What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-04 · 431 added, 437 removed, 1231 unchanged (41% of the section changed)

3 unchanged sentences

(In millions, except share and per share data)

September 30,

Current assets:

1 unchanged sentence

Restricted cash

Accounts receivable, net of allowances of $ 3 and $ 3 at June 30, 2022 and

Accounts receivable, net of allowances of $ 2 and $ 3 at September 30, 2022 and

December 31, 2021, respectively

26 unchanged sentences

5.5 % Series B Redeemable Convertible Preferred Stock, $ 0.0001 par value, 800,000 authorized

shares, 800,000 shares and 0 shares issued and outstanding at June 30, 2022 and December 31,

shares, 800,000 shares and 0 shares issued and outstanding at September 30, 2022 and December

31, 2021, respectively;

2 unchanged sentences

Series A Preferred Stock, $ 0.0001 par value, 7,000,000 authorized shares, 4,000,000 shares

issued and outstanding at June 30, 2022 and December 31, 2021

issued and outstanding at September 30, 2022 and December 31, 2021

Common Stock, $ 0.0001 par value, 500,000,000 authorized shares, 233,786,135 shares and

224,625,193 shares issued at June 30, 2022 and December 31, 2021, respectively (excluding

7,539,697 shares declared for stock dividend at December 31, 2021)

224,625,193 shares issued at September 30, 2022 and December 31, 2021, respectively

(excluding 7,539,697 shares declared for stock dividend at December 31, 2021)

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Total shareholders’

5 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Cost of revenues

Selling, general, and administrative expenses

Operating income (loss)

Operating income

Interest expense, net

Loss on extinguishment of debt

(Gain) loss on extinguishment of debt, net

Non-service pension benefit

1 unchanged sentence

Other expense, net

Income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

Net income (loss) attributable to common shareholders:

Income before income taxes

Income tax provision

Net income attributable to common shareholders:

Stock dividend on Series B Preferred Stock

Net income (loss) attributable to common shareholders

Net income (loss) per common share:

Net income attributable to common shareholders

Net income per common share:

Weighted average shares outstanding:

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(In millions)

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

Other comprehensive income (loss):

Three Months Ended September 30,

Nine Months Ended September 30,

Other comprehensive (loss) income:

Fair value change - derivatives, net of tax benefit (expense)

1 unchanged sentence

Foreign currency translation adjustment

Comprehensive income (loss)

Comprehensive (loss) income

See notes to condensed consolidated financial statements.

11 unchanged sentences

Balance, December 31, 2021

Net income (loss)

Fair value change - derivatives

6 unchanged sentences

Balance, March 31, 2022

Net income (loss)

Fair value change - derivatives

4 unchanged sentences

Balance, June 30, 2022

Fair value change - derivatives

Foreign currency translation adjustment

Series B Preferred Stock dividend

Share repurchases

Share-based compensation and other, net

Balance, September 30, 2022

Preferred Stock Issued

6 unchanged sentences

Balance, December 31, 2020

Net income (loss)

Fair value change - derivatives

5 unchanged sentences

Balance, March 31, 2021

Net income (loss)

Fair value change - derivatives

2 unchanged sentences

Balance, June 30, 2021

Fair value change - derivatives

Foreign currency translation adjustment

Issuance of common shares

Share-based compensation and other, net

Balance, September 30, 2021

See notes to condensed consolidated financial statements.

2 unchanged sentences

(In millions)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Restructuring charges, net of cash paid

4 unchanged sentences

Non-service pension benefit

Loss on extinguishment of debt

(Gain) loss on extinguishment of debt, net

Pension contributions

7 unchanged sentences

Other assets and liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities:

2 unchanged sentences

Proceeds from sales of property, equipment, held for sale assets, and businesses

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash flows from financing activities:

1 unchanged sentence

Payments on long-term borrowings

Repurchases of long-term borrowings

Payments of debt issuance costs

3 unchanged sentences

Restricted shares tendered for taxes

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Effect of foreign currency exchange rate change on cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

Net (decrease) increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash, beginning of period

38 unchanged sentences

The Company holds investments in joint ventures which are accounted for under the equity method of accounting as the Company does not exercise control over the joint ventures.

The Company’s share of earnings from the joint ventures w as $ 1 d uring the three months ended June 30, 2022 and 2021, and $ 1 and $ 2 during the six months ended June 30, 2022 and 2021, respectively.

The Company’s share of earnings from the joint ventu res was $ 2 an d $ 1 d uring the three months ended September 30, 2022 and 2021 , respectively, and $ 3 during the nine months ended September 30, 2022 and 2021.

The earnings are recorded within investment income and other, net in the condensed consolidated statements of operations.

The investment balances wer e $ 3 a nd $ 4 as of June 30, 2022 and December 31, 2021 , respectively, and are recorded within other assets in the condensed consolidated balance sheets.

The investment balances w ere $ 4 as of September 30, 2022 and December 31, 2021 , and are recorded within other assets in the condensed consolidated balance sheets.

Pension and post-retirement obligations

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Accounting standards issued and adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which helps limit the accounting impact from contract modifications, including hedging relationships, due to the transition from the London Interbank Offered Rate ("LIBOR") to alternative reference rates, such as the Secured Overnight Financing Rate, that are completed by December 31, 2022.

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The results of the Chubb business are reported within the Company's Safety Services segment.

The total net consideration after estimated working capital adjustments was $ 2,899 , which included aggregate cash consideration of $ 2,935 paid by the Company for the stock purchase of the Chubb business.

Cash consideration was funded through a combination of cash on hand and net proceeds from the private placement of Series B Preferred Stock (as defined in Note 16 - "Related-Party Transactions"), the offering of the 4.750 % Senior Notes, and the 2021 Term Loan (both defined in Note 12 - "Debt").

Total consideration is still subject to post closing adjustments, which the Company anticipates will be finalized during the fourth quarter of 2022.

During the three and six months ended June 30, 2022, the Company incurred transaction costs of $ 0 and $ 24 , res pectively, which were expensed and included as a component of selling, general, and administrative expenses in the condensed consolidated statements of operations.

The Chubb Acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”).

The consideration paid by the Company for the stock purchase of the Chubb business was funded through a combination of cash on hand and net proceeds from the private placement of Series B Preferred Stock (as defined in Note 16 - "Related-Party Transactions"), the offering of the 4.750 % Senior Notes, and the 2021 Term Loan (both defined in Note 12 - "Debt").

During the three and nine months ended September 30, 2022, the Company incurred transaction cost s of $ 0 and $ 24 , res pectively, which were expensed and included as a component of selling, general, and administrative expenses in the condensed consolidated statements of operations.

The Chubb Acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations .

The purchase price has been preliminarily allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their estimated fair values, with the exception of the following:

(1) pre-acquisition contingencies which are recognized and measured in accordance with ASC 450, Contingencies (“ASC 450”) if fair value cannot be determined;

(1) pre-acquisition contingencies which are recognized and measured in accordance with ASC 450, Contingencies, if fair value cannot be determined;

(2) deferred income tax assets acquired and liabilities assumed are recognized and measured in accordance with ASC 740, Income Taxes ;

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Retirement Benefits ;

(4) contract assets and liabilities are measured and recognized in accordance with ASC 606, Revenue from Contracts with Customers;

and (5) certain lease related assets and liabilities which are measured and recognized in accordance with ASC 842, Leases .

(4) contract assets and liabilities are measured and recognized in accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606") ;

and (5) certain lease related assets and liabilities which are measured and recognized in accordance with ASC 842, Leases ("ASC 842").

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of the Chubb Acquisition:

Cash paid at closing

Working capital and net indebtedness adjustment

Total net consideration

Accounts receivable

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The Company anticipates that it will finalize its accounting for the Chubb Acquisition during the fourth quarter of 2022.

During the three months ended June 30, 2022, the Company recorded a measurement period adjustments, primarily related to working capital balances, property, leases, and other noncurrent liabilities.

During the nine months ended September 30, 2022, the Company recorded measurement period adjustments, primarily related to working capital balances, property and equipment, and intangible assets.

The Company will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.

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The estimated useful lives over which the intangible assets will be amortized are as follows:

customer relationships ( 15 years ), trade names and trademarks ( 15 years ), and contractual backlog ( 1 year ).

customer relationships ( fifteen years ), trade names and trademarks ( fifteen years ), and contractual backlog ( two years ).

The results of operations for the Chubb business are included in the consolidated financial statements of the Company from the date of acquisition.

Pro forma consolidated financial information

The following pro forma consolidated financial information reflects the results of operations of the Company for the three and six months ended June 30, 2021 as if the Chubb Acquisition and related financing had occurred as of January 1, 2021, after giving effect to certain purchase accounting and financing adjustments.

The following pro forma consolidated financial information reflects the results of operations of the Company for the three and nine months ended September 30, 2021 as if the Chubb Acquisition and related financing had occurred as of January 1, 2021, after giving effect to certain purchase accounting and financing adjustments.

These amounts are based on financial information of the Chubb business and are not necessarily indicative of what the Company’s operating results would have been had the Chubb Acquisition and related financing taken place on January 1, 2021.

Three Months Ended

June 30, 2021

Six Months Ended

June 30, 2021

September 30, 2021

Nine Months Ended

September 30, 2021

Net income (loss)

Pro forma financial information is presented as if the operations of Chubb had been included in the consolidated results of the Company since January 1, 2021, and gives effect to transactions that are directly attributable to the Chubb Acquisition and related financing.

Pro forma financial information is presented as if the operations of the Chubb business had been included in the consolidated results of the Company since January 1, 2021, and gives effect to transactions that are directly attributable to the Chubb Acquisition and related financing.

Adjustments, net of related tax impacts, include:

2 unchanged sentences

interest expense under the Company’s 2021 Term Loan and 4.750 % Senior Notes (both defined in Note 12 - "Debt") as if the amounts borrowed to partially finance the purchase price were borrowed on January 1, 2021.

Total cumulative transaction-related costs of $ 44 were expensed and have been included as a component of selling, general, and administrative expenses, were reflected as if the transaction occurred as of January 1, 2021.

Total cumulative transaction-relat ed costs of $ 44 wer e expensed and have been included as a component of selling, general, and administrative expenses, were reflected as if the transaction occurred as of January 1, 2021.

2021 Acquisitions

5 unchanged sentences

The area of the purchase price allocation that is not yet finalized for the NAC acquisition is the valuation of income tax related matters.

During the six months ended June 30, 2022, the Company recorded a measurement period adjustment, primarily related to a reclassification between intangible assets and goodwill for the NAC acquisition.

During the nine months ended September 30, 2022, the Company recorded a measurement period adjustment, primarily related to a reclassification between intangible assets and goodwill for the NAC acquisition.

The Company will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.

Based on preliminary estimates, the total amount of goodwill from the 2021 acquisitions expected to be deductible for tax purpo ses is $ 48 .

Based on preliminary estimates, the total amount of goodwill from the 2021 acquisitions expected to be deductible for tax purposes is $ 48 .

S ee Note 7 –

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Net assets acquired

For the three months ended June 30, 2022, net revenues and operating income from the Company's material acquisitions that closed over the previous 12 months w as $ 560 and $ 4 , respectively.

For the six months ended June 30, 2022, net revenues and operating income from the material acquisitions that closed over the previous 12 months was $ 1,103 and $ 14 , respect ively.

For the three months ended September 30, 2022, net revenues and operating loss from the Company's material acquisitions that closed over the previous twelve months w as $ 526 and $ 7 , respectively.

For the nine months ended September 30, 2022, net revenues and operating income from the material acquisitions that closed over the previous twelve months was $ 1,603 and $ 4 , respect ively.

Accrued consideration

3 unchanged sentences

Contingent consideration arrangements are not contingent on employment and are included as part of purchase consideration at the time of the initial acquisition and are paid over a three to five year period.

The liability for deferred payments is recognized at the date of acquisition based on the Company’s best estimate and is typically payable over a twelve to twenty-four month period.

The liability for deferred payments is recognized at the date of acquisition based on the Company’s best estimate and is typically payable over a one to two year period.

Deferred payments are not contingent on any future performance or employment obligations and can be offset for working capital true-ups, and representations and warranty items.

The total contingent compensation arrangement liab ility was $ 16 and $ 12 at June 30, 2022 and December 31, 2021 , respectively.

The maximum payout of these arrangements upon completion of the future performance periods was $ 20 and $ 57 , inclusive of the $ 16 an d $ 12 , accrued as of June 30, 2022 and December 31, 2021, respectively.

The total contingent compensation arrangement lia bility was $ 17 and $ 12 at September 30, 2022 and December 31, 2021 , respectively.

The maximum payout of these arrangements upon completion of the future performance periods was $1 9 and $ 57 , inclusive of the $ 17 and $ 12 , accrue d as of September 30, 2022 and December 31, 2021, respectively.

The contingent compensation liability is included in contingent consideration and compensation liabilities in the condensed consolidated balance sheets for all periods presented.

3 unchanged sentences

For additional considerations regarding the fair value of the Company's contingent consideration liabilities, see Note 8 - "Fair Value of Financial Instruments."

The total liability for deferred paym ents was $ 15 at both June 30, 2022 and December 31, 2021 , and are included in contingent consideration and compensation liabilities in the condensed consolidated balance sheets for all periods presented.

The total liability for deferred paym ents was $ 12 and $ 15 at September 30, 2022 and December 31, 2021 , respectively, and is included in contingent consideration and compensation liabilities in the condensed consolidated balance sheets for all periods presented.

Restructuring

During the three months ended June 30, 2022, the Company initiated a multi-year restructuring program to drive efficiencies and synergies and optimize operating margin.

During 2022, the Company initiated a multi-year restructuring program to drive efficiencies and synergies and optimize operating margin.

The Company expects to incur expenses related to workforce reductions, lease termination costs, and other facility rationalization costs over the next three years.

The Company recorded total restructuring costs of $ 11 , of which $ 2 was recorded in cost of revenues and $ 9 in selling, general, and administrative expenses on the condensed consolidated statements of operations for both the three and six months ended June 30, 2022, within the Safety Services segment.

The amounts recognized in the period relate to costs associated with workforce reductions.

As of June 30, 2022, the Company had $ 8 in restructuring liabilities recorded in other accrued liabilities on the condensed consolidated balance sheets for this plan, which are expected to be paid within the next six to nine months.

The Company recorded total restructuring costs within the Safety Services segment of $ 7 and $ 18 , of which $ 2 and $ 4 was recorded in cost of revenues and $ 5 and $ 14 in selling, general, and administrative expenses on the condensed consolidated stat ements of operations for the three and nine months ended September 30, 2022, respectively.

The amounts recognized in the nine months ended September 30, 2022 relate to costs associated with workforce reductions.

As of September 30, 2022, the Comp any had $ 11 in restructuring liabilities recorded in other accrued liabilities on the condensed consolidated balance sheets for this plan, which are expected to be paid within the next three to six months.

The Company continues to evaluate operating efficiencies and anticipates incurring additional costs in the coming quarters in connection with these activities, but is unable to estimate those amounts at this time as such plans are not yet finalized.

The following table summarizes the Company's 2022 restructuring program for the six month period ended June 30, 2022:

Six Months Ended

June 30, 2022

The following table summarizes the Company's 2022 restructuring program for the nine month period ended September 30, 2022:

Nine Months Ended

September 30, 2022

Balance as of December 31, 2021

2 unchanged sentences

Currency translation adjustment and other

Balance as of June 30, 2022

Under ASC 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when or as control of promised goods and services are transferred to customers, and the amount of revenue recognized reflects the consideration to which an entity expects to be entitled in exchange for the goods and services transferred.

Balance as of September 30, 2022

Under ASC 606, revenue is recognized when or as control of promised goods and services is transferred to customers and the amount of revenue recognized reflects the consideration to which an entity expects to be entitled in exchange for the goods and services transferred.

Net revenues are primarily recognized by the Company over time utilizing the cost-to-cost measure of progress.

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The Company disaggregates its net revenues primarily by segment, service type, and country from which revenues are invoiced, as th e nature, timing and uncertainty of cash flows are relatively consistent within each of these categories.

The following tables provide disclosure of disaggregated net revenues by segment for the three and six months ended June 30, 2022 and 2021.

The following tables provide disclosure of disaggregated net revenues by segment for the three and nine months ended September 30, 2022 and 2021.

Prior period balances in this table have been recast to reflect current period presentation, as described in Note 2 - "Basis of Presentation and Significant Accounting Policies." Disaggregated net revenues information is as follows:

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Corporate and

Heating, Ventilation, and Air Conditioning ("HVAC")

Infrastructure / Utility

1 unchanged sentence

Corporate and Eliminations

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Corporate and

2 unchanged sentences

Corporate and Eliminations

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Corporate and

2 unchanged sentences

Corporate and Eliminations

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Corporate and

2 unchanged sentences

Corporate and Eliminations

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Corporate and

United States

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Corporate and

United States

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Corporate and

United States

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Corporate and

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The Company utilizes the practical expedient under ASC 606 and does not disclose unsatisfied performance obligations for service contracts as these contracts generally have an original duration of less than one year.

For those in-process contracts with an original duration exceeding one year, the aggregate amount of transaction price allocated to the performance obligations unsatisfied at June 30, 2022 was $ 543 .

The Company expects to recognize revenue on approxim ately 50 % o f the remaining performance obligations over the next 12 m onths .

The Company expects to recognize revenue on approximately 65 % of the r emaining performance obligations over the next twelve m onths .

When more than one contract is entered into with a customer on or close to the same date, management evaluates whether those contracts should be combined and accounted for as a single contract as well as whether those contracts should be accounted for as one, or more than one, performance obligation.

1 unchanged sentence

Contracts are often modified through change orders to account for changes in the scope and price of the goods or services being provided.

Although the Company evaluates each change order to determine whether such modification creates a separate performance obligation, the majority of change orders are for goods or services not distinct within the context of the original contract and, therefore, not treated as separate performance obligations but rather as a modification of the existing contract and performance obligation.

Although the Company evaluates each change order to determine whether such modification creates a separate performance obligation, the majority of change orders are for goods or services not distinct within the context of the original contract and, therefore, not treated as a separate performance obligation but rather as a modification of the existing contract and performance obligation.

Variable consideration

4 unchanged sentences

Such changes in estimates may also result in the reversal of previously recognized net revenues if the ultimate outcome differs from the Company’s previous estimate.

For the three and six months ended June 30, 2022 and 2021, there were no significant reversals of net revenues recognized associated with the revision of transaction prices.

For the three and nine months ended September 30, 2022 and 2021, there were no significant reversals of net revenues recognized associated with the revision of transaction prices.

The Company typically does not incur any returns, refunds or similar obligations after the completion of the performance obligation since any deficiencies are corrected during the course of performance.

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In addition, many of the Company’s time and material arrangements are billed in arrears pursuant to contract terms, resulting in contract assets being recorded as net revenues are recognized in advance of billings.

The Company utilizes the practical expedient under ASC 606 and does not adjust for a significant financing component if the time between payment and the transfer of the related good or service is expected to be one year or less.

The Company’s revenue arrangements are typically accounted for under such expedient as payments are within one year of performance for the Company’s services.

As of June 30, 2022, none of the Company’s contracts contained a significant financing component.

Contract liabilities from the Company’s contracts arise when amounts invoiced to the Company’s customers exceed net revenues recognized under the cost-to-cost measure of progress.

1 unchanged sentence

Contract liabilities decrease as the Company recognizes net revenues from the satisfaction of the related performance obligation.

The Company’s revenue arrangements are typically accounted for under such expedient as payments are within one year of performance for the Company’s services.

As of September 30, 2022, none of the Company’s contracts contained a significant financing component.

Contract assets and contract liabilities are classified as current in the condensed consolidated balance sheets as all amounts are expected to be relieved within one year.

The balances of accounts receivable, net of allowances, contract assets and contract liabilities from contracts with customers as of June 30, 2022 and December 31, 2021 are as follows:

Balance as of June 30, 2022

The balances of accounts receivable, net of allowances, contract assets, and contract liabilities from contracts with customers as of September 30, 2022 and December 31, 2021 are as follows:

Balance as of September 30, 2022

Balance as of December 31, 2021

1 unchanged sentence

In accordance with industry practice, accounts receivable includes retentions receivable, a portion of which may not be received within one year.

At June 30, 2022 and December 31, 2021, retentions receivable w ere $ 130 an d $ 117 , respectively, while the portions that may not be received within one year were $ 29 and $ 25 , respectively.

At September 30, 2022 and December 31, 2021, retentions receivable were $ 134 and $ 117 , respectively, while the portions that may not be received within one year were $ 20 and $ 25 , respectively.

There were no other significant changes due to business acquisitions or significant changes in estimates of contract progress or transaction price.

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GOODWILL AND INTANGIBLES

The following table provides disclosure of goodwill by segment as of June 30, 2022 and December 31, 2021.

Prior period balances in this table have been recast to reflect current period presentation, as described in Note 2 - "Basis of Presentation and Significant Accounting Policies," The changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2022 are as follows:

The following table provides disclosure of goodwill by segment as of September 30, 2022 and December 31, 2021.

Prior period balances in this table have been recast to reflect current period presentation, as described in Note 2 - "Basis of Presentation and Significant Accounting Policies." The changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 2022 are as follows:

Goodwill as of December 31, 2021

Measurement period adjustments and other (1)

Goodwill as of June 30, 2022

(1) Measurement period adjustments and other includes fluctuations due to foreign currency translation and measurement period adjustments recorded during the six months ended June 30, 2022 related to purchase accounting adjustments for acquisitions completed during the previous twelve months (see Note 4 - "Business Combinations").

The Company’s identifiable intangible assets are comprised of the following as of June 30, 2022 and December 31, 2021:

June 30, 2022

Foreign currency translation and other, net (1)

Goodwill as of September 30, 2022

(1) Other includes measurement period adjustments recorded during the nine months ended September 30, 2022 related to acquisitions completed during the previous twelve months (see Note 4 - "Business Combinations").

The Company’s identifiable intangible assets are comprised of the following as of September 30, 2022 and December 31, 2021:

September 30, 2022

Weighted Average

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Amortization expense recognized on identifiable intangible assets is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenues

1 unchanged sentence

Total intangible asset amortization expense

During the three months ended September 30, 2022, the Company recorded measurement period adjustments for the Chubb Acquisition.

The measurement period adjustments resulted in a decrease in amortization expense that had been recorded earlier in the year.

If the intangible assets fair values had been known at the date of the Chubb Acquisition, amortization expense would have decreased b y $ 2 to $ 55 for t he three months ended March 31, 2022 and June 30, 2022, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Unobservable inputs that reflect the reporting entity’s own assumptions.

Unobservable inputs that reflect the Company's own assumptions.

Recurring fair value measurements

The Company’s financial assets and liabilities (adjusted to fair value at least quarterly) are derivative instruments, which are primarily included in other noncurrent liabilities, and contingent consideration, which is primarily included in contingent consideration and compensation liabilities in the condensed consolidated balance sheets.

The following tables summarize the fair values and levels within the fair value hierarchy in which the measurements fall for assets and liabilities measured on a recurring basis as of June 30, 2022 and December 31, 2021:

Fair Value Measurements at June 30, 2022

The Company’s financial assets and liabilities (adjusted to fair value at least quarterly) are derivative instruments and contingent consideration obligations.

In the condensed consolidated balance sheets, derivative instruments are primarily included in other noncurrent assets and other noncurrent liabilities and contingent consideration obligations are primarily included in contingent consideration and compensation liabilities.

Fair Value Measurements at September 30, 2022

Financial assets:

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Financial liabilities:

Derivatives designated as hedge instruments

Cash flow hedges - interest rate swaps

Fair value hedges

Derivatives not designated as hedge instruments

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This analysis reflects the contractual terms of the purchase agreements (e.g., potential payment amounts, length of measurement periods, manner of calculating any amounts due) and utilizes assumptions with regard to future cash flows, probabilities of achieving such future cash flows, and a discount rate.

Depending on the contractual terms of the purchase agreement, the probability of achieving future cash flows or earnings generally represent the only significant unobservable inputs.

Depending on the contractual terms of the purchase agreement, the probabilities of achieving future cash flows or earnings generally represent the only significant unobservable inputs.

The contingent consideration obligations are measured at fair value each reporting period and changes in estimates of fair value are recognized in earnings.

The table below presents a reconciliation of the fair value of the Company’s contingent consideration obligations that use unobservable inputs (Level 3), as well as other information about the contingent consideration obligations:

Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2022

Balance as of December 31, 2021

Adjustments to fair value

Balance as of June 30, 2022

Balance as of September 30, 2022

Number of open contingent consideration arrangements at the end of period

Maximum potential payout at end of period

At June 30, 2022, the remaining open contingent consideration arrangements are set to expire at various dates through 2023.

At September 30, 2022, the remaining open contingent consideration arrangements are set to expire at various dates through 2023.

Level 3 unobservable inputs were used to calculate the fair value adjustments shown in the table above.

The fair value adjustments and the related unobservable inputs were not considered significant for the three and six months ended June 30, 2022.

The fair value adjustments and the related unobservable inputs were not considered significant for the three and nine months ended September 30, 2022.

Fair value estimates

The following table presents the carrying amount and fair value of the Company’s non-variable interest rate debt (“

4.125 % Senior Notes,”

and " 4.750 % Senior Notes," as defined in Note 12 –

“Debt”), including current portion and excluding unamortized debt issuance costs, which is estimated by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions, which are considered to be Level 2 inputs under the fair value hierarchy.

The carrying values of variable interest rate long-term debt, including current portions and excluding accrued interest, approximate their fair values because of the variable interest rates of these instruments, which generally are reset monthly.

June 30, 2022

The following table presents the carrying amount and fair value of the Company’s non-variable interest rate debt ( 4.125 % Senior Notes and 4.750 % Senior Notes, as defined in Note 12 –

“Debt”), including current portions and excluding unamortized debt issuance costs, which are estimated by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions, which are considered to be Level 2 inputs under the fair value hierarchy.

During the three months ended September 30, 2022, the Company repurchased $ 13 and $ 23 of the 4.125% Senior Notes and 4.750% Senior Notes, respectively.

September 30, 2022

December 31, 2021

3 unchanged sentences

4.750 % Senior Notes

The Company uses foreign currency forward contracts, cross currency swaps, and interest rate swap agreements to manage risks associated with foreign currency exchange rates, interest rates, and net investments in foreign operations.

The Company uses foreign currency forward contracts, cross-currency swaps, and interest rate swap agreements to manage risks associated with foreign currency exchange rates, net investments in foreign operations, and interest rates.

The Company does not hold derivative financial instruments of a speculative nature or for trading purposes.

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The Company manages its fixed and floating rate debt mix using interest rate swaps.

Interest rate swap contracts are used by the Company to separate interest rate risk management from the debt funding decision.

The Company uses interest rate swap contracts to separate interest rate risk management from the debt funding decision.

The cash paid and received from the settlement of interest rate swaps is included in interest expense in the condensed consolidated statements of operations.

The Company elected a method that does not require continuous evaluation of hedge effectiveness.

During the second quarter of 2022, the Company entered into an aggr egate $ 400 notional amount of interest rate swaps that exchange a variable rate of interest (LIBOR) for an average fixed rate of interest of approximately 3.46 % ov er the term of the agreements, which mature in January 2028 .

During the three months ended September 30, 2022, the Company terminated the previously outstanding $ 720 notional amount interest rate swap with a maturity date in October 2024 ("2024 Interest Rate Swap").

The present value as of the date of termination of the 2024 Interest Rate Swap is recorded in accumulated other comprehensive income (loss) ("AOCI") on the condensed consolidated balance sheets.

The fair value previously recognized in AOCI related to interest rate movements of the 2024 Interest Rate Swap is being amortized to interest expense on a straight-line basis through October 2024.

The amount amortized from AOCI into interest expense during the three and nine months ended September 30, 2022 was $ 1 .

As of September 30, 2022, approximately $ 33 of unrealized pre-tax gains remained in AOCI.

During the three months ended September 30, 2022, the Company entered into an aggregate $ 720 notional amount interest rate swap ("2026 Interest Rate Swap") that exchanges a variable rate of interest (LIBOR) for an average fixed rate of interest of approximately 3.64 % over the term of the agreement, which matures in October 2026 .

During the three months ended June 30, 2022, the Company entered into an aggr egate $ 400 notional amount of interest rate swaps that exchange a variable rate of interest (LIBOR) for an average fixed rate of interest of approximately 3.46 % ov er the term of the agreements, which mature in January 2028 .

These swaps are forward-starting and are effective commencing January 2023.

As of June 30, 2022, the Company had $ 1,120 notional amount outstanding in swap agreements, which includes the aggregate $ 400 notional amount of forward-starting swaps, and a 5-year $ 720 notional amount interest rate swap with a maturity date of October 2024.

As of September 30, 2022, the Compa ny had $ 1,120 noti onal amount outstanding in swap agreements, which includes the aggregate $ 400 notional amount of forward-starting swaps, and the four-year $ 720 notional 2026 Interest Rate Swap.

The Company has designated these swaps as cash flow hedges of the interest rate risk attributable to forecasted variable interest (LIBOR) payments.

As of June 30, 2022, the weighted average fixed rate of interest on these swaps, excluding the forward-starting swap, was approximately 1.62 %.

Th e effective portion of the after tax fair value gains or losses on these swaps is included as a component of accumulated other comprehensive income (loss) ("AOCI").

As of September 30, 2022, the weighted average fixed rate of interest on these swaps, excluding the forward-starting swap, was approximately 3.64 %.

Th e effective portion of the after tax fair value gains or losses on these swaps is included as a component of AOCI.

Variations in the assets and liability balances are primarily driven by changes in the applicable forward yield curves related to LIBOR.

The fair value of the effective interest rate swaps designated as hedging instruments was an asset of $ 23 and a liability of $ 11 as of June 30, 2022 and December 31, 2021, respectively.

The fair value of the forward-starting interest rate swaps designated as hedging instruments was liability of $ 10 as of June 30, 2022.

The Company recorded interest expense of $ 2 and $ 3 during the three months ended June 30, 2022 and 2021, respectively, and $ 4 and $ 5 of interest expense during the six months ended June 30, 2022 and 2021, respectively, related to interest rate swaps.

The fair value of the effective interest rate swaps designated as hedging instruments w as an asset of $ 9 and a l iability of $ 11 as of September 30, 2022 and Decem ber 31, 2021, respectively.

The fair value of the forward-starting interest rate swaps designated as hedging instruments was an asset of $ 8 as of Septem ber 30, 2022.

The Company recorded interest expense (income) of ($ 1 ) and $ 3 durin g the three months ended September 30, 2022 and 2021, respectivel y, and $ 3 and $ 8 of i nterest expense during the nine months ended September 30, 2022 and 2021, respectively, related to interest rate swaps.

Cross-currency swaps

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dollar equivalent amounts of $ 26 and $ 94 with maturity dates of September 2027 and 2030, respectively.

The total fair value of the cross-currency hedges was an asset of $ 18 and $ 6 as of June 30, 2022 and December 31, 2021, respectively.

The Company recognized income of $ 7 and $ 10 in investment income and other, net, during the three and six months ended June 30, 2022, respectively, and expense of $ 3 and income of less than $ 1 in investment income and other, net, during the three and six months ended June 30, 2021, respectively.

The total fair value of the cross-currency h edges was an asset of $ 25 and $ 6 as of September 30, 2022 and December 31, 2021, respectively.

The Company recognized income of $ 7 and $ 17 in investment income and other, net, during the three and nine months ended September 30, 2022, respectively, and income of $ 3 in investmen t income and other, net, during the three and nine months ended September 30, 2021, respectively.

Net investment hedges

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The fair value previously recognized in AOCI related to interest rate movements of the dedesignated swap is being amortized to interest expense on a straight-line basis throug h the third quarter 2029.

The Company recorded interest income of $ 1 and $ 2 during the three and six months ended June 30, 2022, respectively.

The amount amortized from AOCI into interest expense during the three and six months ended June 30, 2021 was immaterial.

The fair value of the foreign currency swaps designated as net investment hedges was an asset of $ 33 and $ 12 as of June 30, 2022 and December 31, 2021, respectively.

The Company recorded interest income of $ 1 and $ 3 during the three and nine months ended September 30, 2022, respectively.

The fair value of the foreign currency swaps designated as net investment hedges was an asset of $ 45 and $ 12 as of September 30, 2022 and December 31, 2021, respectively.

Fair value hedges

8 unchanged sentences

Any cash flows associated with these instruments are included in operating activities in the condensed consolidated statements of cash flows.

The fair value of these hedges were an asset of $ 38 and a liability of $ 1 as of June 30, 2022, respectively, and are included in other noncurrent liabilities and other assets.

The Company recognized income of $ 38 and $ 44 in investment income and other, net, during the three and six months ended June 30, 2022, respectively.

The fair value of these hedges were an asset of $ 95 as of September 30, 2022 and are included in other assets .

The Company recognized income of $ 51 and $ 95 in investment income and other, net, during the three and nine months ended September 30, 2022, respectively.

Foreign currency contracts

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These arrangements generally do not call for collateral and no cash collateral had been received or pledged related to the underlying derivatives.

The Company recognized income of $ 2 and $ 3 in investment income and other, net, during the three and six months ended June 30, 2022, respectively, and an immaterial amount during the three and six months ended June 30, 2021.

As of June 30, 2022 and December 31, 2021, foreign currency contracts carried immaterial balances within other non current liabilities and other assets.

The Company recognized income of $ 6 and $ 9 in investm ent income and other, net, during the three and nine months ended September 30, 2022, respectively, and an immaterial amount during the three and nine months ended September 30, 2021.

As of September 30, 2022, foreign currency contracts carried balances of $ 2 in other noncurrent liabilities and less than $ 1 in other assets.

As of December 31, 2021, foreign currency contracts carried immaterial balances.

PROPERTY AND EQUIPMENT, NET

The components of property and equipment as of June 30, 2022 and December 31, 2021 are as follows:

The components of property and equipment as of September 30, 2022 and December 31, 2021 are as follows:

September 30,

Machinery and equipment

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Property and equipment, net

Depreciation expense related to property and equipment, including finance leases, was $ 19 and $ 20 during the three months ended June 30, 2022 and 2021, respectively, and $ 38 and $ 39 during the six months ended June 30, 2022 and 2021 , respectively.

Depreciation expense related to property and equipment, including finance lea ses, was $ 22 an d $ 20 during the three months ended September 30, 2022 and 2021, respectiv ely, and $ 60 and $ 59 during the nine months ended September 30, 2022 and 2021 , respectively.

Depreciation expense is included within cost of revenues and selling, general, and administrative expenses in the condensed consolidated statements of operations.

The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to and the agreement creates enforceable rights and obligations.

Under ASC 842, Leases a contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract.

Under ASC 842, a contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract.

The Company also considers whether its service arrangements include the right to control the use of an asset.

The Company leases various facilities, equipment, and vehicles from unrelated parties, which are primarily classified and accounted for as operating leases.

The facility leases are primarily for office space with initial terms extending up to 10 years.

The equipment leases are primarily related to heavy equipment utilized in the completion of construction jobs, and the terms of the agreements range from 1 to 7 years.

Vehicle leases have a minimum lease term ranging from 1 to 7 years.

Some leases include one or more options to renew, generally at the Company’s sole discretion, with renewal terms that can extend the lease term from 1 to 12 years or more.

The facility leases are primarily for office space with initial terms extending up to ten years.

The equipment leases are primarily related to heavy equipment utilized in the completion of construction jobs and the terms of the agreements range from one to seven years.

Vehicle leases have a minimum lease term ranging from one to seven years.

Some leases include one or more options to renew, generally at the Company’s sole discretion, with renewal terms that can extend the lease term by one to twelve years or more.

In addition, certain leases contain termination options, where the rights to terminate are held by either the Company, the lessor, or both parties.

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There were no other material impacts to the lease disclosures contained in the Company's Form 10-K.

The future undiscounted cash flows for each of the next five years and thereafter and reconciliation to the lease liabilities recognized on the condensed consolidated balance sheets as of June 30, 2022 is as follows:

Remainder of 2022

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Supplemental condensed consolidated balance sheets information related to leases is as follows:

September 30,

Weighted-average remaining lease term:

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Maturity Date

September 30,

Term loan facility

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Term loan facility

As of June 30, 2022, the Company had $ 1,127 of principal outstanding under the 2019 Term Loan.

During the six months ended June 30, 2022, the Company made payments of $ 13 on the 2019 Term Loan.

As of June 30, 2022 , the Company had a 5-year interest rate swap with respect to $ 720 of notional value of the 2019 Term Loan, exchanging one-month LIBOR for a fixed rate of 1.62 % per annum.

Accordingly, the Company's fixed interest rate per annum on the swapped $ 720 notional value of the 2019 Term Loan is 4.12 % through its maturity.

The re maining $ 407 of the 2019 Term Loan balance will bear interest at 4.16 % per annum based on one-month LIBOR plus 250 basis points, but the rate will fluctuate as LIBOR fluctuates .

As of September 30, 2022, the Compa ny had $ 1,127 of p rincipal outstanding under the 2019 Term Loan.

During the nine months ended September 30, 2022, the Company made payment s of $ 13 on the 2019 Term Loan.

As of September 30, 2022 , the Company had a four-year interest rate swap with respect to $ 720 of notional value of the 2019 Term Loan, exchanging one-month LIBOR for a fixed rate of 3.64 % per annum.

Accordingly, the Company's fixed interest rate per annum on the swapped $ 720 notional value of the 2019 Term Lo an is 3.64 % thr ough its maturity.

The re maining $ 407 of th e 2019 Term Loan balance will bear interest at 6.25 % per annum based on one-month LIBOR plus 250 basis points, but the rate will fluctuate as LIBOR fluctuates .

Refer to Note 9 - "Derivatives" for additional information.

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The 2021 Term Loan balance will bear interest at 6.50 % per annum based on one-month LIBOR plus 275 basis points, but the rate will fluctuate as LIBOR fluctuates.

During the six months ended June 30, 2022, the Company made paymen ts of $ 15 on the 2021 Term Loan.

During the nine months ended September 30, 2022, the Company made payme nts of $ 15 on t he 2021 Term Loan.

Under the 2022 Incremental Amendment, the Company increased the revolving credit facility capacity by an additional aggregate principal amount of $ 200 to $ 500 and extended the maturity date to 2026 .

The interest rate applicable to borrowings under the $ 500 five-year senior secured revolving credit facility (the “Revolving Credit Facility”) is, at the Company’s option, either (1) a base rate plus an applicable margin equal to 1.25 %, or (2) a Eurocurrency rate (adjusted for statutory reserves) plus an applicable margin equal to 2.25 %.

At June 30, 2022 and December 31, 2021 , the Company had no amounts outstanding under the Revolving Credit Facility, a n d $ 443 and $ 227 was available at June 30, 2022 and December 31, 2021, respectively, after giving effect t o $ 57 an d $ 73 of outstanding letters of credit .

As of June 30, 2022 and December 31, 2021, the Company was in compliance with all applicable debt covenants.

At September 30, 2022 and December 31, 2021 , the Company had no amounts outstanding under the Revolving Credit Facility, a n d $ 424 and $ 227 was available at September 30, 2022 and December 31, 2021 , respectively, after giving effect to $ 76 an d $ 73 of outstanding letters of credit .

As of September 30, 2022 and December 31, 2021, the Company was in compliance with all applicable debt covenants.

Information related to 2021 issuances and extinguishments of long-term debt are described in Note 11 - "Debt" in the Company’s 2021 Annual Report on Form 10-K.

During the three months ended September 30, 2022, the Company repurchased on the open market $ 13 and $ 23 of the 4.125 % Senior Notes and 4.750 % Senior Notes, respectively (the "Repurchases").

In connection with the Repurchases, the Company recognized a net gain on debt extinguishment of $ 5 .

4.125 % Senior Notes

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The gross proceeds from the offering were held in an escrow account as of December 31, 2021 and classified within restricted cash on the condensed consolidated balance sheets.

Upon closing of the Chubb Acquisition, the funds were released from escrow and at that time the 4.750 % Senior Notes were fully and unconditionally guaranteed on a senior unsecured basis by the Company and certain of the Company's subsidiaries.

The Company was in compliance with all covenants contained in the indentures for the 4.125 % Senior Notes and 4.750 % Senior Notes as of June 30, 2022 and December 31, 2021.

The Company was in compliance with all covenants contained in the indentures for the 4.125 % Senior Notes and 4.750 % Senior Notes as of September 30, 2022 and December 31, 2021.

Other obligations

As of June 30, 2022 and December 31, 2021, the Company had $ 3 a nd $ 1 in notes outstanding, respectively, for the acquisition of equipment and vehicles.

Approximate annual maturities, excluding amortization of debt issuance costs, of the Company's financing arrangements for the periods subsequent to June 30, 2022 are as follows:

As of September 30, 2022 and December 31, 2021, the Company had $ 7 and $ 1 in notes outstanding, respectively, for the acquisition of equipment and vehicles, and working capital purposes.

Approximate annual maturities, excluding amortization of debt issuance costs, of the Company's financing arrangements for the periods subsequent to September 30, 2022 are as follows:

Remainder of 2022

The Company’s quarterly income tax provision (benefit) is measured using an estimate of its consolidated annual effective tax rate, adjusted in the current period for discrete income tax items, within the periods presented.

The comparison of the Company’s income tax provision (benefit) between periods may be impacted by the level and mix of ea rnings and losses by tax jurisdiction, foreign income tax rate differentials and discrete items.

The Company’s effective tax rate was 31.8 % and 28.9 % for the three months ended June 30, 2022 and 2021 , respectively, and ( 11.3 %) an d 17.0 % for the six months ended June 30, 2022 and 2021 , respectively.

The Company’s quarterly income tax provision is measured using an estimate of its consolidated annual effective tax rate, adjusted in the current period for discrete income tax items, within the periods presented.

The comparison of the Company’s income tax provision between periods may be impacted by the level and mix of ea rnings and losses by tax jurisdiction, foreign income tax rate differentials and discrete items.

The Company’s effective tax rate was 40.5 % and 38.5 % for the three months ended September 30, 2022 and 2021 , respectively, and 24.2 % an d 31.3 % for the nine months ended September 30, 2022 and 2021 , respectively.

The difference between the effective tax rate and the statutory U.S.

Federal income tax rate of 21.0 % for the six months ended June 30, 2022 and 2021 is due to nondeductible permanent items, state taxes, and the reversal of the Company’s indefinite reinvestment assertion.

As of June 30, 2022, the Company’s deferred tax assets included a valuation allowan ce of $ 101 prima rily related to certain deferred tax assets of the Company’s foreign subsidiaries and a capital loss carryforward in the U.S.

Federal income tax rate of 21.0 % for the nine months ended September 30, 2022 and 2021 is due to nondeductible permanent items, state taxes, and the reversal of the Company’s indefinite reinvestment assertion.

As of September 30, 2022, the Company’s deferred tax assets included a valuation allowan ce of $ 92 prima rily related to certain deferred tax assets of the Company’s foreign subsidiaries and a capital loss carryforward in the U.S.

The factors used to assess the likelihood of realization were the past performance of the related entities, forecasts of future taxable income, future reversals of existing taxable temporary differences, and available tax planning strategies that could be implemented to realize the deferred tax assets.

The ability or failure to achieve the forecasted taxable income in these entities could affect the ultimate realization of deferred tax assets.

As of June 30, 2022, the Company had gross federal, state, and foreign net operating loss carryforwards of approxim ately $ 0 , $ 32 and $ 86 , respectiv ely.

As of September 30, 2022, the Company had gross federal, state, and foreign net operating loss carryforwards of approxim ately $ 0 , $ 32 and $ 80 , respectiv ely.

The state net operating losses have carryforward periods of five to twenty years and begin to expire in 2027 .

1 unchanged sentence

The Company’s liability for unrecognized tax benefits is recorded within other non-current liabilities in the condensed consolidated balance sheets and recognizes interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes in the condensed consolidated statements of operations.

As of June 30, 2022 and December 31, 2021 , the total gross unrecognized tax benefits were $ 2 and $ 2 , respectively.

The Company had accrued gross interest and penalties as of June 30, 2022 and December 31, 2021 of $ 0 and $ 1 , respectively.

During the three and six months ended June 30, 2022 and 2021 , the Company recognized net interest expense of less than $ 1 for all periods.

If all of the Company’s unrecognized tax benefits as of June 30, 2022 were recogni zed, $ 2 would impact the Company’s effective tax rate.

As of September 30, 2022 and December 31, 2021 , the total gross unrecognized tax benefits were $ 2 and $ 2 , respectively.

The Company had accrued gross interest and penalties as of September 30, 2022 and December 31, 2021 of $ 0 and $ 1 , respectively.

During the three and nine months ended September 30, 2022 and 2021 , the Company recognized net interest expense of less than $ 1 for all periods.

If all of the Company’s unrecognized tax benefits as of September 30, 2022 were recog nized, $ 2 would impact the Company’s effective tax rate.

The Company expects $ 1 of unrecognized tax benefits to expire in the next twe lve months due to lapses in the statute of limitations.

As of June 30, 2022, with few exceptions, neither the Company nor its subsidiaries are subject to examination prior to tax year 2014.

As of September 30, 2022, with few exceptions, neither the Company nor its subsidiaries are subject to examination prior to tax year 2014.

There are various other audits in state and foreign jurisdictions.

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Multiemployer plan contribution rates are determined annually and assessed on a pay-as-you-go basis based on union employee payrolls.

Union payrolls cannot be determined for future periods because the number of union employees employed at a given time, and the plans in which they participate, vary depending upon the location and number of ongoing projects and the need for union resources in connection with those projects.

Total consolidated contributions to multiemployer plans were $ 27 and $ 24 during the three months ended June 30, 2022 and 2021, respectively, and $ 51 an d $ 43 during the six months ended June 30, 2022 and 2021, respectively.

Union payrolls cannot be determined for future periods because the number of union employees employed at a given time and the plans in which they participate vary depending upon the location, the number of ongoing projects, and the need for union resources in connection with those projects.

Total consolidated contributions to multiemployer plans were $ 26 and $ 26 during the three months ended September 30, 2022 and 2021 , respectively, and $ 77 and $ 69 during the nine months ended September 30, 2022 and 2021, respectively.

Defined benefit pension plans

5 unchanged sentences

The Profit Sharing Plans provide for annual discretionary con tributions in amounts based on a performance grid as determined by the Company’s directors.

In connection with these plans, the Company recognized $ 4 in expense during both the three months ended June 30, 2022 and 2021 , and $ 6 an d $ 7 in expense during the six months ended June 30, 2022 and 2021, respectively.

In connection with these plans, the Company recognized $ 4 in expense during the three months ended September 30, 2022 and 2021 , and $ 10 and $ 11 i n expense during the nine months ended September 30, 2022 and 2021, respectively.

Employee stock purchase plan

3 unchanged sentences

The ESPP permits employees of the Company to purchase common stock at a price equal to 85 % of the lesser of (i) the market value of the common stock on the first day of the offering period, or (ii) the market value of the common stock on the purchase date, whichever is lower.

Participants are subject to eligibility requirements and may not purchase more than 500 shares in any offering period or more than ten thousand dollars of common stock in a year under th e ESPP.

The Company recognized $ 1 of expense during both the three months ended June 30, 2022 and 2021 , and $ 2 of expense during both the six months ended June 30, 2022 and 2021.

Participants are subject to eligibility requirements and may not purchase more than 500 shares in any offering period or more than ten thousand dollars of common stock in a year under the ESPP.

The Company recognized $ 1 of expense during the three months ended September 30, 2022 and 2021 , and $ 3 o f expense during the nine months ended September 30, 2022 and 2021.

Post-retirement benefit plans

As part of the Chubb Acquisition, the Company assumed an unfunded post-retirement benefit plan that provides life benefits to certain eligible retirees in Canada.

As of June 30, 2022, the benefit obligation w as $ 4 .

The PBO discount rate was 3.0 % a t June 30, 2022.

As of September 30, 2022, the benefit obligation w as $ 4 .

The PBO discount rate was 3.0 % a t September 30, 2022.

Benefit payments, including amounts to be paid from corporate assets and reflecting expected future service, as appropriate, are expected to be less than $ 1 for 2023 through 2028 and thereafter.

1 unchanged sentence

The Company assumed the pension plans as part of the Chubb Acquisition on January 3, 2022, therefore, the plans used a January 3, 2022 measurement date to determine the Company's preliminary valuation of the pension plans in the purchase price allocation.

Guidance under the Financial Accounting Standards Board ("FASB") ASC Topic 715:

Compensation –

Guidance under FASB ASC Topic 715, Compensation –

Retirement Benefits, requires balance sheet recognition of the overfunded or underfunded status of pension and postretirement benefit plans.

23 unchanged sentences

Three Months Ended

June 30, 2022

Six Months Ended

June 30, 2022

September 30, 2022

Nine Months Ended

September 30, 2022

Interest cost

2 unchanged sentences

Major assumptions used in determining the benefit obligation and net periodic benefit cost for pension plans are presented in the following table as weighted averages:

Three and Six Months Ended June 30, 2022

Three and Nine Months Ended September 30, 2022

Benefit Obligation

8 unchanged sentences

The asset allocations are reviewed periodically and rebalanced when necessary.

The fair value of the pension plan assets by asset category are as follows:

The fair values of the pension plan assets by asset category are as follows:

Quoted Prices in

12 unchanged sentences

(1) In accordance with ASU 2015-07 Fair Value Measurement (Topic 820), certain investments that are measured at fair value using net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

The fair value amounts

presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension assets.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension assets.

(2) Represents investments in real estate, including commingled funds and directly held properties.

22 unchanged sentences

The Company issued 7,539,697 shares in January 2022 to Mariposa Acquisition IV, LLC, a related entity that is controlled by a co-chair of the Company’s Board of Directors.

In addition, the Company incurred advisory fees of $ 1 during the three months ended June 30, 2022 and 2021 , and $ 2 during the six months ended June 30, 2022 and 2021, payable to Mariposa Capital, LLC, an entity owned by a co-chair of the Company’s Board of Directors.

On January 3, 2022, the Company issued and sold 800,000 shares of the Company’s 5.5 % Series B Perpetual Convertible Preferred Stock, par value $ 0.0001 per share (the “Series B Preferred Stock”) for an aggregate purchase price of $ 800 .

In addition, the Company incurred advisory fees of $ 1 during the three months ended September 30, 2022 and 2021 , and $ 3 during the nine months ended September 30, 2022 and 2021, payable to Mariposa Capital, LLC, an entity owned by a co-chair of the Company’s Board of Directors.

On January 3, 2022, the Company issued and sold 800,000 shares of the Company’s 5.5 % Series B Redeemable Convertible Preferred Stock, par value $ 0.0001 per share (the “Series B Preferred Stock”) for an aggregate purchase price of $ 800 .

Of the 800,000 shares issued and sold, 200,000 shares were sold to Viking Global Equities Master Ltd.

and Viking Global Equities II LP ("Viking Purchasers"), which is the aggregate owner of more than 5 % of the Company's outstanding stock, for an aggregate purchase price of $ 200 .

The Company has entered into sales contracts with Royal Oak Enterprises, an entity controlled by a co-chair of the Company's Board of Directors, and record ed $ 2 and $ 5 in net revenues for the three and six months ended June 30, 2022, respectively, and as of June 30, 2022 had $ 3 in accounts receivable, net of allowances.

The Company has entere d into sales contracts with Royal Oak Enterprises, an entity controlled by a co-chair of the Company's Board of Directors, and recorded $ 3 and $ 8 in net revenues for the three and nine months ended September 30, 2022, respectively, and as of September 30, 2022 had $ 3 in accounts receivable, net of allowances.

From time to time, the Company also enters into other immaterial related party transactions.

8 unchanged sentences

Over time, the liability is increased for changes in its present value and the capitalized cost is depreciated over the useful life of the related asset.

The outstanding liability for these obligations was $ 20 and $ 6 , and was included in other noncurrent liabilities as of June 30, 2022 and December 31, 2021, respectively.

The outstanding liability for these obligations was $ 19 and $ 6 , and was i ncluded in other noncurrent liabilities as of September 30, 2022 and December 31, 2021, respectively.

Legal proceedings

From time to time, the Company is subject to workmanship warranty, casualty, negligence, construction defect, breach of contract, product liability, and other claims and legal proceedings in the ordinary course of business relating to the products the Company installs that, if adversely determined, could adversely affect the Company's consolidated financial condition, results of operations and cash flows.

From time to time, the Company is subject to workmanship warranty, casualty, negligence, construction defect, breach of contract, product liability, wage and hour, and other claims and legal proceedings in the ordinary course of business relating to the products the Company installs that, if adversely determined, could adversely affect the Company's consolidated financial condition, results of operations, and cash flows.

The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on the Company's business, financial condition, results of operations, or liquidity.

3 unchanged sentences

Series A Preferred Stock

The Company has 4,000,000 shares of Series A Preferred Stock issued and outstanding as of June 30, 2022 ("Series A Preferred Stock").

The Company has 4,000,000 shares of Series A Preferred Stock issued and outstanding as of September 30, 2022 ("Series A Preferred Stock").

The Series A Preferred Stock will be automatically converted into shares of common stock on a one for one basis upon the last day of 2026.

3 unchanged sentences

The SRP authorizes open market, private, and accelerated share repurchase transactions.

Dur ing the three months ended June 30, 2022, the Company repurchased 681,329 shares of common stock for approxima tely $ 11 .

Dur ing the six months ended June 30, 2022, the Company repurchased 1,212,760 shares of common stock for approxima tely $ 22 .

As of June 30, 2022, the Company had approximat ely $ 228 of authorized repurchases remaining under the SRP.

Dur ing the three months ended September 30, 2022, the Company repurchased 738,572 shares of common stock for approxi mately $ 11 .

D uring the nine months ended September 30, 2022, the Company rep urchased 1,951,332 shares of common stock for approximately $ 33 .

As of September 30, 2022, the Company had approximat ely $ 217 of authorized repurchases remaining under the SRP.

Redeemable Convertible Preferred Stock

3 unchanged sentences

The Series B Preferred Stock ranks senior to the Company's common stock and Series A Preferred Stock with respect to dividend rights and rights upon the voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the Company.

The Series B Preferred Stock is classified as redeemable convertible preferred stock on the condensed consolidated balance sheets due to a provision that a change

in control or de-listing of the Company could require the Company to redeem the Series B Preferred Stock for cash at the election of the holder.

The Series B Preferred Stock is classified as redeemable convertible preferred stock on the condensed consolidated balance sheets due to a provision that a change in control or de-listing of the Company could require the Company to redeem the Series B Preferred Stock for cash at the election of the holder.

The Series B Preferred Stock is convertible, at the holder’s option, into shares of the Company’s common stock at a conversion price equal to $ 24.60 per share, subject to certain customary adjustments.

3 unchanged sentences

Series B Preferred Stock dividends are cumulative and accrued quarterly, in cash or in common stock, based on an annual 5.5 % dividend rate.

The Company declared a Series B Preferred Stock dividend and issued $ 11 or 686,455 shares of common stoc k and $ 22 or 1,205,924 s hares of common stock during the three and six months ended June 30, 2022, respectively.

The Company declared a Series B Preferred Stock dividend and issued $ 11 or 739,015 shares of common stoc k and $ 33 or 1,944,939 shar es of common stock during the three and nine months ended September 30, 2022, respectively.

If regular dividends are to be paid in shares of common stock, then each holder shall be entitled to receive such number of whole shares of common stock as is determined by dividing the pro rata amount of regular dividends to which a holder is entitled by the average price per share of common stock over the dividend determination period from dividend notice until the payment date.

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Forfeitures are estimated and recorded using historical forfeiture rates.

During the six months ended June 30, 2022, the Company awarded new RSUs, PSUs, and MSUs, detailed below.

During the nine months ended September 30, 2022, the Company awarded new RSUs, PSUs, and MSUs, detailed below.

Time-Based Restricted Stock Units

The RSUs entitle recipients to shares of the Company’s common stock and primarily vest in equal installments over a three-year service period from date of grant.

The RSUs granted to the Company’s recipients vest ratably over the service period, generally on the anniversary date of their grant date.

During the six months ended June 30, 2022, the Company granted 473,515 RSUs at a weighted average grant-date fair value of $ 19.52 per share.

A total of 207,145 shares vested at a weighted average fair value of $ 13.73 per share during the six months ended June 30, 2022.

The RSUs granted to the Com pany’s recipients vest ratably over the service period, generally on the anniversary date of their grant date.

During the nine months ended September 30, 2022, the Company granted 505,609 RSUs at a weighted average grant-date fair value of $ 19.41 per share.

A total of 227,294 shares vested at a weighted average fair value of $ 14.35 per share during the nine m onths ended September 30, 2022.

Performance-Based Restricted Stock Units

The PSUs entitle the recipient to shares of the Company's common stock if specified performan ce conditions are achieved.

During the six months ended June 30, 2022, the Company approved and granted PSUs with EBITDA-based financial performance conditions.

PSUs vest, if at all, following a 3 year performance period.

If the performance conditions are not met, no compensation cost is recognized and any recognized compensation cost is reversed.

During the six months ended June 30, 2022, the Company granted 545,122 PSUs at a weighted-average grant date fair value of $ 20.77 .

During the nine months ended September 30, 2022, the Company approved and granted PSUs with EBITDA-based financial performance conditions.

PSUs vest, if at all, following a three-year performance period.

If the performance conditions are not met, no compensation cost is re cognized and any recognized compensation cost is reversed.

During the nine months ended September 30, 2022, the Company granted 545,122 PSUs at a weighted-average grant date fair value of $ 20.77 .

The MSUs entitle the recipient to shares of the Company's common stock if specified market conditions are achieved.

During the six months ended June 30, 2022, the Company approved a nd granted 444,926 MSUs with certain share-price targets.

Total MSUs granted during the six months ended June 30, 2022 had a weighted-average grant date fair value of $ 16.31 .

The MSUs will vest 100 %, if at all, on the later of March 9, 2025, the third anniversary of the grant date, and the date that such performance condition is satisfied (but no later than March 9, 2027).

During the nine months ended September 30, 2022, the Company approved and granted 444,926 MSUs with certain share-price targets.

Total MSUs granted during the nine months ended September 30, 2022 had a weighted-average grant date fair value of $ 16.31 .

T he MSUs will vest 100 %, if at all, on the later of March 9, 2025, the third anniversary of the grant date, and the date that such performance condition is satisfied (but no later than March 9, 2027).

For awards subject to a market condition, the grant-date fair value is estimated using a Monte Carlo valuation model.

The Company recognizes stock-based compensation expense for awards subject to market-based vesting conditions regardless of whether it becomes probable that these conditions will be achieved or not, and stock-based compensation expense for

any such awards is not reversed if vesting does not actually occur.

The Monte Carlo model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment.

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Expected volatility

The Company recognized compensation expense of $ 4 an d $ 2 d uring the three months ended June 30, 2022 and 2021, respectively, an d $ 7 and $ 4 durin g the six months ended June 30, 2022 and 2021, respectively, for the RSUs, PSUs, and MSUs in total.

Total unrecognized compensation related to unvested RSUs, PSUs and MSUs as of June 30, 2022 was approximat ely $ 34 , w hich is expected to be recognized over a weighted average period of appro ximately 1.0 years, 2.0 years, and 2.7 years, re spectively.

The Company's actual tax benefits realized from the tax deductions related to the vesting of RSUs for the three and six months ended June 30, 2022 was less than $ 1 and $ 2 , respe ctively.

The Company's actual tax benefits realized from the tax deductions related to the vesting of RSUs for the three and six months ended June 30, 2021 was less than $ 1 and $ 1 , respectively .

Earnings (Loss) Per Share

The Company recognized compensation e xpense of $ 3 and $ 2 during the three months ended September 30, 2022 and 2021, respectively, and $ 10 and $ 6 during the nine months ended September 30, 2022 and 2021, respectively, for the RSUs, PSUs, and MSUs in total.

Total unrecognized compensation related to unvested RSUs, PSUs and MSUs as of September 30, 2022 was approximately $ 29 , w hich is expected to be recognized over a weighted average period of appro ximately 0.9 years, 1.7 years, and 2.4 years, re spectively.

The Company's actual tax benefits realized from the tax deductions related to the vesting of RSUs for the three and nine months ended September 30, 2022 was less than $ 1 and $ 2 , respe ctively.

The Company's actual tax benefits realized from the tax deductions related to the vesting of RSUs was less than $ 1 and $ 1 , for the three and nine months ended September 30, 2021 respectively .

Earnings Per Share

Net income is allocated between the Company’s common shares and other participating securities based on their participation rights.

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Earnings attributable to Series A Preferred Stock and Series B Preferred Stock are not included in earnings attributable to common shares in calculating earnings per common share (the two-class method).

For periods of net loss, there is no impact from the two-class method on earnings (loss) per share (“EPS”) as net loss is allocated to common shares because Series A Preferred Stock and Series B Preferred Stock are not contractually obligated to share the loss.

The following table sets forth the computation of earnings (loss) per common share using the two-class method.

The dilutive effect of outstanding Series A Preferred Stock, the Series B Preferred Stock, the Series A Preferred Stock dividend, and the Series B Preferred Stock Dividend is reflected in diluted EPS using the if-converted method, and options, and restricted and performance shares are reflected using the treasury stock method.

For periods of net loss, there is no impact from the two-class method on earnings per share as net loss is allocated to common shares because Series A Preferred Stock and Series B Preferred Stock are not contractually obligated to share the loss.

The following table sets forth the computation of earnings per common share using the two-class method.

The dilutive effect of outstanding Series A Preferred Stock, the Series B Preferred Stock, the Series A Preferred Stock dividend, and the Series B Preferred Stock Dividend is reflected in diluted EPS using the if-converted method, and options, restricted shares, and performance shares are reflected using the treasury stock method.

For periods of net loss, basic and diluted EPS are the same, as the assumed exercise of Series A Preferred Stock, Series B Preferred Stock, restricted and performance shares, and stock options are anti-dilutive (amounts in millions, except share and per share amounts):

Three Months Ended

Six Months Ended

Basic earnings (loss) per common share:

Net income (loss)

September 30,

Nine Months Ended

September 30,

Basic earnings per common share:

Less income attributable to Series A Preferred Stock

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Less stock dividend attributable to Series B Preferred Stock

Net income (loss) attributable to common shareholders - basic

Net income attributable to common shareholders - basic

Weighted average shares outstanding - basic (1)

Income (loss) per common share - basic

Diluted earnings (loss) per common share:

Net income (loss)

Income per common share - basic

Diluted earnings per common share:

Less income attributable to Series A Preferred Stock

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Less stock dividend attributable to Series B Preferred Stock

Net income (loss) attributable to common shareholders - diluted

Net income attributable to common shareholders - diluted

Weighted average shares outstanding - basic

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Weighted average shares outstanding - diluted

Income (loss) per common share - diluted

Income per common share - diluted

(1) For all periods presented, 4,000,000 shares of Series A Preferred Stock, which are convertible to the same number of common shares, have been excluded from the calculation of diluted shares, as their inclusion would be anti-dilutive.

(2) For the three and six months ended June 30, 2021, dilutive securities include common share equivalents which represent the annual dividend, payable in common shares, that Series A Preferred Shares would be entitled to receive assuming that the volume weighted average price of the Company’s common shares for the last ten trading days of the period would be the same average price during the last ten trading days of the calendar year.

(2) For the three and nine months ended September 30, 2021, dilutive securities include common share equivalents which represent the annual dividend, payable in common shares, that Series A Preferred Shares would be entitled to receive assuming that the volume weighted average price of the Company’s common shares for the last ten trading days of the period would be the same average price during the last ten trading days of the calendar year.

The holders of the Series A Preferred Stock are entitled to receive an annual dividend based on the increase in the market price of the Company’s common stock (the "Annual Dividend Amount").

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During 2021, the Annual Dividend Amount was calculated based on the appreciation of the Company’s share price over the highest previously used share price of $ 17.8829 .

For the three and nine months ended September 30, 2022, the Series A Preferred Shares would not be entitled to an annual dividend because the volume weighted average price of the Company’s common shares for the last ten trading days of the period did not exceed the highest previously used share price of $ 24.3968 .

SEgment information

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Summarized financial information for the Company’s reportable segments is presented and reconciled to consolidated financial information in the following tables, including a reconciliation of consolidated operating income (loss) to EBITDA:

The tables below may contain slight summation differences due to rounding:

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Corporate and

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Non-service pension benefit

Gain on extinguishment of debt, net

Capital expenditures

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Corporate and

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Investment income and other, net

Loss on extinguishment of debt

Capital expenditures

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Corporate and

3 unchanged sentences

Non-service pension benefit

Gain on extinguishment of debt, net

Capital expenditures

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Corporate and

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Investment income and other, net

Loss on extinguishment of debt

Loss on extinguishment of debt, net

Capital expenditures

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Restructuring

During the three months ended June 30, 2022, we initiated a multi-year restructuring program to drive efficiencies and synergies and optimize operating margin.

We recorded total restructuring costs of $11 million within the Safety Services segment, of which $2 million was recorded in cost of revenues and $9 million in selling, general, and administrative expenses on the condensed consolidated statements of operations for both the three and six months ended June 30, 2022.

During 2022, we initiated a multi-year restructuring program to drive efficiencies and synergies and optimize operating margin.

We recorded total restructuring costs within the Safety Services segment of $7 and $18, of which $2 and $4 million was recorded in cost of revenues and $5 and $14 million in selling, general, and administrative expenses on the condensed consolidated statements of operations for the three and nine months ended September 30, 2022, respectively.

The amounts recognized in the period primarily relate to costs associated with workforce reductions.

As of June 30, 2022, we had $8 million in restructuring liabilities recorded in other accrued liabilities on the condensed consolidated balance sheets for this plan, which we expect to pay within the next six to nine months.

As of September 30, 2022, we had $11 million in restructuring liabilities recorded in other accrued liabilities on the condensed consolidated balance sheets for this plan, which we expect to pay within the next three to six months.

For additional information about our restructuring activity, see Note 5 –

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On January 3, 2022, we completed the acquisition of the Chubb fire and security business (the "Chubb Acquisition").

We paid an aggregate cash consideration of $2,935 million for the stock purchase of the Chubb fire and security business (the "Chubb business").

The total net consideration for the Chubb Acquisition was $2,893 million for the stock purchase of the Chubb fire and security business (the "Chubb business").

The Chubb business is a globally recognized fire safety and security services provider, offering customers complete and reliable services from design and installation to monitoring and on-going maintenance and recurring services.

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products and services, which can affect their planned capital and maintenance budgets in certain end markets.

Market, regulatory and industry factors could affect demand for our services, including:

(i) changes to customers’

capital spending plans;

(ii) mergers and acquisitions among the customers we serve;

(iii) new or changing regulatory requirements or other governmental policy changes or uncertainty;

(iv) economic, market or political developments;

(v) changes in technology, tax and other incentives;

and (vi) access to capital for customers in the industries we serve.

Market, regulatory and industry factors could affect demand for our services.

Availability of transportation and transmission capacity and fluctuations in market prices for energy and other fuel sources can also affect demand for our services for pipeline and power generation construction services.

These fluctuations, as well as the highly competitive nature of our industries, can result, and has resulted, in lower proposals and lower profit on the services we provide.

These fluctuations, as well as the highly competitive nature of our industries, have resulted, and may continue to result, in lower proposals and lower profit on the services we provide.

In the face of increased pricing pressure on key materials, such as steel, or other market developments, we strive to maintain our profit margins through productivity improvements, cost reduction programs, pricing adjustments, and business streamlining efforts.

Increased competition for skilled labor resources and higher labor costs can reduce our profitability and impact our ability to deliver timely service to our customers.

We have experienced supply chain disruptions, which have negatively impacted the source and supply of materials needed to perform our work.

Additionally, the COVID-19 pandemic has impacted the availability of skilled labor resources, particularly in our international businesses, interrupting our ability to perform our services and execute our jobs.

In addition, fluctuations in foreign currencies may have an impact on our financial position and results of operations.

However, we believe that our exposure to transactional gains or losses resulting from changes in foreign currencies is limited because our foreign operations primarily invoice and collect receivables in their respective local or functional currencies, and the expenses associated with these transactions are generally contracted and paid for in the same local currencies.

In cases where operational

transactions represent a material currency risk, we enter into cross currency swaps.

Refer to Note 9 - "Derivatives" to our condensed consolidated financial statements included herein for additional information on our hedging activities.

In cases where operational transactions represent a material currency risk, we generally enter into cross-currency swaps.

Refer to Note 9 - "Derivatives" to our condensed consolidated financial statements included in this quarterly report for additional information on our hedging activities.

While we actively monitor economic, industry and market factors that could affect our business, we cannot predict the effect that changes in such factors may have on our future consolidated results of operations, liquidity and cash flows, and we may be unable to fully mitigate, or benefit from, such changes.

COVID-19 Update

We continue to monitor short- and long-term impacts of the COVID-19 pandemic, and as the situation has continued to evolve, the impacts on our work have also evolved.

Throughout 2020 and into 2021, we encountered headwinds related to job site accessibility, project delays, workflow disruptions due to COVID-19 protocols, and diminished demand from our customers.

With the progress in the administration of vaccines during 2021, we began, and continue to experience stabilization and volume improvements as our teams and customers adapted to working in the long-term COVID-19 environment and the markets in which we operate began to recover.

In the second half of 2021 and into the first half of 2022, we experienced supply chain disruptions, which have negatively impacted the source and supply of materials needed to perform our work.

Additionally, the outbreak of recent variants and their related containment and mitigation efforts that have been put in place around the world, has impacted the availability of skilled labor resources, particularly in our international businesses, interrupting our ability to perform our services and execute our jobs.

Although the majority of our businesses have largely recovered from the impacts of the COVID-19 pandemic, there remains significant uncertainty about the resulting market disruption or volatility, including the potential effects on our operations.

We continue to be cautiously optimistic about the markets in which we operate and the customers we serve;

however, should there be a slowdown in economic activity due to surges in the number of cases, or an increase in variants of the virus that are more virulent, contagious, or against which current vaccines are less effective, it is possible that projects could be delayed or canceled or that we could experience restricted access to our customers’

facilities, preventing us from performing maintenance and service projects.

The extent to which our business and results of operations are impacted in future periods will also depend upon a number of other factors, including limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring vaccination, testing, or quarantine, our customers’

demand for our services, and our ability to continue to safely and effectively operate in this environment.

Russia-Ukraine conflict

The military conflict between Russia and Ukraine has had political, social and economic impacts that have affected our business, and may have future business impacts that are difficult to predict or quantify.

The most immediate impact has been on energy supply and pricing, increasing our direct costs.

In addition, the conflict is exacerbating general global inflationary pressures as the longer term interruption in production of goods in Ukraine emerges, which may continue into the future.

The conflict is also reducing international political stability, which in turn may adversely impact markets in a variety of ways.

For example, sanctions and other penalties imposed by countries across the globe against Russia are creating substantial uncertainty in the global economy.

While we do not have operations in Russia or Ukraine and believe that we do not have a material direct exposure to customers, suppliers and vendors in those countries, we are unable to predict the impact that these actions will have on the global economy or on our financial condition, results of operations, and cash flows.

Should the conflict escalate beyond its current scope, including, among other potential impacts, the geographic proximity of the conflict relative to the rest of Europe, where a material portion of our business is carried out, further impacts on our business could emerge.

The precise impacts on our business are difficult to predict but could include increased direct costs of materials and labor;

While we continue to monitor the conflict in Ukraine, there has not been any direct, material impact on our operations as we do not have any customers or operations in Russia or Ukraine.

Should the conflict escalate beyond its current scope, the precise impacts on our business are difficult to predict but could include increased direct costs of materials and labor;

increased credit or other capital costs;

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There is a portion of amortization expense related to the backlog intangible assets reflected in cost of revenues in the condensed consolidated statements of operations.

(Gain) loss on extinguishment of debt, net

(Gain) loss on extinguishment of debt, net reflects the difference between the repurchase price and carrying amount of debt at the time of extinguishment.

Non-service pension benefit

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Results of Operations

The following is a discussion of our financial condition and results of operations during the three and six months ended June 30, 2022 and the three and six months ended June 30, 2021.

Three months ended June 30, 2022 compared to the three months ended June 30, 2021

Three Months Ended June 30,

The following is a discussion of our financial condition and results of operations during the three and nine months ended September 30, 2022 and the three and nine months ended September 30, 2021.

Three months ended September 30, 2022 compared to the three months ended September 30, 2021

Three Months Ended September 30,

($ in millions)

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Selling, general, and administrative expenses

Operating income (loss)

Operating income

Interest expense, net

Loss on extinguishment of debt

Gain on extinguishment of debt, net

Non-service pension benefit

1 unchanged sentence

Other expense, net

Income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

Income before income taxes

Income tax provision

NM = Not meaningful

Net revenues for the three months ended June 30, 2022 were $1,649 million compared to $978 million for the same period in 2021, an increase of $671 million or 68.6%.

The increase in net revenues was primarily driven by additional revenues contributed by acquisitions completed during the previous 12 months within the Safety Services segment.

In addition, the increase in net revenues was due to growth in inspection and service revenue, our ability to pass through inflationary increases in costs through project pricing, as well as continued market recoveries from the COVID-19 pandemic within our Safety Services and Specialty Services segments.

The following table presents our gross profit (net revenues less cost of revenues) and gross margin (gross profit as a percentage of net revenues) for the three months ended June 30, 2022 and 2021, respectively:

Three Months Ended June 30,

Net revenues for the three months ended September 30, 2022 were $1,735 million compared to $1,047 million for the same period in 2021, an increase of $688 million or 65.7%.

The increase in net revenues was primarily driven by acquisitions completed during the previous twelve months within the Safety Services segment.

In addition, the increase in net revenues was due to growth in inspection, service, and monitoring revenue and our ability to pass through inflationary increases in costs through project pricing.

The following table presents our gross profit (net revenues less cost of revenues) and gross margin (gross profit as a percentage of net revenues) for the three months ended September 30, 2022 and 2021, respectively:

Three Months Ended September 30,

($ in millions)

Our gross profit for the three months ended June 30, 2022 was $435 million compared to $232 million for the same period in 2021, an increase of $203 million, or 87.5%.

Gross margin was 26.4%, an increase of 270 basis points compared to prior year, primarily due to acquisitions completed during the previous 12 months within the Safety Services segment, an improved mix of service and inspection revenue, which generates higher margins, and growth within the Safety Services segment.

Our gross profit for the three months ended September 30, 2022 was $440 million compared to $252 million for the same period in 2021, an increase of $188 million, or 74.6%.

Gross margin was 25.4%, an increase of 130 basis points compared to prior year, primarily due to acquisitions completed during the previous twelve months within the Safety Services segment, an improved mix of inspection, service, and monitoring revenue, which generates higher margins, and growth within the Safety Services segment.

These improvements were partially offset by supply chain disruptions and inflation causing downward pressure on margins.

Operating expenses

The following table presents operating expenses and operating margin (operating income (loss) as a percentage of net revenues) for the three months ended June 30, 2022 and 2021, respectively:

Three Months Ended June 30,

The following table presents operating expenses and operating margin (operating income (loss) as a percentage of net revenues) for the three months ended September 30, 2022 and 2021, respectively:

Three Months Ended September 30,

($ in millions)

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Selling, general, and administrative expenses

Our SG&A expenses for the three months ended June 30, 2022 were $376 million compared to $185 million for the same period in 2021, an increase of $191 million.

SG&A expenses as a percentage of net revenues was 22.8% during the three months ended June 30, 2022 compared to 18.9% for the same period in 2021.

The primary drivers for the increase in SG&A expenses include additional SG&A expenses contributed by acquisitions completed in the prior 12 months, as well as higher levels of spending associated with acquisitions, including integration, transformation, and reorganization expenses and an increase in amortization expense of $23 million compared to the same period in 2021.

Our SG&A expenses excluding amortization for the three months ended June 30, 2022 were $323 million, or 19.6% of net revenues, compared to $155 million, or 15.8% of net revenues, for the same period of 2021 primarily due to the factors discussed above.

Our SG&A expenses for the three months ended September 30, 2022 were $379 million compared to $211 million for the same period in 2021, an increase of $168 million.

SG&A expenses as a percentage of net revenues was 21.8% during the three months ended September 30, 2022 compared to 20.2% for the same period in 2021.

The primary drivers for the increase in SG&A expenses include additional SG&A expenses contributed by acquisitions completed in the prior twelve months, as well as higher levels of spending associated with acquisitions, including integration, transformation, and reorganization expenses and an increase in amortization expense of $6 million compared to the same period in 2021.

Our SG&A expenses excluding amortization for the three months ended September 30, 2022 were $343 million, or 19.8% of net revenues, compared to $181 million, or 17.3% of net revenues, for the same period of 2021 primarily due to the factors discussed above.

See the discussion and reconciliation of our non-U.S.

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Interest expense, net

Interest expense was $28 million and $14 million for the three months ended June 30, 2022 and 2021, respectively.

The increase in interest expense was primarily due to increased debt following the Chubb Acquisition related financing.

Loss on extinguishment of debt

During 2021, we completed a private offering of $350 million aggregate principal amount of senior notes (4.125% Senior Notes).

The proceeds from the offering were used to repay all outstanding indebtedness under the previously outstanding term loan, prepay a portion of the 2019 Term Loan, pay transaction fees and expenses, and fund general corporate purposes.

In connection with the repayment of a previously outstanding term loan and prepayment on a portion of the 2019 Term Loan, we incurred a loss on extinguishment of debt of $9 million related to unamortized debt issuance costs.

Interest expense was $33 million and $14 million for the three months ended September 30, 2022 and 2021, respectively.

The increase in interest expense was primarily due to increased debt used for financing the Chubb Acquisition and higher interest rates due to a larger proportion of floating interest rate debt in the current year.

Gain on extinguishment of debt, net

During 2022, we repurchased $13 million and $23 million of the outstanding principal amount of the 4.125% Senior Notes and 4.750% Senior Notes, respectively.

In connection with the repurchases, we recognized a net gain on debt extinguishment of $5 million.

Non-service pension benefit

The non-service pension benefit was $11 million and $0 million for the three months ended June 30, 2022 and 2021, respectively.

The non-service pension benefit was $(10) million and $0 million for the three months ended September 30, 2022 and 2021, respectively.

The higher year-on-year benefit in 2022 was solely due to the acquisition of pension plans as part of the Chubb Acquisition during 2022.

Investment income and other, net

Investment income and other, net was $2 million and $6 million for the three months ended June 30, 2022 and 2021, respectively.

The decrease in investment income and other, net was primarily due to the impact of changes in foreign currency rates and fluctuations in the fair value of our derivative instruments.

Income tax provision (benefit)

The income tax expense (benefit) for the three months ended June 30, 2022 was an expense of $14 million compared to $9 million in the same period of the prior year.

This change was driven by higher income before taxes in the three months ended June 30, 2022 compared to the same period in 2021.

The effective tax rate for the three months ended June 30, 2022 was 31.8%, compared to 28.9% in the same period of 2021.

Investment income and other, net remained consistent at $(3) million and $(3) million for the three months ended September 30, 2022 and 2021, respectively.

Income tax provision

The income tax expense for the three months ended September 30, 2022 was $18 million compared to $11 million in the same period of the prior year.

This change was driven by higher income before taxes in the three months ended September 30, 2022 compared to the same period in 2021.

The effective tax rate for the three months ended September 30, 2022 was 40.5%, compared to 38.5% in the same period of 2021.

The difference in the effective tax rate was driven by discrete and nondeductible permanent items.

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federal income tax rate of 21.0% is due to the nondeductible permanent items, state taxes, and the reversal of our indefinite reinvestment assertion.

Net income (loss) and EBITDA

The following table presents net income (loss) and EBITDA for the three months ended June 30, 2022 and 2021, respectively:

Three Months Ended June 30,

Net income and EBITDA

The following table presents net income and EBITDA for the three months ended September 30, 2022 and 2021, respectively:

Three Months Ended September 30,

($ in millions)

Net income (loss)

EBITDA (non-GAAP)

Net income (loss) as a % of net revenues

Net income as a % of net revenues

EBITDA as a % of net revenues

Our net income (loss) for the three months ended June 30, 2022 was $30 million compared to $21 million for the same period in 2021, an increase of $9 million.

The improvement resulted from additional revenue and profit contributed by acquisitions completed in the previous 12 months and an improved mix of inspection and service revenue.

These increases were largely offset by higher levels of spending related to integration of recently acquired businesses and increased interest costs associated with newly issued term loan debt.

Net income as a percentage of net revenues for the three months ended June 30, 2022 and June 30, 2021 was 1.8% and 2.1%, respectively.

EBITDA for the three months ended June 30, 2022 was $148 million compared to $96 million for the same period in 2021, an increase of $52 million.

Our net income for the three months ended September 30, 2022 was $28 million compared to $19 million for the same period in 2021, an increase of $9 million.

The improvement resulted from additional revenue and profit contributed by acquisitions completed in the previous twelve months and an improved mix of inspection, service, and monitoring revenue.

These increases were largely offset by higher levels of spending related to integration of recently acquired businesses, increased interest costs associated with newly issued term loan debt, and increased amortization expense of $19 million compared to the same period in the prior year.

Net income as a percentage of net revenues for the three months ended September 30, 2022 and 2021 was 1.6% and 1.8%, respectively.

EBITDA for the three months ended September 30, 2022 was $152 million compared to $96 million for the same period in 2021, an increase of $56 million.

The increase in EBITDA was primarily driven by the factors previously discussed.

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GAAP financial measures below.

Operating Segment Results for the three months ended June 30, 2022 compared to the three months ended June 30, 2021

Three Months Ended June 30,

Operating Segment Results for the three months ended September 30, 2022 compared to the three months ended September 30, 2021

Three Months Ended September 30,

($ in millions)

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Operating Income (Loss)

Three Months Ended June 30,

Three Months Ended September 30,

($ in millions)

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Corporate and Eliminations

Three Months Ended June 30,

Three Months Ended September 30,

($ in millions)

4 unchanged sentences

Corporate and Eliminations

The following discussion breaks down the net revenues, operating income (loss), and EBITDA by operating segment for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

The following discussion breaks down the net revenues, operating income (loss), and EBITDA by operating segment for the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

Safety Services

Safety Services net revenues for the three months ended June 30, 2022 increased by $634 million or 123.8% compared to the same period in the prior year.

The increase was primarily driven by additional net revenues contributed by acquisitions completed in the prior 12 months, general market recoveries in both our Life Safety and HVAC services businesses and increased inspection and service revenue within our Life Safety and HVAC service businesses.

Safety Services operating margin for the three months ended June 30, 2022 and 2021 was approximately 5.5% and 10.2%, respectively.

The decline was primarily the result of increased spending related to the integration of recently acquired businesses, and supply chain disruptions and inflation causing downward pressure on margins, partially offset by an increase in service and inspection revenue.

Safety Services EBITDA as a percentage of net revenues for the three months ended June 30, 2022 and 2021 was approximately 10.6% and 14.3%, respectively.

Safety Services net revenues for the three months ended September 30, 2022 increased by $621 million or 116.5% compared to the same period in the prior year.

The increase was primarily driven by acquisitions completed in the prior twelve months and increased inspection, service, and monitoring revenue within our Life Safety and HVAC services businesses.

Safety Services operating margin for the three months ended September 30, 2022 and 2021 was approximately 5.2% and 10.5%, respectively.

The decline was primarily the result of increased spending related to the integration of recently acquired businesses, supply chain disruptions and inflation causing downward pressure on margins, and increased amortization expense of $21 million compared to the same period in the prior year, partially offset by an increase in inspection, service, and monitoring revenue.

Safety Services EBITDA as a percentage of net revenues for the three months ended September 30, 2022 and 2021 was approximately 10.1% and 14.1%, respectively.

This decline was primarily related to the factors discussed above.

Specialty Services

Specialty Services net revenues for the three months ended June 30, 2022 increased by $42 million or 8.8% compared to the same period in the prior year.

The increase was primarily driven by increased activity in the infrastructure and utility markets during the three months ended June 30, 2022 compared to the same period in the prior year and general market recoveries driving a rebound in the demand for our services when compared to the prior year, which was negatively impacted by the COVID-19 pandemic.

Additionally, we have been able to offset some of the inflationary increases in cost of goods sold through strategic pricing improvements and contract negotiations, resulting in increased net revenues during the three months ended June 30, 2022 compared to the same period on the prior year.

Specialty Services operating margin for the three months ended June 30, 2022 and 2021 was approximately 6.2% and 5.0%, respectively.

The improvement was primarily driven by higher levels of productivity in the execution of specialty contracting work during the three months ended June 30, 2022 compared to the same period during the prior year.

During the three months ended June 30, 2021, we experienced margin contractions due to lower sales volumes but consistent indirect costs.

Comparatively, during the three months ended June 30, 2022, margins increased due to the growth in sales volumes.

Specialty Services net revenues for the three months ended September 30, 2022 increased by $63 million or 12.0% compared to the same period in the prior year.

The increase was primarily driven by increased activity in the infrastructure, fabrication, and utility markets during the three months ended September 30, 2022 compared to the same period in the prior year.

Additionally, we have been able to offset some of the inflationary increases in cost of goods sold through strategic pricing improvements and contract negotiations, resulting in increased net revenues during the three months ended September 30, 2022 compared to the same period of the prior year.

Specialty Services operating margin for the three months ended September 30, 2022 and 2021 was approximately 7.6% and 5.9%, respectively.

The improvement was primarily driven by higher levels of productivity in the execution of specialty contracting work during the three months ended September 30, 2022 compared to the same period during the prior year.

The improvement was also due to decreased depreciation expense of $4 million in the three months ended September 30, 2022 compared to the same period in the prior year.

Comparatively, during the three months ended September 30, 2022, margins increased due to the growth in sales volumes.

These improvements were partially offset by supply chain disruptions and inflationary pressures on margins.

Specialty Services EBITDA as a percentage of net revenues for the three months ended June 30, 2022 and 2021 was approximately 11.6% and 12.2%, respectively, due to the factors discussed above.

Six months ended June 30, 2022 compared to the six months ended June 30, 2021

Six Months Ended June 30,

Specialty Services EBITDA as a percentage of net revenues for the three months ended September 30, 2022 and 2021 was approximately 12.4% and 12.3%, respectively, due to the factors discussed above.

Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

Nine Months Ended September 30,

($ in millions)

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Selling, general, and administrative expenses

Operating income (loss)

Operating income

Interest expense, net

Loss on extinguishment of debt

(Gain) loss on extinguishment of debt, net

Non-service pension benefit

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Other expense, net

Income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

Income before income taxes

Income tax provision

NM = Not meaningful

Net revenues for the six months ended June 30, 2022 were $3,120 million compared to $1,781 million for the same period in 2021, an increase of $1,339 million or 75.2%.

The increase in net revenues was primarily attributable to additional revenues contributed by acquisitions completed within the Safety Services segment during the past 12 months.

The increase in net revenues was also due to growth in service and inspection revenue, our ability to pass through inflationary increases in costs through project pricing, and continued market recoveries from the COVID-19 pandemic within our Safety Services and Specialty Services segments.

The following table presents our gross profit (net revenues less cost of revenues) and gross margin (gross profit as a percentage of net revenues) for the six months ended June 30, 2022 and 2021, respectively:

Six Months Ended June 30,

Net revenues for the nine months ended September 30, 2022 were $4,855 million compared to $2,828 million for the same period in 2021, an increase of $2,027 million or 71.7%.

The increase in net revenues was primarily attributable to revenues contributed by acquisitions completed within the Safety Services segment during the past twelve months.

The increase in net revenues was also due to growth in inspection, service, and monitoring revenue, our ability to pass through inflationary increases in costs through project pricing, and continued market recoveries from the COVID-19 pandemic within our Safety Services and Specialty Services segments.

The following table presents our gross profit (net revenues less cost of revenues) and gross margin (gross profit as a percentage of net revenues) for the nine months ended September 30, 2022 and 2021, respectively:

Nine Months Ended September 30,

($ in millions)

Our gross profit for the six months ended June 30, 2022 was $811 million compared to $413 million for the same period in 2021, an increase of $398 million, or 96.4%.

Gross margin was 26.0%, an increase of 280 basis points compared to prior year, primarily due to acquisitions completed within the Safety Services segment during the past 12 months.

Additionally, the increase was driven by an improved mix of service and inspection revenue, which generates higher margins, and growth within the Safety Services segment.

Our gross profit for the nine months ended September 30, 2022 was $1,251 million compared to $665 million for the same period in 2021, an increase of $586 million, or 88.1%.

Gross margin was 25.8%, an increase of 230 basis points compared to prior year, primarily due to acquisitions completed within the Safety Services segment during the past twelve months.

Additionally, the increase was driven by an improved mix of inspection, service, and monitoring revenue, which generates higher margins, and growth within the Safety Services segment.

These improvements were partially offset by supply chain disruptions and inflation causing downward pressure on margins.

Operating expenses

The following table presents operating expenses and operating margin (operating income (loss) as a percentage of net revenues) for the six months ended June 30, 2022 and 2021, respectively:

Six Months Ended June 30,

The following table presents operating expenses and operating margin (operating income (loss) as a percentage of net revenues) for the nine months ended September 30, 2022 and 2021, respectively:

Nine Months Ended September 30,

($ in millions)

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Selling, general, and administrative expenses

Our SG&A expenses for the six months ended June 30, 2022 were $759 million compared to $368 million for the same period in 2021, an increase of $391 million.

SG&A expenses as a percentage of net revenues was 24.3% during the six months ended June 30, 2022 compared to 20.7% for the same period in 2021.

The increase in SG&A expenses was primarily driven by additional SG&A expenses contributed by acquisitions completed in the prior 12 months.

Our SG&A expenses for the nine months ended September 30, 2022 were $1,138 million compared to $579 million for the same period in 2021, an increase of $559 million.

SG&A expenses as a percentage of net revenues were 23.4% during the nine months ended September 30, 2022 compared to 20.5% for the same period in 2021.

The increase in SG&A expenses was primarily driven by additional SG&A expenses contributed by acquisitions completed in the prior twelve months.

Also driving the increase was higher levels of spending associated with acquisitions, including integration, transition, and reorganization expenses and an increase in amortization expense of $53 million compared to the same period in 2021.

Our SG&A expenses excluding amortization for the six months ended June 30, 2022 were $652 million, or 20.9% of net revenues, compared to $308 million, or 17.3% of net revenues, for the same period of 2021 primarily due to the factors discussed above.

Our SG&A expenses excluding amortization for the nine months ended September 30, 2022 were $995 million, or 20.5% of net revenues, compared to $489 million, or 17.3% of net revenues, for the same period of 2021 primarily due to the factors discussed above.

See the discussion and reconciliation of our non-U.S.

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Interest expense, net

Interest expense was $55 million and $29 million for the six months ended June 30, 2022 and 2021, respectively.

The increase in interest expense was primarily due to increased debt related to the financing of the Chubb Acquisition.

Loss on extinguishment of debt

During 2021, we completed a private offering of $350 million aggregate principal amount of senior notes (4.125% Senior Notes).

In connection with the repayment of the previously outstanding term loan and prepayment on a portion of the 2019 Term Loan, we incurred a loss on extinguishment of debt of $9 million related to unamortized debt issuance costs, that did not recur in the current period.

Interest expense was $88 million and $43 million for the nine months ended September 30, 2022 and 2021, respectively.

The increase in interest expense was primarily due to increased debt related to the financing of the Chubb Acquisition and higher interest rates due to a larger proportion of floating interest rate debt in the current year.

(Gain) loss on extinguishment of debt, net

During 2022, we repurchased $13 million and $23 million of the outstanding principal amount of the 4.125% Senior Notes and 4.750% Senior Notes, respectively.

In connection with the repurchases, we recognized a net gain on debt extinguishment of $5 million.

During 2021, in connection with the repayment of the previously outstanding term loan and prepayment on a portion of the 2019 Term Loan using proceeds from the private offering of $350 million aggregate principal amount of senior notes (4.125% Senior Notes), we incurred a loss on extinguishment of debt of $9 million related to unamortized debt issuance costs.

Non-service pension benefit

The non-service pension benefit was $22 million and $0 million for the six months ended June 30, 2022 and 2021, respectively.

The higher year-on-year benefit in 2022 was solely due to the acquisition of pension plans as part of the Chubb Acquisition during the six months ended June 30, 2022.

The non-service pension benefit was $(32) million and $0 million for the nine months ended September 30, 2022 and 2021, respectively.

The higher year-on-year benefit in 2022 was solely due to the acquisition of pension plans as part of the Chubb Acquisition during the nine months ended September 30, 2022.

Investment income and other, net

Investment income and other, net was $2 million and $9 million for the six months ended June 30, 2022 and 2021, respectively.

The decline in investment income and other, net was primarily due to a the impact of changes in foreign currency rates and fluctuations in the fair value of our derivative instruments.

Income tax provision (benefit)

The income tax expense (benefit) for the six months ended June 30, 2022 was a benefit of $2 million compared to an expense of $3 million in the same period of the prior year.

This change was driven by favorable discrete items in the six months ended June 30, 2022 compared to the same period in 2021.

The effective tax rate for the six months ended June 30, 2022 was (11.3%), compared to 17.0% in the same period of 2021.

Investment income and other, net was $(5) million and $(12) million for the nine months ended September 30, 2022 and 2021, respectively.

The decline in investment income and other, net was primarily due to COVID-19 relief at Canadian subsidiaries of $2 million in 2021 and the impact of changes in foreign currency rates.

Income tax provision

The income tax expense for the nine months ended September 30, 2022 was $16 million compared to $14 million in the same period of the prior year.

This change was driven by unfavorable discrete items in the nine months ended September 30, 2022 compared to the same period in 2021.

The effective tax rate for the nine months ended September 30, 2022 was 24.2%, compared to 31.3% in the same period of 2021.

The difference in the effective tax rate was driven by discrete and nondeductible permanent items.

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federal income tax rate of 21.0% is due to the nondeductible permanent items, state taxes, and the reversal of our indefinite reinvestment assertion.

Net income (loss) and EBITDA

The following table presents net income (loss) and EBITDA for the six months ended June 30, 2022 and 2021, respectively:

Six Months Ended June 30,

Net income and EBITDA

The following table presents net income and EBITDA for the nine months ended September 30, 2022 and 2021, respectively:

Nine Months Ended September 30,

($ in millions)

Net income (loss)

EBITDA (non-GAAP)

Net income (loss) as a % of net revenues

Net income as a % of net revenues

EBITDA as a % of net revenues

Our net income (loss) for the six months ended June 30, 2022 was $23 million compared to $13 million for the same period in 2021, an increase of $10 million.

The improvement is primarily attributable to additional revenue and profit contributed by acquisitions completed in the previous 12 months.

The increase was also driven by an improved mix of service and inspection revenue.

These increases in revenues were partially offset by increased acquisition and integration related expenses, including interest costs associated with newly issued term loan debt used to fund acquisition activity.

Net income as a percentage of net revenues for both the six months ended June 30, 2022 and 2021 was 0.7%.

EBITDA for the six months ended June 30, 2022 was $228 million compared to $147 million for the same period in 2021, an increase of $81 million.

Our net income for the nine months ended September 30, 2022 was $51 million compared to $32 million for the same period in 2021, an increase of $19 million.

The improvement is primarily attributable to additional revenue and profit contributed by acquisitions completed in the previous twelve months.

The increase was also driven by an improved mix of inspection, service, and monitoring revenue.

These increases in revenues were partially offset by increased acquisition and integration related expenses, increased interest costs associated with newly issued term loan debt, and increased amortization expense of $70 million.

Net income as a percentage of net revenues for the nine months ended September 30, 2022 and 2021 was 1.1% and 1.1%, respectively.

EBITDA for the nine months ended September 30, 2022 was $380 million compared to $243 million for the same period in 2021, an increase of $137 million.

The increase in EBITDA was primarily driven by the factors previously discussed.

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GAAP financial measures below.

Operating Segment Results for the six months ended June 30, 2022 compared to the six months ended June 30, 2021

Six Months Ended June 30,

Operating Segment Results for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

Nine Months Ended September 30,

($ in millions)

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Operating Income (Loss)

Six Months Ended June 30,

Nine Months Ended September 30,

($ in millions)

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Corporate and Eliminations

Six Months Ended June 30,

Nine Months Ended September 30,

($ in millions)

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Corporate and Eliminations

The following discussion breaks down the net revenues, operating income (loss), and EBITDA by operating segment for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

The following discussion breaks down the net revenues, operating income (loss), and EBITDA by operating segment for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

Safety Services

Safety Services net revenues for the six months ended June 30, 2022 increased by $1,242 million or 127.0% compared to the same period in the prior year.

The increase was primarily attributable to additional revenues contributed by acquisitions completed in the past 12 months.

The increase was also driven by general market recoveries in both our Life Safety and HVAC service businesses and increased service and inspection revenue within our Life Safety businesses.

Safety Services operating margin for the six months ended June 30, 2022 and 2021 was approximately 5.7% and 9.9%, respectively.

Safety Services net revenues for the nine months ended September 30, 2022 increased by $1,863 million or 123.3% compared to the same period in the prior year.

The increase was primarily attributable to acquisitions completed in the past twelve months.

The increase was also driven by general market recoveries in both our Life Safety and HVAC services businesses and increased inspection, service, and monitoring revenue within our Life Safety businesses.

Safety Services operating margin for the nine months ended September 30, 2022 and 2021 was approximately 5.5% and 10.1%, respectively.

The decline was primarily the result of increased spending related to the integration of recently acquired businesses.

Additionally, the decline was driven by supply chain disruptions and inflation causing downward pressure on margins, partially offset by an increase in service and inspection revenue.

Safety Services EBITDA as a percentage of net revenues for the six months ended June 30, 2022 and 2021 was approximately 11.0% and 14.1%, respectively.

Additionally, the decline was partially driven by supply chain disruptions and inflation causing downward pressure on margins, and increased amortization expense of $71 million compared to the same period in the prior year, partially offset by an increase in inspection, service, and monitoring revenue.

Safety Services EBITDA as a percentage of net revenues for the nine months ended September 30, 2022 and 2021 was approximately 10.7% and 14.1%, respectively.

This decline was primarily related to the factors discussed above.

Specialty Services

Specialty Services net revenues for the six months ended June 30, 2022 increased by $110 million or 13.4% compared to the same period in the prior year.

The increase was primarily attributable to increased activity in the specialty contracting markets during the six months ended June 30, 2022 compared to the same period in the prior year.

Specialty Services net revenues for the nine months ended September 30, 2022 increased by $173 million or 12.8% compared to the same period in the prior year.

The increase was primarily attributable to increased activity in the specialty contracting, infrastructure, and utility markets during the nine months ended September 30, 2022 compared to the same period in the prior year.

Additionally, the increase was driven by general market recoveries driving a resumption in the demand for our services when compared to the prior year, which was negatively impacted by the COVID-19 pandemic.

We have also been able to offset some of the inflationary increases in cost of revenues through strategic pricing improvements and contract negotiations, resulting in increased net revenues during the six months ended June 30, 2022 compared to the same period on the prior year.

Specialty Services operating margin for the six months ended June 30, 2022 and 2021 was approximately 2.7% and 0.7%, respectively.

The improvement was primarily attributable to higher levels of productivity in the execution of specialty contracting work during the six months ended June 30, 2022 compared to the same period in 2021.

During the six months ended June 30, 2022, margins increased due to growth in sales volumes.

Comparatively, during the six months ended June 30, 2021, we experienced margin contractions as a result of lower sales volumes but consistent indirect costs.

We have also been able to offset some of the inflationary increases in cost of revenues through strategic pricing improvements and contract negotiations, resulting in increased net revenues during the nine months ended September 30, 2022 compared to the same period on the prior year.

Specialty Services operating margin for the nine months ended September 30, 2022 and 2021 was approximately 4.6% and 2.7%, respectively.

The improvement was primarily attributable to higher levels of productivity in the execution of specialty contracting work during the nine months ended September 30, 2022 compared to the same period in 2021.

During the nine months ended September 30, 2022, margins increased due to growth in sales volumes.

Comparatively, during the nine months ended September 30, 2021, we experienced margin contractions as a result of lower sales volumes but consistent indirect costs.

These margin improvements were partially offset by supply chain disruptions and inflationary pressures on margins.

Specialty Services EBITDA as a percentage of net revenues for the six months ended June 30, 2022 and 2021 was approximately 8.6% and 8.8%, respectively, due to the factors discussed above.

Specialty Services EBITDA as a percentage of net revenues for the nine months ended September 30, 2022 and 2021 was approximately 10.1% and 10.2%, respectively, due to the factors discussed above.

Non-GAAP Financial Measures

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The following tables present reconciliations of SG&A expenses to SG&A expenses (excluding amortization) for the periods indicated:

Three Months Ended June 30,

Three Months Ended September 30,

($ in millions)

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SG&A expenses (excluding amortization)

Six Months Ended June 30,

Nine Months Ended September 30,

($ in millions)

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The following table presents a reconciliation of net income (loss) to EBITDA for the periods indicated:

Three Months Ended June 30,

Three Months Ended September 30,

($ in millions)

Reported net income (loss)

Adjustments to reconcile net income (loss) to EBITDA:

Reported net income

Adjustments to reconcile net income to EBITDA:

Interest expense, net

Income tax provision (benefit)

Six Months Ended June 30,

Income tax provision

Nine Months Ended September 30,

($ in millions)

Reported net income (loss)

Adjustments to reconcile net income (loss) to EBITDA:

Reported net income

Adjustments to reconcile net income to EBITDA:

Interest expense, net

Income tax provision (benefit)

Income tax provision

Liquidity and Capital Resources

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We believe these sources will be sufficient to fund our liquidity requirements for at least the next twelve months.

Although we believe we have sufficient resources to fund our future cash requirements, there are many factors with the potential to influence our cash flow position including weather, seasonality, commodity prices, market conditions, inflation, and prolonged impacts of COVID-19, over which we have no control.

As of June 30, 2022, we had $773 million of total liquidity, comprising $330 million in cash and cash equivalents and $443 million ($500 million less outstanding letters of credit of approximately $57 million, which reduce availability) of available borrowings under our Revolving Credit Facility.

As of September 30, 2022, we had $819 million of total liquidity, comprising $395 million in cash and cash equivalents and $424 million ($500 million less outstanding letters of credit of approximately $76 million, which reduce availability) of available borrowings under our Revolving Credit Facility.

On January 3, 2022, we issued and sold 800,000 shares of Series B Preferred Stock (defined below) for an aggregate purchase price of $800 million, and entered into an amendment to our credit agreement.

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In March 2022, we announced that our Board of Directors authorized a stock repurchase program, authorizing the purchase of up to an aggregate of $250 million of shares of common stock through February 2024.

During the three and six months ended June 30, 2022, we repurchased 681,329 and 1,212,760 shares of common stock for approximately $11 million and $22 million, respectively, under this stock repurchase program, leaving approximately $228 million of authorized repurchases.

During the three and nine months ended September 30, 2022, we repurchased 738,572 and 1,951,332 shares of common stock for approximately $11 million and $33 million, respectively, under this stock repurchase program, leaving approximately $217 million of authorized repurchases.

The following table summarizes net cash flows with respect to our operating, investing and financing activities for the periods indicated:

Six Months Ended June 30,

Nine Months Ended September 30,

($ in millions)

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by financing activities

Effect of foreign currency exchange rate change on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash, cash equivalents, and restricted cash at the end of the period

Net Cash Provided by (Used in) Operating Activities

Net cash provided by (used in) operating activities was $(64) million for the six months ended June 30, 2022 compared to $19 million for the same period in 2021.

Cash flows from operations is primarily driven by changes in the mix and timing of demand for our services and working capital needs associated with the various services we provide.

Net Cash Provided by Operating Activities

Net cash provided by operating activities was $82 million for the nine months ended September 30, 2022 compared to $68 million for the same period in 2021.

The increase in cash flows provided by operating activities is primarily due to an increase in net income in the period.

This increase is partially offset by working capital needs associated with the various services we provide.

Working capital is primarily affected by changes in total accounts receivable, accounts payable, accrued expenses, and contract assets and contract liabilities, all of which tend to be related and are affected by changes in the timing and volume of work performed.

During the six months ended June 30, 2022, operating cash flows were impacted by inflationary pressures and supply chain disruptions leading to an increase in the required level of working capital investment needed to ensure we have materials available to meet our growth in sales volumes, as well as higher levels of spending related to acquisition and integration costs.

Further, the increase in the cost of our debt driven by new debt issuances that occurred during the later half of 2021 and the first half of 2022 and a one-time contribution to assumed pension plans of $27 million were factors in our increased use of cash for operating activities during the six months ended June 30, 2022 compared to the same period in the prior year.

Net Cash Provided by (Used in) Investing Activities

Net cash used in investing activities was $(2,903) million for the six months ended June 30, 2022 compared to $(35) million for the same period in 2021.

During the current year, we completed the Chubb Acquisition within our Safety Services segment resulting in the use of $2,875 million for acquisitions during the six months ended June 30, 2022 compared to $12 million for the same period in 2021.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $1,818 million for the six months ended June 30, 2022 compared to $187 million for the same period in 2021.

The increase in cash provided by financing activities was primarily due to $1,101 million of proceeds from the issuance of the 2021 Term Loan and other debt, and $797 million of proceeds from the issuance of Series B Preferred Stock, partially offset by payments of $31 million on long-term borrowings and $22 million of share repurchases.

During the nine months ended September 30, 2022, operating cash flows were impacted by inflationary pressures and supply chain disruptions leading to an increase in the required level of working capital investment needed to ensure we have materials available to meet our growth in sales volumes, as well as higher levels of spending related to acquisition and integration costs.

Further, the increase in the cost of our debt driven by new debt issuances that occurred during the later half of 2021 and the first half of 2022, and a one-time contribution to assumed pension plans of $27 million were factors in our increased cash provided by operating activities during the nine months ended September 30, 2022 compared to the same period in the prior year.

Net Cash Used in Investing Activities

Net cash used in investing activities was $(2,931) million for the nine months ended September 30, 2022 compared to $(81) million for the same period in 2021.

During the current year, we completed the Chubb Acquisition and other immaterial acquisition activity resulting in the use of $2,881 million for acquisitions during the nine months ended September 30, 2022 compared to $51 million for the same period in 2021.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $1,773 million for the nine months ended September 30, 2022 compared to $629 million for the same period in 2021.

The increase in cash provided by financing activities was primarily due to $1,104 million of proceeds from the issuance of the 2021 Term Loan and other debt, and $797 million of proceeds from the issuance of Series B Preferred Stock.

The increase was partially offset by $33 million of payments on long-term borrowings, $30 million of repurchases of long-term borrowings, and $33 million of repurchases of common stock.

In the same period of the prior year, cash provided by financing activities was primarily driven by proceeds of $350 million from the completed offering of the 4.125% Senior Notes and $230 million from the issuance of common stock in connection with the warrant exercises.

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Furthermore, with respect to the revolving credit facility, we must maintain a first lien net leverage ratio that does not exceed (i) 4.00 to 1.00 for each fiscal quarter ending in 2021, and (ii) 3.75 to 1.00 for each fiscal quarter ending thereafter, if on the last day of any fiscal quarter the outstanding amount of all revolving loans and letter of credit obligations (excluding undrawn letters of credit up to $40 million) under the Credit Agreement is greater than 30% of the total revolving credit commitments thereunder subject to a right of cure.

Our first lien net leverage ratio as of June 30, 2022 was 2.88:1.00.

As of June 30, 2022, we had $1,127 million and $1,085 million of indebtedness outstanding on the 2019 Term Loan and 2021 Term Loan, respectively.

Our first lien net leverage ratio as of September 30, 2022 was 2.72:1.00.

As of September 30, 2022, we had $1,127 million and $1,085 million of indebtedness outstanding on the 2019 Term Loan and 2021 Term Loan, respectively.

We had no amounts outstanding under the Revolving Credit Facility, under which $424 million was available after giving effect to $76 million of outstanding letters of credit, which reduces availability.

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We used the net proceeds from the sale of the 4.125% Senior Notes to repay the previously outstanding term loan, prepay a portion of the 2019 Term Loan and for general corporate purposes.

As of June 30, 2022, we had $350 million aggregate principal amount of 4.125% Senior Notes outstanding.

During the three months ended September 30, 2022, we repurchased $13 million of outstanding principal amount of the 4.125% Senior Notes and recognized a net gain of $2 million on the debt extinguishment.

As of September 30, 2022, we had $337 million aggregate principal amount of 4.125% Senior Notes outstanding.

We completed a private offering of $300 million aggregate principal amount of 4.750% Senior Notes due 2029 (the “4.750% Senior Notes”) issued under an indenture dated October 21, 2021, as supplemented by a supplemental indenture dated January 3, 2022.

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We used the net proceeds from the sale of the 4.750% Senior Notes to finance a portion of the consideration for the Chubb Acquisition.

As of June 30, 2022, we had $300 million aggregate principal amount of 4.750% Senior Notes outstanding.

During the three months ended September 30, 2022, we repurchased $23 million of outstanding principal amount of the 4.750% Senior Notes and recognized a net gain of $3 million on the debt extinguishment.

As of September 30, 2022, we had $277 million aggregate principal amount of 4.750% Senior Notes outstanding.

Debt Covenants

We were in compliance with all covenants contained in the indentures governing the 4.125% Senior Notes and 4.750% Senior Notes and Credit Agreement as of June 30, 2022 and December 31, 2021.

We were in compliance with all covenants contained in the indentures governing the 4.125% Senior Notes and 4.750% Senior Notes and Credit Agreement as of September 30, 2022 and December 31, 2021.

Issuance of Series B Preferred Stock

On January 3, 2022, concurrent with the closing of the Chubb Acquisition, we issued and sold 800,000 shares of our 5.5% Series B Perpetual Convertible Preferred Stock, par value $0.0001 per share (the "Series B Preferred Stock"), for an aggregate purchase price of $800 million, pursuant to securities purchase agreements entered into on July 26, 2021 with certain investors.

On January 3, 2022, concurrent with the closing of the Chubb Acquisition, we issued and sold 800,000 shares of our 5.5% Series B Redeemable Convertible Preferred Stock, par value $0.0001 per share (the "Series B Preferred Stock"), for an aggregate purchase price of $800 million, pursuant to securities purchase agreements entered into on July 26, 2021 with certain investors.

The net proceeds from the Series B Preferred Stock issuance were used to fund a portion of the consideration for the Chubb Acquisition.

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Interest rate risk

As of June 30, 2022, our variable interest rate debt was primarily related to our 2019 Term Loan, our 2021 Term Loan, and our Revolving Credit Facility.

As of June 30, 2022, excluding letters of credit outstanding of $57 million, we had no amounts of outstanding revolving loans, $1,127 million outstanding on the 2019 Term Loan, and $1,085 million outstanding on the 2021 Term Loan.

As of June 30, 2022, we had a 5-year interest rate swap with respect to $720 million of notional value of the 2019 Term Loan, exchanging one-month LIBOR for a fixed rate of 1.62% per annum.

Accordingly, our fixed interest rate per annum on the swapped $720 million notional value of the 2019 Term Loan is 4.12% through its maturity.

The remaining $407 million of our 2019 Term Loan balance will bear interest at 4.16% per annum based on one-month LIBOR plus 250 basis points.

As of September 30, 2022, our variable interest rate debt was primarily related to our 2019 Term Loan, our 2021 Term Loan, and our Revolving Credit Facility.

As of September 30, 2022, excluding letters of credit outstanding of $76 million, we had no amounts of outstanding revolving loans, $1,127 million outstanding on the 2019 Term Loan, and $1,085 million outstanding on the 2021 Term Loan.

As of September 30, 2022, we had a four-year interest rate swap with respect to $720 million of notional value of the 2019 Term Loan, exchanging one-month LIBOR for a rate of 3.64% per annum.

This expense will be offset by the amortization through October 2024 of the remaining gain of $33 million recognized from the termination of the previously outstanding $720 million notional amount interest rate swap resulting in an effective rate on the $720 million of notional value of the 2019 Term Loan of 3.97%.

The remaining floating $407 million of our 2019 Term Loan balance will bear interest at 6.25% per annum based on one-month LIBOR plus 250 basis points.

The 2021 Term Loan balance will bear interest at 6.50% per annum based on one-month LIBOR plus 275 basis points, but the rate will fluctuate as LIBOR fluctuates.

1 unchanged sentence

The net investment hedge reduces our overall effective interest rate by approximately 24 basis points.

A 100-basis point increase in the applicable interest rates under our credit facilities (including the unhedged portion of our 2019 Term Loan debt) would have increased our interest expense by approximately $11 million for the six months ended June 30, 2022.

While we cannot predict our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we continue to evaluate our financial position on an ongoing basis.

4 unchanged sentences

Our operations are in approximately 20 countries globally.

Revenues generated from foreign operations represented approximately 40% of our consolidated net revenues for both the three and six months ended June 30, 2022.

Revenues generated from foreign operations represented approximately 35% and 38% of our consolidated net revenues for the three and nine months ended September 30, 2022, respectively.

Net revenues and expenses related to our foreign operations are, for the most part, denominated in the functional currency of the foreign operation, which minimizes the impact fluctuations in exchange rates would have on net income or loss.

We are subject to fluctuations in foreign currency exchange rates when transactions are denominated in currencies other than the functional currencies.

Such transactions were not material to our operations during the six months ended June 30, 2022.

Such transactions were not material to our operations during the nine months ended September 30, 2022.

Translation gains or losses, which are recorded in accumulated other comprehensive loss in the condensed consolidated balance sheets, result from translation of the assets and liabilities of our foreign subsidiaries into U.S.

Foreign currency translation losses (gains) totaled approximately $166 million and ($4) million for the three months ended June 30, 2022 and 2021, respectively, and $225 million and $0 million for the six months ended June 30, 2022 and 2021, respectively.

Foreign currency translation losses totaled approximately $86 million and $9 million for the three months ended September 30, 2022 and 2021, respectively, and $311 million and $9 million for the nine months ended September 30, 2022 and 2021, respectively.

Our exposure to fluctuations in foreign currency exchange rates has increased as a result of the Chubb Acquisition and may continue to increase in the future if we continue to expand our operations outside of the U.S.

19 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements