipment 1.5 – 10 Buildings 10 – 40 Furniture and fixtures 5 In addition, we depreciate assets under finance leases and leasehold improvements over the shorter of their estimated useful lives or the remaining lease term. Upon retirement or sale of an asset, we remove the cost and accumulated depreciation from our Consolidated Balance Sheets. When applicable, we record corresponding gains or losses within the accompanying Consolidated Statements of Comprehensive Income (Loss). Leases We adopted ASU 2016-02, Leases (Topic 842), and all related amendments on November 1, 2019, on a modified retrospective basis. Topic 842 requires lessees to recognize substantially all leases on their balance sheet as a right-of-use (“ROU”) asset and a lease liability. 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. We did not elect the use of hindsight for determining the reasonably certain lease term. We enter into various noncancelable l ease agreements for office space, parking facilities, warehouses, vehicles, and equipment used in the normal course of business. We determine if an arrangement is a lease at inception and begin recording lease activity at the commencement date, which is generally the date in which we take possession of or control the physical use of the asset. ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term with lease expense recognized on a straight-line basis. We use our incremental borrowing rate to determine the present value of future lease payments unless the implicit rate in a lease is readily determinable. Our incremental borrowing rate is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. This incremental borrowing rate is applied to the minimum lease payments within each lease agreement to determine the amounts of our ROU assets and lease liabilities. Our lease terms range from one to 30 years. Some leases include one or more options to renew, with renewal terms that can extend the lease term. We typically include options to extend the lease in a lease term when it is reasonably certain that we will exercise that option and when doing so is at our sole discretion. Certain equipment and vehicle leases may also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Typically, if we decide to cancel or terminate a lease before the end of its term, then we would owe the lessor the remaining lease payments under the term of such lease. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. We may rent or sublease certain real estate assets that we no longer use to third parties. Lease agreements may contain rent escalation clauses, rent holidays, or certain landlord incentives, including tenant improvement allowances. ROU assets include amounts for scheduled rent increases and are reduced by lease incentive amounts. Certain of our lease agreements include variable rent payments, consisting primarily of rental payments adjusted periodically for inflation and amounts paid to the lessor based on cost or consumption, such as maintenance and utilities . These costs are expensed as incurred. Certain of our parking arrangements also contain variable rent payments that are a percentage of parking services revenue based on contractual levels. We record contingent rent as it becomes probable that specified targets will be met. Vari able rent lease components are not included in the lease liability. Service concession arrangements within the scope of ASU No. 2017-10, Service Concession Arrangements (Topic 853) : Determining the Customer of the Operation Services , are excluded from the scope of Topic 842. Lease costs associated with these arrangements are recorded as a reduction of revenues. See Note 3, “Revenues,” for further discussion. 56 Goodwill and Other Intangible Assets Goodwill represents the excess purchase price of acquired businesses over the fair value of the assets acquired and liabilities assumed. We have elected to make the first day of our fourth quarter, August 1, the annual impairment assessment date for goodwill. However, we could be required to evaluate the recoverability of goodwill more often if impairment indicators exist. Goodwill is tested for impairment at a “reporting unit” level by performing either a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We may elect not to perform the qualitative assessment for some or all reporting units and instead perform a quantitative test under which we estimate the fair value using a weighting of fair values derived from an income approach and a market approach. The discounted estimates of future cash flows include significant management assumptions, such as revenue growth rates, operating margins, weighted average cost of capital, and future economic and market conditions. Other intangible assets primarily consist of acquired customer contracts and relationships that are amortized using the sum-of-the-years’-digits method over their useful lives, consistent with the estimated useful life considerations used in the determination of their fair values. This accelerated method of amortization reflects the pattern in which the economic benefits from the intangible assets of customer contracts and relationships are expected to be realized. We amortize other non-customer acquired intangibles using a straight-line method of amortization. We evaluate other intangible assets, as well as our long-lived assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. When this occurs, a recoverability test is performed that compares the projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying amount. If the projected undiscounted cash flows are less than the carrying amount, then we calculate an impairment loss. The impairment loss calculation compares the fair value, which is based on projected discounted cash flows, to the carrying value. See Note 9, “Goodwill and Other Intangible Assets,” for further information on goodwill, other intangible assets, and impairment charges. Other Noncurrent Assets At October 31, 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 As part of our Technical Solutions business, we enter into ESPCs with the federal government pursuant to which we agree to develop, design, engineer, and construct a project and to guarantee that the project will satisfy agreed-upon performance standards. ESPC receivables represent the amount to be paid by various federal government agencies for work we have satisfactorily performed under specific ESPCs. We assign certain of our rights to receive those payments to unaffiliated third parties that provide construction financing, which we record as a liability, for such contracts. This construction financing is recorded as cash flows from financing activities, while the use of the cash received to pay project costs under these arrangements is classified as operating cash flows. The ESPC receivable is recognized as revenue as each project is constructed. Upon completion and acceptance of the project by the government and upon satisfaction of true sale criteria, the assigned ESPC receivable from the government and corresponding ESPC liability are eliminated from our consolidated financial statements. Fair Value of Financial Instruments Fair value is the price we would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. In the absence of active markets for identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Preference is given to observable inputs. These two types of inputs create the following fair value hierarchy: Level 1 – Quoted prices for identical instruments in active markets; 57 Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable; and Level 3 – Significant inputs to the valuation model are unobservable. We evaluate assets and liabilities subject to fair value measurements on a recurring and non-recurring basis to determine the appropriate level at which to classify them for each reporting period. Some non-financial assets are measured at fair value on a non-recurring basis only in certain circumstances, including the event of impairment. See Note 7, “Fair Value of Financial Instruments,” for the fair value hierarchy table and for details on how we measure fair value for our assets and liabilities. Insurance Reserves We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. Insurance claim liabilities represent our estimate of retained risks without regard to insurance coverage. We retain a substantial portion of the risk related to certain workers’ compensation and medical claims. Liabilities associated with these losses include estimates of both filed claims and IBNR Claims. With the assistance of third-party actuaries, we review our estimate of ultimate losses for IBNR Claims on a quarterly basis and adjust our required self-insurance reserves as appropriate. See Note 10, “Insurance,” for further details on the quarterly review procedures. As part of this evaluation, we review the status of existing and new claim reserves as established by third-party claims administrators. The third-party claims administrators establish the case reserves based upon known factors related to the type and severity of the claims, demographic factors, legislative matters, and case law, as appropriate. We compare actual trends to expected trends and monitor claims developments. The specific case reserves estimated by the third-party administrators are provided to an actuary who assists us in projecting an actuarial estimate of the overall ultimate losses for our self-insured or high deductible programs, which includes the case reserves plus an actuarial estimate of reserves required for additional developments, such as IBNR Claims. We utilize the results of actuarial studies to estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years. In general, our insurance reserves are recorded on an undiscounted basis. We allocate current-year insurance expense to our operating segments based upon their underlying exposures, while actuarial adjustments related to prior year claims are recorded within Corporate expenses. We classify claims as current or long-term based on the expected settlement date. Estimated insurance recoveries related to recorded liabilities are reflected as assets in our Consolidated Balance Sheets when we believe the receipt of such amounts is probable. Other Accrued Liabilities At October 31, 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, 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 We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. Once a contract is identified, we evaluate whether it is a combined or single contract and whether it should be accounted for as more than one performance obligation. Generally, most of our contracts are cancelable by either party without a substantive penalty, and the majority of our contracts have a notification period of 30 to 60 days. If a contract includes a cancellation clause, the remaining contract term is limited to the required termination notice period. At contract inception, we assess the services promised to our customers and identify a performance obligation for each promise to transfer to the customer a service, or a bundle of services, that is distinct. To identify 58 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; however, these activities fulfill a single integrated performance obligation since we perform a continuous service that is substantially the same and has the same pattern of transfer to the customer. Our performance obligations are primarily satisfied over time as we provide the related services. We allocate the contract transaction price to this single performance obligation and recognize revenue as the services are performed, as further described in “Contract Types” below. Certain arrangements involve variable consideration (primarily per transaction fees, reimbursable expenses, and sales-based royalties). We do not estimate the variable consideration for these arrangements; rather, we recognize these variable fees in the period they are earned. Some of our contracts, often related to Airline Services, may also include performance incentives based on variable performance measures that are ascertained exclusively by future performance and therefore cannot be estimated at contract inception and are recognized as revenue once known and mutually agreed upon. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current, and forecasted) that is reasonably available to us. We primarily account for our performance obligations under the series guidance, using the as-invoiced practical expedient when applicable. We apply the as-invoiced practical expedient to record revenue as the services are provided, given the nature of the services provided and the frequency of billing under the customer contracts. Under this practical expedient, we recognize revenue in an amount that corresponds directly with the value to the customer of our performance completed to date and for which we have the right to invoice the customer. We typically bill customers on a monthly basis and have the right to consideration from customers in an amount that corresponds directly with the performance obligation satisfied to date. The time between completion of the performance obligation and collection of cash is generally 30 to 60 days. Sales-based taxes are excluded from revenue. Contracts generally can be modified to account for changes in specifications and requirements. We consider contract modifications to exist when the modification either changes the consideration, creates new performance obligations, or changes the existing scope of the contract and related performance obligations. Historically, contract modifications have been for services that are not distinct from the existing contract, since we are providing a bundle of services that are highly interrelated, and are therefore treated as if they were part of that existing contract. Such modifications are generally accounted for retrospectively as part of the existing contract. Contract Types We have arrangements under various contract types, as described below. Monthly Fixed-Price Monthly fixed-price arrangements are contracts in which the client agrees to pay a fixed fee every month over a specified contract term. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual amount over time, because the customer simultaneously receives and consumes the benefits of the services as they are performed. Square-Foot Square-foot arrangements are contracts in which the client agrees to pay a fixed fee every month based on the actual square footage serviced over a specified contract term. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual amount over time, because the customer simultaneously receives and consumes the benefits of the services as they are performed. Cost-Plus Cost-plus arrangements are contracts in which the clients reimburse us for the agreed-upon amount of wages and benefits, payroll taxes, insurance charges, and other expenses associated with the contracted work, 59 plus a profit margin. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual amount over time, because the customer simultaneously receives and consumes the benefits of the services as they are performed. Work Orders Work orders generally consist of supplemental services requested by clients outside of the standard service specification and include cleanup after tenant moves, construction cleanup, flood cleanup, and snow removal. The nature of these short-term contracts involves performing one-off type services, and revenue is recognized at the agreed-upon contractual amount over time as the services are provided, because the customer simultaneously receives and consumes the benefits of the services as they are performed. Transaction-Price Transaction-price contracts are arrangements in which customers are billed a fixed price for each transaction performed on a monthly basis (e.g., wheelchair passengers served, airplane cabins cleaned). We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual amount over time, because the customer simultaneously receives and consumes the benefits of the services as they are performed. Hourly Hourly arrangements are contracts in which the client is billed a fixed hourly rate for each labor hour provided. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual amount over time, because the customer simultaneously receives and consumes the benefits of the services as they are performed. Management Reimbursement Under management reimbursement arrangements, we manage a parking facility for a management fee and pass through the revenue and expenses associated with the facility to the owner. We measure progress toward satisfaction of the performance obligation over time as the services are provided. Under these contracts we recognize both revenues and expenses, in equal amounts, that are directly reimbursed from the property owner for operating expenses, as such expenses are incurred. Such revenues do not include gross customer collections at the managed locations, because they belong to the property owners. We have determined we are the principal in these transactions, because the nature of our performance obligation is for us to provide the services on behalf of the customer and we have control of the promised services before they are transferred to the customer. Management reimbursement revenue was $ 280.6 million, $ 240.3 million, and $ 295.6 million during 2022, 2021, and 2020, respectively. Leased Location Under leased location parking arrangements, we pay a fixed amount of rent, plus a percentage of revenues derived from monthly and transient parkers, to the property owner. We retain all revenues received and we are responsible for most operating expenses incurred. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized over time, because the customer simultaneously receives and consumes the benefits of the services as they are performed. Rental expense and certain other expenses under contracts that meet the definition of service concession arrangements are recorded as a reduction of revenue. Allowance Under allowance parking arrangements, we are paid a fixed amount or hourly rate to provide parking services, and we are responsible for certain operating expenses that are specified in the contract. We measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual rate over time, because the customer simultaneously receives and consumes the benefits of the services as they are performed. 60 Energy Savings Contracts and Fixed-Price Repair and Refurbishment Under energy savings contracts and fixed-price repair and refurbishment arrangements, we agree to develop, design, engineer, and construct a project. Additionally, as part of bundled energy solutions arrangements, we guarantee the project will satisfy agreed-upon performance standards. We use the cost-to-cost method, which compares the actual costs incurred to date with the current estimate of total costs to complete, to measure the satisfaction of the performance obligation and recognize revenue as work progresses and we incur costs on our contracts; we believe this method best reflects the transfer of control to the customer. This measurement and comparison process requires updates to the estimate of total costs to complete the contract, and these updates may include subjective assessments and judgments. Equipment purchased for these projects is project-specific and considered a value-added element to our work. Equipment costs are incurred when 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. We recognize revenue over time for all of our services as we perform them, because (i) control continuously transfers to the customer as work progresses or (ii) we have the right to bill the customer as costs are incurred. The customer typically controls the work in process, as evidenced either by contractual termination clauses or by our rights to payment for work performed to date plus a reasonable profit to deliver products or services that do not have an alternative use to us. Certain project contracts include a schedule of billings or invoices to the customer based on our job-to-date percentage of completion of specific tasks inherent in the fulfillment of our performance obligation(s) or in accordance with a fixed billing schedule. Fixed billing schedules may not precisely match the actual costs incurred. Therefore, revenue recognized may differ from amounts that can be billed or invoiced to the customer at any point during the contract, resulting in balances that are considered revenue recognized in excess of 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. Certain projects include service maintenance agreements under which existing systems are repaired and maintained for a specific period of time. We generally recognize revenue under these arrangements over time. Our service maintenance agreements are generally one-year renewable agreements. Franchise We franchise certain engineering services through individual and area franchises under the Linc Service and TEGG brands, which are part of ABM Technical Solutions. Initial franchise fees result from the sale of a franchise license and include the use of the name, trademarks, and proprietary methods. The franchise license is considered symbolic intellectual property, and revenue related to the sale of this right is recognized at the agreed-upon contractual amount over the term of the initial franchise agreement. Royalty fee revenue consists of sales-based royalties received as part of the consideration for the franchise right, which is calculated as a percentage of the franchisees’ revenue. We recognize royalty fee revenue at the agreed-upon contractual rates over time as the customer revenue is generated by the franchisees. A receivable is recognized for an estimate of the unreported royalty fees, which are reported and remitted to us in arrears. 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. 61 Costs to Obtain a Contract with a Customer We capitalize the incremental costs of obtaining a contract with a customer, primarily commissions, as contract assets and recognize the expense on a straight-line basis over a weighted average expected customer relationship period. Capitalized commissions are classified as current or noncurrent based on the timing of when we expect to recognize the expense. Contract Balances The timing of revenue recognition, billings, and cash collections results in contract assets and contract liabilities, as further explained below. The timing of revenue recognition may differ from the timing of invoicing to customers. If a contract includes a cancellation clause that allows for the termination of the contract by either party without a substantive penalty, then the contract term is limited to the termination notice period. Contract assets primarily consist of billed trade receivables, unbilled trade receivables, and costs incurred in excess of amounts billed. Billed and unbilled trade receivables represent amounts from work completed in which we have an unconditional right to bill our customer. Costs incurred in excess of amounts billed typically arise when the revenue recognized on projects exceeds the amount billed to the customer. These amounts are transferred to billed trade receivables when the rights become unconditional. Contract assets also include the capitalization of incremental costs of obtaining a contract with a customer, primarily commissions. Contract liabilities consist of deferred revenue and advance payments and billings in excess of revenue recognized. We generally classify contract liabilities as current since the related contracts are generally for a period of one year or less. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation. Advertising Advertising costs are expensed as incurred. During 2022, 2021, and 2020, advertising expense was $ 6.0 million, $ 6.2 million, and $ 1.8 million, respectively. Share-Based Compensation Our current share-based awards principally consist of restricted stock units (“RSUs”) and various performance share awards. We recognize compensation costs associated with these awards in selling, general and administrative expenses. For RSUs and 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 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. Taxes Collected from Clients and Remitted to Governmental Agencies We record taxes on client transactions due to governmental agencies as receivables and liabilities on the Consolidated Balance Sheets. Net Income Per Common Share Basic net income per common share is net income divided by the weighted-average number of common shares outstanding during the period. Diluted net income per common share is based on the weighted-average number of common shares outstanding during the period, adjusted to include the potential dilution from the conversion of RSUs, vesting of performance shares, and exercise of stock options. Contingencies and Litigation We are a party to a number of lawsuits, claims, and proceedings incident to the operation of our business, including those pertaining to labor and employment, contracts, personal injury, and other matters, some of which allege substantial monetary damages. Some of these actions may be brought as class actions on behalf of a class or purported class of employees. We accrue for loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better 62 estimate, then the minimum amount of the range is recorded as a liability. We recognize legal costs as an expense in the period incurred. Income Taxes We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered. Deferred tax assets are reviewed for recoverability on a quarterly basis. A valuation allowance is recorded to reduce the carrying amount of a deferred tax asset to its realizable value unless it is more likely than not that such asset will be realized. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense in our Consolidated Statements of Comprehensive Income (Loss). Recently Adopted Accounting Standards 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 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 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): Scope . 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. 63 3. 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. 64 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) 10.0 — 10.0 Goodwill (3) 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. 65 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). 66 4. REVENUES Disaggregation of Revenues We generate revenues under several types of contracts, which are further described in Note 2, “Basis of Presentation and Significant Accounting Policies.” Generally, the type of contract is determined by the nature of the services provided by each of our major service lines throughout our reportable segments; therefore, we disaggregate revenues from contracts with customers into major service lines. We have determined that disaggregating revenues into these categories best depicts how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors. Our reportable segments are B&I, 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 M&D Education Aviation Technical Solutions Total Major Service Line Janitorial (1) $ 2,746.6 $ 1,242.4 $ 720.6 $ 119.8 $ — $ 4,829.4 Parking (2) 354.3 36.6 0.9 311.7 — 703.6 Facility Services (3) 995.0 166.2 113.2 28.3 — 1,302.7 Building & Energy Solutions (4) — — — — 626.8 626.8 Airline Services (5) — — — 344.2 — 344.2 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 M&D Education Aviation Technical Solutions Total Major Service Line Janitorial (1) $ 2,180.2 $ 1,157.9 $ 724.1 $ 116.8 $ — $ 4,179.0 Parking (2) 296.1 39.8 0.9 257.0 — 593.8 Facility Services (3) 377.5 165.4 105.8 24.9 — 673.6 Building & Energy Solutions (4) — — — — 529.8 529.8 Airline Services (5) — — — 252.4 — 252.4 Total $ 2,853.8 $ 1,363.1 $ 830.8 $ 651.1 $ 529.8 $ 6,228.6 (1) Janitorial arrangements provide a wide range of essential cleaning services for commercial office buildings, airports and other transportation centers, educational institutions, government buildings, health facilities, industrial buildings, retail stores, and stadiums and arenas. These arrangements are often structured as monthly fixed-price, square-foot, cost-plus, and work order contracts. (2) Parking arrangements provide parking and transportation services for clients at various locations, including airports and other transportation centers, commercial office buildings, educational institutions, health facilities, hotels, and stadiums and arenas. These arrangements are structured as management reimbursement, leased location, and allowance contracts. Certain of these arrangements are considered service concession agreements and are accounted for under the guidance of Topic 853; accordingly, rent expense related to these arrangements is recorded as a reduction of the related parking service revenues. (3) Facility Services arrangements provide onsite mechanical engineering and technical services and solutions relating to a broad range of facilities and infrastructure systems that are designed to extend the useful life of facility fixed assets, improve equipment operating efficiencies, reduce energy consumption, lower overall operational costs for clients, and enhance the sustainability of client locations. These arrangements are generally structured as monthly fixed-price, cost-plus, and work order contracts. (4) Building & Energy Solutions arrangements provide custom energy solutions, 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. (5) Airline Services arrangements support airlines and airports with services such as passenger assistance, catering logistics, and airplane cabin maintenance. These arrangements are often structured as monthly fixed-price, cost-plus, transaction price, and hourly contracts. 67 Remaining Performance Obligations At October 31, 2022, performance obligations that were unsatisfied or partially unsatisfied for which we expect to recognize revenue totaled $ 236.6 million. We expect to recognize revenue on approximately 77 % of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter, based on our estimates of project timing. These amounts exclude variable consideration primarily related to: (i) contracts where we have determined that the contract consists of a series of distinct service periods and revenues are based on future performance that cannot be estimated at contract inception; (ii) parking contracts where we and the customer share the gross revenues or operating profit for the location; and (iii) contracts where transaction prices include performance incentives that are based on future performance and therefore cannot be estimated at contract inception. We apply the practical expedient that permits exclusion of information about the remaining performance obligations with original expected durations of one year or less. Contract Balances The following tables present the balances in our contract assets and contract liabilities: As of October 31, (in millions) 2022 2021 Contract assets Billed trade receivables (1) $ 1,138.8 $ 1,057.6 Unbilled trade receivables (1) 162.5 112.1 Costs incurred in excess of amounts billed (2) 75.8 52.5 Capitalized commissions (3) 30.9 27.8 (1) Included in trade accounts receivable, net, on the Consolidated Balance Sheets. The fluctuations correlate directly to the execution of new customer contracts and to invoicing and collections from customers in the normal course of business. (2) Fluctuation is primarily due to the timing of payments on our contracts measured using the cost-to-cost method of revenue recognition. (3) Included in other current assets and other noncurrent assets on the Consolidated Balance Sheets. During the year ended October 31, 2022, we capitalized $ 17.4 million of new costs and amortized $ 14.4 million of previously capitalized costs. There was no impairment loss recorded on the costs capitalized. (in millions) Year Ended October 31, 2022 Contract liabilities (1) Balance at beginning of year $ 58.5 Acquisition additions (2) 31.6 Additional contract liabilities 213.9 Recognition of deferred revenue ( 224.4 ) Balance at end of year $ 79.6 (1) Included in other accrued liabilities on the Consolidated Balance Sheets. (2) Represents additions associated with the RavenVolt acquisition. 5. LEASES The components of lease assets and liabilities and their classification on our Consolidated Balance Sheets were as follows: 68 As of October 31, (in millions) Classification 2022 2021 Lease assets Operating leases Right-of-use assets $ 115.2 $ 126.5 Finance leases Property, plant and equipment, net (1) 10.0 3.7 Total lease assets $ 125.2 $ 130.2 Lease liabilities Current liabilities Operating leases Current portion of lease liabilities $ 30.3 $ 31.8 Finance leases Other accrued liabilities 2.8 0.4 Noncurrent liabilities Operating leases Long-term lease liabilities 104.5 116.6 Finance leases Other noncurrent liabilities 6.4 2.0 Total lease liabilities $ 144.1 $ 150.8 (1) Finance lease assets are recorded net of accumulated amortization of $ 16.9 million and $ 16.3 million as of October 31, 2022 and October 31, 2021, respectively. The components of lease costs and classification within the Consolidated Statements of Comprehensive Income (Loss) were as follows: Years Ended October 31, (in millions) 2022 2021 Operating lease costs: Operating expenses (1)(2) $ 60.2 $ 51.9 Selling, general and administrative expenses (3) 25.7 25.3 Finance lease costs: Operating expenses (4) 1.7 2.5 Interest expense (5) 0.4 0.5 Total lease costs $ 88.1 $ 80.2 (1) Related to certain parking arrangements. (2) Includes short-term lease costs and variable lease costs. (3) Includes short-term lease costs. (4) Represents amortization of leased assets. (5) Interest on lease liabilities. The following table presents information on short-term and variable lease costs: Years Ended October 31, (in millions) 2022 2021 Short-term lease costs $ 43.3 $ 34.8 Variable lease costs 6.0 3.7 Total short-term and variable lease costs $ 49.3 $ 38.5 Sublease income generated during the year ended October 31, 2022, was immaterial. 69 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: (in millions) Operating Lease Liabilities Finance Lease Liabilities Total Fiscal 2023 $ 35.2 $ 3.2 $ 38.4 Fiscal 2024 30.0 2.4 32.4 Fiscal 2025 23.7 2.4 26.1 Fiscal 2026 20.9 1.6 22.5 Fiscal 2027 15.1 — 15.1 Thereafter 26.6 — 26.6 Total lease payments 151.6 9.5 161.1 Less: imputed interest 16.7 0.4 17.1 Present value of lease liabilities $ 134.8 $ 9.2 $ 144.0 Future sublease rental income was excluded for the periods shown above as the amounts are immaterial. We have entered into operating lease arrangements as of October 31, 2022, that are effective for future periods. The total amount of ROU assets and lease liabilities related to these arrangements is immaterial. The following table includes the weighted-average remaining lease terms, in years, and the weighted-average discount rate used to calculate the present value of operating lease liabilities: Years Ended October 31, 2022 2021 Weighted-average remaining lease term (years) Operating leases 5.7 5.7 Finance leases 3.5 1.5 Weighted-average discount rate Operating leases 4.09 % 4.11 % Finance leases 3.82 % 4.78 % 70 The following table includes supplemental cash and non-cash information related to operating leases: Years Ended October 31, (in millions) 2022 2021 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 35.3 $ 38.9 Operating cash flows from finance leases 0.4 0.5 Financing cash flows from finance leases 1.9 2.8 Lease assets obtained in exchange for new operating lease liabilities 23.1 20.6 6. NET INCOME PER COMMON SHARE Basic and Diluted Net Income Per Common Share Calculations Years Ended October 31, (in millions, except per share amounts) 2022 2021 2020 Income from continuing operations $ 230.4 $ 126.3 $ 0.2 Income from discontinued operations, net of taxes — — 0.1 Net income $ 230.4 $ 126.3 $ 0.3 Weighted-average common and common equivalent shares outstanding — Basic 67.1 67.4 66.9 Effect of dilutive securities RSUs 0.2 0.3 0.1 Stock options — — 0.1 Performance shares 0.2 0.2 0.1 Weighted-average common and common equivalent shares outstanding — Diluted 67.5 68.0 67.3 Net income per common share — Basic Income from continuing operations $ 3.44 $ 1.87 $ 0.00 Income from discontinued operations — — — Net income $ 3.44 $ 1.87 $ 0.00 Net income per common share — Diluted Income from continuing operations $ 3.41 $ 1.86 $ 0.00 Income from discontinued operations — — — Net income $ 3.41 $ 1.86 $ 0.00 Anti-Dilutive Outstanding Stock Awards Issued Under Share-Based Compensation Plans Years Ended October 31, (in millions) 2022 2021 2020 Anti-dilutive — — 0.4 71 7. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair Value Hierarchy of Our Financial Instruments Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis As of October 31, (in millions) Fair Value Hierarchy 2022 2021 Cash and cash equivalents (1) 1 $ 73.0 $ 62.8 Insurance deposits (2) 1 0.9 0.7 Assets held in funded deferred compensation plan (3) 1 4.1 4.9 Debt facilities (4) 2 1,271.3 888.8 Interest rate swap assets (5) 2 36.9 — Interest rate swap liabilities (5) 2 — 4.6 Preferred equity investment (6) 3 3.0 — Contingent Consideration (7) 3 59.0 — (1) Cash and cash equivalents are stated at nominal value, which equals fair value. (2) Represents restricted deposits that are used to collateralize our insurance obligations and are stated at nominal value, which equals fair value. These insurance deposits are included in “Other noncurrent assets” on the accompanying Consolidated Balance Sheets. See Note 10, “Insurance,” for further information. (3) Represents investments held in Rabbi trusts associated with two of our deferred compensation plans, which we include in “Other noncurrent assets” on the accompanying Consolidated Balance Sheets. The fair value of the assets held in the funded deferred compensation plan is based on quoted market prices. See Note 12, “Employee Benefit Plans,” for further information. (4) Represents gross outstanding borrowings under our syndicated line of credit and term loan. Due to variable interest rates, the carrying value of outstanding borrowings under our line of credit and term loan approximates the fair value. See Note 11, “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, 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 In addition to assets and liabilities that are measured at fair value on a recurring basis, we are also required to measure certain items at fair value on a non-recurring basis. These assets can include: goodwill; intangible assets; property, plant and equipment; lease-related ROU assets; and long-lived assets that have been reduced to fair value when they are held for sale. If certain triggering events occur or if an annual impairment test is required, 72 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. The Company determined that certain components that were previously developed would no longer be implemented. 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. 8. PROPERTY, PLANT AND EQUIPMENT Property, Plant and Equipment As of October 31, (in millions) 2022 2021 Machinery and other equipment $ 158.7 $ 148.9 Computer equipment and software 106.8 97.2 Transportation equipment 64.1 57.9 Leasehold improvements 67.0 59.6 Furniture and fixtures 17.3 14.6 Buildings 7.7 7.7 Land 0.7 0.7 422.2 386.6 Less: Accumulated depreciation (1) 296.9 274.7 Total $ 125.4 $ 111.9 (1) For 2022, 2021, and 2020, depreciation expense was $ 40.3 million, $ 45.0 million, and $ 48.0 million, respectively. 73 9. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill (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 Balance at October 31, 2021 $ 1,129.8 $ 407.2 $ 459.3 $ 69.9 $ 162.7 $ 2,228.9 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) 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 As of October 31, 2022 2021 (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 Trademarks and trade names (1) 21.4 ( 15.4 ) 6.1 19.8 ( 10.4 ) 9.5 Contract rights and other (1) 15.3 ( 2.4 ) 12.9 0.5 ( 0.4 ) 0.1 Total (2) $ 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. Estimated Annual Amortization Expense for Each of the Next Five Years (in millions) 2023 2024 2025 2026 2027 Estimated amortization expense (1) $ 75.9 $ 54.3 $ 47.3 $ 41.2 $ 35.9 (1) These amounts could vary as acquisitions of additional intangible assets occur in the future and as purchase price allocations are finalized for existing acquisitions. The estimates of future cash flows used in determining the fair value of goodwill and other intangible assets involve significant management judgment and are based upon assumptions about expected future operating performance, economic conditions, market conditions, and cost of capital. Inherent in estimating the future cash flows are uncertainties beyond our control, such as changes in capital markets. The actual cash flows could differ materially from management’s estimates due to changes in business conditions, operating performance, and economic conditions. 74 10. INSURANCE We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. For the majority of these insurance programs, we retain the initial $ 1.0 million to $ 1.5 million of exposure on a per-occurrence basis, either through deductibles or self-insured retentions. Beyond the retained exposures, we have varying primary policy limits ranging between $ 1.0 million and $ 5.0 million per occurrence. To cover general liability and automobile liability losses above these primary limits, we maintain commercial umbrella insurance policies that provide aggregate limits of $ 200.0 million. Our insurance policies generally cover workers’ compensation losses to the full extent of statutory requirements. Additionally, to cover property damage risks above our retained limits, we maintain policies that provide per occurrence limits of $ 75.0 million. We are also self-insured for certain employee medical and dental plans. We maintain stop-loss insurance for our self-insured medical plan under which we retain up to $ 0.5 million of exposure on a per-participant, per-year basis with respect to claims. We maintain our reserves for workers’ compensation, general liability, automobile liability, and property damage insurance claims based upon known trends and events and the actuarial estimates of required reserves considering the most recently completed actuarial reports. We use all available information to develop our best estimate of insurance claims reserves as information is obtained. The results of actuarial reviews are used to estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years. Insurance Reserve Adjustments Actuarial Reviews and Updates Performed During 2022 We review our self-insurance liabilities on a quarterly basis and adjust our accruals accordingly. Actual claims activity or development may vary from our assumptions and estimates, which may result in material losses or gains. As we obtain additional information that affects the assumptions and estimates used in our reserve liability calculations, we adjust our self-insurance rates and reserves for future periods and, if appropriate, adjust our reserves for claims incurred in prior accounting periods. During the first and third quarters of 2022, we performed comprehensive actuarial reviews of the majority of our casualty insurance programs to evaluate changes made to claims reserves and claims payment activity for the periods of May 1, 2021, through October 31, 2021, and November 1, 2021, through April 30, 2022, respectively (the “Actuarial Reviews”). The Actuarial Reviews were comprehensive in nature and were based on loss development patterns, trend assumptions, and underlying expected loss costs during the periods analyzed. During the second and fourth quarters of 2022, we performed interim actuarial updates of the majority of our casualty insurance programs that considered changes in claims development and claims payment activity for the respective periods analyzed (the “Interim Updates”). These Interim Updates were abbreviated in nature based on actual versus expected development during the periods analyzed and relied on the key assumptions in the Actuarial Reviews (most notably loss development patterns, trend assumptions, and underlying expected loss costs). Based on the results of the Actuarial Reviews and Interim Updates, w e decreased our total reserves related to prior years for known claims as well as our estimate of the loss amounts associated with IBNR Claims during 2022 by $ 36.8 million. In 2021, we decreased our total reserves related to prior year claims by $ 36.0 million. Insurance-Related Balances and Activity As of October 31, (in millions) 2022 2021 Insurance claim reserves, excluding medical and dental $ 551.0 $ 574.8 Medical and dental claim reserves 8.1 9.9 Insurance recoverables 71.0 66.5 At October 31, 2022 and 2021, insurance recoverables are included in both “Other current assets” and “Other noncurrent assets” on the accompanying Consolidated Balance Sheets. 75 Casualty Program Insurance Reserves Rollforward Years Ended October 31, (in millions) 2022 2021 2020 Net balance at beginning of year $ 508.3 $ 434.8 $ 443.3 Change in case reserves plus IBNR Claims — current year 145.7 117.9 128.5 Change in case reserves plus IBNR Claims — prior years ( 36.8 ) ( 36.0 ) ( 30.2 ) Claims paid ( 129.1 ) ( 99.8 ) ( 106.8 ) Acquisition (1) ( 8.2 ) 91.6 0.2 Net balance, October 31 (2) 479.9 508.3 434.8 Recoverables 71.0 66.5 70.1 Gross balance, October 31 $ 551.0 $ 574.8 $ 504.9 (1) During 2021, insurance reserves increased as a result of the Able Acquisition. 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. Instruments Used to Collateralize Our Insurance Obligations As of October 31, (in millions) 2022 2021 Standby letters of credit $ 153.7 $ 157.9 Surety bonds 73.2 83.8 Restricted insurance deposits 0.9 0.7 Total $ 227.8 $ 242.3 11. DEBT 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) 520.0 255.0 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 %. 76 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. 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 Amended Credit Facility provides for the issuance of up to $ 350.0 million for standby letters of credit and the issuance of up to $ 75.0 million in swingline advances. The obligations under the Amended Credit Facility are secured on a first-priority basis by a lien on substantially all of our assets and properties, subject to certain exceptions. Additionally, we may repay amounts borrowed under the Amended Credit Facility at any time without penalty. 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. 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. In the event of a material acquisition, as defined in the Amended Credit Facility, we may elect to increase the maximum total net leverage ratio to 5.50 to 1.00 for a total of four fiscal quarters and increase the maximum secured net leverage ratio to 4.50 to 1.00 for a total of four fiscal quarters. We did not make this election for the Able Acquisition. Our borrowing capacity is subject to, and limited by, compliance with the covenants described above. At October 31, 2022, we were in compliance with these covenants. The Amended Credit Facility also includes customary events of default, including: failure to pay principal, interest, or fees when due, failure to comply with covenants; the occurrence of certain material judgments; 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. 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. 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. 77 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. As of October 31, 2022, the following principal payments are required under the term loan. (in millions) 2023 2024 2025 2026 2027 Debt maturities $ 32.5 $ 32.5 $ 32.5 $ 1,023.8 $ — Interest Rate Swaps We enter into interest rate swaps to manage the interest rate risk associated with our floating-rate, LIBOR-based borrowings. Under these arrangements, we typically pay a fixed interest rate in exchange for LIBOR-based variable interest throughout the life of the agreement. We initially report the mark-to-market gain or loss on a derivative as a component of AOCL and subsequently reclassify the gain or loss into earnings when the hedged transactions occur and affect earnings. Interest payables and receivables under the swap agreements are accrued and recorded as adjustments to interest expense. All of our interest rate swaps have been designated and accounted for as cash flow hedges from inception. See Note 7, “Fair Value of Financial Instruments,” regarding the valuation of our interest rate swaps. Notional Amount Fixed Interest Rate Effective Date Maturity Date $ 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. During 2022, we amortized $ 3.5 million, net of taxes of $ 1.3 million, of that gain and we amortized $ 4.7 million, net of taxes of $ 1.7 million, during 2021. 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.” 12. EMPLOYEE BENEFIT PLANS Defined Benefit Plans We provide benefits to certain employees under various defined benefit and postretirement benefit plans (collectively, the “Plans”). The Plans were previously amended to preclude new participants. All but one of the Plans are unfunded. 78 Information for the Plans As of October 31, (in millions) 2022 2021 Net obligations $ 6.0 $ 7.5 Projected benefit obligations (1) 12.2 15.9 Fair value of assets 6.2 8.4 (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 $ 0.4 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. Future benefit payments in the aggregate are expected to be $ 11.2 million. Deferred Compensation Plans We maintain deferred compensation plans that permit eligible employees and directors to defer a portion of their compensation. At October 31, 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. The assets held in the Rabbi trust are not available for general corporate purposes. At October 31, 2022 and 2021, the fair value of these assets was $ 4.1 million and $ 4.9 million, respectively, and these amounts are included in “Other noncurrent assets” on the accompanying Consolidated Balance Sheets. Aggregate expense recognized under these deferred compensation plans was $ 0.3 million, $ 0.2 million, and $ 0.2 million for 2022, 2021, and 2020, respectively. Defined Contribution Plans We sponsor four defined contribution plans covering certain employees that are subject to the applicable provisions of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code (“IRC”). Certain plans permit a company match of a portion of the participant’s contributions or a discretionary contribution after the participant has met the eligibility requirements set forth in the plan. During 2022, 2021, and 2020, we made matching contributions required by the plans of $ 27.7 million , $ 21.6 million, and $ 18.2 million, respectively. 79 Multiemployer Pension and Postretirement Plans We participate in various multiemployer pension plans under union and industry-wide agreements that provide defined pension benefits to employees covered by collective bargaining agreements. Because of the nature of multiemployer plans, there are risks associated with participation in these plans that differ from single-employer plans. Assets contributed by an employer to a multiemployer plan are not segregated into a separate account and are not restricted to provide benefits only to employees of that contributing employer. In the event another participating employer in a multiemployer plan no longer contributes to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers, including us. In the event of the termination of a multiemployer pension plan or a withdrawal from a multiemployer pension plan, we could incur material liabilities under applicable law. Key Information for Individually Significant Multiemployer Defined Benefit Pension Plans (1) ($ in millions) Pension Protection Act Zone Status (3) FIP/RP Status (4) Contributions by ABM Surcharge Imposed (5) Expiration Dates of Collective Bargaining Agreements Pension Fund EIN/PN (2) 2022 2021 Pending/ Implemented 2022 2021 2020 Building Service 32BJ Pension Fund 13-1879376 / 001 Yellow 6/30/2021 Red 6/30/2020 Implemented $ 22.7 $ 18.8 $ 16.8 No 12/31/2023 – 8/31/2025 S.E.I.U. National Industry Pension Fund 52-6148540 / 001 Red 12/31/2021 Red 12/31/2020 Implemented 17.6 10.9 11.1 Yes 10/31/2023 – 7/31/2025 IUOE Stationary Engineers Local 39 Pension Plan 94-6118939 / 001 Green 12/31/2021 Green 12/31/2020 N/A* 4.4 6.6 4.3 N/A* 8/31/2023 – 10/31/2024 SEIU Local 1 & Participating Employers Pension Trust 36-6486542 / 001 Green 9/30/2021 Green 9/30/2020 N/A* 5.8 3.9 4.3 N/A* 6/30/2024 Central Pension Fund of the IUOE & Participating Employers 36-6052390 / 001 Green 1/31/2022 Green 1/31/2021 N/A* 12.8 5.3 7.1 N/A* 6/30/2024 Western Conference of Teamsters Pension Plan 91-6145047 / 001 Green 12/31/2021 Green 12/31/2020 N/A* 2.2 2.0 2.5 N/A* 11/30/2022 All Other Plans: 8.2 9.3 9.5 Total Contributions $ 73.8 $ 56.8 $ 55.5 *Not applicable (1) To determine individually significant plans, we evaluated several factors, including our total contributions to the plan, our significance to the plan in terms of participating employees and contributions, and the funded status of the plan. (2) The “EIN/PN” column provides the Employer Identification Number and the three-digit plan number assigned to the plan by the IRS. (3) The Pension Protection Act Zone Status columns provide the two most recently available Pension Protection Act zone statuses from each plan. The zone status is based on information provided to us and other participating employers and is certified by each plan’s actuary. Among other factors, plans in the red zone are generally less than 65 % funded, plans in the yellow zone are less than 80 % funded, and plans in the green zone are at least 80 % funded. (4) Indicates whether a Financial Improvement Plan (“FIP”) for yellow zone plans or a Rehabilitation Plan (“RP”) for red zone plans is pending or implemented. (5) Indicates whether our contribution in 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. 80 Multiemployer Pension Plans for which ABM is a Significant Contributor Pension Fund Contributions to the plan exceeded more than 5% of total contributions per most currently available Forms 5500 (as of the plan’s year end) 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 Building Service 32BJ Pension Fund 6/30/2021, 6/30/2020 and 6/30/2019 Building Service Pension Plan* 4/30/2021, 4/30/2020, and 4/30/219 Contract Cleaners Service Employees’ Pension Plan* 12/31/2021, 12/31/2020, and 12/31/2019 Massachusetts Service Employees Pension Plan* 12/31/2021, 12/31/2020, and 12/31/2019 SEIU Local 1 & Participating Employers Pension Trust 9/30/2021, 9/30/2020, and 9/30/2019 S.E.I.U. National Industry Pension Fund 12/31/2021, 12/31/2020, and 12/31/2019 Service Employees International Union Local 1 Cleveland Pension Plan* 12/31/2021, 12/31/2020, and 12/31/2019 Service Employees International Union Local 32BJ, District 36 Building Operators Pension Trust Fund* 12/31/2021, 12/31/2020, and 12/31/2019 Teamsters Local 617 Pension Fund* 2/28/2021, 2/29/2020, and 2/28/2019 Teamsters Local Union No. 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 U.S.W.U. 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. Multiemployer Defined Contribution Plans In addition to contributions noted above, we also make contributions to multiemployer defined contribution plans. During 2022, 2021, and 2020, our contributions to the defined contribution plans were $ 54.7 million, $ 21.2 million, and $ 15.5 million, respectively. Other Multiemployer Benefit Plans We also contribute to several multiemployer postretirement health and welfare plans based on obligations arising under collective bargaining agreements covering union-represented employees. These plans may provide medical, pharmacy, dental, vision, mental health, and other benefits to employees as determined by the trustees of each plan. The majority of our contributions benefit active employees and, as such, may not constitute contributions to a postretirement benefit plan. However, since we are unable to separate contribution amounts to postretirement benefit plans from contribution amounts paid to benefit active employees, we categorize all such amounts as contributions to postretirement benefit plans. During 2022, 2021, and 2020, our contributions to such plans wer e $ 426.6 million , $ 270.8 million, and $ 264.8 million, respectively. There have been no significant changes that affect the comparability of total contributions for any of the periods presented. 81 13. COMMITMENTS AND CONTINGENCIES Letters of Credit and Surety Bonds We use letters of credit and surety bonds to secure certain commitments related to insurance programs and for other purposes. As of October 31, 2022, these letters of credit and surety bonds totaled $ 158.3 million and $ 618.6 million, respectively. Guarantees In some instances, we offer clients guaranteed energy savings under certain energy savings contracts. At October 31, 2022 and 2021, total guarantees were $ 230.5 million and $ 254.3 million, respectively, and these guarantees extend through 2042 and 2041, respectively. We accrue for the estimated cost of guarantees when it is probable that a liability has been incurred and the amount can be reasonably estimated. Historically, we have not incurred any material losses in connection with these guarantees. Indemnifications We are party to a variety of agreements under which we may be obligated to indemnify the other party for certain matters. These agreements are primarily standard indemnification arrangements entered into in our ordinary course of business. Pursuant to these arrangements, we may agree to indemnify, hold harmless, and reimburse the indemnified parties for losses suffered or incurred by the indemnified party, generally our clients, in connection with any claims arising out of the services that we provide. We also incur costs to defend lawsuits or settle claims related to these indemnification arrangements, and in most cases these costs are paid from our insurance program. Although we attempt to place limits on such indemnification arrangements related to the size of the contract, the maximum obligation may not be explicitly stated and, as a result, we are unable to determine the maximum potential amount of future payments we could be required to make under these arrangements. Our certificate of incorporation and bylaws may require us to indemnify our directors and officers for certain liabilities that were incurred as a result of their status or service to ABM as a director or officer. The amount of these obligations cannot be reasonably estimated. Unclaimed Property Audits We routinely remit escheat payments to states in compliance with applicable escheat laws, and we are subject to unclaimed property audits by states in the ordinary course of business. The property subject to review in the audit process may include unclaimed wages, vendor payments, or customer refunds. State escheat laws generally require entities to report and remit abandoned or unclaimed property to the state, and failure to do so can result in assessments that could include interest and penalties in addition to the payment of the escheat liability. Legal Matters We are a party to a number of lawsuits, claims, and proceedings incident to the operation of our business, including those pertaining to labor and employment, contracts, personal injury, and other matters, some of which allege substantial monetary damages. Some of these actions may be brought as class actions on behalf of a class or purported class of employees. At October 31, 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 $ 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. If one or more matters are resolved in a particular period in an amount in excess of, or in a manner different than, what we anticipated, this could have a material adverse effect on our financial position, results of operations, or cash flows. 82 In some cases, although a loss is probable or reasonably possible, we cannot reasonably estimate the maximum potential losses for probable matters or the range of losses for reasonably possible matters. Therefore, our accrual for probable losses and our estimated range of loss for reasonably possible losses do not represent our maximum possible exposure. Certain Legal Proceedings In determining whether to include any particular lawsuit or other proceeding in our disclosure below, we consider both quantitative and qualitative factors. These factors include, but are not limited to: the amount of damages and the nature of any other relief sought in the proceeding; if such damages and other relief are specified, our view of the merits of the claims; whether the action is or purports to be a class action, and our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; and the potential impact of the proceeding on our reputation. The Consolidated Cases of Bucio and Martinez v. ABM Janitorial Services filed on April 7, 2006, pending in the Superior Court of California, County of San Francisco (the “Bucio case”) The Bucio case 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. On May 11, 2011, the plaintiffs filed a motion to reconsider, which was denied. The plaintiffs appealed the class certification issues. The trial court stayed the underlying lawsuit pending the decision in the appeal. The Court of Appeal of the State of California, First Appellate District (the “Court of Appeal”), heard oral arguments on November 7, 2017. On December 11, 2017, the Court of Appeal reversed the trial court’s order denying class certification and remanded the matter for certification of a meal period, travel expense reimbursement, and split shift class. The case was remitted to the trial court for further proceedings on class certification, discovery, dispositive motions, and trial. On September 20, 2018, the trial court entered an order defining four certified subclasses of janitors who were employed by the legacy ABM janitorial companies in California at any time between April 7, 2002, and April 30, 2013, on claims based on alleged previous automatic deduction practices for meal breaks, unpaid meal premiums, unpaid split shift premiums, and unreimbursed business expenses, such as mileage reimbursement for use of personal vehicles to travel between worksites. On February 1, 2019, the trial court held that the discovery related to PAGA claims allegedly arising after April 30, 2013, would be stayed until after the class and PAGA claims accruing prior to April 30, 2013, had been tried. The parties engaged in mediation in July 2019, which did not result in settlement of the case. On October 17, 2019, the plaintiffs filed a motion asking the trial court to certify additional classes based on an alleged failure to maintain time records, an alleged failure to provide accurate wage statements, and an alleged practice of combining meal and rest breaks. The trial court denied the plaintiffs’ motion to certify additional classes on December 26, 2019. The case was reassigned to a new judge on January 6, 2020. ABM filed motions for summary adjudication as to certain of plaintiffs’ class claims, and the trial court denied those motions in November 2020. The parties engaged in another mediation in January 2021, which did not result in a settlement of the case. Plaintiffs filed motions for summary adjudication and/or summary judgment on some claims in December 2020. In February and March 2021, the parties engaged in expert discovery that provided detailed information regarding the plaintiffs’ damage calculations on the class claims. On February 25, 2021, the California Supreme Court issued an opinion in Donohue v. AMN Services , which addresses the standard for adjudicating meal period claims under California law and we believe is supportive of ABM’s legal position in the Bucio case. On May 5, 2021, the trial court denied all of the plaintiffs’ December 2020 motions for summary adjudication and/or summary judgment, and the case was assigned to a new judge. On May 5, 2021, the trial court ordered the parties to attend a mandatory settlement conference before a separate judge on June 11, 2021. The trial date was scheduled for July 12, 2021. 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 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, 83 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. 14. PREFERRED AND COMMON STOCK Preferred Stock We are authorized to issue 500,000 shares of preferred stock. None of these preferred shares are issued. Common Stock Effective December 18, 2019, our Board of Directors replaced our then-existing share repurchase program with a new share repurchase program under which we may repurchase up to $ 150.0 million of our common stock. These purchases may take place on the open market or otherwise, and all or part of the repurchases may be made pursuant to Rule 10b5-1 plans or in privately negotiated transactions. The timing of repurchases is at our discretion and will depend upon several factors, including market and business conditions, future cash flows, share price, share availability, and other factors. Repurchased shares are retired and returned to an authorized but unissued status. The repurchase program may be suspended or discontinued at any time without prior notice. Repurchase Activity We repurchased shares under the 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. Years Ended October 31, (in millions, except per share amounts) 2022 2021 Total number of shares purchased 2.3 — Average price paid per share $ 42.15 N/A Total cash paid for share repurchases $ 97.5 $ — 15. SHARE-BASED COMPENSATION PLANS 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. On May 2, 2006, our stockholders approved the 2006 Equity Incentive Plan, which was last amended and restated on March 7, 2018 (as amended and restated, the “2006 Equity Plan”). The 2006 Equity Plan is an omnibus plan that provides for a variety of equity and equity-based award vehicles, including stock options, stock appreciation rights, RSUs, performance shares, and other share-based awards. Shares subject to awards that terminate without vesting or exercise are available for future awards under the 2006 Equity Plan. Certain of the awards under the 2006 Equity Plan may qualify as “performance-based” compensation under the IRC. 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- 84 based awards. Shares subject to awards that terminate without vesting or exercise are available for future awards under the 2021 Equity Plan. Certain of the awards under the 2021 Equity Plan may qualify as “performance-based” compensation under the IRC. No further shares are authorized for issuance under the 2006 Equity Plan. There are 3,975,000 total shares of common stock authorized for issuance under the 2021 Equity Plan, and at October 31, 2022, there were 3,133,563 shares of common stock available for grant for future equity-based compensation awards. In addition, there are certain plans under which we can no longer issue awards, such as the 2006 Equity Plan, although awards outstanding under such plans may still vest and be exercised. We also maintain an employee stock purchase plan, which our stockholders approved on March 9, 2004 (the “2004 Employee Stock Purchase Plan”). As amended, there are 4,000,000 total shares of common stock authorized for issuance under the 2004 Employee Stock Purchase Plan. Effective May 1, 2006, the 2004 Employee Stock Purchase Plan is no longer considered compensatory and the values of the awards are no longer treated as share-based compensation expense. Additionally, as of that date, the purchase price became 95 % of the fair value of our common stock price on the last trading day of the month. Employees may designate up to 10 % of their compensation for the purchase of stock, subject to a $ 25,000 annual limit. Employees are required to hold their shares for a minimum of six months from the date of purchase. At October 31, 2022, there were 436,961 remaining unissued shares under the 2004 Employee Stock Purchase Plan. Compensation Expense by Type of Award and Related Income Tax Benefit Years Ended October 31, (in millions) 2022 2021 2020 RSUs $ 18.5 $ 17.6 $ 11.5 Performance shares 12.0 15.8 8.8 Share-based compensation expense before income taxes 30.5 33.5 20.3 Income tax benefit ( 8.6 ) ( 9.4 ) ( 5.7 ) Share-based compensation expense, net of taxes $ 21.9 $ 24.1 $ 14.6 RSUs and Dividend Equivalent Rights 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. RSUs granted to non-employee directors vest on the first anniversary date of the grant date. In general, the receipt of RSUs is subject to the Grantee’s continuing employment or service as a director. RSUs are credited with dividend equivalent rights that are converted to RSUs at the fair market value of our common stock on the dates the dividend payments are made and are subject to the same terms and conditions as the underlying award. RSU Activity Number of Shares (in millions) Weighted-Average Grant Date Fair Value per Share Outstanding at October 31, 2021 1.0 $ 36.90 Granted 0.5 41.63 Vested (including 0.2 shares withheld for income taxes) ( 0.4 ) 37.51 Forfeited ( 0.1 ) 40.04 Outstanding at October 31, 2022 1.0 $ 38.58 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 2022, 2021, and 2020, the weighted-average grant date fair value per share of awards granted was $ 41.63 , 85 $ 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. Performance Shares, Including TSR Performance Shares Performance shares consist of a contingent right to receive shares of our common stock based on performance targets adopted by our Compensation Committee. Performance shares are credited with dividend equivalent rights that will be converted to performance shares at the fair market value of our common stock beginning after the performance targets have been satisfied and are subject to the same terms and conditions as the underlying award. For certain performance share awards, the number of performance shares that will vest is based on pre-established internal financial performance targets and typically a three-year service and performance period. The number of TSR-modified awards that will vest over the respective three-year performance period is based on our total shareholder return relative to the S&P 1500 Composite Commercial Services & Supplies Index. Vesting of 0 % to 150 % of the awards originally granted may occur depending on the respective performance metrics. Performance Share Activity Number of Shares (in millions) Weighted-Average Grant Date Fair Value per Share Outstanding at October 31, 2021 1.0 $ 38.24 Granted 0.4 43.06 Vested (including 0.2 shares withheld for income taxes) ( 0.4 ) 35.04 Performance adjustments — 47.75 Forfeited — 39.64 Outstanding at October 31, 2022 1.0 $ 41.30 At October 31, 2022, total unrecognized compensation cost related to performance share awards was $ 17.1 million, which is expected to be recognized ratably over a weighted-average vesting period of 1.9 years. Except for TSR performance shares, these costs are based on estimated achievement of performance targets and estimated costs are periodically reevaluated. For our TSR performance shares, these costs are based on the fair value of awards at the grant date and are recognized on a straight-line basis over the service period of three years . In 2022, 2021, and 2020, the weighted-average grant date fair value per share of awards granted was $ 43.06 , $ 39.97 , and $ 35.92 , respectively. In 2022, 2021, and 2020, the total grant date fair value of performance shares vested and converted to shares of ABM common stock was $ 13.6 million, $ 9.0 million, and $ 6.1 million, respectively. In 2022, 2021, and 2020, we used the Monte Carlo simulation valuation technique to estimate the fair value of TSR performance share grants, which used the assumptions in the table below. Monte Carlo Assumptions 2022 2021 2020 Expected life (1) 2.81 years 2.81 years 2.81 years Expected stock price volatility (2) 41.8 % 42.9 % 28.7 % Risk-free interest rate (3) 1.1 % 0.2 % 1.5 % Stock price (4) $ 42.88 $ 40.75 $ 37.99 (1) The expected life represents the remaining performance period of the awards. (2) The expected volatility for each grant is determined based on the historical volatility of our common stock over a period equal to the remaining term of the performance period from the date of grant for all awards. 86 (3) The risk-free interest rate is based on the continuous compounded yield on U.S. Treasury Constant Maturity Rates with varying remaining terms; the yield is determined over a time period commensurate with the performance period from the grant date. (4) The stock price is the closing price of our common stock on the valuation date. Employee Stock Purchase Plan Years Ended October 31, (in millions, except per share amounts) 2022 2021 2020 Weighted-average fair value of granted purchase rights per share $ 2.19 $ 2.17 $ 1.75 Common stock issued 0.1 0.1 0.1 Fair value of common stock issued per share $ 41.68 $ 41.18 $ 33.18 Aggregate purchases $ 3.4 $ 3.3 $ 3.5 16. INCOME TAXES Geographic Sources of Income from Continuing Operations Before Income Taxes Years Ended October 31, (in millions) 2022 2021 2020 United States $ 278.5 $ 152.8 $ 45.2 Foreign 31.5 27.0 8.1 Income from continuing operations before income taxes $ 310.0 $ 179.8 $ 53.3 Components of Income Tax (Provision) Benefit Years Ended October 31, (in millions) 2022 2021 2020 Current: Federal $ 3.5 $ ( 66.3 ) $ ( 59.3 ) State ( 6.0 ) ( 27.4 ) ( 28.6 ) Foreign ( 9.4 ) ( 7.8 ) ( 1.7 ) Deferred: Federal ( 46.1 ) 34.9 23.2 State ( 22.1 ) 13.2 12.5 Foreign 0.5 ( 0.1 ) 0.9 Income tax provision $ ( 79.6 ) $ ( 53.5 ) $ ( 53.1 ) 87 Reconciliation of the U.S. Statutory Tax Rate to Annual Effective Tax Rate Years Ended October 31, 2022 2021 2020 U.S. statutory rate 21.0 % 21.0 % 21.0 % State and local income taxes, net of federal tax benefit 7.7 6.8 ( 0.6 ) Federal and state tax credits ( 1.5 ) ( 2.6 ) ( 4.7 ) Impact of foreign operations ( 0.1 ) 0.3 1.3 Changes in uncertain tax positions ( 2.5 ) 1.5 ( 2.0 ) Incremental tax benefit from share-based compensation awards ( 0.5 ) ( 0.4 ) ( 1.6 ) Energy efficiency incentives ( 0.3 ) ( 0.7 ) ( 3.8 ) Impact from goodwill impairment — — 81.7 Nondeductible expenses 1.7 2.9 4.4 Other, net 0.2 1.0 3.9 Effective tax rate 25.7 % 29.8 % 99.6 % 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 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; a $ 2.6 million provision for change in tax reserves; a $ 1.4 million provision for true-ups; and a $ 1.2 million benefit for energy efficiency incentives. 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. 88 Components of Deferred Tax Assets and Liabilities As of October 31, (in millions) 2022 2021 Deferred tax assets attributable to: Self-insurance claims (net of recoverables) $ 96.1 $ 92.0 Deferred and other compensation 33.0 34.4 Accounts receivable allowances 5.8 8.2 Settlement liabilities 10.4 44.2 Other accruals 4.8 6.6 Other comprehensive income — 1.3 State taxes 1.2 0.7 State net operating loss carryforwards 3.2 4.0 Tax credits 3.1 2.9 Unrecognized tax benefits 3.3 3.3 Deferred payroll taxes 18.1 35.1 Operating lease liabilities 31.0 33.5 Gross deferred tax assets 210.0 266.2 Valuation allowance ( 1.6 ) ( 2.2 ) Total deferred tax assets 208.4 264.0 Deferred tax liabilities attributable to: Property, plant and equipment ( 5.4 ) ( 4.1 ) Goodwill and other acquired intangibles ( 222.9 ) ( 222.2 ) Right-of-use assets ( 31.9 ) ( 33.8 ) Tax accounting method change ( 17.1 ) ( 15.8 ) Other comprehensive Income ( 9.0 ) — Other ( 11.8 ) ( 10.6 ) Total deferred tax liabilities ( 298.1 ) ( 286.5 ) Net deferred tax liabilities $ ( 89.7 ) $ ( 22.5 ) Net Operating Loss Carryforwards and Credits State net operating loss carryforwards totaling $ 55.6 million at October 31, 2022, are being carried forward in several state jurisdictions where we are permitted to use net operating losses from prior periods to reduce future taxable income. These losses will expire between 2023 and 2042. Federal net operating loss carryforwards were fully utilized during 2021. Federal and state tax credit carryforwards totaling $ 3.7 million are available to reduce future cash taxes and will expire between 2023 and 2042. The valuation allowance represents the amount of tax benefits related to state net operating loss carryforwards that are not likely to be realized. We believe the remaining deferred tax assets are more likely than not to be realizable based on estimates of future taxable income. Changes to the Valuation Allowance Years Ended October 31, (in millions) 2022 2021 2020 Valuation allowance at beginning of year $ 2.2 $ 4.1 $ 8.4 Other, net ( 0.6 ) ( 1.9 ) ( 4.3 ) Valuation allowance at end of year $ 1.6 $ 2.2 $ 4.1 89 Unrecognized Tax Benefits At October 31, 2022, 2021, and 2020, there were $ 22.0 million, $ 30.4 million, and $ 35.5 million, respectively, of unrecognized tax benefits that if recognized in the future would impact our effective tax rate. We estimate that a decrease in unrecognized tax benefits of up to approximately $ 1.8 million is reasonably possible over the next 12 months due to lapses of applicable statutes of limitations. 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 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 Years Ended October 31, (in millions) 2022 2021 2020 Balance at beginning of year $ 30.4 $ 35.5 $ 35.3 Additions for tax positions related to the current year — 3.7 2.1 Additions for tax positions related to prior years 0.3 0.3 1.6 Reductions for tax positions related to prior years ( 1.5 ) ( 5.3 ) — Reductions for lapse of statute of limitations ( 7.2 ) ( 2.5 ) ( 3.0 ) Settlements — ( 1.3 ) ( 0.5 ) Balance at end of year $ 22.0 $ 30.4 $ 35.5 Jurisdictions We conduct business in all 50 states, significantly in California, Texas, and New York, as well as in various foreign jurisdictions. Our most significant income tax jurisdiction is the United States. Due to expired statutes and closed audits, our federal income tax returns for years prior to fiscal 2019 are no longer subject to examination by the U.S. Internal Revenue Service. Generally, for the majority of state and foreign jurisdictions where we do business, periods prior to fiscal 2019 are no longer subject to examination. We are currently being examined by the tax authorities of California, New York City, Montana, and Massachusetts. 90 17. SEGMENT AND GEOGRAPHIC INFORMATION Segment Information 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 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. 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 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. The accounting policies for our segments are the same as those disclosed within our significant accounting policies in Note 2, “Basis of Presentation and Significant Accounting Policies.” Our management evaluates the performance of each reportable segment based on its respective operating profit results, which include the allocation of certain centrally incurred costs. Corporate expenses not allocated to segments include certain CEO and other finance and human resource departmental expenses, certain information technology costs, share-based compensation, certain legal costs and settlements, restructuring and related costs, certain actuarial adjustments to self-insurance reserves, and direct acquisition costs. Management does not review asset information by segment, therefore we do not present assets in this note. 91 Financial Information by Reportable Segment Years Ended October 31, (in millions) 2022 2021 2020 Revenues Business & Industry $ 4,095.9 $ 2,853.8 $ 2,856.4 Manufacturing & Distribution 1,445.2 1,363.1 1,151.4 Education 834.7 830.8 805.1 Aviation 804.0 651.1 670.7 Technical Solutions 626.8 529.8 504.0 Government Services — — — $ 7,806.6 $ 6,228.6 $ 5,987.6 Operating profit Business & Industry $ 334.9 $ 285.9 $ 229.2 Manufacturing & Distribution 161.8 155.5 108.0 Education (1) 47.1 61.5 ( 39.9 ) Aviation (2) 29.3 32.1 ( 60.1 ) Technical Solutions (3) 63.8 49.4 9.7 Government Services ( 0.3 ) ( 0.2 ) ( 0.1 ) Corporate (4) ( 284.5 ) ( 374.6 ) ( 146.9 ) 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 ( 0.9 ) ( 1.2 ) ( 2.1 ) 348.8 206.3 95.7 Income from unconsolidated affiliates 2.4 2.1 2.2 Interest expense ( 41.1 ) ( 28.6 ) ( 44.6 ) Income from continuing operations before income taxes $ 310.0 $ 179.8 $ 53.3 Depreciation and amortization Business & Industry $ 47.1 $ 18.4 $ 17.3 Manufacturing & Distribution 13.4 13.4 14.1 Education 25.4 30.5 33.7 Aviation 8.2 9.1 10.6 Technical Solutions 7.0 5.9 7.2 Corporate 11.4 12.7 13.5 $ 112.4 $ 89.9 $ 96.4 (1) Reflects impairment charges totaling $ 99.3 million on goodwill during the year ended October 31, 2020. (2) Reflects impairment charges totaling $ 61.1 million on goodwill and intangible assets during the year ended October 31, 2020. (3) Reflects impairment charges totaling $ 12.4 million on goodwill and intangible assets during the year ended October 31, 2020. (4) Reflects accrued litigation settlement reserve totaling $ 142.9 million for the Bucio case during the year ended October 31, 2021. Geographic Information Based on the Country in Which the Sale Originated (1) Years Ended October 31, (in millions) 2022 2021 2020 Revenues United States $ 7,335.3 $ 5,847.8 $ 5,625.1 All other countries 471.3 380.8 362.5 $ 7,806.6 $ 6,228.6 $ 5,987.6 (1) Substantially all of our long-lived assets are related to U.S. operations. 92 18. SUBSEQUENT EVENTS 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. 93 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.