APi Group Corp 10-Q

ITEM 1. FINANCIAL STATEMENTS APi Group Corporation Condensed Consolidated Balance Sheets (Unaudited) (In millions, except share and per share data) September 30, 2023 December 31, 2022 Assets Current assets: Cash and cash equivalents $ 461 $ 605 Accounts receivable, net of allowances of $ 4 and $ 3 at September 30, 2023 and December 31, 2022, respectively 1,280 1,313 Inventories 155 163 Contract assets 530 459 Prepaid expenses and other current assets 226 112 Total current assets 2,652 2,652 Property and equipment, net 377 407 Operating lease right of use assets 227 222 Goodwill 2,404 2,382 Intangible assets, net 1,624 1,784 Deferred tax assets 107 108 Pension and post-retirement assets 407 392 Other assets 151 144 Total assets $ 7,949 $ 8,091 Liabilities, Redeemable Convertible Preferred Stock, and Shareholders’ Equity Current liabilities: Short-term and current portion of long-term debt $ 256 $ 206 Accounts payable 431 490 Contingent consideration and compensation liabilities 18 27 Accrued salaries and wages 320 337 Contract liabilities 474 463 Operating and finance leases 72 73 Other accrued liabilities 328 325 Total current liabilities 1,899 1,921 Long-term debt, less current portion 2,342 2,583 Pension and post-retirement obligations 37 40 Contingent consideration and compensation liabilities 10 6 Operating and finance leases 170 166 Deferred tax liabilities 340 340 Other noncurrent liabilities 122 111 Total liabilities 4,920 5,167 Commitments and contingencies (Note 15) 5.5 % Series B Redeemable Convertible Preferred Stock, $ 0.0001 par value, 800,000 authorized shares, 800,000 shares issued and outstanding at September 30, 2023 and December 31, 2022; aggregate liquidation preference of $ 840 797 797 Shareholders’ equity: Series A Preferred Stock, $ 0.0001 par value; 7,000,000 authorized shares; 4,000,000 shares issued and outstanding at September 30, 2023 and December 31, 2022 — — Common stock; $ 0.0001 par value, 500,000,000 authorized shares, 235,146,035 shares and 233,403,912 shares issued at September 30, 2023 and December 31, 2022, respectively (excluding 413,135 and 584,584 shares declared for stock dividend at September 30, 2023 and December 31, 2022, respectively) — — Additional paid-in capital 2,562 2,558 Accumulated deficit ( 36 ) ( 164 ) Accumulated other comprehensive loss ( 294 ) ( 267 ) Total shareholders’ equity 2,232 2,127 Total liabilities, redeemable convertible preferred stock, and shareholders’ equity $ 7,949 $ 8,091 See notes to condensed consolidated financial statements. 3 Table of Contents APi Group Corporation Condensed Consolidated Statements of Operations (Unaudited) (In millions, except per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net revenues $ 1,784 $ 1,735 $ 5,169 $ 4,855 Cost of revenues 1,273 1,295 3,737 3,604 Gross profit 511 440 1,432 1,251 Selling, general, and administrative expenses 407 379 1,148 1,138 Operating income 104 61 284 113 Interest expense, net 37 33 112 88 (Gain) loss on extinguishment of debt, net — ( 5 ) 3 ( 5 ) Non-service pension benefit ( 3 ) ( 10 ) ( 9 ) ( 32 ) Investment income and other, net ( 4 ) ( 3 ) ( 9 ) ( 5 ) Other expense, net 30 15 97 46 Income before income taxes 74 46 187 67 Income tax provision 20 18 59 16 Net income $ 54 $ 28 $ 128 $ 51 Net income attributable to common shareholders: Stock dividend on Series B Preferred Stock ( 11 ) ( 11 ) ( 33 ) ( 33 ) Net income attributable to common shareholders $ 43 $ 17 $ 95 $ 18 Net income per common share: Basic $ 0.15 $ 0.06 $ 0.32 $ 0.06 Diluted 0.15 0.06 0.32 0.06 Weighted average shares outstanding: Basic 235 234 235 233 Diluted 270 266 269 266 See notes to condensed consolidated financial statements. 4 Table of Contents APi Group Corporation Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (In millions) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income $ 54 $ 28 $ 128 $ 51 Other comprehensive income (loss): Fair value change - derivatives, net of tax benefit (expense) of $ — , $( 16 ), $( 2 ), and $( 27 ), respectively 1 51 7 82 Foreign currency translation adjustment ( 63 ) ( 86 ) ( 22 ) ( 311 ) Comprehensive income (loss) $ ( 8 ) $ ( 7 ) $ 113 $ ( 178 ) See notes to condensed consolidated financial statements. 5 Table of Contents APi Group Corporation Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) (In millions, except share amounts) Preferred Stock Issued and Outstanding Common Stock Issued and Outstanding Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Shareholders’ Equity Shares Amount Shares Amount Balance, December 31, 2022 4,000,000 $ — 233,403,912 $ — $ 2,558 $ ( 164 ) $ ( 267 ) $ 2,127 Net income — — — — — 26 — 26 Fair value change - derivatives — — — — — — ( 9 ) ( 9 ) Foreign currency translation adjustment — — — — — — 14 14 Gain on dedesignated derivatives amortized from AOCI into income — — — — — — ( 4 ) ( 4 ) Series B Preferred Stock dividend — — 1,082,877 — — — — — Share repurchases — — ( 541,316 ) — ( 12 ) — — ( 12 ) Profit sharing plan contributions — — 631,194 — 14 — — 14 Share-based compensation and other, net — — 636,233 — 9 — — 9 Balance, March 31, 2023 4,000,000 $ — 235,212,900 $ — $ 2,569 $ ( 138 ) $ ( 266 ) $ 2,165 Net income — — — — — 48 — 48 Fair value change - derivatives — — — — — — 15 15 Foreign currency translation adjustment — — — — — — 27 27 Gain on dedesignated derivatives amortized from AOCI into income — — — — — — ( 4 ) ( 4 ) Series B Preferred Stock dividend — — 436,992 — — — — — Share repurchases — — ( 428,688 ) — ( 11 ) — — ( 11 ) Share-based compensation and other, net — — 49,201 — 7 — — 7 Balance, June 30, 2023 4,000,000 $ — 235,270,405 $ — $ 2,565 $ ( 90 ) $ ( 228 ) $ 2,247 Net income — — — — — 54 — 54 Fair value change - derivatives — — — — — — 1 1 Foreign currency translation adjustment — — — — — — ( 63 ) ( 63 ) Gain on dedesignated derivatives amortized from AOCI into income — — — — — — ( 4 ) ( 4 ) Share repurchases — — ( 656,489 ) — ( 18 ) — — ( 18 ) Share-based compensation and other, net — — 532,119 — 15 — — 15 Balance, September 30, 2023 4,000,000 $ — 235,146,035 $ — $ 2,562 $ ( 36 ) $ ( 294 ) $ 2,232 6 Table of Contents Preferred Stock Issued and Outstanding Common Stock Issued and Outstanding Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Shareholders’ Equity Shares Amount Shares Amount Balance, December 31, 2021 4,000,000 $ — 224,625,193 $ — $ 2,560 $ ( 237 ) $ — $ 2,323 Net loss — — — — — ( 7 ) — ( 7 ) Fair value change - derivatives — — — — — — 9 9 Foreign currency translation adjustment — — — — — — ( 59 ) ( 59 ) Series A Preferred Stock dividend — — 7,539,697 — — — — — Series B Preferred Stock dividend — — 519,469 — — — — — Share repurchases — — ( 531,431 ) — ( 11 ) — — ( 11 ) Profit sharing plan contributions — — 622,655 — 15 — — 15 Share-based compensation and other, net — — 413,029 — 8 — — 8 Balance, March 31, 2022 4,000,000 $ — 233,188,612 $ — $ 2,572 $ ( 244 ) $ ( 50 ) $ 2,278 Net income — — — — — 30 — 30 Fair value change - derivatives — — — — — — 22 22 Foreign currency translation adjustment — — — — — — ( 166 ) ( 166 ) Series B Preferred Stock dividend — — 686,455 — — — — — Share repurchases — — ( 681,329 ) — ( 11 ) — — ( 11 ) Share-based compensation and other, net — — 24,584 — 3 — — 3 Balance, June 30, 2022 4,000,000 — 233,218,322 — 2,564 ( 214 ) ( 194 ) 2,156 Net income — — — — — 28 — 28 Fair value change - derivatives — — — — — — 51 51 Foreign currency translation adjustment — — — — — — ( 86 ) ( 86 ) Series B Preferred Stock dividend — — 739,015 — — — — — Share repurchases — — ( 738,572 ) — ( 11 ) — — ( 11 ) Share-based compensation and other, net — — 567,370 — 12 — — 12 Balance, September 30, 2022 4,000,000 $ — 233,786,135 $ — $ 2,565 $ ( 186 ) $ ( 229 ) $ 2,150 See notes to condensed consolidated financial statements. 7 Table of Contents APi Group Corporation Condensed Consolidated Statements of Cash Flows (Unaudited ) (In millions) Nine Months Ended September 30, 2023 2022 Cash flows from operating activities: Net income $ 128 $ 51 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 59 60 Amortization 167 165 Restructuring charges, net of cash paid 17 12 Deferred taxes 5 ( 9 ) Share-based compensation expense 19 14 Profit-sharing expense 14 10 Non-cash lease expense 55 49 Net periodic pension benefit ( 9 ) ( 32 ) Loss (gain) on extinguishment of debt, net 3 ( 5 ) Other, net 3 13 Pension contributions ( 3 ) ( 27 ) Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable 23 ( 104 ) Contract assets ( 78 ) ( 134 ) Inventories 2 ( 25 ) Prepaid expenses and other current assets ( 62 ) ( 25 ) Accounts payable ( 47 ) 68 Accrued liabilities and income taxes payable ( 27 ) ( 6 ) Contract liabilities 9 46 Other assets and liabilities ( 61 ) ( 39 ) Net cash provided by operating activities 217 82 Cash flows from investing activities: Acquisitions, net of cash acquired ( 57 ) ( 2,881 ) Purchases of property and equipment ( 64 ) ( 60 ) Proceeds from sales of property and equipment 13 10 Net cash used in investing activities ( 108 ) ( 2,931 ) Cash flows from financing activities: Proceeds from long-term borrowings — 1,104 Payments on long-term borrowings ( 206 ) ( 33 ) Repurchases of long-term borrowings — ( 30 ) Payments of debt issuance costs — ( 25 ) Repurchases of common stock ( 41 ) ( 33 ) Proceeds from equity issuances — 797 Payments of acquisition-related consideration ( 4 ) ( 6 ) Restricted shares tendered for taxes ( 2 ) ( 1 ) Net cash (used in) provided by financing activities ( 253 ) 1,773 Effect of foreign currency exchange rate change on cash, cash equivalents, and restricted cash ( 1 ) ( 17 ) Net decrease in cash, cash equivalents, and restricted cash ( 145 ) ( 1,093 ) Cash, cash equivalents, and restricted cash, beginning of period 607 1,491 Cash, cash equivalents, and restricted cash, end of period $ 462 $ 398 Supplemental cash flow disclosures: Cash paid for interest $ 119 $ 81 Cash paid for income taxes, net of refunds 70 24 Accrued consideration issued in business combinations 5 1 Shares of common stock issued to profit sharing plan 14 13 See notes to condensed consolidated financial statements. 8 Table of Contents APi Group Corporation Notes to Condensed Consolidated Financial Statements (Unaudited) (Amounts in millions, except shares and where noted otherwise) NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Nature of business APi Group Corporation (the “Company” or “APG”) is a global, market-leading business services provider of safety and specialty services in over 500 locations worldwide. Principles of consolidation The accompanying interim unaudited condensed consolidated financial statements (the “Interim Statements”) include the accounts of the Company and of its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. These Interim Statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and do not include all of the information and footnotes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements. The condensed consolidated balance sheets as of December 31, 2022, were derived from audited financial statements for the year then ended but do not include all of the information and footnotes required by U.S. GAAP with respect to annual financial statements. In the opinion of management, the Interim Statements include all adjustments (including normal recurring accruals) necessary for a fair presentation of the Company’s consolidated financial position, results of operations, and cash flows for the dates and periods presented. It is recommended that these Interim Statements be read in conjunction with the Company’s audited annual consolidated financial statements and accompanying footnotes thereto for the year ended December 31, 2022. Results for interim periods are not necessarily indicative of the results to be expected for a full fiscal year or for any future period. Cash, cash equivalents, and restricted cash The Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents. Restricted cash is reported as other current assets in the condensed consolidated balance sheets. Restricted cash reflects collateral against certain bank guarantees. Investments The Company holds investments in joint ventures, the majority of which are accounted for under the equity method of accounting as the Company does not exercise control over the joint ventures. The Company exercises control over one joint venture that is consolidated into the Company's financial statements and the results for that joint venture for the three and nine months ended September 30, 2023 were immaterial. The Company’s share of earnings from the non-consolidated joint ventures was $ 1 and $ 2 during the three months ended September 30, 2023 and 2022, respectively, and $ 5 and $ 3 during the nine months ended September 30, 2023 and 2022, respectively. The earnings are recorded within investment income and other, net in the condensed consolidated statements of operations. The investment balances were $ 6 and $ 4 as of September 30, 2023 and December 31, 2022, respectively, and are recorded within other assets in the condensed consolidated balance sheets. NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS See the discussion below for information pertaining to the effects of recent accounting pronouncements as updated from the discussion in the Company’s 2022 audited consolidated financial statements included in the Company’s Annual Report on Form 10-K filed on March 1, 2023. In August 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-05, Business Combinations— Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement , which requires that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture would initially measure its assets and liabilities at fair value. ASU 2023-05 is effective for joint ventures with a formation date on or after January 1, 2025, with early 9 Table of Contents adoption permitted. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements, but does not expect the impact to be material. In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification. This update will improve disclosure and presentation requirements of a variety of topics and align the requirements in the FASB codification with the SEC’s regulations. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements, but does not expect the impact to be material. NOTE 3. BUSINESS COMBINATIONS The Company regularly evaluates potential acquisitions that strategically fit with the Company’s existing portfolio or expand the Company’s portfolio into a new and attractive business area. Acquisitions are accounted for as business combinations using the acquisition method of accounting. As such, the Company makes a preliminary allocation of the purchase price to the tangible assets, identifiable intangible assets acquired, and liabilities assumed. In the months after closing, as the Company obtains additional information about the acquired assets and liabilities and learns more about the newly acquired business, it is able to refine the estimates of fair value and more accurately allocate the purchase price. The purchase price is allocated to acquired assets and liabilities assumed based upon their estimated fair values, with limited exceptions as permitted pursuant to U.S. GAAP, as determined based on estimates and assumptions deemed reasonable by the Company. The Company engages third-party valuation specialists to assist with the preparation of critical assumptions and calculations of the fair value of acquired tangible and intangible assets in connection with significant acquisitions. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed is recorded as goodwill. Goodwill is attributable to the workforce of the acquired businesses, the complementary strategic fit and resulting synergies these businesses bring to existing operations, and the opportunities in new markets expected to be achieved from the expanded platform. 2023 Acquisitions The Company completed an acquisition included within the Safety Services segment on June 30, 2023 ("Acquisition A23"). Consideration for Acquisition A23 included cash paid at closing of $ 30 , cash deposited into escrow for future deferred payments of $ 5 , and accrued consideration of $ 3 . The results of operations of this acquisition are included in the Company’s condensed consolidated statements of operations from the date of acquisition. During the nine months ended September 30, 2023, the Company completed four individually immaterial acquisitions for aggregate consideration transferred of $ 24 , made up of cash paid at closing of $ 22 and accrued consideration of $ 2 . The results of operations of these acquisitions are included in the Company’s condensed consolidated statement of operations from their respective dates of acquisition and were not material. The Company has not finalized its accounting for the acquisitions and will make appropriate adjustments to the purchase price allocation prior to completion of the measurement periods, as required. Based on preliminary estimates, the total amount of goodwill from acquisitions expected to be deductible for tax purposes is $ 38 . The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the dates of acquisition: 10 Table of Contents Acquisition A23 Other 2023 acquisitions Cash paid at closing $ 30 $ 22 Cash deposited into escrow 5 — Accrued consideration 3 2 Total net consideration $ 38 $ 24 Accounts receivable $ 8 $ — Contract assets 1 — Intangible assets 13 5 Goodwill 20 19 Accounts payable ( 1 ) — Contract liabilities ( 3 ) — Net assets acquired $ 38 $ 24 2022 Chubb Acquisition During 2022, the Company completed its acquisition of the Chubb fire and security business (the "Chubb Acquisition"). The Chubb fire and security business (the "Chubb business" or "Chubb") 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. The Chubb business is headquartered in the United Kingdom, and has operations in 17 countries, expanding the Company's geographic footprint to a total of over 20 countries. The results of the Chubb business are reported within the Company's Safety Services segment. Based on U.S. income tax principles related to acquisitions of non-U.S. entities, none of the total amount of goodwill is deductible for U.S. income tax purposes. The following table summarizes the final fair values of the assets acquired and liabilities assumed at the date of the Chubb Acquisition: Cash paid at closing $ 2,935 Working capital and net indebtedness adjustment ( 42 ) Total net consideration $ 2,893 Cash $ 60 Accounts receivable 426 Inventories 68 Contract assets 183 Other current assets 25 Property and equipment 73 Operating lease right of use assets 146 Pension and post-retirement assets 626 Other noncurrent assets 8 Intangible assets 1,200 Goodwill 1,367 Accounts payable ( 192 ) Contract liabilities ( 162 ) Accrued expenses ( 255 ) Finance and operating lease liabilities ( 148 ) Pension and post-retirement obligations ( 56 ) Deferred tax liabilities ( 383 ) Other noncurrent liabilities ( 93 ) Net assets acquired $ 2,893 11 Table of Contents Accrued consideration The Company’s acquisition purchase agreements typically include deferred payment provisions, often to sellers who become employees of the Company or its subsidiaries. The provisions are made up of three general types of arrangements, contingent compensation and contingent consideration (both of which are contingent on the future performance of the acquired entity) and deferred payments related to indemnities. Contingent compensation arrangements are typically contingent on the former owner’s future employment with the Company, and the related amounts are recognized over the required employment period, which is typically one to four years . 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 one to four 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 one to three 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 liability was $ 7 and $ 19 at September 30, 2023, and December 31, 2022, respectively. The maximum payout of these arrangements upon completion of the future performance periods was $ 15 and $ 25 , inclusive of the $ 7 and $ 19 , accrued as of September 30, 2023, and December 31, 2022, respectively. The contingent compensation liability is included in contingent consideration and compensation liabilities in the condensed consolidated balance sheets for all periods presented. The Company primarily determines the contingent compensation liability based on forecasted cumulative earnings compared to the cumulative earnings target set forth in the arrangement. Compensation expense associated with these arrangements is recognized ratably over the required employment period. The contingent consideration obligations are measured at fair value each reporting period and changes in estimates of fair value are recognized in earnings. 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 payments was $ 14 and $ 9 at September 30, 2023 and December 31, 2022, respectively, and is included in contingent consideration and compensation liabilities in the condensed consolidated balance sheets for all periods presented. NOTE 4. ASSETS HELD FOR SALE During the three months ended September 30, 2023, the Company determined its intent to sell an infrastructure/utility operating company in its Specialty Services segment (the "Operating Company"), and classified the net book value of the Operating Company as held for sale in the condensed consolidated balance sheets. As of September 30, 2023, the Operating Company remains classified as held for sale. Pursuant to the authoritative literature, the Company evaluated the recoverability of the carrying value of the assets and liabilities held for sale. During the three months ended September 30, 2023, the Company recorded an impairment charge of $ 13 in selling, general, and administrative expenses in the condensed consolidated statements of operations related to impairment of goodwill, intangible assets, and other assets. The following table presents information related to the major classes of assets recorded in prepaid expenses and other current assets and liabilities recorded in other accrued liabilities that were classified as held for sale in the condensed consolidated balance sheets: September 30, 2023 Accounts receivable $ 14 Inventories 2 Contract assets 6 Property and equipment, net 27 Operating lease right of use assets 2 Accounts payable ( 8 ) Other current liabilities ( 3 ) Noncurrent operating and finance leases ( 3 ) Total assets and liabilities held for sale $ 37 On October 3, 2023, the Company entered into a definitive agreement to sell the Operating Company for $ 37 . The sale is expected to close before December 31, 2023. 12 Table of Contents NOTE 5. RESTRUCTURING During 2022, the Company announced its multi-year Chubb restructuring program designed to drive efficiencies and synergies and optimize operating margin. The Chubb restructuring program includes expenses related to workforce reductions, lease termination costs, and other facility rationalization costs through fiscal year 2024. During the nine months ended September 30, 2023, the Company incurred pre-tax restructuring costs within the Safety Services segment of $ 21 in connection with the Chubb restructuring program. Since the Chubb Acquisition, the Company has incurred aggregate restructuring costs of $ 51 . As of September 30, 2023, the Company had $ 23 in restructuring liabilities recorded in other accrued liabilities on the condensed consolidated balance sheets for this plan. In total, the Company estimates that it will recognize approximately $ 105 of restructuring costs related to the Chubb restructuring program by the end of fiscal year 2024. For the restructuring program, employee-related costs consist of termination benefits provided to employees who have been involuntarily terminated and voluntary early retirement benefits. Program related costs include costs incurred as a direct result of the restructuring program such as consulting fees and facility relocation costs. The following table summarizes the Company's restructuring program for the nine months ended September 30, 2023 and 2022: Employee termination benefits Program related costs Asset write-downs Total December 31, 2022 $ 22 $ — $ — $ 22 Charges 21 1 4 26 Payments ( 18 ) — — ( 18 ) Reversals ( 1 ) — — ( 1 ) Currency translation adjustment ( 1 ) — — ( 1 ) September 30, 2023 $ 23 $ 1 $ 4 $ 28 Employee termination benefits Program related costs Asset write-downs Total December 31, 2021 $ — $ — $ — $ — Charges 18 — — 18 Payments ( 6 ) — — ( 6 ) Currency translation adjustment ( 1 ) — — ( 1 ) September 30, 2022 $ 11 $ — $ — $ 11 NOTE 6. NET REVENUES Contracts with customers The Company derives net revenues primarily from contracts with a duration of less than one week to three years (with the majority of contracts with durations of less than six months), which are subject to multiple pricing options, including fixed price, unit price, time and material, or cost plus a markup. Net revenues are primarily recognized by the Company over time utilizing the cost-to-cost measure of progress. Net revenues recognized at a point in time primarily relate to distribution contracts and short-term time and material contracts. The Company also enters into fixed-price service contracts related to monitoring, maintenance, and inspection of safety systems. The Company disaggregates its net revenues primarily by segment, service type, and country from which revenues are invoiced, as the 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 nine months ended September 30, 2023, and 2022. During 2023, the Company moved an immaterial business component within the Safety 13 Table of Contents Services segment from the HVAC to the Life Safety reporting unit, and prior period amounts in this table have been recast to reflect the current period presentation. Disaggregated net revenues information is as follows: Three Months Ended September 30, 2023 Safety Services Specialty Services Consolidated Life Safety $ 1,084 $ — $ 1,084 Heating, Ventilation, and Air Conditioning ("HVAC") 133 — 133 Infrastructure/Utility — 360 360 Fabrication — 42 42 Specialty Contracting — 167 167 Corporate and Eliminations — — ( 2 ) Net revenues $ 1,217 $ 569 $ 1,784 Three Months Ended September 30, 2022 Safety Services Specialty Services Consolidated Life Safety $ 1,021 $ — $ 1,021 HVAC 133 — 133 Infrastructure/Utility — 341 341 Fabrication — 87 87 Specialty Contracting — 162 162 Corporate and Eliminations — — ( 9 ) Net revenues $ 1,154 $ 590 $ 1,735 Nine Months Ended September 30, 2023 Safety Services Specialty Services Consolidated Life Safety $ 3,250 $ — $ 3,250 HVAC 383 — 383 Infrastructure/Utility — 907 907 Fabrication — 155 155 Specialty Contracting — 492 492 Corporate and Eliminations — — ( 18 ) Net revenues $ 3,633 $ 1,554 $ 5,169 Nine Months Ended September 30, 2022 Safety Services Specialty Services Consolidated Life Safety $ 3,003 $ — $ 3,003 HVAC 371 — 371 Infrastructure/Utility — 849 849 Fabrication — 194 194 Specialty Contracting — 477 477 Corporate and Eliminations — — ( 39 ) Net revenues $ 3,374 $ 1,520 $ 4,855 14 Table of Contents Three Months Ended September 30, 2023 Safety Services Specialty Services Corporate and Eliminations Consolidated United States $ 595 $ 559 $ ( 2 ) $ 1,152 France 140 — — 140 Other 482 10 — 492 Net revenues $ 1,217 $ 569 $ ( 2 ) $ 1,784 Three Months Ended September 30, 2022 Safety Services Specialty Services Corporate and Eliminations Consolidated United States $ 568 $ 565 $ ( 9 ) $ 1,124 France 125 — — 125 Other 461 25 — 486 Net revenues $ 1,154 $ 590 $ ( 9 ) $ 1,735 Nine Months Ended September 30, 2023 Safety Services Specialty Services Corporate and Eliminations Consolidated United States $ 1,738 $ 1,525 $ ( 18 ) $ 3,245 France 446 — — 446 Other 1,449 29 — 1,478 Net revenues $ 3,633 $ 1,554 $ ( 18 ) $ 5,169 Nine Months Ended September 30, 2022 Safety Services Specialty Services Corporate and Eliminations Consolidated United States $ 1,576 $ 1,481 $ ( 39 ) $ 3,018 France 417 — — 417 Other 1,381 39 — 1,420 Net revenues $ 3,374 $ 1,520 $ ( 39 ) $ 4,855 For in-process contracts, the aggregate amount of transaction price allocated to the unsatisfied performance obligations at September 30, 2023 was $ 2,732 . The Company expects to recognize revenue on approximately 87 % of the remaining performance obligations over the next twelve months . Contract assets and liabilities 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 September 30, 2023 and December 31, 2022 are as follows: Accounts receivable, net of allowances Contract assets Contract liabilities Balance at September 30, 2023 $ 1,280 $ 530 $ 474 Balance at December 31, 2022 1,313 459 463 The Company did not recognize significant revenues associated with the final settlement of contract value for any projects completed in prior periods. In accordance with industry practice, accounts receivable includes retentions receivable, a portion of which may not be received within one year. At September 30, 2023 and December 31, 2022, retentions receivable were $ 159 and $ 150 , respectively, while the portions that may not be received within one year were $ 27 and $ 35 , respectively. 15 Table of Contents NOTE 7. GOODWILL AND INTANGIBLES Goodwill The following table provides disclosure of goodwill by segment as of September 30, 2023 and December 31, 2022. The changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 2023 are as follows: Safety Services Specialty Services Total Goodwill Goodwill as of December 31, 2022 $ 2,201 $ 181 $ 2,382 Acquisitions 39 — 39 Impairment of goodwill (1) — ( 4 ) ( 4 ) Foreign currency translation ( 13 ) — ( 13 ) Goodwill as of September 30, 2023 $ 2,227 $ 177 $ 2,404 (1) During the three months ended September 30, 2023, the Company determined its intent to sell the Operating Company (see Note 4 – “Assets Held for Sale”). Pursuant to the authoritative literature, the Company evaluated the recoverability of the carrying value of the assets and liabilities held for sale and recorded a goodwill impairment charge of $ 4 . Intangibles The Company’s identifiable intangible assets are comprised of the following as of September 30, 2023 and December 31, 2022: September 30, 2023 Weighted Average Remaining Useful Lives (in Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortized intangibles: Contractual backlog 0.3 $ 154 $ ( 146 ) $ 8 Customer relationships 9.5 1,513 ( 477 ) 1,036 Trade names and trademarks 12.4 702 ( 122 ) 580 Total $ 2,369 $ ( 745 ) $ 1,624 16 Table of Contents December 31, 2022 Weighted Average Remaining Useful Lives (in Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortized intangibles: Contractual backlog 0.9 $ 153 $ ( 126 ) $ 27 Customer relationships 10.0 1,508 ( 367 ) 1,141 Trade names and trademarks 13.2 704 ( 88 ) 616 Total $ 2,365 $ ( 581 ) $ 1,784 Amortization expense recognized on identifiable intangible assets is as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Cost of revenues $ 7 $ 15 $ 20 $ 22 Selling, general, and administrative expenses 49 36 147 143 Total intangible asset amortization expense $ 56 $ 51 $ 167 $ 165 NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS U.S. GAAP defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance discusses valuation techniques such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. As the basis for evaluating such inputs, a three-tier value hierarchy prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets. Level 2: Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3: 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 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. 17 Table of Contents 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 September 30, 2023 and December 31, 2022: Fair Value Measurements at September 30, 2023 Financial assets: Level 1 Level 2 Level 3 Total Derivatives designated as hedge instruments Cash flow hedges - interest rate swaps $ — $ 36 $ — $ 36 Cash flow hedges - cross currency contracts — 15 — 15 Cash flow hedges - foreign currency forward contracts — — — — Net investment hedges - cross currency contracts — 27 — 27 Fair value hedges - cross currency contracts — 47 — 47 Derivatives not designated as hedge instruments Foreign currency forward contracts — 1 — 1 Total $ — $ 126 $ — $ 126 Financial liabilities: Derivatives not designated as hedge instruments Foreign currency forward contracts — ( 1 ) — ( 1 ) Contingent consideration obligations — — ( 6 ) ( 6 ) Total $ — $ ( 1 ) $ ( 6 ) $ ( 7 ) Fair Value Measurements at December 31, 2022 Financial assets: Level 1 Level 2 Level 3 Total Derivatives designated as hedge instruments Cash flow hedges - interest rate swaps $ — $ 14 $ — $ 14 Cash flow hedges - cross currency contracts — 17 — 17 Cash flow hedges - foreign currency forward contracts — — — — Net investment hedges - cross currency contracts — 32 — 32 Fair value hedges - cross currency contracts — 50 — 50 Derivatives not designated as hedge instruments Foreign currency forward contracts — — — — Total $ — $ 113 $ — $ 113 Financial liabilities: Derivatives not designated as hedge instruments Foreign currency forward contracts — — — — Contingent consideration obligations — — ( 4 ) ( 4 ) Total $ — $ — $ ( 4 ) $ ( 4 ) The Company determines the fair value of its derivative instruments designated as hedge instruments using standard pricing models and market-based assumptions for all inputs such as yield curves and quoted spot and forward exchange rates. Accordingly, the Company’s derivative instruments are classified as Level 2. Contingent consideration obligations The value of the contingent consideration obligations is determined using a probability-weighted discounted cash flow method. This fair value measurement is based on unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. This analysis reflects the contractual terms of the purchase agreements (e.g., 18 Table of Contents 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 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: Nine Months Ended, September 30, 2023 Balance as of December 31, 2022 $ 4 Issuances 3 Settlements ( 1 ) Adjustments to fair value — Balance as of September 30, 2023 $ 6 Number of open contingent consideration arrangements at the end of the period 2 Maximum potential payout at the end of the period $ 6 At September 30, 2023, the remaining open contingent consideration arrangements are set to expire at various dates through 2025. 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 nine months ended September 30, 2023. Fair value estimates The following table presents the carrying amount and fair value of the Company’s term loans and senior notes (instruments defined in Note 11 – “Debt”), including current portions and excluding unamortized debt issuance costs. The fair values are estimated by discounting future cash flows at current interest rates for borrowing arrangements with similar terms and conditions. The inputs used to calculated fair value are considered to be Level 2 inputs under the fair value hierarchy. During the first quarter of 2023, the Company repaid an aggregate amount of $ 200 , $ 100 to each of the 2019 Term Loan and 2021 Term Loan. September 30, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value 2019 Term Loan $ 1,027 $ 1,027 $ 1,127 $ 1,120 2021 Term Loan 985 986 1,085 1,075 4.125 % Senior Notes 337 285 337 284 4.750 % Senior Notes 277 242 277 243 See Note 19 - "Subsequent Events” for a discussion of the October 2023 repricing of the 2019 Term Loan and 2021 Term Loan, extension of the 2019 Term Loan, and partial repayment of the 2019 Term Loan. NOTE 9. DERIVATIVES 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. The Company records derivatives as assets and liabilities on the condensed consolidated balance sheets at fair value. Changes in fair value are recognized immediately in earnings unless the derivative qualifies and is designated as a hedge under ASC 815, Derivatives and Hedging . Cash flows from derivatives are classified in the condensed consolidated statements of cash flows in the same category as the cash flows from items subject to designated hedge or undesignated (economic) hedge relationships. The Company evaluates hedge effectiveness at inception and on an ongoing basis. If a derivative is no longer expected to be effective, hedge accounting is discontinued. 19 Table of Contents The Company is exposed to credit risk in the event of nonperformance of counterparties for foreign currency forward exchange contracts, cross currency swaps, and interest rate swap agreements. The Company monitors its exposure to credit risk by using credit approvals and credit limits and by selecting major global banks and financial institutions as counterparties. The Company does not enter into derivative transactions for trading purposes, and is not party to any derivatives that require collateral to be posted prior to settlement. Certain of the Company’s derivative transactions are subject to master netting arrangements that allow the Company to net settle contracts with the same counterparties. These arrangements do not call for collateral, and no cash collateral had been received or pledged related to the underlying derivatives as of September 30, 2023. The following table presents the fair value of derivative instruments: September 30, 2023 December 31, 2022 Outstanding Gross Notional Amount Other Assets Other Noncurrent liabilities Outstanding Gross Notional Amount Other Assets Other Noncurrent liabilities Derivatives designated as hedging instruments: Cash flow hedges: Interest rate swaps $ 1,120 $ 36 $ — $ 1,120 $ 14 $ — Cross currency contracts 120 15 — 120 17 — Foreign currency forward contracts 2 — — — — — Fair value hedges: Cross currency contracts 721 47 — 721 50 — Net investment hedges: Cross currency contracts 230 27 — 230 32 — Total derivatives designated as hedging instruments 2,193 125 — 2,191 113 — Derivatives not designated as hedging instruments: Foreign currency forward contracts 103 1 ( 1 ) 118 — — Total derivatives not designated as hedging instruments 103 1 ( 1 ) 118 — — Total derivatives $ 2,296 $ 126 $ ( 1 ) $ 2,309 $ 113 $ — 20 Table of Contents The following table presents the after tax effect of derivatives on the condensed consolidated statements of operations: Amount of income (expense) recognized in income Derivatives Location of income (expense) recognized in income Three Months Ended September 30, 2023 2022 Cash flow hedging relationships: Interest rate swaps Interest expense, net $ 8 $ 1 Cross currency contracts Investment income and other, net 3 7 Cross currency contracts Interest expense, net 1 1 Foreign currency forward contracts Investment income and other, net — — Fair value hedging relationships: Cross currency contracts Investment income and other, net 22 49 Cross currency contracts Interest expense, net 1 1 Net investment hedging relationships: Cross currency contracts Interest expense, net 1 1 Not designated as hedging instruments: Foreign currency forward contracts Investment income and other, net — 2 Amount of income (expense) recognized in income Derivatives Location of income (expense) recognized in income Nine Months Ended September 30, 2023 2022 Cash flow hedging relationships: Interest rate swaps Interest expense, net $ 23 $ ( 3 ) Cross currency contracts Investment income and other, net 1 15 Cross currency contracts Interest expense, net 2 2 Foreign currency forward contracts Investment income and other, net — — Fair value hedging relationships: Cross currency contracts Investment income and other, net 1 92 Cross currency contracts Interest expense, net 2 3 Net investment hedging relationships: Cross currency contracts Interest expense, net 3 3 Not designated as hedging instruments: Foreign currency forward contracts Investment income and other, net — 5 Currency Effects The income (expense) from derivatives designed to offset foreign currency exposure and recorded in investment income and other, net were offset by foreign currency transaction gains and losses resulting in a net gain (loss) of $ 0 for both the three months ended September 30, 2023 and 2022, and $ 0 and $( 2 ) for the nine months ended September 30, 2023 and 2022, respectively. 21 Table of Contents The following table presents the effect of cash flow and fair value hedge accounting on accumulated other comprehensive income (loss) ("AOCI"): Amount of gain (loss) recognized in other comprehensive income Location of gain (loss) reclassified from AOCI into income Amount of gain (loss) reclassified from AOCI into income Three Months Ended September 30, Three Months Ended September 30, Derivatives 2023 2022 2023 2022 Cash flow hedging relationships: Interest rate swaps $ 8 $ 35 Interest expense, net $ 4 $ 1 Cross currency contracts ( 2 ) — Investment income and other, net 3 7 Forward currency forward contracts — — Investment income and other, net — — Fair value hedging relationships: Cross currency contracts ( 7 ) 6 Investment income and other, net 23 51 Net investment hedging relationships: Cross currency contracts 2 10 Interest expense, net ( 1 ) ( 1 ) Amount of gain (loss) recognized in other comprehensive income Location of gain (loss) reclassified from AOCI into income Amount of gain (loss) reclassified from AOCI into income Nine Months Ended September 30, Nine Months Ended September 30, Derivatives 2023 2022 2023 2022 Cash flow hedging relationships: Interest rate swaps $ 16 $ 54 Interest expense, net $ 12 $ 1 Cross currency contracts ( 3 ) 3 Investment income and other, net 1 15 Forward currency forward contracts — — Investment income and other, net — — Fair value hedging relationships: Cross currency contracts ( 3 ) 1 Investment income and other, net 1 94 Net investment hedging relationships: Cross currency contracts ( 3 ) 25 Interest expense, net — ( 1 ) Cash flow hedges For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized in current earnings. Interest rate swaps The Company manages its fixed and floating rate debt mix using interest rate swaps. The Company uses interest rate swap contracts to separate interest rate risk management from the debt funding decision. The Company elected a method that does not require continuous evaluation of hedge effectiveness. During 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 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. As of September 30, 2023, approximately $ 18 of unrealized pre-tax gains remained in AOCI. 22 Table of Contents During 2022, the Company entered into an aggregate $ 720 notional amount interest rate swap ("2026 Interest Rate Swap"), as amended on May 19, 2023 in connection with the transition to the Secured Overnight Financing Rate ("SOFR"). Refer to Note 11 - "Debt" for additional information. The 2026 Interest Rate Swap exchanges a variable rate of interest (SOFR) for an average fixed rate of interest of approximately 3.59 % over the term of the agreement, which matures in October 2026. During the first quarter of 2023, the aggregate $ 400 notional forward-starting swaps became effective ("2028 Interest Rate Swap"), as amended on May 19, 2023 in connection with the transition to SOFR. Refer to Note 11 - "Debt" for additional information. These interest rate swaps exchange a variable rate of interest (SOFR) for an average fixed rate of interest of approximately 3.41 % over the term of the agreements, which mature in January 2028. As of September 30, 2023, the Company had $ 1,120 notional amount outstanding in swap agreements, which includes the aggregate $ 400 notional 2028 Interest Rate Swap, and the $ 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 (SOFR) payments for its SOFR based term loans of $ 2,012 . As of September 30, 2023, the weighted average fixed rate of interest on these swaps was approximately 3.52 %. Variations in the assets and liability balances are primarily driven by changes in the applicable forward yield curves related to SOFR. Cross-currency swaps The Company enters into cross-currency exchange contracts utilized to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies and to hedge exposures of certain intercompany loans subject to changes in foreign currency exchange rates. The Company periodically assesses whether its currency exchange contracts are effective, and when a contract is determined to be no longer effective as a hedge, the Company discontinues hedge accounting prospectively. During 2021, the Company entered into two cross-currency swaps designated as cash flow hedges with gross notional U.S. dollar equivalent amounts of $ 26 and $ 94 with maturity dates of September 2027 and 2030, respectively. Foreign currency forward contracts The Company utilizes foreign currency forward contracts to hedge the effect of foreign currency exchange rate fluctuations on forecasted foreign currency transactions, including inventory purchases and intercompany charges and other payments. These forward contracts are designated as cash flow hedges. The changes in fair value of these contracts are recorded in other comprehensive income until the hedged items affect earnings, at which time the hedge gain or loss is reclassified into current earnings. The Company periodically assesses whether its currency exchange contracts are effective, and when a contract is determined to be no longer effective as a hedge, the Company discontinues hedge accounting prospectively. Fair value hedges The Company has certain intercompany loans subject to changes in foreign currency exchange rates. To hedge these exposures, during 2022, the Company entered into three cross-currency swaps each with maturity dates of January 2027. These contracts are designated as fair value hedges with gross notional U.S. dollar equivalents of $ 271 , $ 241 , and $ 209 in GBP, CAD, and EUR, respectively. The Company measures the effectiveness of fair value hedges of anticipated transactions on a spot-to-spot basis. Accordingly, the spot-to-spot change in the derivative fair values are recorded in the condensed consolidated statements of operations and perfectly offset the spot-to-spot change in the underlying intercompany loans, and as such, these hedges are deemed highly effective. The excluded component of the fair values of these derivatives is reported in AOCI within shareholders’ equity in the condensed consolidated balance sheets. Any cash flows associated with these instruments are included in operating activities in the condensed consolidated statements of cash flows. Net investment hedges The Company has net investments in foreign subsidiaries subject to changes in foreign currency exchange rates. During 2021, the Company entered into a $ 230 notional foreign currency swap designated as a net investment hedge for a portion of the Company’s net investments in Euro-denominated subsidiaries. Gains and losses resulting from a change in fair value of the net investment hedge are offset by gains and losses on the underlying foreign currency exposure and are included in AOCI in the condensed consolidated balance sheets. 23 Table of Contents During 2021, the Company amended the critical terms of the foreign currency swap by extending the maturity date and modifying the U.S. dollar and Euro coupons. The amended swap was redesignated as a net investment hedge as a result of the amendment, recorded at fair value with changes recorded in AOCI, and the initial net investment hedge was dedesignated. The amended net investment hedge reduces the Company’s interest expense by approximately $ 3 annually and reduces its overall effective interest rate by approximately 24 basis points and will mature in July 2029. 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 through the third quarter of 2029. Foreign currency contracts The Company uses foreign currency forward contracts to mitigate the foreign currency exposure of certain foreign currency transactions. Fair market value gains or losses on foreign currency forward contracts not designated as hedging instruments were included in the results of operations and are classified in investment income and other, net in the condensed consolidated statements of operations. NOTE 10. PROPERTY AND EQUIPMENT, NET The components of property and equipment as of September 30, 2023, and December 31, 2022 are as follows: Estimated Useful Lives (In Years) September 30, 2023 December 31, 2022 Land N/A $ 26 $ 30 Building 39 83 98 Machinery and equipment 1 - 20 268 313 Autos and trucks 4 - 10 112 116 Office equipment 5 - 7 86 35 Leasehold improvements 1 - 15 33 33 Total cost 608 625 Accumulated depreciation ( 231 ) ( 218 ) Property and equipment, net $ 377 $ 407 Depreciation expense related to property and equipment, including finance leases, was $ 21 and $ 22 during the three months ended September 30, 2023 and 2022, and $ 59 and $ 60 during the nine months ended September 30, 2023 and 2022, respectively. Depreciation expense is included within cost of revenues and selling, general, and administrative expenses in the condensed consolidated statements of operations. 24 Table of Contents NOTE 11. DEBT Debt obligations consist of the following: Maturity Date September 30, 2023 December 31, 2022 Term loan facility 2019 Term Loan October 1, 2026 $ 1,027 $ 1,127 2021 Term Loan January 3, 2029 985 1,085 Revolving Credit Facility October 1, 2026 — — Senior notes 4.125 % Senior Notes July 15, 2029 337 337 4.750 % Senior Notes October 15, 2029 277 277 Other obligations 6 6 Total debt obligations 2,632 2,832 Less: unamortized deferred financing costs ( 34 ) ( 43 ) Total debt, net of deferred financing costs 2,598 2,789 Less: short-term and current portion of long-term debt ( 256 ) ( 206 ) Long-term debt, less current portion $ 2,342 $ 2,583 Term loan facility The Company amended its credit agreement during the second quarter of 2023, which provided for amended interest rates applicable to the Company's existing term loans and future borrowings under the revolving credit facility. In May 2023, the Company entered into an amendment to the credit agreement to replace the London Inter-Bank Offered Rate ("LIBOR") index with Term SOFR. As of September 30, 2023, the Company had $ 1,027 of principal outstanding under the $ 1,200 term loan (the "2019 Term Loan") with a maturity date of October 1, 2026. During the nine months ended September 30, 2023, the Company made a payment of $ 100 on the 2019 Term Loan. The interest rate applicable to the 2019 Term Loan is, at the Company's option, either (a) a base rate plus an applicable margin equal to 1.50 % or (b) Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.50 % plus a credit spread adjustment ("CSA"). As of September 30, 2023, the Company had $ 985 of principal outstanding under the $ 1,100 term loan (the "2021 Term Loan") with a maturity date of January 3, 2029. During the nine months ended September 30, 2023, the Company made a payment of $ 100 on the 2021 Term Loan. The interest rate applicable to the 2021 Term Loan is, at the Company's option, either (1) a base rate plus an applicable margin equal to 1.75 % or (2) Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.75 % plus a CSA. 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 Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.25 % plus a CSA. See Note 19 - "Subsequent Events” for a discussion of the October 2023 repricing of the 2019 Term Loan and 2021 Term Loan, extension of the 2019 Term Loan, and partial repayment of the 2019 Term Loan. Swap activity In the three months ended September 30, 2023, the Company amended its existing interest rate swaps in connection with the transition to SOFR for the term loans. As of September 30, 2023, the Company had a four-year interest rate swap with respect to $ 720 of notional value, exchanging one-month SOFR for a fixed rate of 3.59 % per annum, and a five-year interest rate swap, which started in the first quarter of 2023, exchanging one-month SOFR for a rate of 3.41 %. Accordingly, the Company's fixed interest rate per annum on the first swapped $ 400 notional value of the term loans is 3.41 % and the second swapped $ 720 notional value of 25 Table of Contents the term loans is 3.59 % through their maturity. The remaining $ 892 of the term loans balance will bear interest based on one-month SOFR plus CSA plus 250 basis points or SOFR plus CSA plus 275 basis points, but the rate will fluctuate as SOFR fluctuates. Refer to Note 9 - "Derivatives" for additional information. As of September 30, 2023 and December 31, 2022, the Company had no amounts outstanding under the Revolving Credit Facility, and $ 484 and $ 446 was available at September 30, 2023 and December 31, 2022, respectively, after giving effect to $ 16 and $ 54 of outstanding letters of credit, respectively. As of September 30, 2023 and December 31, 2022, the Company was in compliance with all applicable debt covenants. Senior notes 4.125 % Senior Notes During 2021, the Company completed a private offering of $ 350 aggregate principal amount of 4.125 % Senior Notes (the “ 4.125 % Senior Notes”) issued under an indenture dated June 22, 2021. The 4.125 % Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company and certain of the Company’s subsidiaries. The Company repurchased $ 13 of the 4.125 % Senior Notes in September 2022 and the balance as of September 30, 2023 was $ 337 . 4.750 % Senior Notes During 2021, the Company completed a private offering of $ 300 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. The 4.750 % Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company and certain of the Company's subsidiaries. The Company repurchased $ 23 of the 4.750 % Senior Notes in September 2022 and the balance as of September 30, 2023 was $ 277 . 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, 2023, and December 31, 2022. Other obligations As of each of September 30, 2023 and December 31, 2022, the Company had $ 6 in notes outstanding for working capital purposes and the acquisition of equipment and vehicles. NOTE 12. INCOME TAXES 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 earnings and losses by tax jurisdiction, foreign income tax rate differentials, and discrete items. The Company’s effective tax rate was 25.5 % and 40.5 % for the three months ended September 30, 2023 and 2022, and 31.3 % and 24.2 % for the nine months ended September 30, 2023, and 2022, respectively. The difference between the effective tax rate and the statutory U.S. federal income tax rate of 21.0 % for the three and nine months ended September 30, 2023 and 2022 is due to nondeductible permanent items, state taxes, taxes on foreign earnings in jurisdictions that have higher tax rates, and the reversal of the Company’s indefinite reinvestment assertion. As of September 30, 2023, the Company’s deferred tax assets included a valuation allowance of $ 105 primarily related to certain net operating loss, capital loss, and tax credit carryforwards of the Company’s foreign subsidiaries. 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 September 30, 2023, the Company had gross federal, state, and foreign net operating loss carryforwards of approximately $ 0 , $ 21 , and $ 104 , respectively. The state net operating losses have carryforward periods of five to twenty 26 Table of Contents years and begin to expire in 2027. The foreign net operating losses have carryback periods of three years , carryforward periods of twenty years , or are indefinite, and begin to expire in 2036. The Company’s liability for unrecognized tax benefits is recorded within other noncurrent 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 September 30, 2023, and December 31, 2022, the total gross unrecognized tax benefits were $ 6 and $ 8 , respectively. The Company had accrued gross interest and penalties as of each of September 30, 2023 and December 31, 2022 of $ 2 . During the three and nine months ended September 30, 2023 and 2022, the Company did not recognize net interest expense. If all of the Company’s unrecognized tax benefits as of September 30, 2023, were recognized, $ 8 would impact the Company’s effective tax rate. The Company does not expect any unrecognized tax benefits to expire in the next twelve months. The Company files income tax returns in the U.S. federal jurisdiction, and various state, local, and foreign jurisdictions. As of September 30, 2023, 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, including an ongoing IRS exam related to the 2019 final S Corporation return. No adjustments have been proposed and the Company does not expect the results of the audits to have a material impact on the Interim Statements. On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022, which includes changes to the U.S. corporate income tax system, including a 15% minimum tax based on “adjusted financial statement income” for certain large corporations which is effective for taxable years beginning after December 31, 2022, and a 1% excise tax on share repurchases after December 31, 2022. While these tax law changes are not expected to have a material adverse effect on the Company's results of operations going forward, it is unclear how this legislation will be implemented by the U.S. Department of Treasury and what, if any, impact it will have on the Company's effective tax rate. The Company will continue to evaluate the impact of the Inflation Reduction Act as further information becomes available. NOTE 13. EMPLOYEE BENEFIT PLANS Defined benefit pension plans The Company sponsors both funded and unfunded foreign defined benefit pension plans that cover a portion of the Company's employees, and the largest plans are closed to new participants and frozen for accrual of future service. During the second quarter of 2023, an annuity purchase transaction, commonly known as a “buy-in”, was executed for the two pension plans in the United Kingdom. Under the terms of the contract, which is issued by a third-party insurance company with no affiliation to the Company, all pension obligations will be funded by the insurer’s annuity payments, but the plans still retain full legal responsibility to pay the benefits to plan participants using the insurance payments. As the plans maintain full legal responsibility, with the annuity contracts being assets of the plans, settlement accounting has not been applied and the contracts represent a change in investment strategy and not a significant change in the plan structure requiring a remeasurement at the interim date. Given the funded status of the plans, the Company does not expect any future contributions to be required. The components of the net periodic pension benefit for the defined benefit pension plans are as follows: Three Months Ended September 30, 2023 2022 Service cost $ 1 $ 3 Interest cost 16 7 Expected return on plan assets ( 19 ) ( 18 ) Net periodic pension benefit $ ( 2 ) $ ( 8 ) 27 Table of Contents Nine Months Ended September 30, 2023 2022 Service cost $ 3 $ 9 Interest cost 47 24 Expected return on plan assets ( 56 ) ( 56 ) Net periodic pension benefit $ ( 6 ) $ ( 23 ) Multiemployer pension plans Certain subsidiaries of the Company contribute amounts to multiemployer pension plans and other multiemployer benefit plans and trusts, which are recorded as a component of employee wages and salaries within costs of revenues on the condensed consolidated statements of operations. Contributions are generally based on fixed amounts per hour per employee for employees covered under these plans. 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, the number of ongoing projects, and the need for union resources in connection with those projects. Total consolidated contributions to multiemployer plans were $ 25 and $ 26 during the three months ended September 30, 2023 and 2022, respectively, and $ 75 and $ 77 during the nine months ended September 30, 2023 and 2022, respectively. Profit sharing plans The Company has a trustee-administered profit-sharing retirement plan covering substantially all of the Company's employees in the U.S. not covered by collective bargaining agreements and a profit sharing plan for employees in Canada (collectively, “Profit Sharing Plans”). The Profit-Sharing Plans provide for annual discretionary contributions in amounts based on a performance grid as determined by the Company’s directors, which may be settled in shares of the Company's common stock or in cash. In connection with these plans, the Company recognized $ 4 and $ 4 in expense during the three months ended September 30, 2023 and 2022, respectively, and $ 14 and $ 10 in expense during the nine months ended September 30, 2023 and 2022, respectively. Employee stock purchase plan Most of the Company’s employees in the U.S. and Canada, including named executive officers, are eligible to participate in the Company’s Employee Stock Purchase Plan (the “ESPP”). Sales of shares of the Company’s common stock under the ESPP are generally made pursuant to offerings that are intended to satisfy the requirements of Section 423 of the Internal Revenue Code. 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 the ESPP. The Company recognized $ 1 of expense during each of the three months ended September 30, 2023 and 2022 and $ 4 and $ 3 of expense during the nine months ended September 30, 2023 and 2022, respectively. NOTE 14. RELATED-PARTY TRANSACTIONS The Company incurred advisory fees of $ 1 during each of the three months ended September 30, 2023 and 2022 and $ 3 during each of the nine months ended September 30, 2023 and 2022, in each case payable to Mariposa Capital, LLC, an entity owned by a co-chair of the Company’s Board of Directors. In addition, dividends for Series A Preferred Stock were declared as of December 31, 2021 and settled in shares during January 2022. 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. During 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. The Company declared dividends of 103,283 and 184,754 shares of common stock on the Series B Preferred Stock held by the Viking Purchasers during the three months ended September 30, 2023, and 2022, respectively. The Company declared 28 Table of Contents dividends of 337,103 and 486,234 shares of common stock on the Series B Preferred Stock held by the Viking Purchasers during the nine months ended September 30, 2023, and 2022, respectively. 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 recorded $ 1 and $ 3 in net revenues for the three and nine months ended September 30, 2023, respectively. From time to time, the Company also enters other immaterial related-party transactions. NOTE 15. COMMITMENTS AND CONTINGENCIES The Company is involved in various litigation matters and is subject to claims from time to time from customers and various government entities. While it is not feasible to determine the outcome of any of these uncertainties, it is the opinion of management that their outcomes will not have a material adverse effect on the financial position, results of operations, or cash flows of the Company. Environmental obligations The Company's operations are subject to environmental regulation by various authorities. The Company has accrued for the costs of environmental remediation activities, including but not limited to, investigatory, remediation, operating and maintenance costs, and performance guarantees, and periodically reassess these amounts. Management believes that the likelihood of incurring losses materially in excess of the amounts accrued is remote. The outstanding liability for these obligations was $ 17 and $ 16 , and was included in other noncurrent liabilities on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively. NOTE 16. SHAREHOLDERS’ EQUITY AND REDEEMABLE CONVERTIBLE PREFERRED STOCK Shareholders' equity Series A Preferred Stock The Company had 4,000,000 shares of Series A Preferred Stock issued and outstanding as of September 30, 2023 ("Series A Preferred Stock"). The Series A Preferred Stock will be automatically converted into shares of common stock on a one -for-one basis on the last day of 2026. The holders of the Series A Preferred Stock are entitled to receive an annual dividend in the form of common stock or cash, at the Company’s sole option, based on the increase in the market price of the Company’s common stock. Stock Repurchases The Company is authorized to purchase up to an aggregate of $ 250 of shares of the Company’s common stock pursuant to the stock repurchase program ("SRP"), which will expire on February 29, 2024, unless otherwise modified or terminated by the Company's Board of Directors. The SRP authorizes open market, private, and accelerated share repurchase transactions. During the three months ended September 30, 2023, and 2022, the Company repurchased 656,489 and 738,572 shares of common stock for aggregate payments of approximately $ 18 and $ 11 , respectively. During the nine months ended September 30, 2023 and 2022, the Company repurchased 1,626,493 and 1,951,332 shares of common stock for approximately $ 41 and $ 33 , respectively. As of September 30, 2023, the Company had approximately $ 166 of authorized repurchases remaining under the SRP. Redeemable Convertible Preferred Stock Series B Preferred Stock During 2022, the Company authorized, issued, and sold, for an aggregate purchase price of $ 800 , 800,000 shares of the Company’s 5.5 % Series B Preferred Stock, par value $ 0.0001 per share. The holders of the Series B Preferred Stock are entitled to dividends at the rate of 5.5 % per annum, payable in cash or the Company’s common stock, at the Company's election. The Series B Preferred Stock ranks senior to the Company's common stock and Series A Preferred Stock with 29 Table of Contents respect to dividend rights and rights upon 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 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. The holders of Series B Preferred Stock have certain other rights including voting rights on an as converted basis, certain pre-emptive rights on private equity offerings by the Company, certain registration rights, and, in the case of certain holders, certain director designation rights, as provided in the certificate of designation governing the Series B Preferred Stock. The Company may, at its option, effect conversion of the outstanding shares of Series B Preferred Stock to common stock, but only if the volume-weighted average price of the Company's common stock exceeds $ 36.90 per share for 15 consecutive trading days. Dividends The holders of Series B Preferred Stock are entitled to receive cumulative dividends at a rate of 5.5 % as and when declared by the Board of Directors, prior and in preference to any declaration or payment of any dividend on the Company's common stock and Series A Preferred Stock. 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 of $ 11 , or 584,584 shares of common stock, in December 2022 and issued the shares in January 2023. The Company declared a Series B Preferred Stock dividend of $ 11 , or 413,135 shares of common stock, and $ 11 , or 739,015 shares of common stock, during the three months ended September 30, 2023, and 2022, respectively. The Company declared and issued a Series B Preferred Stock dividend of $ 11 , or 739,015 shares of common stock, during the three months ended September 30, 2022. The Company declared and issued a Series B Preferred Stock dividend of $ 22 , or 935,285 shares of common stock, and $ 33 , or 1,944,939 shares of common stock, during the nine months ended September 30, 2023, and 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. NOTE 17. EARNINGS PER SHARE Net income is allocated between the Company’s common shares and other participating securities based on their participation rights. The Series A Preferred Stock and Series B Preferred Stock represent participating securities. 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 per common share (“EPS”) as net loss is allocated to common shares because Series A Preferred Stock and Series B Preferred Stock shares are not contractually obligated to share the loss. 30 Table of Contents The following table sets forth the computation of EPS using the two-class method. The dilutive effect of outstanding Series A Preferred Stock, 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 September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Basic earnings per common share: Net income $ 54 $ 28 $ 128 $ 51 Less income allocable to Series A Preferred Stock ( 4 ) ( 2 ) ( 10 ) ( 2 ) Less income allocable to Series B Preferred Stock ( 4 ) ( 2 ) ( 10 ) ( 2 ) Less stock dividend attributable to Series B Preferred Stock ( 11 ) ( 11 ) ( 33 ) ( 33 ) Net income attributable to common shareholders $ 35 $ 13 $ 75 $ 14 Weighted average shares outstanding - basic 235,418,566 233,605,429 234,996,055 232,982,467 Income per common share - basic $ 0.15 $ 0.06 $ 0.32 $ 0.06 Diluted earnings per common share: Net income $ 54 $ 28 $ 128 $ 51 Less income allocable to Series A Preferred Stock ( 4 ) ( 2 ) ( 10 ) ( 2 ) Less stock dividend attributable to Series B Preferred Stock ( 11 ) ( 11 ) ( 33 ) ( 33 ) Net income attributable to common shareholders - diluted $ 39 $ 15 $ 85 $ 16 Weighted average shares outstanding - basic 235,418,566 233,605,429 234,996,055 232,982,467 Dilutive securities: (1) Restricted stock units, warrants, and stock options 420,465 336,325 308,745 357,350 Shares issuable upon conversion of Series B Preferred Shares 32,520,000 32,520,000 32,520,000 32,520,000 Shares issuable pursuant to the Series A Preferred Stock dividend (2) 1,679,291 — 1,099,296 — Weighted average shares outstanding - diluted 270,038,322 266,461,754 268,924,096 265,859,817 Income per common share - diluted $ 0.15 $ 0.06 $ 0.32 $ 0.06 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 nine months ended September 30, 2023, dilutive securities include common share equivalents which represent the annual dividend, payable in the form of common shares or cash at the Company's sole option, 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"). The Annual Dividend Amount is equal to 20 % of the increase in the volume-weighted average market price per share of the Company’s common shares for the last ten trading days of the calendar year, multiplied by 141,194,638 shares. During 2023, the Annual Dividend Amount was calculated based on the appreciation of the Company’s share price over the highest previously used share price of $ 24.3968 . 31 Table of Contents NOTE 18. SEGMENT INFORMATION The Company manages its operations under two operating segments which represent the Company’s two reportable segments: Safety Services and Specialty Services. This structure is generally focused on various businesses related to contracting services and maintenance of industrial and commercial facilities. Both reportable segments derive their revenues from installation, inspection, maintenance, service and repair, retrofitting and upgrading, engineering and design, distribution, fabrication, and various types of other services in over 20 countries. The Safety Services segment focuses on end-to-end integrated occupancy systems (fire protection solutions, HVAC, and entry systems), including design, installation, inspection, and service of these integrated systems. The work performed within this segment spans across industries and facilities and includes commercial, education, healthcare, high-tech, industrial and special-hazard settings. The Specialty Services segment provides a variety of infrastructure services and specialized industrial plant services, which include maintenance and repair of critical infrastructure such as underground electric, gas, water, sewer, and telecommunications infrastructure. This segment’s services include engineering and design, fabrication, installation, maintenance service and repair, retrofitting and upgrading, pipeline infrastructure, access and road construction, supporting facilities, and performing ongoing integrity management and maintenance to customers within the energy industry. Customers within this segment vary from private and public utilities, communications, healthcare, education, transportation, manufacturing, industrial plants, and governmental agencies throughout North America. The accounting policies of the reportable segments are the same as those described in Note 1 – “Basis of Presentation and Significant Accounting Policies.” All intercompany transactions and balances are eliminated in consolidation. Intercompany revenues and costs between entities within a reportable segment are eliminated to arrive at segment totals and eliminations between segments are separately presented. Corporate results include amounts related to corporate functions such as administrative costs, professional fees, acquisition-related transaction costs (exclusive of acquisition integration costs, which are included within the segment results of the acquired businesses), and other discrete items. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is the measure of profitability used by management to manage its segments and, accordingly, in its segment reporting. As appropriate, the Company supplements the reporting of consolidated financial information determined in accordance with U.S. GAAP with certain non-U.S. GAAP financial measures, including EBITDA. The Company believes these non-U.S. GAAP measures provide meaningful information and help investors understand the Company’s financial results and assess its prospects for future performance. The Company uses EBITDA to evaluate its performance, both internally and as compared with its peers because it excludes certain items that may not be indicative of the Company’s core operating results for its reportable segments. Segment EBITDA is calculated in a manner consistent with consolidated EBITDA. 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: Three Months Ended September 30, 2023 Safety Services Specialty Services Corporate and Eliminations Consolidated Net revenues $ 1,217 $ 569 $ ( 2 ) $ 1,784 EBITDA Reconciliation Operating income (loss) $ 98 $ 43 $ ( 37 ) $ 104 Plus: Investment income and other, net 2 1 1 4 Non-service pension benefit 3 — — 3 Depreciation 8 13 — 21 Amortization 42 13 1 56 EBITDA $ 153 $ 70 $ ( 35 ) $ 188 Total assets $ 5,983 $ 1,315 $ 651 $ 7,949 Capital expenditures 5 10 3 18 32 Table of Contents Three Months Ended September 30, 2022 Safety Services Specialty Services Corporate and Eliminations Consolidated Net revenues $ 1,154 $ 590 $ ( 9 ) $ 1,735 EBITDA Reconciliation Operating income (loss) $ 60 $ 45 $ ( 44 ) $ 61 Plus: Investment income and other, net 1 2 — 3 Non-service pension benefit 10 — — 10 Gain on extinguishment of debt, net — — 5 5 Depreciation 8 12 2 22 Amortization 37 14 — 51 EBITDA $ 116 $ 73 $ ( 37 ) $ 152 Total assets $ 5,879 $ 1,357 $ 705 $ 7,941 Capital expenditures 5 16 5 26 Nine Months Ended September 30, 2023 Safety Services Specialty Services Corporate and Eliminations Consolidated Net revenues $ 3,633 $ 1,554 $ ( 18 ) $ 5,169 EBITDA Reconciliation Operating income (loss) $ 292 $ 84 $ ( 92 ) $ 284 Plus: Investment income and other, net 2 6 1 9 Non-service pension benefit 9 — — 9 Loss on extinguishment of debt, net — — ( 3 ) ( 3 ) Depreciation 21 37 1 59 Amortization 125 39 3 167 EBITDA $ 449 $ 166 $ ( 90 ) $ 525 Total assets $ 5,983 $ 1,315 $ 651 $ 7,949 Capital expenditures 19 41 4 64 Nine Months Ended September 30, 2022 Safety Services Specialty Services Corporate and Eliminations Consolidated Net revenues $ 3,374 $ 1,520 $ ( 39 ) $ 4,855 EBITDA Reconciliation Operating income (loss) $ 186 $ 70 $ ( 143 ) $ 113 Plus: Investment income and other, net 2 5 ( 2 ) 5 Non-service pension benefit 32 — — 32 Gain on extinguishment of debt, net — — 5 5 Depreciation 20 35 5 60 Amortization 120 43 2 165 EBITDA $ 360 $ 153 $ ( 133 ) $ 380 Total assets $ 5,879 $ 1,357 $ 705 $ 7,941 Capital expenditures 16 37 7 60 33 Table of Contents NOTE 19. SUBSEQUENT EVENTS On October 3, 2023, the Company entered into a definitive agreement to sell an infrastructure/utility operating company in its Specialty Services segment, for $ 37 . The sale is expected to close before December 31, 2023. Refer to Note 4 - "Assets Held for Sale" for additional information. On October 11, 2023, the Company completed repricing of its 2019 Term Loan and 2021 Term Loan. The repricing reduces the applicable margin on all outstanding amounts by 25 basis points. Additionally, $ 422 of the 2019 Term Loan was extended to the 2021 Term Loan and assumed all the same terms as the repriced 2021 Term Loan. The Company made a repayment of $ 100 on the 2019 Term Loan concurrent with the close of this transaction. Following the repricing transaction, the Company has $ 505 outstanding on 2019 Term Loan and $ 1,407 outstanding on the 2021 Term Loan. 34 Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This quarterly report contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). These forward-looking statements are based on beliefs and assumptions as of the date such statements are made and are subject to risks and uncertainties. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms including “expect”, “anticipate”, “project”, “will”, “should”, “believe”, “intend”, “plan”, “estimate”, “potential”, “target”, “would”, and similar expressions, although not all forward-looking statements contain these identifying terms. These forward-looking statements are based on our current expectations and assumptions and on information currently available to management and include, among others, statements regarding, as of the date such statements are made: • our beliefs and expectations regarding our business strategies and competitive strengths; • our beliefs regarding procurement challenges and the nature of our contractual arrangements and renewal rates and their impact on our future financial results; • our beliefs regarding our acquisition platform and ability to execute on and successfully integrate strategic acquisitions; • our beliefs regarding the future demand for our services, the seasonal and cyclical volatility of our business, financial condition, results of operations, and cash flows; • our beliefs regarding the recurring and repeat nature of our business, customers and revenues, and its impact on our cash flows and organic growth opportunities and our belief that it helps mitigate the impact of economic downturns; • our intent to continue to grow our business, both organically and through acquisitions, and our beliefs regarding the impact of our business strategies on our growth; • our beliefs regarding our customer relationships and plans to grow existing business and expand service offerings; • our beliefs regarding our ability to pass along commodity price increases to our customers; • our expectations regarding the cost of compliance with laws and regulations; • our expectations regarding labor matters; • our beliefs regarding market risk, including our exposure to foreign currency fluctuations, and our ability to mitigate that risk; • our expectations and beliefs regarding accounting and tax matters; • our beliefs regarding the effectiveness of the steps taken to remediate previously reported material weaknesses in our internal control over financial reporting and the timing of remediation; • our expectations regarding future capital expenditures; • our expectations regarding future expenses in connection with our multi-year restructuring program, including those related to workforce reductions; • our expectations regarding future pension contributions; • our expectations regarding the acquisition (the "Chubb Acquisition") of the Chubb fire and security business (the "Chubb business" or "Chubb"), including the operational challenges and the expected benefits of the acquisition and future growth, expansion, cross-selling and other value creation opportunities; and • our beliefs regarding the sufficiency of our current sources of liquidity to fund our future liquidity requirements, our expectations regarding the types of future liquidity requirements and our expectations regarding the availability of future sources of liquidity. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this quarterly report and in our Annual Report on Form 10-K, filed on March 1, 2023, including those described under “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” in such Form 35 Table of Contents 10-K, and other filings we make with the SEC. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this quarterly report may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Important factors that may materially affect the forward-looking statements include the following: • adverse developments in the credit markets that could adversely affect funding of construction projects; • exposure to global economic, political and legal risks related to our international operations, including geopolitical instability; • the ability and willingness of customers to invest in infrastructure projects; • a decline in demand for our services or for the products and services of our customers; • the fact that our revenues are derived primarily from contracts with durations of less than six months and the risk that customers will not renew or enter into new contracts; • our ability to successfully acquire other businesses, successfully integrate acquired businesses into our operations and manage the risks and potential liabilities associated with those acquisitions; • the impact of our regional, decentralized business model on our ability to execute on our business strategies and operate our business successfully; • our ability to compete successfully in the industries and markets we serve; • our ability to properly manage and accurately estimate costs associated with specific customer projects, in particular for arrangements with fixed price terms; • supply chain constraints and interruptions, and the resulting increases in the cost, or reductions in the supply, of the materials and commodities we use in our business and for which we bear the risk of such increases; • the impact of inflation; • our relationship with our employees, a large portion of which are covered by collective bargaining arrangements, and our ability to effectively manage and utilize our workforce; • the inherently dangerous nature of the services we provide and the risks of potential liability; • the impact of customer consolidation; • the loss of the services of key senior management personnel and the availability of skilled personnel; • the seasonality of our business and the impact of weather conditions; • the variability of our operating results between periods and the resulting difficulty in forecasting future operating results; • litigation that results from our business, including costs related to any damages we may be required to pay as a result of general liability or workmanship claims brought by our customers; • the impact of health, safety, and environmental laws and regulations, and the costs associated with compliance with such laws and regulations; • our substantial level of indebtedness and the effect of restrictions on our operations set forth in the documents that govern such indebtedness; • our expectations regarding the acquisition of the Chubb business, including the expected benefits of the acquisition and future value creation opportunities; and • our compliance with certain financial maintenance covenants in our credit agreement and the effect on our liquidity of any failure to comply with such covenants. The factors identified above are believed to be important factors, but not necessarily all of the important factors, which could cause actual results to differ materially from those expressed in any forward-looking statement made by us. Other factors not discussed herein could also have a material adverse effect on us. You should not rely upon forward-looking statements as predictions of future events. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. These forward-looking statements speak only as of the date of this quarterly report. We assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, except as required by applicable law. 36 Table of Contents All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this quarterly report and hereafter in our other SEC filings and public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties. 37 Table of Contents